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Competition Law and Competition Policy in India: How the Competition Commission has Dealt with Anticompetitive Restraints by Government Entities

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Abstract

Can adoption of an antitrust/competition law substitute for a formal competition policy that lays down principles for reforming other government policies that affect competition? We address this question in the context of India, which has a track record of antitrust enforcement as well as a history of extensive controls over the private sector and domination of key sectors by state owned firms. After briefly summarizing these features, we argue that several clauses of the Competition Act, 2002, allow the Competition Commission of India (CCI) to challenge public restraints on competition. We then undertake a detailed review of several cases that have addressed public restraints and that have gradually extended the jurisdiction of the Act. We also identify some areas that remain beyond its reach—government policies that violate competitive neutrality, and discretionary purchases by public buyers—and we note possible social or business justifications for such restraints. Finally, we briefly discuss conflicts between the CCI and other regulatory agencies. We suggest that these remaining challenges can be addressed without laying down a broader policy.

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Notes

  1. See Bhattacharjea (2008, 2012) for an assessment of the MRTP Act, its legacy, the major features of the Competition Act, and the reasons for its delayed enforcement (also summarized briefly below). Given the orientation of this paper, we do not discuss the increasingly active enforcement of Indian competition law in relation to private anti-competitive conduct, except in cases where we feel that government policy has facilitated such conduct. For a detailed examination of the working of the law, see Bhattacharjea (2016) on merger regulation; Bhattacharjea and De (2017) on anti-cartel enforcement; Bhattacharjea (2017) on the treatment of vertical restraints; and Bhattacharjea (2012) and Gouri (2014) for an overall assessments.

  2. Competition Commission of India (2017, p. 7).

  3. Bhagwati and Desai (1970) provided the earliest academic documentation and analysis of the control regime. The essays in Mohan (2017)—by academics, policymakers, and entrepreneurs—provide a retrospective assessment of the control era and the subsequent reforms. Bhattacharjea (2008) reviews the working of the MRTP Act.

  4. The sections of the MRTP Act that dealt with anti-competitive agreements and ‘monopolistic trade practices’ were retained, but ineffectively enforced until the Act was repealed in 2009, when the corresponding sections of the Competition Act were brought into force. See Bhattacharjea (2008).

  5. However, India emerged as the world’s biggest (ab)user of anti-dumping duties; and very recently (February 2018) tariffs were raised on a number of products with the avowed intention of encouraging import substitution under the government’s ‘Make in India’ policy. As in all other countries, trade policy remains outside the purview of competition law.

  6. Several commentators in discussions held on the draft competition policy have pointed out that the competition policy may not be politically expedient.

  7. See Bhattacharjea (2012) for a more detailed account of these developments. In 2017, the government passed an amendment to abolish the COMPAT and transfer its functions and pending cases to the National Company Law Appellate Tribunal. More recently, it announced that it would “right-size” the Commission by not replacing members as they complete their five-year terms or retire at age 65, so that it strength would decline to a Chairperson and three members.

  8. This section was drafted by Geeta Gouri, a former Member of the Commission, based on comments that were sent to the Ministry but are no longer accessible. This is from memory and rough notes.

  9. The suggestion in the draft policy for a separate National Commission on Competition found no favor with the Commission.

  10. See Goodwin and Martinez Licetti (2016) of the World Bank Group for a discussion on new developments in competition advocacy programmes adopted by different countries, both advanced and less developed, and the identification of a few best practices through yearly inquiries that are conducted by the group.

  11. As shown by Bhattacharjea (2013), this kind of initial orientation was important for competition laws to acquire political legitimacy in many old and new jurisdictions.

  12. Accessible at www.cci.gov.in.

  13. Cases No. 6 and 74 of 2015, Fast Track Call Pvt Ltd and Meru Travel Solutions Pvt Ltd v. ANI Technologies Pvt Ltd., order dated 19/7/2017.

  14. Cases No. 7 and 30 of 2012, Matrimony.com and Consumer Unity and Trust Society v Google LLC and Ors, combined order dated 8/2/2018. Orders are awaited in Case no. 6 of 2014, Vishal Gupta v Google Inc., Case No. 17/2014, Ashish Ahuja v. Snapdeal, and Case No. 7 of 2012, Consim Info Pvt Ltd v. Google Inc.

  15. See Cooper and Kovacic (2010) and Crane (2013) for details.

  16. See Gal and Faibish (2007), Sokol (2009), Lianos (2013) Cooper and Kovacic (2010), Fox and Healey (2014).

  17. According to Sokol (2009, p. 126) empirical research on the impact of public restraints on competition is sporadic and almost non-existent in the context of developing countries.

  18. A few jurisdictions—mostly developing and transitional economies and European Common market—even went further and included state officials in public procurement, free movement, and market blockage for outsiders; allowed the use of state action as a defense to the anti-competitive practices of private entities; and authorized the law to challenge the state’s anti-competitive measures directly.

  19. The COMPAT was abolished in May 2017, and all pending and future appeals will now go before the National Company Law Appellate Tribunal.

  20. See Gouri (2009, p. 1). It was then estimated to be about 26% of India’s gross domestic capital formation.

  21. MSME (2012), Public Procurement Policy for Micro and Small Enterprises (MSEs) Order, 2012, Retrieved August 1st, 2017 from http://www.fisme.org.in/FinalPressorder.pdf.

  22. Section 19(4)(k) of the Competition Act includes ‘social obligations and costs’ only for defining dominance of an enterprise. This phrase is absent in Section 19(3), which looks at factors that could result in adverse effect on competition with regard to agreements.

  23. See Case no. 11/2009 Jindal Steel & Power Ltd. v. Steel Authority of India Ltd., order dated 20/12/11. SAIL India v. Jindal Steel and Ors, appeal no. 01/2009, order dated 15/02/2010.

  24. Cases 64/2010 and 12/2011, Arshiya Rail Infrastructure Limited (ARIL) and Anr. v. Ministry of Railways (MoR) and Anr, order dated 14/08/2012.

  25. Containerization of bulk goods—such as coal, minerals and other items of bulk freight traffic—was introduced by Railways in 1980s, and CONCOR was created in 1988 to serve this purpose. However, private entry into container services is relatively new and started only in 2007.

  26. Union of India v. Competition Commission of India, W.P.(C) 993/2012, judgment dated 23/02/2012.

  27. Case no 64/2010, Arshiya Rail Infrastructure Limited (ARIL) and Anr. v. Ministry of Railways (MoR) and Anr, Competition Commission of India interim order dated 03/05/2011, para 30, quoted in Union of India (n 26 above), p 16.

  28. PPP was conceived as a mechanism for involving the private sector in areas that were historically reserved for the public sector: prominently in infrastructure and natural monopolies, such as the railways. PPP was considered as both politically expedient and economically viable.

  29. Case no. 42/2013 Builders Association of India (BAI, Kerala Chapter) v. The State of Kerala & Ors., order dated 12/05/2015.

  30. Case no. 70/2014 Rajat Verma v. Haryana Public Works (B&R) Department & Ors., order dated 12/01/2015.

  31. Appeal no. 45/2015 Rajat Verma v. Haryana Public Works (B&R) Department & Ors, judgment dated 16/02/2016; CCI order dated 27/2/2017. CCI is yet to deliver its final order on this case.

  32. Appeal no. 51/2015 Prem Prakash v. The Principal Secretary, Madhya Pradesh Public Works Department and Ors., judgment dated 17/02/2016; CCI Case no. 50/2014 Prem Prakash v. The Principal Secretary Madhya Pradesh Public Works Department & Ors., order dated 17/03/2017.

  33. Shri Satyendra Singh v. Ghaziabad Development Authority, order dated 28/2/2018, para 15.

  34. Case no 06/2010 Ms Anila Gupta v. Brihan Mumbai Electricity Supply and Transport Undertaking (BEST), order dated 11/01/2012.

  35. Tata Power Company Ltd v. Reliance Energy Ltd. & Ors. (2008) 10 SCC 321.

  36. This case was later resolved in the Supreme Court whereby TPCL was allowed to lay its own distribution network in the BEST-reserved area to supply willing customers under universal service obligation of a distribution licensee contained in section 43 of the EA, without undermining BEST’s special status. Anila Gupta was, however, denied open access by BEST. (Civil Appeal No 4233 of 2012, Brihanmumbai Electricity Supply and Transport Undertaking v. Maharashtra Electricity Regulatory Commission and Ors. Judgment dated 08/05/2014.).

  37. Suo moto Case No 02/2014 Re Cartelization by public sector insurance companies in rigging the bids submitted in response to the tenders floated by the Government of Kerala for selecting insurance service provider for Rashtriya Swasthya Bima Yojna, order dated 10/07/2015.

  38. For COMPAT judgment, see Appeal nos 94-97/2015 M/s National Insurance Company Ltd and Ors v. Competition Commission of India, judgment dated 9/12/2016.

  39. Appeal no. 36/2014 Indian Trade Promotion Organization v. Competition Commission of India and Ors, judgment dated 01/07/2016.

  40. Case No. 3/2012 M/s. Maharashtra State Power Generation Company Ltd. (MSPGCL) v. M/s. Mahanadi Coalfields Ltd. (MCL) & Anr., Case No. 11/2012 Maharashtra State Power Generation Company Ltd. v. M/s. Western Coalfields Ltd. & Anr. and Case No. 59/2012 M/s. Gujarat State Electricity Corporation Limited v.M/s. South Eastern Corporation Limited & Anr., Common Order dated 09/12/2013 (Coal India Limited was Opposite Party No.2 in each of these cases. A revised order was issued in these three cases on 24/03/2017); Case No. 05/2013, along with Case No. 07/2013, M/s. Madhya Pradesh Power Generating Company Limited v. M/s.South Eastern Coalfields Ltd. & Anr, Order dated 15/04/2014; Case No. 37/2013, West Bengal Power Development Corporation Limited v. Coal India Limited and Ors, Order dated 15/04/2014; Case no. 44/2013 Sponge Iron Manufactures Association v. M/s Coal India limited & Ors, Order dated 15/04/2014 (a revised order issued in these four cases on 21/04/2017); Case No. 08/2014, M/s. GHCL Limited v. M/s. Coal India Limited, Order dated 16/02/2015 (a revised order was issued on this case on 21/04/2017). Case No. 88/2013, M/s Sai Wardha Power Company Limited v. Western Coalfields Limited & Anr.; Order dated 27/10/2014; Case No. 59/2013, Shri Bijay Poddar v. M/s Coal India Limited and its subsidiaries, Order dated 27/10/2014.

  41. Ashoka Smokeless Coal (P) Ltd. v. Union of lndia, (2007) 2 SCC 640.

  42. Appeal no. 80/2014 Coal India Limited and Anr v. Competition Commission of India and Anr, judgment dated 09/12/2016; Appeal no. 81/2014 Coal India Limited v. Competition Commission of India and Anr, judgment dated 20/03/2017 and Appeal nos. 01/2014, 44-47/2014, 49/2014, 70/2014 and 52/2015 Coal India Limited and Ors v. Maharashtra State Power Generation Company Limited and Ors, judgment dated 17/05/2016 (combined judgement on the issue of principles of natural justice).

  43. Revised orders dated 24/3/2017 and 21/04/2017, as in n 40 above.

  44. These cases are distinct from other public procurement bid-rigging cases, where the relevant government departments/ministries approached the CCI with allegations of collusion by private bidders. See Bhattacharjea and De (2017) for details.

  45. Competition assessment of public buyers is a relatively unexplored area, despite the fact that there is a sizable economic literature on buyer power and its impact on competition that may have direct relevance to public procurement contract (OFT 2004; Sanchez 2009). On the one hand, a public buyer may have significant power both vertically (with respect to its suppliers) as well as horizontally (with respect to its competitors) by sheer size of its demand (if not fragmented like local public bodies). E.g. imposing disproportionate qualitative selection requirements or restrictive technical specifications may result in pricing distortion.

  46. Case no. 39/2010, Travel Agents Association of India v. Balmer Lawrie & Co. Ltd. and Anr, order dated15/09/2010 and Case no. 98/2015 Mr. Yeshwanth Shenoy v. Air India, Alliance Air and Air India Express & Ors, order dated 06/01/2016.

  47. It is quite interesting to note that the informant also included competing private airlines as opposing parties because of lack of their courage to speak up against the alleged violations.

  48. Case no. 03/2010 Pandrol Rahee Technologies (Pvt.) Ltd., Kolkata v. Delhi Metro Rail Corporation Ltd. & Ors., order dated 07/10/2011. The Commission noted that the fasteners that were selected were from a company that had cleared the technical and safety requirements of the Indian Railways.

  49. Case no 15/2010 Jupiter Gaming Solutions Private Limited v. Government of Goa & Ors., order dated 12/05/2011.

  50. Case no 04/2010 Explosive Manufacturers Welfare Association v. Coal India Limited and its Officers, order dated 26/07/2011; and Case no. 33/2014 Association of Third Party Administrators v. General Insurers’ (Public Sector) Association of India, order dated 04/01/2016.

  51. PSU insurance companies formed their captive Third Party Administrator, and Kerala PWD established the Kerala State Construction Corporation Limited for this purpose. CIL, on the other hand, chose a PSU for a portion of its procurement of explosives. As discussed above, Indian Railways signed a long-term contract with SAIL for purchase of rails due to delayed entry by private firms.

  52. It is worth pointing out that although India jumped 32 ranks to the 100th position in the 2017 World Bank’s ‘Ease of Doing Business’ Index, it ranks a miserable 164th out of 190 countries on the ‘Enforcing Contracts’ component of the Index (http://www.doingbusiness.org/rankings).

  53. Bid rigging in public procurement falls within the purview of three government agencies: the Comptroller and Auditor General (CAG), the Central Vigilance Commission (CVC), and the Competition Commission of India (CCI)—the three C’s. The Ministry of Finance issues notification on the procedures and formats for tendering that are followed by all PSUs. These formats are continuously revised with inputs not only from the three C’s but from Ministries.

  54. Case No 29/2010, Builders’ Association of India v. Cement Manufacturers’ Association & Ors, order dated 12 June 2012. Paragraphs cited here are from the modified order passed on 31 August 2016. See Bhattacharjea and De (2017) for a detailed analysis of this case, which led to the largest-ever fines imposed by CCI.

  55. MRTP Case No. 1/28, M/s Royal Energy Ltd. v. M/s Indian Oil Corporation Ltd. & Ors., order dated 09/05/2012.

  56. Appeal nos 21-28/2014, Chemists and Druggists Association, Ferozepur v CCI and Anr, judgment dated 30 December 2015.

  57. See Bhattacharjea and De (2017) for discussion of the many CCI and COMPAT orders in the pharma sector. The regional associations were also found to have committed other contraventions, including fixing wholesale and retail margins.

  58. See para 16.8 of Case no. C-175/09/DGIR/27/28-MRTP, The Belgaum District Chemists and Druggists Association vs. Abbott India Ltd. & Others, order dated 02/03/2017. Two similar cases are Case no 54/2015, Sudeep P.M. & others v. All Kerala Chemists and Druggists Association, order dated 31/10/2017 and Case no. 97/2013, Reliance Agency v. Chemists and Druggists Association of Baroda & Others, order dated 10/01/2018.

  59. Case no 38/2011, Indian Sugar Mills Association & Ors v. Indian Jute Mills Association & Ors, Order dated 31/10/2014.

  60. Dalmia Cement (Barat) Limited and Anr v. Union of India and Ors. (1996) 10 SCC 104.

  61. Appeal nos. 73-78/2014; 83-88/2014; 08-15/2015 Indian Jute Mills Association v. Competition Commission of India and Ors, judgment dated 01/07/2016.

  62. Raghavan (2000). This statement was cited by the Raghavan Committee from an article by Rao (1998).

  63. Suo-Moto Case no. 01/2010, In Re: Sugar Mills, order dated 30/11/2011. Following Rangarajan (2012), some restrictions such as levy sugar and regulated release mechanisms for non-levy sugar were later withdrawn. However, the sugar industry still operates under ECA, and other control mechanisms such as cane area reservations, minimum distance criteria, support price to sugarcane farmers, and high import and export duties are still operating in the sector. For details, see http://dfpd.nic.in/sugar.htm, accessed on 6th August, 2017.

  64. Shri Neeraj Malhotra, Advocate v. North Delhi Power Ltd. & Ors. [Case No. 6/2009].

  65. Telecom Regulatory Authority of India (2017), Regulatory Principles of Tariff Assessment, Consultation Paper No.3, 17th February, 2017, retrieved December 31st, 2017 from www.trai.gov.in. The power to fix tariffs is drawn from Section 11(2)—except that this power was designed in the context of fixing tariffs for natural monopolies and not for tariffs in competitive markets, where the market fixes the tariff.

  66. https://economictimes.indiatimes.com/tech/internet/no-need-for-intervention-in-predatory-pricing-cci-chief/articleshow/63340028.cms, viewed 16 May 2018.

  67. https://economictimes.indiatimes.com/news/politics-and-nation/trai-cci-slug-it-out-over-rights-of-jurisdiction-in-supreme-court/articleshow/63007388.cms, viewed 16 May 2018.

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Correspondence to Aditya Bhattacharjea.

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Dr. Gouri is a former member of the CCI.

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Bhattacharjea, A., De, O. & Gouri, G. Competition Law and Competition Policy in India: How the Competition Commission has Dealt with Anticompetitive Restraints by Government Entities. Rev Ind Organ 54, 221–250 (2019). https://doi.org/10.1007/s11151-018-9641-0

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