Resale price Maintenance

Vertical agreements imposing RPM are an infringement of the Competition Act under
Section 3(4)(e) of the Competition Act, 2002. The requisites of the offence are that

(i) the sale of goods to the buyer is preconditioned on the fact that the resale of goods
by the buyer shall be on the prices stipulated by the seller, and
(ii) ii) the buyer should not be allowed to charge a lower price on the resale than the
one stipulated. Thus, only minimum RPM is disallowed, a manufacturer may
impose a maximum price beyond which the buyer/re-seller may be disallowed to
sell.
(iii) Further, offences under Section 3(4) require that such conduct cause appreciable
adverse effect on competition.

Ghanshyam dass vij v Bajaj corp ltd

ESYS Information Technologies v Intel Corporation

ESYS Information Technologies, a non-exclusive independent distributor for

designated products of Intel in India, had filed the complaint against US-based
Intel Corp. as well as Hong Kong-based Intel Semiconductor and Intel
Technology India.
It had also alleged that Intel imposed anti-competitive agreements and indulged in
unfair pricing practices, thereby denying market access. The complaint against
Intel and the two related entities was filed with the CCI in August 2011, while the
probe was ordered in December that year. The watchdog’s investigation arm—
director general—submitted its report in June 2013.
It was alleged that Intel abused its dominant position in market of
microprocessors, which are mainly used in mobiles and computer devices.
The commission noted that even though Intel is a dominant enterprise in the
market for desktop PCs, mobiles and servers, the company’s alleged conduct is
not abusive in terms of any of the provisions of the Competition Act. “...the
alleged pricing policy of Intel does not amount to secondary line price
discrimination and has not resulted in foreclosure of any of its downstream
customers," the order said.
 Intel was compelling to sell its low demand products with high demand products
and it was alleged that denying the distributors not to deal dictated the retail price
of its products to the distributrs in contravention of sec3(4) (e) of the act ehich
prohibited resale price maintainence. n a relief for Intel, CCI concluded that it had
“not restricted and limited the market by foreclosing the distribution network to its
competitors."
Intel did not deny access to its competitors in the microprocessor market nor had it
“imposed supplementary conditions or leveraged its dominant position in the
market of high-demand products in the market for low-demand products," among
others, according to the ruling. “Since no case is made out against Intel, either
under the provisions...of the (Competition) Act, the matter relating to this
information is disposed of accordingly and the proceedings are closed forthwith,"
the CCI noted.

How ever it was found by the DG that the said agreement only talked of
1. suggested porices but then left the final price at the sole discration of the distributor.
2. Clause4(d) of the agreemntexpressely provided that distributors were free to sell the
intel products at a price suggested by the distributors
3. Monitoring of resale price by intel was at a macro level exercise and canot be termed
at RPM

The first case which substantively dealt with a matter involving the offence, the
allegation persisted to circulation of list of suggested prices by the manufacturer.
The manufacturer also carried out monitoring of prices in the downstream market.
However, it left the discretion on final pricing to the distributors. The CCI held
that suggesting that suggesting prices to the distributors and monitoring prices in
the downstream market would not constitute a violation of the Actprices to the
distributors and monitoring prices in the downstream market would not constitute
a violation of the Act.
Recent pending investigation against intel: https://www.azbpartners.com/bank/cci-
orders-investigation-for-abuse-of-dominance-allegations-against-intel-
corporation/

M Shubham sanitwares v Hindustan Sanitary ware ltd

The Informant has alleged that the Opposite Party has been regularly issuing price
lists to its dealers recommending the maximum discount that can be given on the
Maximum Retail Price (MRP) to the sub-dealers or customers. Moreover, the
Case No. 09 of 2015 Page 4 of 9 Opposite Party has also communicated to its
dealers/ distributors that if any dealer/ distributor offers any discount more than
the prescribed limit then the same shall be dealt severely. In this regard, the
Informant has submitted several emails written by one of the officials of the
Opposite Party to it. The Informant has also alleged that the Opposite Party is
engaged in the practice of tie-inarrangement by forcing its customers/ dealers to
purchase its products alongwith the products sourced from other manufacturers. It
is stated that the Opposite Party operates an Allied Products Division (APD)
which is engaged in marketing of outsourced products from local and foreign
manufacturers such as PVC cisterns, fittings and seat covers, tubs and shower
panels, bath accessories etc
. In this regard, the Commission perused Clause 10 of the „Agreement‟ which
states “We shall advise you maximum retail prices from time to time for selling
HINDWARE products to your customers. Under no circumstances, you will
charge prices higher than our recommended MRP.” In this regard, the
Commission notes that the said clause does not raise any competition concern.
The definition of „resale price maintenance‟ as provided in explanation (e) to
section 3(4) of the Act clearly states that prescribing/setting maximum resale price
is not prohibited under the Act. Moreover, since such price does not restrict the
resellers to sell below a particular price, the same does not raise any competition
concern to require any intervention by the Commission
As far as the price lists issued by the Opposite Party with respect to discounts to
be offered to sub-dealers and retail customers is concerned, it has been alleged
that the Opposite Party had sent communications to its dealers/ distributors that
discounts more than the limit stipulated by it should not be given to the customers.
From a perusal of e-mails sent by Opposite Party to the Informant, the
Commission observes that through such e-mails, the Opposite Party conveyed to
its dealers/ distributors that if they want to give more discount then the Opposite
Case No. 09 of 2015 Page 8 of 9 Party should be kept informed by routing such
proposals through it. After careful examination of the emails exchanged between
the Parties, the Commission notes that there is no absolute restriction or
prohibition imposed by the Opposite Party on the Informant. Until and unless
regulation of discounts leads to appreciable adverse effect on competition, such
practices do not become anti-competitive per se. As such, in view of the facts and
circumstances of the present case, prima facie there seems to be no contravention
of section 3(4) read with 3(1) of the Act. 16. As far as the allegation of tie-in
arrangement is concerned, the Commission after considering the product range
has found that complete set of bathroom fittings consist of ceramic and non-
ceramic products are sold together as a set by companies dealing with branded
products in organized industry of ceramics. Though, individual units are also sold
consumers always have a choice to go for a complete set or different units from
different manufacturers. 17. In light of the above analysis, the Commission is of
the view that the Informant has not placed any new evidence to substantiate its
allegations of violation of the provisions of section 3(4) of the Act. Moreover, the
issues raised by the Informant in the instant case have already been considered by
the Commission in its previous order in Case No. 99 of 2013. 18. Thus, the
Commission finds that no prima facie case of contravention of the provisions of
either section 3 (4) or section 4 of the Act is made out against the Opposite Party
in the instant matter. Accordingly, the matter is closed under the provisions of
section 26(2) of the Act.
Case Link: https://www.cci.gov.in/sites/default/files/092015.pdf

Jasper Infotech
The present case is pertaining to the information filed by Jasper Infotech (P) Ltd.
against Kaff Appliances India (P) Ltd. for the alleged contravention of Section
3(4) of Competition Act. The Informant displayed OP-Kaff’s products on its
online portal ‘Snapdeal’ at a discounted price, aggrieved by which the OP
displayed a caution notice on its website alleging that the OP’s products sold by
Informant through its website are without authorization and are counterfeit. The
stated caution notice said that OP will not honour warranties on its products sold
through the said website and any purchase made from it would be at customer’s
own risk.
Further, a legal notice was served in order to withdraw the caution notice alleging
a violation of certain provisions of the Competition Act.
According to the Informant, the main grievance of OP was regarding the
discounted price at which such products were sold by the Informant through its
website and to substantiate the said claim it revealed an e-mail which attempted to
impose a price restriction in the form of Minimum Operating Price (MOP) on the
website to make sales at a minimum price and threatened to ban online sales if
such prices were not maintained, which resultantly is a contravention of Section
3(4)(e) of the Competition Act.
The other contravention attempted by OP was to cut off supplies to distributors
who were aiming to sell through an online channel which amounted to a violation
of Section 3(4)(d) of Competition Act. On perusal of the facts, Commission
directed DG for an enquiry.
DG in conclusion to its report said that, firstly OP is not involved in maintaining a
resale price and secondly, it does not possess sufficient market power to cause
AAEC as provided under Section 18(3) and accordingly no contravention could
be established under the provisions of Section 3(4)(e) of the Act. Further, on the
establishment of the said report by DG, further investigation was directed under
Section 26(7) of the Act. In the said investigation, DG concluded that alleged
conduct of OP did not lead to any AAEC under Section 19(3) of the Act.
Analysis
Commission observed that, distributors/dealers were using the services of the
informant while selling the products of OP, it ipso facto becomes a part of
distribution/vertical chain and thus, it would be incorrect to state that an Informant
is only a market place facilitating interaction of the buyers and sellers
online. Further, while not agreeing with DG’s observation it was stated by the
Commission that the agreements between manufacturers/distributors and e-
commerce players can be looked into under Section 3(4) read with Section 3(1) of
the Act.
To establish a contravention under Section 3(4) read with Section 3(1), two
conditions need to be fulfilled- firstly, agreement/arrangement/understanding
 ought to exist and secondly, such agreement/ arrangement/understanding has
caused or has the potential to cause AAEC.
A Right of the manufacturer to choose the most efficient distribution channel
ought not to be interfered with, unless the said choice leads to anti-competitive
effects.
Commission found merit in justifications offered by OP and observed that
evidence on record does not demonstrate the conduct/practice of OP led to any
AAEC and presence of a large number of dealers who were competing with each
other suggests a fair degree of intra-brand competition.
Thus, evidence on record did not reveal the existence of any price restriction of
minimum RPM and intra-brand competition negated the anti-competitive impact
of OP’s alleged conduct. The case was thereby closed. [Jasper Infotech (P) Ltd. v.
KAFF Appliances (India) (P) Ltd., 2019 SCC OnLine CCI 2, Order dated 15-01-
2019]

IPR AND COMPETITION LAW INTERFACE Sec3(5)

https://incsoc.net/wp-content/uploads/2018/02/E-
Compendium_Interface_between_Competition_and_Intellectual_Property_Rights-
WCD_2016.pdf
Section 3 of the Indian Competition Act specifies that:-

“No enterprise or association of an enterprise is allowed to make any agreement about production,
distribution, supply, acquisition, storage, controls of goods or provision of services, which will have
a significant adverse impact on competition within India”.

In general word, it means that it restrains the enterprise or group of the enterprise to enter into any
agreement relating to any activities which will hurt competition. It is limited to India.

Section 3(5): It talks about the exception. it talks that competition law does not affect the IPR rights.
But if we study the Section 3(5) with Section 4 then we find that it also restrains the IP holders to
abuse its dominant position and if they misuse its dominating position then competition law will
come into the picture. From this, we can conclude that they are supplementary to each other rather
than contradicting it.
Aamir Khan Production Private Limited vs The Director-General 
The Bombay HC held that CCI has jurisdiction to hear all the matters vis-à-vis competition law and
IPR. CCI also held that IPR related right is not sovereign in nature but merely a statutory right
granted under a law.
What the petitioners are seeking to do is to redraft the language of sub-section (5) of Section 3 of
the Competition Act, 2002 to read that nothing contained in this section (Section 3 of the
Competition Act) shall apply to the right of any person under the Copyright Act, 1957. All that
sub-section (5) of Section 3 provides is that sub-section (1) of Section 3 shall not take away or
restrict the right of any person to restrain any infringement of copyright or the right of any
person to impose reasonable conditions for protecting his rights under the Copyright Act.
Hence all the defences which can be raised before the Copyright Board can be also raised
before the Competition Commission.
Subsequently, the Delhi High Court in Telefonaktiebolaget Lm Ericsson v. Union of India
&Ors., attempted to strike a balance between Competition Law and IPR. It held that CCI
cannot be ousted from its jurisdiction solely on the grounds that the case falls under the
purview of the patent controller. However, at the same time it “cautioned” CCI to limit its
inquiry as to whether in the instant matter the applicant abused its dominant position.
Entertainment Network (India) Limited v. Super Cassette Industries Ltd,19 the Supreme Court
reiterated on the issue related to conflict between two laws. The court observes that even
though the copyright holder has full monopoly but the same is limited in the sense that if such
monopoly creates disturbance in smooth functioning of the market will be in violation of
competition law and same was in relation to refusal of license. Undoubtedly, IPR owners can
enjoy the fruits of their labour via royalty by issuing licenses but the same is not absolute.

Link: https://indiankanoon.org/doc/1313927/
 Monsanto v. Competition Commission of India. 
Competition Law and Intellectual property rights (hereinafter, IPR’) form an independent
and interdependent relationship. Deliberations on the interrelationship between IPR and
Competition Law have gained profound significance. Intellectual Property Rights grant
exclusivity and monopoly rights to the creator, on the other hand, competition law aims to
discourage the concentration of power in any form. The author would delve into the
 shortcomings of present dispute resolution pertaining to Competition law disputes which have
an element of IPR by analyzing the case of Monsanto v. Competition Commission of India. 
In the instant case, Monsanto had developed a technology which genetically modified cotton seeds
so as to make them resistant against pests and worms. The technology was patented and
thereby farmers and seed manufacturers “sub-licensed” the same from Monsanto’s Indian
subsidiary MMBL. MMBL while licensing this technology not only imposed a high trait value
charge, but also imposed restrictive clauses within the license agreement. The clauses were
such that they prevented the sub-licensees from entering into a supply agreement with
Monsanto’s competitors and also mandatorily forced the sub-licensees to destroy their
“technology infused” cotton crops.
Competition Commission of India found prima facie merit in the case of the petitioners, taking due
note of the fact that Monsanto constitutes 99% of the market share in BT technology and thus
was dominant. By imposing the above restrictions Monsanto was “abusing” its dominant
position and thus CCI invoked its powers under Section 26(1) of the Competition Act, 2002 by
ordering the Director General to carry out the investigation. Monsanto approached the Delhi
High Court and pleaded that firstly, by virtue of Section 3(5) of the Competition Act, the
restriction of “anti-competitive” agreements was not applicable on IPR related
disputes. Secondly, it contended that CCI lacked jurisdiction in this matter by arguing that even
if Monsanto’s practices were unfair, the matter should have been referred to the Controller of
Patents. The Delhi High Court refuted both the arguments by stating that section 3(5)
permits an Intellectual property right holder to impose “reasonable conditions”, the
criteria which Monsanto nullified and also established the supremacy of Competition
Commission of India in competition law and IPR related disputes. r/w sec 60 and sec 61
 FICCI Multiplex Association of India v. United Producers/Distributors Forum , CCI stated
that there was a clear violation of Section 3(3) of the Act as it was found that the members of
United Producers/ Distributors Forum formed a cartel for extracting higher revenues. Thus,
section 3 is applicable when there is “an anti- competitive agreement” such as in the case of
cartels.
Union of India v. Cyanamide India Limited &Another,20 it was held by the court that charging
excessive prices on life saving drugs is within the ambit of price control and CCI has
jurisdiction over such matter. In case of scarcity of substitutes there is always a peril of
creation of monopolies which disturbs the economic efficiency in the market. Further, in
different jurisdiction same principle was reiterated.
 Relevant Market In Competition

Relevant Market In Competition Case Analyses

Dr. S CHAKRAVARTHY
 Introduction
Delineation of “relevant market” is central to effective enforcement of competition laws.
For the Competition Authority, such delineation clarifies the space within which he/she needs
to adjudicate on competition cases. It is indeed the first step in the analysis of conduct on the
part of the market players concerned.

Definition of the relevant market involves the description of the context in which
certain economically harmful conduct could take place. The process, therefore, of defining a
market and a relevant market, is of the first moment, meaning thereby that any assessment of
the conduct of a market player can only follow and not precede the definition. The process
begins by assuming provisionally that certain anti-competitive conduct exists in the market. It
then proceeds to define through a series of questions, the boundaries of the smallest market in
which such conduct could be sustained. After the contours of the smallest market are defined
and drawn, the actual conduct in question is subjected to an analysis, to determine if it has or
could have an anticompetitive effect.

This short paper seeks to define the relevant market, relevant product market, relevant
geographic market and the analytical methodology applicable by Competition Authorities to
define relevant markets.

Relevant Market
‘Relevant Market’ refers to the line of commerce in which competition has been restrained
and to the geographic area involved, defined to include all reasonably substitutable products
or services, and all nearby competitors, to which consumers could turn in the near term if the
restraint or abuse raised prices by a not insignificant amount1 . In simple terms, relevant
market identifies the particular product/service or class of products produced or services
rendered by an enterprise(s) in a given geographic area. Identification also includes
identification of enterprises that compete to supply those products or services.

A relevant market has therefore two fundamental dimensions, product and

geographic. The product market describes the good or service. The geographic market
describes the locations of the producers or sellers of the product or service. Relevant market
is defined by consumer or purchaser preferences and actions. For instance, if purchasers
consider two goods to be close substitutes or readily interchangeable, those two goods are
considered to be in the same relevant market. As an illustration, butter and margarine can be
considered to be in the same relevant market. In contrast, even if producers/sellers consider
two goods to be very similar on the ground that they are manufactured on the same machines,
the goods may not be in the same relevant market. As an illustration even if 13–inch
automobile tyres and 14–inch automobile tyres are made on the same machine, purchasers do
not substitute between 13-inch and 14-inch tyres and thus the two sizes are in two different
relevant markets.

In sum, relevant market means the market determinable with reference to the relevant
product market or the relevant geographic market or with reference to both the markets.

Product Market
Competition Authorities in various countries use or adopt different definitions of the product
market. Despite the lack of uniformity, the veneer that runs through the definitions is that the
product market has the characteristic of interchangeability or substitutability of
goods/services by the consumers/purchasers. Put differently, goods/services that purchasers
consider to be substitutes are generally regarded to be in the same product market and those
that the purchasers do not consider to be substitutes are regarded to be in separate product
markets.

On the demand side, the relevant product market includes all such substitutes that the
consumer would switch to, if the price of the product relevant to the investigation were to
increase. From the supply side, this would include all producers who could, with their
existing facilities, switch to the production of such substitute goods. There are 3 elements that
pin a product market. They are:

– Price increase
– Reaction of purchasers
– Smallest size requirement.

Price Increase
The critical issue in the element price increase is that the purchasers shift for substitutes when
the price of the product/service increases. The price increase must be non-transitory, meaning
thereby that the increase is expected to continue over the foreseeable future. The reaction of
the purchasers to a transitory or short-term change in price is likely to be different from their
reaction to a long-term change in price. If cake bakers know that an increase in the price of
butter is temporary, then they are likely to continue to use butter in baking cakes. On the
other hand, if they know that such a price increase is permanent and over a long period, then
they are likely to invest in developing a recipe that uses margarine. Thus, if the price of butter
is expected to be high for a long period of time, butter and margarine are in the same product
market.

The price increase needs to be small but significant. A small price change is likely to
make the purchasers identify close substitutes. A large price change is likely to make them
identify more distant substitutes. For the Competition Authority, the inclusion of distant
substitutes in the relevant product market may be warranted, if the increase in the price is big.
Otherwise, close substitutes alone would fall into the relevant product market. Another point
to be made is that the price change should be significant, so that purchasers react to the
change. A very insignificant price change may cause no purchaser reaction. The expression
“significant” is subjective but some countries adopt 5 % price change as significant as in
United States and Canada.

Reaction of Purchasers
Purchasers react to price increases generally rationally. Continuing with the butter and
margarine example, assume that all the purchasers at the old prices bought butter. If the price
of butter increases and if all the purchasers switch to margarine from butter, then margarine
and butter would be in the same product market with margarine being the substitute for butter
for all the customers. If the purchasers do not switch to margarine in response to price
increase to butter, then margarine is not a good substitute to butter in the perception of the
purchasers and therefore, butter and margarine would not be in the same product market.

Smallest Size Requirement

The third element constituting the product market is that the market should be the smallest
collection of goods or services for which the purchaser reaction holds. This requirement
prevents product markets bracketing non-substitute products. The rationale for including this
element is that products should not be considered as substitutes merely because there is a
price increase in the product in demand/use by customers. Substitutability should have a
direct nexus with the price increase in the product in demand/use.

Relevant product market could be determined by the Competition Authority having

regard to all or any of the following factors:
– physical characteristics or end-use of goods;
– price of goods or service;
– consumer preferences;
– exclusion of in-house production;
– existence of specialised producers;
– classification of industrial products.

For determining the product market, Competition Authorities may estimate the
demand elasticity of some group of products in the neighborhood of prevailing prices.
Demand elasticity is the percentage change in quantity demanded divided by percentage
change in the price of the product. But data may not be available for computing elasticity and
therefore, competition officials, who do the spade work investigation, would be advised to
interview a host of economic agents to gather sufficient information to enable the
Competition Authority to make reasonable inferences about the correct relevant product
market. Economic agents who could provide useful information include:

– Purchasers of the product

– Purchasers of similar products
– Sellers of the product
– Sellers of the same product in another region
– Sellers of similar products
– Association of purchasers or sellers of the product
– Wholesalers/retailers of the product and similar products
– Statistical bureaus for the product

Some useful questions that may be posed to buyers are:

1. Who are your current suppliers?
2. Who have been your suppliers in the past?
3. Why did you switch suppliers? (if answers to one and two are different) 4. Who else have
you considered as suppliers?
5. Why have you not bought from them?
6. What is important when you decide from which supplier to buy? Why?
7. Is there a substitute for the product that you are using?
8. What is necessary to substitute the product you are presently using?

The above questions need to be modified during actual investigation as relevant

information unfolds. Likewise, sellers could be asked the following questions:
1. Who are your competitors?
2. What needs to be done by you to convince purchasers to buy from you? (Timely delivery,
advertise, superior technical service).
3. What needs to be done by you to convince purchasers to switch from buying from one of
your competitors to buying from you (provide discount in price)
4. Is there any type of purchasers who tend to buy from you rather than from your
competitor?
5. If so why do they prefer you?

Answers to questions listed above (subject to additions and modifications to the list as
may be necessary) should be collated, analysed and placed before the Competition Authority
for judicial determination of the relevant product market. The list of questions should not be
construed as exhaustive or comprehensive but as indicative and enabling. A point worth
emphasizing is that products can be considered as substitutable, if purchasers are inclined to
shift to another product with similar characteristics, in the event the price of the product in
use is raised by a small but significant amount and if such price rise is continuously
maintained or is likely to be maintained over a reasonable length of time, say, 6 months.

Geographic Market
The geographical boundaries of the relevant market can be similarly defined. Geographic
dimension involves identification of the geographical area within which competition takes
place. Relevant geographic markets could be local, national, international or occasionally
even global, depending upon the facts in each case. Some factors relevant to geographic
dimension are consumption and shipment patterns, transportation costs, perishability and
existence of barriers to the shipment of products between adjoining geographic areas. For
example, in view of the high transportation costs in cement, the relevant geographical market
may be the region close to the manufacturing facility.

The principle of geographic market is similar to that of product market. The

geographic market is defined by purchasers’ views of the substitutability or
interchangeability of products made or sold at various locations. In particular, if purchasers of
a product sold in one location would, in response to a small but significant and non-transitory
increase in its price, switch to buying the product sold at another location, then those two
locations are regarded to the in the same geographic market, with respect to that product. If
not, the two locations are regarded to be in different geographic markets.

For example, markets for sand, gravel, cardboard boxes, refuse hauling and other
heavy but low value products are often quite small because the cost of transportation is a
large fraction of the cost of the product. Transportation cost therefore can indirectly affect the
limits of the geographical markets. Limits of geographic markets are often determined by
transportation costs, tariffs, trade barriers etc. As an illustration, if foreign producers of a
product must pay a tariff (domestic producers do not) then the resulting increase in the price
of the foreign product may be so large that the consumers would not switch from the
domestic product for the foreign product. Similarly regulations such as for health and safety
can serve as barriers to the sale of some goods and services. The relevant geographic market
could be determined by the Competition Authority having regard to all or any of the
following factors:

– regulatory trade barriers;

– local specification requirements;
– national procurement policies; • adequate distribution facilities;
– transport costs;
– language;
– consumer preferences;
– need for secure or regular supplies or rapid after-sales services.

Barriers to market entry include administrative decisions by State agencies, legal

provisions relating to conditions of manufacturing and delivery, legal professional standards,
trade policy (tariffs, quotas, antidumping measures etc), financial barriers laid down by the
State and barriers in terms of techniques, technologies and intellectual property rights.

Two Models
To find the contours of the relevant market, some competition offices identify only suppliers
and potential suppliers. This approach may be in order, if dominance is defined in terms of
market share criterion. But if the market has many other enterprises in addition to the
dominant one and if those others would immediately shift their production capacity into
production of the relevant product in the event the dominant enterprise were to behave anti-
competitively, then the approach may suffer from the flaw that the dominant enterprise is
really not dominant. The desirable approach may therefore be to use demand substitution plus
supply substitution model for purposes of determining the relevant market. The diagram
below illustrates the 2 different approaches to relevant market determination.

Relevance Of Relevant Market In Competition Cases

Relevant market is crucial in analyzing Dominance and offences of Abuse of Dominance.
The new Indian competition law3 defines a dominant position as a position of strength,
enjoyed by an enterprise in the relevant market, which enables it to operate independently of
competitive forces prevailing in the relevant market or affect its competitors or consumers or
the relevant market in its favour. The same Act describes, inter alia, abuse of dominance to
occur when an enterprise uses its dominant position in one relevant market to enter into, or
protect, other relevant market. For an enterprise to abuse a dominant position, it must hold a
dominant position in a relevant market. The first step, therefore, in an evaluation of an
enterprise’s actions is to define the relevant market.

Likewise, Merger Regulation cases require identification of the relevant market. By

and large, mergers (or combinations, to use a more comprehensive term), which cause or are
likely to cause an appreciable adverse effect on competition within the relevant market are
likely to be blocked by the Competition Authorities. Relevant market boundary is therefore
germane to adjudication of mergers on the touchstone of competition.

The Boeing-McDonnell Douglas merger is a good case4 on the relevance of the

relevant market in merger regulation. Boeing wanted to acquire its jet aircraft competitor
McDonnell Douglas. This attracted competition law. In connection with this merger
(acquisition), Boeing entered into contracts with 3 large American airlines to be their
exclusive supplier of commercial jet airplanes for 20 years. Even though, the merger was on
the US soil, the European Commission exercised its jurisdiction in the matter on the ground
that many countries, particularly Europe, constituted the relevant market. The logic behind
the said contention of the European Commission was that after the merger, there were only 2
suppliers, namely, the merged entity and Airbus Industries, an European Consortium, thus
reducing the number of market players in supplying jet aircraft from 3 to 2. The European
Commission saw the exclusive contracts as an emanation of Boeing’s increased dominance
(its share of the commercial jet aircraft market would increase to about 70% upon merger
with McDonnell Douglas). The European Commission also feared that the contracts would
unfairly foreclose the European Consortium from access to a substantial part of the market. It
ultimately allowed the merger to proceed only on the condition that Boeing forego the
exclusivity of the contracts and share technology of McDonnell Douglas.

Finale
The determination of ‘relevant market’ by the Competition Authority has to be done, having
due regard to the ‘relevant product market’ and the ‘relevant geographic market’. In practice,
defining a relevant market is sometimes only approximate. It is often difficult to predict the
reactions of purchasers/consumers to a price increase. It is here that investigation becomes
critical to the determination of the relevant market. Good investigation would involve
identifying the important economic agents and posing questions appropriate to their
operations and germane to the case on hand. A possible road map has been set in this paper,
but there is no short cut for determining the relevant market.

Determination of relevant market – ‘easier said than done’

With progress comes new set of challenges; same is true in context of the challenges
faced by Indian Competition watchdog. With the enactment of the Competition Act 2002
(‘the Act’) our competition regulator Competition Commission of India (‘CCI’) was
entrusted with the task of assuring that the Indian market operate in a competitive
environment.

Under all circumstances, the CCI is obligated to curtail any abuse of dominance by a
market player. For this the CCI relies on the investigation conducted by the Director General
(DG), who determines whether the market player is abusing its dominant position or not and
thereafter the CCI pronounces its order. Such order passed by CCI is premised on the said
scrutiny of each factor mentioned in Article 19(4) of the Act.

The above said procedure sounds like a cakewalk but it can be aptly remarked as ‘it is
easier said than done’. In the matter titled as “Belaire Owner’s Association vs.  DLF Limited
and Ors.”1, CCI pronounced its order which created ripples in the Competition
jurisprudence; as the said order being a fore-runner in the infant Indian competition 
jurisprudence, was  perceived to settle the dust surrounding the concept “relevant market”.
But soon the notion seemed to whittle down with more such orders being pronounced by our
own CCI. It can be rightly asserted that the concept‘Relevant market’ is an indelible
ingredient in determining the abuse of dominant position by a market player and thus every
time CCI pronounces its order, it needs to interpret the concept ‘relevant market’.

CONCEPT OF RELEVANT MARKET

Relevant market has been defined in different statutes all over the world like the Act,
UK laws, European laws and anti trust laws of US; however it is neither possible nor
justifiable to limit the scope of ‘relevant market’ to few theoretical definitions. Even the
adjudicating forums find it difficult to restrict the ambit of the said concept and each dispute
results in a new and unique interpretation. So the whole scrutiny boils down to determination
as to what is the relevant market in a particular set of facts. Only then the remaining issues
can be settled.

Definition of the relevant market as enshrined in Section 2(r) of the Act cannot be
exhaustive as the term owes its origin to the concept of Economics and thus is bound to be
dynamic depending on the unique set of facts for each case. Section 2(r) of Competition Act
2002 reads as:

"relevant market" means the market which may be determined by the Commission
with reference to the relevant product market or the relevant geographic market or with
reference to both the markets;

It is manifest from the above definition that the task of determining the “relevant
market” is left with the Commission and the terms like ‘relevant product market’ and the
‘relevant geographic market’ involves understanding of the legal concepts, concepts of
Economics and also involves analysis of volumes of data/statistics before arriving unto a
conclusion.

Relevant market in common parlance refers to the market where competition takes
place. A relevant market can further be divided into ‘relevant product market’ and ‘relevant
geographic market’.

To put in simple words, a relevant product market basically refers to two kinds of
substitutability of the product/service – one is the ‘demand side substitution’ which stipulates
a situation where the market player is not benefited by a slight increase in price because the
consumer has the option of substituting the use of such product/service and the second is the
‘supply side substitution’ when other market players increase supply of such product/service
canceling the effect of any increase in price.

Section 2(t) of the Competition Act 2002 defines the ‘relevant product market’ as
follows:

"relevant product market" means a market comprising all those products or

services which are regarded as interchangeable  or  substitutable  by  the  consumer, by
reason of characteristics of the products or services, their prices and intended use;

Relevant Geographic market being the other facet of relevant market basically
involves two elements viz. homogenous condition of competition and distinct condition of
competition. Section 2(s) of the Competition Act 2002 defines the relevant geographic
market as:

"relevant geographic market" means a market comprising the area in which

the conditions of competition for supply of goods or provision of services or demand
of goods or services are  distinctly homogenous and can be distinguished from the
conditions prevailing in the neighbouring areas”.

CONCEPT OF ‘RELEVANT MARKET’ FROM GLOBAL PERSPECTIVE

Are the above definitions as enshrined under our Competition Act different from the
definitions adopted globally? In fact, the said definitions have been directly imported from
the definition as provided in the EC Treaty. Competition Law in European Commission is
ruled by the provisions of EC treaty, Article 81 and Article 82 being the two relevant articles.
Article 82 is of utmost relevance being closely affiliated to the term relevant market. In
Europe, there are basically two sources for relevant market;one is the 1997 Commission
notice on market definition and other is the ratio decidendi derived from different case laws.
In Europe, jurists place huge reliance on the data for evidentiary value and thus the
authenticity of such data are a vital determinant for deciding the relevant market suited to
each and every case. Despite a notice and lots of precedents; paradox and conflicting
judgments are a common phenomenon in the competition jurisprudence of Europe. A final
and settled set of rules for determining the issue of relevant market is still a distant dream.

Section 2 of The Sherman Anti Trust Act of United States (US) states as under:

“Every person who shall monopolize, or attempt to monopolize, or combine or

conspire with any other person or  persons,  to  monopolize  any  part  of  the  trade  or 
commerce among the several State, with foreign nations, shall be deemed guilty of a
felony…”

Therefore the requirements of above section can be summarized as follows2:

1. the possession of monopoly power in the relevant market  and

2. the willful acquisition or maintenance of that power as distinguished from growth or

development as a consequence of a superior product, business acumen, or historic
accident.
 It can be observed from the said section of Anti- trust Act that in evaluating an
offence under this section, the first issue that needs to be zeroed in is the determination of the
relevant market. Only after such determination, the adjudicating authority can successfully
carry any further investigation related to alleged abuse of dominant position by a market
player.

CCI PERPLEXED – A SNAPSHOT

It is easy to present the definition of a concept as aggregation of few words but it is

equally difficult to interpret such words in different set of facts and circumstances. Every
now and then, our CCI finds itself in the same paradox. In the famous Belaire case DG
concluded that since the cost of each flat was above 1.5 Crore the relevant market was the
‘high- end residential market’ in Gurgaon. It further argued ‘a  customer wanting a flat in
Gurgaon would not look at Noida or another city; and that a small change in price – say 5 %
- will not make buyers in Belaire shift to lower priced flats under development in
Gurgaon. This way both the relevant geographic market and relevant product market seemed
to be determined successfully.

But very soon the CCI found itself in an imbroglio when innumerable cases against
builders were filed involving the determination of the relevant market to reach unto a
conclusion. Very sadly, the regulator while dismissing such complaints seemed perplexed as
is evident from the different benchmarks and yardsticks adopted. In the case of Emaar MGF,
even though the flats were priced at over Rs. 2 Crore the relevant market was ascertained to
be the ‘residential accomodation’ in Gurgaon. In its very own order, the CCI
remarked ‘Since the apartments in the case comes to about Rs. 95 lakh…. the relevant
market will be high-end residential apartments’.

Such interpretation of ‘Relevant Market’ in these two cases led to utter confusion
giving rise to a moot question; if price of apartments is taken into consideration in
determining the ‘Relevant market’, then how can CCI in one case determine relevant market
to be ‘residential accommodation, for flats priced over 2 crores’while in other case relevant
market was determined to be ‘High end residential apartments for flats priced around 95
lakhs’?

Further in the case of another Unitech project, Unitech Habitat in Greater Noida, the
relevant market was determined to be the residential units on sale in Noida, greater Noida and
the area around the Noida Expressway. In this case, the flats were priced at about Rs. 50 lakh
and thus this may be the reason why CCI did not feel the need of adding any prefix like high
end or low end to the definition of relevant market.

These are the few perplexities that CCI had faced in last few months as it suffers
badly from the absence of scientific economic analysis. As such, it had to rely heavily on
scanty information available in the public domain thus leading to such contradictions.

ANALYSIS OF ‘RELEVANT MARKET’ CONCEPT

From the above detailed discussion highlighting the different definitions of the
concept ‘relevant market’ which are more or less similar in its ambit all round the globe and
from the recent paradox that has caught unawares our adjudicating authority, it is now
evident that determination of ‘relevant market’ is the subject matter which needs to be
determined first to decide the issue of abuse of dominance. Despite having various case laws
along with statutes at discretion, determination of ‘relevant market’ had been a nightmare for
the adjudicating authorities of almost the whole world as it involves the complexities of both
Economics and Law. Even country like US with its archaic Anti-trust laws had not been able
to settle down the issue and give finality to the complexities involved in determination of
relevant market.

CONCLUSION

It cannot be disputed that competition jurisprudence of our country is in its infancy. It

is also a well settled fact that determination of relevant market is dependant upon set of
data/statistics. CCI being the watchdog had been entrusted with this job which in no way can
be said to be an easy task. Law being dynamic is bound to witness contradictions. But,
instead of being complacent and criticizing CCI every now and then, better way needs to be
chalked out.

Determining more than one relevant market for each case and then examining
dominance in each relevant market may be given a try.The most vital factor in such
determination is the data relied and thus, the data collection and analysis needs a prime
consideration by all involved in this process. It must be appreciated that the concept of
relevant market is a cornerstone of the competition law and thus must not be misinterpreted
to have a restricted reach only to the infrastructure sector. Some or the other day its tentacles
will certainly take even other sectors in its grip. It invites the sector representatives and
experts to do more research and try to come out with more concrete documents related to the
said purpose. Even though it will not be binding, it will certainly have some persuasive value.
Last but not the least, competition advocacy initiatives must lead all the relevant measures.

While discussing the concept of dominant position under the Law of Competition, one
of the most intriguing question which lingers our minds is what does relevant market
connote? ‘Relevant market’ is one of the primary concerns while determining dominant
position as well as abuse of dominant position by an enterprise.

Section 2(r) of the Act renders an exclusive definition for the term ‘relevant market’.
It states that it means the market which may be determined by the Commission with reference
to the relevant product market or the relevant geographic market or with reference to both
markets.

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Relevant product market is defined as a market comprising all those products or

services which are regarded as interchangeable or substitutable by the consumer, by reason of
characteristics of the products or services, their prices and intended use.

Relevant geographic market refers to a market comprising the area in which the

conditions of competition for supply of goods or provision of services or demand of goods or
services are distinctly homogenous and can be distinguished from the conditions prevailing in
the neighboring areas.

M/s Saint Gobain Glass India Ltd. v. M/s Gujrat Gas Company Limited– In this
case, the CCI in order to determine the ‘relevant market’ took note of factors to be considered
while determining relevant product market and relevant geographic market. The CCI stated
that to determine the “relevant product market”, the Commission is to have due regard to
all or any of the following factors viz., physical characteristics or end-use of goods, price of
goods or service, consumer preferences, exclusion of in-house production, existence of
specialized producers and classification of industrial products, in terms of the provisions
contained in Section 19(7) of the Act.

To determine the “relevant geographic market”, the Commission shall have due

regard to all or any of the following factors viz., regulatory trade barriers, local specification
requirements, national procurement policies, adequate distribution facilities, transport costs,
language, consumer preferences and need for secure or regular supplies or rapid after-sales
services, in terms of the provisions contained in Section 19(6) of the Act.
 Section 19(6) enlists the factors to be considered by CCI while determining ‘relevant
geographic market’:

1. Regulatory trade barriers;

2. Local specification requirements;

3. National procedure policies;

4. Adequate distribution facilities;

5. Transport costs;

6. Language;

7. Consumer preferences;

8. Need for secure or regular supplies

Section 19(7) of the Act enlists the factors to be considered by the CCI while
determining ‘relevant product market’:

1. Physical characteristics or end-use of goods;

2. Price of goods or services;

3. Consumer preferences;

4. Exclusion of in-house production;

5. Existence of specialized producers;

6. Classification of industrial products;

When does an enterprise engage in an abusive conduct or abuse its dominant

position?

An undertaking in a dominant position is entitled also to pursue its own interests.

However, such an undertaking engages in abusive conduct when it makes use of the
opportunities arising out of its dominant position in such a way as to reap trading
benefits which it would not have reaped if there had been normal and sufficiently
effective competition. For the purposes of this section, the conduct of a party would be
tested on the basis of the end effect i.e. whether access to a market has been denied not. In
other words, the same conduct by different parties may attract provisions of Section 4(2)(c)
of the Act depending on whether the conduct of the parties results into denial of market
access in any manner. As per Section 4(2)(c) of the Act, there shall be an abuse of dominant
position if any enterprise indulges in a practice resulting in denial of market access in any
manner.

In the case of Jupiter Gaming Solutions case, the CCI while determining alleged
abuse of dominance by Government of Goa stated that dominance per se is not bad, but its
abuse is bad in Competition Law in India. CCI further opined that abuse is said to occur when
an enterprise uses its dominant position in the relevant market in an exclusionary or /and an
exploitative manner.  In the case the Government’s tender bid of lottery contained certain
conditions which apparently restricted the size of bidders such as, minimum gross turnover of
the participating entity, participating entity should have experience of at least three years. The
CCI held that the Government of Goa by imposing such conditions abused its dominant
position denial/restriction of market access to the other parties in the relevant market.

Abuse of Dominance cases

India: CCI Dismisses Allegations On WhatsApp And Facebook For Abuse Of

Dominance In Digital Payments Market

CCI dismisses allegations on WhatsApp and Facebook for abuse of dominance in

digital payments market

By way of order dated 18.08.2020, the Competition Commission of India (CCI) has

dismissed allegations of abuse of dominance by WhatsApp Inc ("WhatsApp") and Facebook
Inc ("Facebook") in the market for internet-based messaging application through smartphones
to manipulate another market i.e. 'market for UPI enabled digital payment applications' in its
favour, with its new feature of UPI based transfer of funds.

Background and allegations

Information before the CCI was filed by a lawyer- Ms. Harshita Chawla 'highlighting'
the anti-competitive practices followed by platforms in Unified Payment Interface (UPI)
market in India which affect participants/players in the said market, besides impacting
individual customer/consumer in the long run. It was alleged that WhatsApp backed by
Facebook and its dominance in the internet based instant messaging App, is bundling its
messaging App with the payment option (WhatsApp Pay) to penetrate into the UPI enabled
Digital Payments App Market. It was alleged that UPI enabled Digital payment market deals
with customer sensitive data and with the given volume of data, national security and data
privacy can be compromised, if the anti-competitive activities are left unchecked and
unregulated, thereby leading to loss at a national level.

Besides these broad allegations, the informant made two specific allegations:

 The users of WhatsApp automatically get the payment app owned by WhatsApp i.e.
'WhatsApp Pay' installed on their smartphones and this automatic installation of the
Payment option into the Messenger App is nothing short of 'pre-installation' which is
forced upon a user of the "dominant" product, the WhatsApp messenger , as
automatic installation of WhatsApp Pay on existing WhatsApp Messenger user's
device amounts to imposition of unfair condition on the users/consumers. There exist
two separate markets for Internet based Messaging Apps on smartphones and for UPI
enabled Digital Payments Apps and that there exists a sufficient consumer demand for
use of these apps separately and independently. Thus, the conduct of WhatsApp
amounts to bundling since the two products are offered as a package and are not
available independent of each other, which contravenes Section 4(2)(d) of the Act.
This bundling arrangement allegedly has an element of 'coercion' as WhatsApp enjoys
a dominant position in the internet based instant messaging app market, having a pre-
existing user base of more than 400 million monthly active users in India. A user who
does not wish to install the Payments App but only the Messenger App does not have
the option to do so.
  That the acquisition of WhatsApp, Instagram and Oculus by Facebook causes an
adverse effect on the competition as these companies have huge data sets of users
which they can use for their commercial advantage.

Submissions by Facebook

It was submitted that while Facebook is the parent company of WhatsApp, they are
separate and distinct companies and it is only arrayed as a proper party in this matter. It was
highlighted that Informant has neither made any allegations against Facebook, nor has prayed
for any relief against it, therefore, Facebook should be deleted from the memorandum of
parties.

Further, Facebook challenged the allegation regarding its previous acquisitions stating
that such legitimate and legal acquisitions cannot be equated with abuse of dominance under
Section 4 of the Act. Further, it was submitted that WhatsApp and Facebook are separate and
distinct entities and any alleged strengths of Facebook cannot be attributed to WhatsApp.

Submission by WhatsApp

It was submitted by WhatsApp that the information filed before the Commission was
premature since the full version of WhatsApp Pay was still to be released in India , which
would enable all users in India to access the WhatsApp Pay feature, has not been launched
yet.

Further, WhatsApp challenged the informant's market definition stating that the
informant incorrectly defined the relevant market to be, the 'market for internet based instant
messaging apps in India' whereas WhatsApp operates in a much broader market under
'market for user attention'. WhatsApp application competes broadly with all digital products
and services that seek to capture user attention through innumerable different services or
functionalities, such as social networking, messaging, gaming, content viewing and sharing,
photo and video sharing, or music, amongst many others and the relevant market cannot be
limited to a specific mode of engagement like instant messaging.

With respect to allegations of dominance, WhatsApp claimed that it does not enjoy a
dominant position in the market proposed by it or even in the narrow market proposed by the
Informant and the assessment does not meet the test for dominance under the Act as the
Informant has failed to provide any comparative analysis to demonstrate that WhatsApp acts
independent of competitive constraints from other messaging applications active in India
such as Google Hangouts, iMessage, Viber, Hike, Zoom, Skype, Telegram, or Truecaller, or
SMS services offered by every telecommunications operator in India.

It was further submitted that to constitute an abuse, it must be demonstrated that

WhatsApp Pay has imposed itself upon users of the WhatsApp messenger application, who
have no choice but to submit to using WhatsApp Pay. Further, WhatsApp Pay remains
disabled until it is manually set up by a user and WhatsApp's other non-payment features
remain uncompromised in terms of functionality and quality, irrespective of it being pre-
installed and no user can send or receive funds through WhatsApp Pay without taking these
voluntary steps to enter into these separate terms of service and registering for the WhatsApp
Pay feature.

Further, with regards to allegations of bundling, it was submitted that since WhatsApp
pay is only in the beta phase, it cannot be even said to exist as a separate product. It was
contended that the allegation of bundling is without merit and does not satisfy the conditions
of bundling as understood in the antitrust context. (i) it was submitted that the WhatsApp
application and the payments feature are not separate products, rather it is an additional
feature. (ii) there is no insistence or coercion for the use of WhatsApp Pay. Neither the users
are required to register for or use WhatsApp's payment feature in order to use the WhatsApp
messenger service nor the use of WhatsApp messenger service is conditional upon the usage
of its payments feature.

Challenge to informant's locus standi

Both WhatsApp and Facebook challenged the locus standi of the informant stating
that a lawyer, such as the Informant, who has not even claimed any legal injury as a
consumer or as a member of any consumer or trade association as a result of WhatsApp's
alleged conduct does not have the locus standi to file information. This submission was based
on the decision of the Hon'ble National Company Law Tribunal in its recent judgement
in Samir Agarwal v. Competition Commission of India.

Further, it was alleged that the informant is indulging in forum shopping since the
Supreme Court was also approached by the informant with the same subject matter
allegations and this fact was not disclosed in the information.

CCI's prima facie order

Decision on locus standi

 As regards the challenge to the locus of the informant, the Commission noted that as
per the scheme of the Act, the challenge was misconceived. It was observed that the
Preamble to the Act unequivocally voices the ethos with which the Act was enacted, keeping
in view the economic development of the country, for the establishment of a Commission to
prevent practices having adverse effect on competition, to promote and sustain competition in
markets, to protect the interests of consumers and to ensure freedom of trade carried on by
other participant's in markets, in India, and for matters connected therewith or incidental
thereto.

"Even though a case filed by an aggrieved party may appear to be a case in personam,
underlying it is a larger question of market distortion. The mere fact that a case has been filed
by an aggrieved party under the Competition Act, does not take away its character of being a
case in rem involving a larger question of fair and competitive markets."

Further, it was held that role of the Commission as an overarching market regulator
also finds its foundational footing in the amendments introduced in the Act, vide the
Competition (Amendment) Act, 2007, whereby the provisions of Section 19 (1) (a) were
amended substituting the words "receipt of a complaint" with "receipt of any information"
which clearly reflected the legislative intention of emphasizing the inquisitorial nature of the
proceedings of the Commission.

The Commission placing reliance on the earlier decisions of the Appellate Tribunal
held that that the Informant need not necessarily be an aggrieved party to file a case before
the Commission. Neither the Act specifies any such requirement explicitly, nor the same can
be implicitly read into the provisions which clearly point towards the inquisitorial system
envisaged by the Parliament. It was held that since there are divergent decisions of the
Hon'ble Appellate forum on the question of locus of the Informant, it may not be appropriate
for the Opposite Parties to challenge the maintainability of the information filed by the
Informant, based on the observation in the case of Samir Agarwal case alone.

Further, as regards the challenge that the informant had indulged in forum shopping,
the Commission noted that where the Informant approaches the Commission with unclean
hands or bases its case on incorrect facts or evidence, there are adequate provisions under the
Act, to deal with such instances and to demand that the dismissal of an otherwise
maintainable information, would be stretching the argument too far. As regards non-
disclosure, the Commission noted that the Informant in the present case and the petitioner in
the PIL filed before the Hon'ble Supreme Court are not the same and the attempt to draw
some linkages are not relevant to the facts of the present matter given the inquisitorial scheme
of the Act. More so, when such a disclosure being a technical requirement, and not a factum
leading to dismissal of an information, the assertion of the OPs that the 'Commission should
not consider the present Information on the ground of the Informant's unclean hands alone' is
not tenable.

Decision on merits

Relevant Market

Commission observed that WhatsApp and Facebook broadly are third party apps
providing internet-based consumer communications services. Consumer communications
services can be sub-segmented based on different parameters e.g. on the basis of
functionality, some apps enable real-time communication in various forms, such as voice and
multimedia messaging, video chat, group chat, voice call, sharing of location, etc., while
others provide services such as communication with a wider set of people in an impersonal
setting such as sharing status and posts. Further, while some consumer communications apps
are proprietary in nature, i.e. available on only one operating system such as FaceTime and
iMessage service available on Apple's iPhones, while others operate as over-the-top ('OTT')
apps offered for download on multiple operating systems, e.g. WhatsApp and Facebook are
available on a variety of mobile operating systems, including iOS, Android, Windows Phone
etc. Further, segmentation can also be based on whether a set of consumer communications
apps are available for all types of devices, or only for particular type(s) of device e.g. while
Facebook is available on smartphones as well as PCs, WhatsApp essentially is a smartphone
app.

CCI observed that there are peculiar features which these consumer communication
apps possess, where for some functions they may appear substitutable while not so for others,
making it all the more challenging to compartmentalize them into water-tight categories, and
therefore, it is important to identify the primary or most dominant feature(s) of an app to
categorise it into a particular relevant market.

As regards WhatsApp, it was observed that WhatsApp is primarily an Over-The-Top

(OTT) messaging App, linked to a smartphone device and mobile number, which has features
of communicating personally, both one-to-one or group. It uses the internet to send and
receive text messages, images, audio or video content, sharing of location etc. from one user
to another as opposed to the mobile network used for traditional texting/SMSing. On the
other hand, Facebook is a social networking app which connects many users simultaneously.
The users can post text, photos and multimedia which is visible to all those other users whom
they have agreed to be their 'friend' or with a different privacy setting, with any other user.
Users can also use various embedded apps, join common-interest groups, receive
notifications of their Facebook friends' activities etc.

CCI noted that one of the economic tools widely used by competition authorities for
gauging substitutability and for defining relevant market in traditional markets is the SSNIP
(Small but Significant Non-Transitory Increase in Price) Test. However, given that 'price' is
the most significant consideration for application of SSNIP Test, it may be difficult to
contextualise substitutability from SSNIP point of view for OTT communication Apps as
they do not levy monetary charge on the users.

Accordingly, the Commission held that that the relevant product market in which
WhatsApp operates is the 'market for Over-The-Top (OTT) messaging apps through
smartphones' in India.

UPI enabled Digital Payment Apps also work as third-party apps (not the banking
entities) enabling instant transfer of funds (in the form of IMPS) between users having
subscribed to the Apps on their smartphones and having access to internet which is a new
technology infrastructure that existing bank apps can integrate with, in order to facilitate easy
transfer of funds and other monetary transactions between two people in a secure and
convenient manner. Further, these UPI enabled Digital Payment Apps, e.g. PayTM, Google
Pay, Phone Pe etc., allow several value-added features besides traditional transfer of funds,
such as integrating payment for utilities, mobile bills, purchasing train tickets, air tickets,
movie tickets and thus, provide services which are distinct and which may not be substituted
with any other mode of payment such as debit cards, credit cards, net banking, etc. Therefore,
the second relevant market for assessing the allegations of the Informant was determined to
be 'market for UPI enabled Digital Payments Apps in India'.

Dominance

Commission observed that Facebook and WhatsApp are group entities and though
they may operate in separate relevant markets, their strengths can be attributed to each-others'
positioning in the respective markets in which they operate.
 CCI noted that the data provided by the informant showed that WhatsApp messenger
is the most widely used app for social messaging, followed by Facebook Messenger in the
relevant market delineated by the Commission and is way ahead of other messaging apps like
Snapchat, WeChat etc. showing its relative strength. Further, WhatsApp messenger and
Facebook Messenger are owned by the same group and therefore do not seem to be
constrained by each other, rather adding on to their combined strength as a group.
Accordingly, owing to its popularity and wide usage, for one-to-one as well as group
communications and its distinct and unique features, WhatsApp was found to be dominant.

Abuse of Dominance

Commission observed that the allegation levelled by the informant are in the nature of
both exploitative as well as exclusionary abuses flowing from the same conduct. On the
exploitative side, the Informant was aggrieved that the users of WhatsApp Messenger have
been imposed with another App 'WhatsApp Pay' to which they did not subscribe or download
[Section 4(2)(a)(i)] and since these two apps operate in two different markets, the tying of the
latter with the former is anticompetitive [Section 4(2)(d)]. On the exclusionary side, it was
alleged that this conduct distorts another market i.e. 'market for UPI enabled digital payment
applications in India'.

As regards the allegations with respect to Section 4(2)(a)(i), Commission did not find
merit in the allegation as the mere existence of an App on the smartphone does not
necessarily convert into transaction/usage and as per WhatsApp's submission in order to
enable WhatsApp payment, the user has to separately register for it which necessarily
requires the users to accept terms of the service agreement and privacy policy and therefore
no action cannot be completed without voluntary steps. Further, the users will have full
discretion whether to use WhatsApp Pay app or not, which implies that the users will have an
option to use any other payment apps which might already have been downloaded on their
smartphones.

As regards bundling/tying, the Commission observed that certain conditions which

need to be fulfilled to conclude a case of tying are (i) the tying and tied products are two
separate products; (ii) the entity concerned is dominant in the market for the tying product;
(iii) the customers or consumer does not have a choice to only obtain the tying product
without the tied product; and (iv) the tying is capable of restricting/foreclosing competition in
the market. CCI noted that the first two conditions are met since (i) WhatsApp Messenger
and WhatsApp Pay are two distinct products with different functionalities; and (ii) WhatsApp
is dominant in the 'market for OTT messaging apps through smartphones in India'.

On the third condition, CCI observed that WhatsApp had submitted that WhatsApp
users do not "automatically" or "mandatorily" have to use the WhatsApp Pay feature, but
rather retain full discretion on whether or not to use WhatsApp and the WhatsApp Pay
feature'. It was prima facie found that Installation of the WhatsApp messenger does not
appear to explicitly mandate/coerce the user to use WhatsApp Pay exclusively or to influence
the consumer choice implicitly in any other manner, at present. Accordingly, the third
condition does not seem to have been established.

As regards the fourth condition i.e. the actual or likely impact of installation on
competition in the market for tied product, the Commission observed that at present, the UPI
digital payments market consists of various established players e.g. Google Pay, PayTM,
Phone Pe, Amazon Pay etc. which are backed by big companies/investors and in an evolving
market the players seem to be vigorously competing which is evident from
offers/discounts/incentives offered by them to their users. It was concluded that in such a
market to perceive that WhatsApp Pay will automatically get a considerable market share
only on the basis of its pre-installation seems implausible. Further, the Commission also
observed that WhatsApp Pay had got approvals to act as a payment app in India in February
2020 in beta version, and only recently, it seems to have complied with the data localisation
norms stipulated by NPCI to operate fully and therefore, its actual conduct is yet to manifest
in the market. Accordingly, the Commission observed that this allegation was premature in
nature.

Accordingly, the Commission closed the case under Section 26(2) of the Act.

Mr. Asish Ahuja v. Snapdeal.com, 7

where the CCI clearly stated that both the markets( brick and mortar and online
markets) are different in matter of discount and purchase experience. In such cases the
consumers look for the options available in both the markets and thereby, decide accordingly.
In case if the price of the goods in the online market has elevated significantly, then there is a
likelihood that the consumer will shift towards the offline market and vice-versa. On the basis
of such reasoning the Commission is of the opinion that the two markets-online and offline,
are divergent channels of distribution of the like product and not two different relevant
markets.
 CCI’s perception of the e-commerce platforms and their respective relevant markets
has evolved over time, and three years later, in All India Online Vendors Association
(informant) and Flipkart India Pvt. Ltd. & Ors. (OPs), CCI Case No. 20 of 2018, (“AIOVA
case”) while the CCI dismissed allegations of abuse of dominance against online marketplace
platforms, it noted that the services provided by online marketplace platforms might be blurry
sometimes, but it clearly offered a unique set of services and benefits to consumers that could
not be provided by traditional brick and mortar stores. Further, operations of online
marketplace platforms were different from online retail stores since marketplaces had goods
being sold by multiple sellers whereas online retail stores were simply selling goods owned
by the single retailer. Based on these key differences, CCI delineated the relevant market as
the market for services provided by online marketplace platforms.

NCLAT directs investigation into alleged abuse of dominant position by Flipkart

-Quashes earlier CCI order closing the case

Vaish Associates Advocates

India April 9 2020

By a recent judgment dated 04.03.2020, the Hon’ble National Company Appellate

Tribunal (“NCLAT”) has set aside the order dated 06.11.2018 passed by the Competition
Commission of India (“CCI”) dismissing allegations of Abuse of Dominant Position by
Flipkart India Pvt. Ltd and Flipkart Internet Pvt. Ltd.

The information before the CCI was filed by All India Online Vendors Association
(“AIOVA/informant”) which is a group of more than 2000 sellers selling on e-commerce
marketplace such as Flipkart, Amazon, and Snapdeal etc. The primary allegation was that
Flipkart India sells goods to companies like WS Retail Services Private Limited (“WS Retail
Service”), which was owned by the founders of Flipkart Internet Pvt Ltd.( FlipKart Internet)
till 2012, at a discounted price and thereafter, these goods are sold on the platform operated
by Flipkart Internet. As per the informant, this practice amounted to preferential treatment to
certain sellers. In other words, the information revealed an alleged strategy of Flipkart India
to acquire goods from various persons and to immediately sell them to WS Retail Services at
a discount, which would, in turn, sell these goods as sellers on the internet platform
Flipkart.com of Flipkart internet  was anti-competitive and forecloses markets for online sale
of the goods by members of AIOVA.

The CCI in its order held that Flipkart is not in a dominant position in the relevant
market due to the presence of Amazon (its closest competitor having a valuation around $700
billion) and other competitors such as Paytm Mall, SnapDeal, and Shopclues etc. In addition,
new entrants such as Paytm Mall revealed the low entry barriers in the relevant market and
,therefore , no case of abuse of dominant position was made out against FlipKart. AIOVA
challenged this CCI order dated 6.11.2018 (prima facie order) in appeal before NCLAT.

Incidentally, AIOVA had referred to the decision in a case before the Income Tax
Appellate Tribunal (ITAT) namely Flipkart India Pvt. Ltd v Assistant Commissioner of
Income Tax (ITA No. 202/Bang/2018) before CCI which was ignored by CCI in its prima
facie order .This decision was , however, noticed by NCLAT and played a major role in the
NCLAT decision in the appeal filed . 

The NCLAT noticed the observations of the Assessing Officer in the above-
mentioned case under the Income Tax Act, 1961 , which revealed the manner in which
Flipkart India Pvt. Ltd was operating in the market and resorting to predatory pricing and
claimed the losses suffered on account of such predatory pricing as business expenditure and
claimed credit for the same before the Assessing Officer . NCLAT observed that although the
conclusion drawn to impose tax was set aside by the ITAT, however, the above observations
of the Assessing Officer remained a crucial fact on record which do  make out a prima
facie case for predatory pricing against FlipKart which merits investigation by the DG under
the Competition Act, 2002.  The ITAT had observed that selling at a price below cost prices
by Flipkart was not an irrational economic behavior but a clearly thought out strategy to
establish a monopoly in market by brand building thereby generating consumer goodwill.

Accordingly, NCLAT being satisfied that there is a prima facie case which merits
investigation, directed the CCI to direct the DG for investigation into the matter.
 SC stays NCLAT order for CCI probe against Flipkart

Fast Track Call Cab Pvt. Ltd. & Anr. (informant) and ANI Technologies Pvt. Ltd.
(OPs), CCI Case No. 6 & 74 of 2015

In another case[5] involving online taxi booking platforms Ola and its competitor
Uber the allegations pertained to abuse of dominance by way of offering heavy discounts to
passengers and incentives to cab drivers associated with them. The CCI defined a narrow
relevant market as the market for radio-taxi services in the city of Bengaluru (even though the
cab aggregators had a similar business model across the country). Radio-taxi services were
distinguished[6] from other modes of public transportation and the CCI rejected the cab
aggregators’ assertion that the relevant market should be defined at a broader level since all
alternative modes of transport posed an effective competitive constraint on the cab
aggregators.

In all three cases, while delineating the relevant market, CCI has considered the
nature of services / products offered by the digital market participants and assessed if the
same were substitutable by the customer with services / products offered by traditional
markets.

Uber and Ola win antitrust case in India (?) – No Hub and Spoke cartel with drivers -NCLAT
dismisses appeal on grounds of lack of locus standi
By way of judgment dated 29.05.2020, the National Company Law Appellate
Tribunal (“NCLAT”) has exonerated cab aggregators Ola and Uber from allegations of
facilitating price fixing through their drivers under a “hub and spoke’ cartel arrangement
while dismissing the appeal filed by an individual on the ground of lack of locus standi . The
NCLAT, inter alia, held that an informant before the Competition Commission of India
(“CCI/Commission”) has to be a person who has suffered invasion of his legal rights as a
consumer or beneficiary of healthy competitive practices.

Background

The informant (an independent law practitioner) had initially filed an Information
before the Commission alleging that the online cab aggregators Ola and Uber were using
their respective algorithms to facilitate price fixing between drivers. In other words, the
informant alleged that there was collusion amongst the drivers through the cab aggregators
who purportedly used algorithms to fix prices which the drivers were bound to accept. As per
the informant, algorithmic pricing adopted by Ola & Uber takes away the liberty of
individual drivers to compete and amounts to price fixing through a “hub and spoke” cartel
like arrangement.

The Commission closed the case under Section 26(2) of the Competition Act, 2002
(“the Act”) , without calling for any response from either Uber and Ola , holding that there
was neither any instance of any agreement/understanding between the cab aggregators and
their respective drivers nor between the drivers inter se qua price fixing. The Commission
had also noticed that Ola and Uber being Cab Aggregators operating through their respective
apps were not an association of drivers and they acted as separate entities from their
respective drivers. A rider books his ride at any given time which is accepted by an
anonymous driver available in the area and such driver has no opportunity to co-ordinate its
action with other drivers thereby ruling out such activity being termed as a cartel activity. The
Commission ruled out any hub and spoke cartel like arrangement between Ola/Uber and their
respective drivers.

The informant, being aggrieved by the Commission’s decision filed an appeal before
the NCLAT levelling allegations of price fixing in contravention of Section 3 and price
discrimination in contravention of Section 4 by Ola and Uber.

Proceedings before NCLAT

Submissions by appellant –  The appellant submitted that the Commission has

erroneously concluded on the genuineness and legality of the pricing model of Ola and Uber
in the absence of their defence, and that the Commission has not refuted the allegation that
the OPs fixed prices which the drivers are bound to follow and has, therefore, acquiesced the
fact of price fixing and that the Commission has erroneously implied that price fixing done
by way of an app is immune from scrutiny. The appellant further submitted that the
Commission’s observations that the ‘app determined pricing on many occasions goes lower
than what an independent driver would have charged’ does not legitimise the price fixing,
that the price determined by a private enterprise cannot be considered as competitive price for
all of the drivers for taking that price, and that the Commission has erred in treating drivers
and the app providers as a “single economic enterprise” and that the Commission has erred in
holding that there is no agreement amongst the drivers to fix prices where the app provider is
acting as a “hub” and lastly that the Commission was not justified in ignoring the fact that
Uber’s business model was challenged in USA  with identical allegations which was
considered fit for investigation.

Submission by Ola-  Ola submitted that it merely acts as an intermediary which

connects two ends of the supply chain i.e. taxi driver and the commuter and Ola and the taxi
drivers connected to Ola are not at the same level of supply chain. It was further submitted
that the Informant has not been able to establish an agreement between Ola and Taxi drivers
connected to it, or between the taxi drivers themselves, where they have agreed to fix prices.
As regards pricing mechanism, it submitted that there are numerous variables such as,
distance, time, availability of cab, weather etc. based on which the Ola App algorithm sets the
fare of the trip which makes it impossible for anyone to fix prices. Contending the allegations
of ‘hub and spoke’ cartel, it was submitted that there was no evidence of the taxi drivers
entering into a conspiracy by way of Ola App to exchange price sensitive information
amongst each other for fixing prices and maintaining the same. Under the business model of
Ola, there is no such information which and supply in the city and each specific city/ area
where the services are is exchanged amongst the drivers and Ola.

  Submissions by Uber-  Uber submitted that the price structure offered by it is

comparable to metered taxis as well as auto rickshaws which follow standard price
mechanism at different points of the day. Moreover, the driver partners are free to charge any
amount which is lower than the one recommended by the App and also free to pick-up
passengers not using the Uber App. It was further submitted that the surge pricing model is
a product of the demand being provided. It was further submitted that the Uber App is a
technology service offered by Uber to its driver partners with riders having the choice to go
for alternative modes of transport and driver partners having choice to undertake offline
private or corporate transport duties. Further the driver partners are free to negotiate a lower
fare than what is recommended. Uber further submitted that it does not function as an
association with its driver partners, as such it cannot facilitate a cartel between them as
alleged.

Submissions on locus standi-  It was submitted by Ola that the Informant is not an
aggrieved person and that no prejudice has been caused to him and on the basis of foreign
law, an inquiry initiated in a foreign jurisdiction cannot be basis for interfering with the
impugned order nor can same be done on the basis of opinion of authors of some article in
foreign journals. On the other hand, the informant contended that ‘Informant’ falls within the
definition of “any person” under Section 19(1)(a) of the Act which includes an individual
who can file an information virtually like an F.I.R in a criminal case can be filed by anybody.

NCLAT Decision

 Issue of Locus standi-  The NCLAT on the issue of locus noted:

“ The question that arises for consideration is whether a ‘person’ would mean any
natural person irrespective of he being a consumer who has suffered invasion of his legal
rights or a person whose legal rights have been or are likely to be jeopardised by the alleged
anti-competitive agreement or abuse of dominant position. It is true that the concept of locus
standi has been diluted to some extent by allowing public interest litigation, class action and
actions initiated at the hands of consumer and trade associations. Even the whistle blowers
have been clothed with the right to seek redressal of grievances affecting public interest by
enacting a proper legal framework. However, the fact remains that when a statute like the
Competition Act specifically provides for the mode of taking cognizance of allegations
regarding contravention of provisions relating to certain anti-competitive agreement and
abuse of dominant position by an enterprise in a particular manner and at the instance of a
person apart from other modes viz. suo motu or upon a reference from the competitive
government or authority, reference to receipt of any information from any person in section
19(1) (a) of the Act has necessarily to be construed as a reference to a person who has
suffered invasion of his legal rights as a consumer or beneficiary of healthy competitive
practices. Any other interpretation would make room for unscrupulous people to rake issues
of anti-competitive agreements or abuse of dominant position targeting some enterprises
with oblique motives.”

Accordingly, the NCLAT held that there was nothing on record to show that the
informant has suffered a legal injury at the hands of Ola and Uber as a consumer or as a
member of any consumer or trade association and therefore the informant has no locus
standi   to maintain an action qua the alleged contravention of Act by Ola and/or Uber.

On Merits-  Even after holding that the informant had no locus, the NCLAT dismissed
the appeal on the basis of merits as well. The NCLAT noted that the business model of Ola
and Uber does not support the allegation of Informant as regards price discrimination. It was
observed that there was no allegation of collusion between the Cab Aggregators through their
algorithms which implied an admission on the part of Informant that the two taxi service
providers are operating independent of each other. The NCLAT observed that the concept of
hub and spoke cartel stated to be applicable to the business model of Ola and Uber as a hub
with their platforms acting as a hub for collusion inter se the spokes i.e. drivers resting upon
US Class Action Suit titled “Spencer Meyer v. Travis Kalanick” has no application as the
business model of Ola and Uber (as it operates in India) does not manifest in restricting price
competition among drivers to the detriment of its riders. The matter relates to foreign antitrust
jurisdiction with different connotation and cannot be imported to operate within the ambit
and scope of the mechanism dealing with redressal of competition concerns under the Act.

Further, as regards Ola, it was observed that that Ola platform have no inter
se connectivity and lack the possibility of sharing information with regard to the commuters
and the earnings they make out of the rides provided which excludes the probability of
collusion inter se the drivers through the platform of Ola. With respect to Uber, it was
observed that it provides a technology service to its driver partners and riders through the
Uber App and assist them in finding a potential ride and also recommends a fare for the same.
However, the driver partners as also the riders are free to accept such ride or choose the App
of competing service, including choosing alternative modes of transport. Even with regard to
fare though Uber App would recommend a fare, the driver partners have liberty to negotiate a
lower fare. It is, therefore, evident that the Cab Aggregators do not function as an association
of its driver partners.

On the issue of abuse of dominant position, it was noted that neither Ola nor Uber was
holding a dominant position to impose price discrimination considering that there are other
players offering taxi service/ transportation service/ service providers in transport sector.
Moreover, Ola and Uber are not operating as a joint venture or a group, thus both enterprises
taken together cannot be deemed to be holding a dominant position within the ambit of
Section 4 of the Act. Accordingly, the appeal was dismissed based on lack locus standi as
well as on merits.

Comment: This order of NCLAT, unless challenged by a second appeal in Supreme

Court, seems to close the growing challenge to the controversial application-based business
model of cab aggregators, at least for the time being, in India. On merits, It is surprising the
both the CCI and the appellate tribunal chose to believe on the averments made by both Uber
and Ola on their face value without considering it necessary to investigate the matter to find
any possibility of harm to competition or whether the algorithms were programmed with a
pre-determined manner to produce surged pricing and whether such discriminatory pricing
harmed consumers ,as compared with the standard meter taxis prices etc. The order, in my
view, exhibits that the competition regime in India is still far away from assessing
algorithms-based collusions by e-platforms.

On locus, in my humble view, the order of NCLAT is against the spirit of the original
2007 amendment to the Competition Act, 2002, whereby the concept of “complainant” was
replaced with that of an ‘Informant”. As per the statement of reasons before the said
amendment an Informant may or may not have any personal interest or suffered any personal
injury from the impugned anti-competitive conduct since such conduct is against the society
in rem and it is the duty of every citizen to point out such illegal conduct to the Commission
and the Commission is mandated to inquire into it if it finds that there exists a prima facie
case to investigate . The NCLAT, it is respectfully submitted, has imputed its own
interpretation to the words “any person” which is contrary to the legislative intent of the Act
as amended in 2007. Interestingly, the Commission itself had not closed the case because of
lack of locus standi of the Informant but on merits, which was rightly questioned in the
appeal but the NCLAT chose to enter into this question though not very pertinent in my view.

INTRODUCTION

The Competition Commission of India (“Commission”) in its recent order in M/s. Mega
Cabs Pvt. Ltd. v. M/s ANI Technologies Pvt. Ltd.1 (“Ola”) and Meru Travel Solutions
Private Limited v. Uber India Systems Private Limited (“Uber”)2 (together “Opposite
Parties”), held that Opposite Parties were not in a dominant position in the relevant market
of New Delhi and consequently, the practices followed by Opposite Parties were not in
violation of Sections 3 and 4 of the Competition Act, 2002 (“Act”).

In the case of Ola, the Commission categorically held that access to funding sources, which
enabled it to provide discounts and incentives, were not available exclusively to Ola and
consequently, access to sources of funding could not be considered as being anti-
competitive. This is an important issue since an argument to the contrary was raised in M/s.
Fast Track Call Cab Private Ltd. v. ANI Technologies Pvt. Ltd.3 (Fast Track). In Fast
Track Commission placed reliance on the report prepared TechSci Research Pvt. Ltd. to
come to a conclusion that a prima facie case was made out. However, the report prepared by
New Age TechSci (“TechSci”) in Uber case was rejected when another report which had
contradictory findings was also placed before the Commission.

Interestingly, while in Fast Track where the order was passed under section 26(1) of the Act
without hearing the opposite party. In the present cases and in Meru Travel Solutions
Private Limited v. Uber4 (“Meru Kolkata”)5, all cases where Commission concluded that
allegations of anti-competitive behaviour were not made out, the opposite parties in the
respective cases appeared and were able to controvert the material placed before
Commission.

Background Facts

Informants in both cases (Meru Travel Solutions Private Limited, Meru, and M/s. Mega
Cabs Pvt. Limited, Mega Cabs, both parties “Informants”) had filed complaints under
Section 19 (1) (a) of the Act against the Opposite Parties operating radio taxi services under
the brand name “OLA” and “UBER”. Informants in their respective cases alleged that the
respective Opposite Parties were in a dominant position in the relevant market and that they
abused their position by engaging in anti-competitive practices including predatory pricing
and incentivizing drivers to eliminate competition in violation of sections 3 and 4 of the Act.

Contentions and Issue

In both cases, the Opposite Parties appeared and contested reliance placed on the reports
relied by the respective Informant. The Informants in both cases relied on market search
reports to substantiate the allegation that Opposite Parties were in a dominant position and
therefore, had committed acts that were in violation of Sections 3 and 4 of the Act. Mega
Cabs relied on a report prepared by 6Wresearch and Meru relied on a report prepared by
TechSci. Informants alleged that the practices of excessive discounts, incentives and pricing
followed by Opposite Parties were an abuse of the dominant position held by the Opposite
Parties and hence, Opposite Parties were in violation of the Act.

In both cases, Opposite Parties contested authenticity and reliability of the reports. In the
case of Ola, the report of 6Wresearch was objected to on the ground that it was
commissioned by an unknown client, it was for internal purpose and in any event was not
accurate or reliable in respect of the data provided. Interestingly, Informant in Meru
Kolkata relied on a report by TechSci Research Pvt. Ltd. which was ultimately rejected by
the Commission due to existence of another report prepared by 6Wresearch which had
contradictory findings. The issue before the Commission in both cases was whether the
Opposite Parties were in a dominant position and whether the Opposite Parties indulged in
practices of predatory pricing and incentives to drivers excluded other players from relevant
market at the cost of suffering business losses.

Judgment and Analysis

The Commission rightly determined the relevant market relying on its previous decisions
in Fast Track and Meru Kolkata. The relevant market in all cases was identified to be the
“radio taxi services” and based on the city in which it was operating, the relevant
geographical market would be determined as operations restricted to within the city limits.
The Commission narrowed down the relevant market to Delhi even though the reports relied
by the Informants were in respect of National Capital Region. The Commission in both the
cases held that the reports relied by Informants in respective cases did not demonstrate that
Opposite Parties were in a dominant position and additionally, due to the existence of
several players, despite Opposite Parties being prominent did not establish its dominance in
the market.

The Commission also rejected both reports. In Ola’s case, the report relied was found to be
commissioned by an unknown client for internal purpose. In Uber’s case it was found that
another report contradicted the report relied by Meru on several parameters. As a result, the
Commission did not rely on the contents of the reports though it agreed that stiff
competition existed in the market and Ola and Uber were major players. Further, with
respect to violations of Section 3 of the Act, the Commission held that availability of the
funds and innovative technology or models developed for operating in a particular market
did not create entry barriers. Such avenues were available to all existing players and not
exclusively to the Opposite Parties and therefore there was no violation of competition law.

This decision is remarkably striking in the different approach of the Commission from its
first order in Fast Track, which involved same issue. In Fast Track, Commission placed
reliance on the only report which was placed before it, by TechSci Research Private Limited
and placing reliance on this report Commission was of the prima facie view that predatory
pricing engaged by the Opposite Party was aimed at driving the other players out of the
market and that it amounted to abuse of dominant position. It is interesting to note that in the
case of Fast Track alone, the opposite party was not heard and the Commission directed the
Director-General to investigate. In contrast, in all other cases discussed above, the opposite
party appeared before the Commission and contested the report and the Commission
accepted these objections. While in Fast Track, Commission did refuse any interim order
under Section 33 of the Act6, it is interesting to see if Commission would be inclined to
exercise its power of review in light of seemingly different conclusions based on similar
facts7 in other cases where an order has been passed directing investigation by the Director-
General.

The Supreme Court of India in Namit Sharma v. Union of India8 has held that in order to
maintain judicial discipline and consistency in the functioning of quasi-judicial bodies, it is
imperative to give appropriate attention to the doctrine of precedence and not overlook the
judgments of the courts dealing with the subject and principles applicable in a given case.
Further, it is not only the higher court’s judgments that form binding precedents but even
those of the larger Benches of the Commission should be given due acceptance and
enforcement by the smaller Benches of the Commission which has clearly been overlooked
in the present case.9 The approach followed by the Commission in the recent cases has
helped nip at the bud litigation which would have otherwise been a burden on the court
system and for the opposite party. It is hoped that as observed by the Supreme Court,
Commission is consistent in this approach.
 India – Matrimony.com v. Google: A Cat on the Wall Approach to Intervening in the
Expanding Digital Space

In its decision passed on February 8, 2018 the Competition Commission of India

(CCI) has imposed a fine of INR 135.86 crores (approximately $1.36 bn) on Google for
abusing its dominant position by engaging in search bias vis-à-vis Google flights service and
imposing unfair terms in the intermediation agreements with website owners incorporating
Google’s search bar and/or ad.[1] The present decision sets the tone for CCI’s intervention in
the digital market in India involving the careful balancing of anti-trust intervention with
market innovation.

Background

The informants namely Matrimony.com Limited and Consumer Unity and Trust
Society raised many allegations vis-à-vis abuse of dominance (AoD) by Google. However,
this post shall focus on the three main allegations where Google was held liable for AoD,
namely:

1. Display of ‘universal results’[2] in fixed positions in the search engine results page
(SERP), in deviation from the order of relevance;

2. Manipulation of the search algorithm to favour its own search vertical services like
Google flight, Google maps etc. which are prominently displayed in the SERP; and

3. Imposing of unfair conditions in the syndication/intermediation agreements with

website publishers.

Delineation of the relevant market and assessment of dominance

The commission defined the relevant market to be (1) the market for online web
search services in India and (2) the market for online search advertising in India. CCI also
dismissed Google’s argument that use of its search services did not involve any
consideration/purchase of services. This was because in a two-sided market the
data/information collected from the users on every search contributed to ‘big-data’ analysis
and revenue to Google from targeted advertisements.

Further, CCI also found Google to be dominant in the relevant markets based on inter
alia the following factors: its volume of business, total revenue, market share and the high
entry barriers in terms of scale and technology in the online web search and online search
advertisement market in India.

Abuse of dominant position

CCI began this analysis by highlighting the special responsibilities on Google by

being dominant in the digital market, where network effects and innovation are crucial.
Further, CCI laid down a high standard for antitrust intervention in the fast paced digital
market by observing that any intervention must be targeted and proportionate to balance the
twin goals of nurturing innovation and addressing consumer harm.

In respect of the first allegation, CCI found Google to be guilty of AoD, as until
October 2010 the ‘universal results’ were displayed in the 1st, 4th or 10th position in the
SERP, irrespective of their relevance. However, after October 2010 Google changed its
policy in this regard and the ‘universal results’ appeared in the SERP on the basis of their
relevance only. Further, CCI held that Google was providing more space and prominently
displaying its flight comparison vertical’s box in the SERP. Resultantly, Google was able to
use the link inserted in the box to direct users to its own vertical, driving away traffic from
the competitor’s pages and generating more advertisement revenue in the process.

The third allegation on which the Commission found Google to be guilty of AoD
related to the unfair terms in the negotiated intermediation agreements with website
publishers offering Google’s search/advertisement services on their websites. The relevant
term in such agreements directed the website publisher not to implement search technologies
which were ‘same or substantially similar’ to that of Google. CCI found this clause to be
violate of antitrust principles as it reduced the choice of website publishers and also in effect
denied market access to Google’s competitors. Additionally, on this basis CCI held that
Google was using its dominant position in the online search market to leverage its position in
the online syndicate search agreement market.

In terms of remedy for the above breaches, CCI issued a forward looking cease and
desist order directing Google not to revert to the its earlier policy (prior to October 2010) vis-
à-vis ‘universal results’ placement. Further, CCI directed Google to display a disclaimer that
the link placed in the commercial flight unit box in the top of the SERP leads to Google’s
flight comparison vertical’s page and not its competitors page. The Commission also directed
Google to remove the restrictive clause in the search intermediation agreements. Finally, CCI
imposed a penalty of INR 135.86 crores which was a 5% penalty on Google’s average total
revenue generated from India operations over the relevant period.

Analysis

This decision marks the starting point for CCI’s intervention in the digital space and it
is expected that the principle of targeted and proportionate antitrust intervention will shape
CCI’s approach in subsequent cases in the digital market like big-data etc.

However, CCI has not applied this principle in practice as there is inadequate
evidence of consumer harm in many of its findings. CCI’s findings vis-à-vis search bias relies
on Google’s public statements and Microsoft’s submissions/reports on user behaviour. There
was no proper analysis of user’s clicking behaviour in India and on whether competitors
actually lost out on volumes due to Google’s conduct. CCI’s observation below highlights
this issue of lack of fact-finding:

“The Commission notes that there may be equally efficient websites/ specialised
search service providers, but due to reduced visibility, they may not be able to sustain and
survive in the market for flight search services.”[3]

Further, CCI failed to define online search syndication agreements as a relevant

market but found Google to be leveraging its dominance in the online search market to
protect its position in the online search syndication agreement market. The above-mentioned
issue of evidentiary standards becomes increasingly relevant as CCI is slated to hear on
merits the AoD and patent hold-up claims against standard essential patent holder Ericsson.

Contrastingly, the European Commission’s (EC) in its 2017 order against Google has
extensively relied on market studies/surveys to assess the user behaviour in EU, which
showed that moving the first ranked link to the third rank in the SERP reduced the number of
clicks by almost 50%.[4] The EC also analysed the increase in traffic on Google’s shopping
vertical in comparison with its competitors, in the relevant EU jurisdictions.

Further, in terms of the remedy awarded the EC decision was more market oriented as
Google was asked to propose commitments to remedy the breaches. Finally, the EC accepted
Google’s commitments to provide space to three non-Google alternatives on the SERP next
to its shopping vertical unit’s box.[5] The remedy awarded by CCI in directing Google to
insert a disclaimer in the link provided in its flight vertical unit’s box may be inadequate to
address the consumer harm. Therefore, in effect this decision and the paltry fine may not
really affect or alter Google’s operations and growth in India.

The order is also a limited victory for consumers/competitors as CCI has rejected
many allegations against Google including discriminatory conditions on AdWords advertisers
and trademark owners through Google’s keyword bidding policy etc. However, in spite of its
contributions and shortcomings this decision stands as a testament to the difficulty that
competition agencies are grappling with globally while setting out the boundaries of antitrust
intervention in the digital space