Dr. V.K.

Unni
Professor
Indian Institute of Management Calcutta
E-mail: unniv@iimcal.ac.in

UNNI IIM-C
 MCX Stock Exchange (MCX-SX), was launched in
2008, under the regulatory framework of SEBI.
 The exchange received approval from SEBI and
Reserve Bank of India (RBI) to launch a nationwide
electronic platform for trading in currency derivatives
 Though MCX-SX wanted to enter other segments such
as equities its application was rejected by SEBI
 National Stock Exchange (NSE) is India’s premier stock
exchange with monopoly in equity, F&O and Wholesale
Debt Market markets
 From 2008 NSE was also operating in currency
derivatives market

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 MCX -SX, lodged a complaint in 2009 with the
Competition Commission of India (CCI) against NSE,
alleging abuse of dominance by the latter
 MCX-SX alleged that NSE had waived admission and
substantially reduced trade-related fees to eliminate
competition and prevent other entities from entering the
market
 The NSE replied that it was merely waiving fees as a
form of introductory pricing.
 The CCI, after examining the information and hearing
the parties, has found a prima facie case and has
ordered its Director General (DG) to carryout detailed
investigation and submit an investigation report for its
consideration.

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 The DG held in December 2010 that NSE was dominant in the
entire stock exchange market service as a “single relevant
product”,
 In May 2011 the CCI issued a notice to NSE on the aspect of
penalty
 Under the Law, CCI can levy penalties up to 10% of the turn-
over over the last 3 years and also issue a cease and desist
order against NSE
 CCI noted that NSE which had 100% share in F&O, 75% and
90% in the equity and wholesale debt market respectively
used the monopoly profits from these sectors to consolidate its
position in the CD market
 CCI also held that the zero pricing policy followed by NSE
went beyond promotional pricing
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 With the monopoly profits earned in other segments NSE can
well afford to bear losses for a substantially long period and
thus drive out other competitors from the market
 CCI also took a similar stand on the waiver of admission and
deposit fees charged from members
 As against Rs. 5.6 lakhs charged as admission fees from
those who want to be a member in the equity market it did not
charge any admission fees in the CD market
 CCI further noted that the waiver of data feed fee which was
another source of income for exchanges was also done with
the intention of weeding out competition from the market

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 The policy followed by NSE to promote its software NOW
also came for CCI’s criticism
 NSE denied interface access of NOW to the users of ODIN
(which was developed by a company called FT which was
the co-promoter of MCX-SX)
 CCI noted that NSE has thus denied its members the
freedom to choose their software of choice
 Thus CCI was of the opinion that NSE used its position of
massive strength in the non-CD segments to protect its turf
in the CD segment

UNNI IIM-C
 The commission determined in its majority order dated 25
May 2011 that NSE did enjoy a dominant position only in the
currency derivatives (CD) sector, which it found was clearly an
independent and distinct relevant market.
 This went against the DG’s finding in December 2010 that
NSE was dominant in the entire stock exchange market
service as a “single relevant product”
 The CCI’s narrow definition of relevant market as just applying
to CDs is good for NSE as a broader definition would have led
to more scrutiny in other markets also
 While five of the seven members of the CCI found in favour of
MCX, the other two dissented

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 FICCI-Multiplex Association of India v. United
Producers/Distributors Forum (UPDF) and Others (May 2011)
 The CCI started investigation in 2009 following the cinema
operators' allegation that the producers and distributors were running
a cartel
 The multiplex cinema chains had been involved in a dispute with the
movie makers and distributors over revenue sharing
 In protest, the movie makers went on strike, and this continued for
more than 2 months
 In May 2011 CCI imposed a penalty of Rs 1 lakh each against 27
major film producers for abusing their dominant positions and
entering into anti-competitive agreements against the cinema owners
federation UNNI IIM-C
 While arriving at the decision , CCI noted the following
 UPDF and others produce and distribute almost 100% of the Hindi
Films produced/supplied/distributed in India and thereby exercise
almost complete control over the Indian Film Industry
 UPDF vide their notice dated 27.03.2009 had instructed all
producers and distributors including those who are not the members
of UPDF, not to release any new film to the members of Multiplex
Association for the purposes of exhibition
 The above notice was sent to the members by UPDF because of the
conflict between the producers/distributors and the members of the
informant on revenue sharing ratio

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Cartel like conduct
 The producers and distributors most of who are members of two
associations decided collectively not to release films to multiplex
owners during the period April-June 2009
 This was done with the intention to extract more favourable revenue
share from Multiplex owners.
 Multiplexes could release only some low budget movies during the
period
Persons involved
 The producers and distributors formed an association by the name of
United Producers and Distributors Forum for the purpose which also
issued letters to the producers and distributors not to supply films to
the multiplexes
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 Key persons involved on behalf of producers-distributors were
Mukesh Bhatt, Amir Khan, Shahrukh Khan, Karan Johar etc
Evidence of cartel meetings
 Producers and distributors held meetings and conferences on the
issue and associations, individual producers-distributors also bore
the expenses together for such meetings and conferences
Instances of anti-competitive conduct
 Letters were issued by associations to the members with
an appeal not to release films to multiplexes.
 These letters even carried threat of suspension / boycott

 During the period April- June 2009 there was a collective

decision not to release films to multiplexes
UNNI IIM-C
 As a result, there was loss of revenue to the multiplex owners
and end-consumers also could not get the opportunity of
watching films in multiplexes
 The CCI noted that the producers/distributors with their
collective market power attempted to ensure that multiplex
owners did not get the business of film exhibition till they agreed
to the proposal of enhanced revenue share
 CCI found some important aspects of a cartel that have been
found to exist in this case.
1. Ability of the producers/distributors to control release of films.
2. Pre-meditated and calculated joint stand taken by the
producers/distributors in their face-off with the multiplexes.
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3. Convenient existence of forum for cartel-forming in the guise
of active associations of producers / distributors
4. Geographical concentration of the film industry in Mumbai,
enabling intense and regular interaction necessary for cartels
5. Policing of the cartel “agreement” and ability of punishing any
violators of the cartel agreement as evidenced from letters
written to members.
6. Open threats of dire consequences to intimidate members who
may not be too willing to abide by the cartel agreement
7. Complete ownership and control of their films by the
producers/distributors gave them a commanding position to
dictate terms
 CCI noted that all the above 7 factors showcased some of the
classic behaviour pattern of cartels

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DLF Case 2011
 CCI has imposed a penalty of Rs. 630 crores on DLF Limited
(DLF), a leading real estate Developer in India for abuse of
dominance and unfair trade practices.
 Apart from the monetary penalty, CCI has ordered DLF to cease and
desist from imposing and formulating such unfair conditions.
 Further, DLF has also been ordered to amend such conditions within
3 months.
 CCI decided in favour of allotees of the apartments, Belaire Owner’s
Association- Gurgaon, and held that DLF by placing discriminatory
and abusive clauses in the Apartment Agreements is guilty of
abusing its dominant position.

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 The complaint was filed because there was a delay in handing over
possession
 Furthermore it was also alleged that DLF violated building
restriction norms by increasing the number of floors from 19 to 29
and increasing the number of apartments from 384 to 564
 It was also alleged that DLF has charged exorbitant late fees and
interest, for delayed payments made by the buyers and the
agreement between the apartment owners and DLF was also
extremely one sided.
 DLF's contended that they did not hold any dominant position in the
relevant market because neither the size of an entity nor resources
available to that entity alone can determine dominant position in a
relevant market.
UNNI IIM-C
 DLF argued that along with factors like total assets, return on
assets, profit after tax those on liabilities and indebtedness of
the company along with its debt-equity ratio should also be
used to determine whether an entity is dominant.
 Furthermore the consumers were not dependent on the DLF's
projects and that they had ample choice to book or purchase
apartments
 Since there was no entry barrier for new developers to enter the
market in the relevant period, DLF cannot be said to occupy a
position of dominance.

UNNI IIM-C
 CCI delineated the relevant market as the market in respect of high-
end residential properties in Gurgaon
 In the relevant market, DLF Ltd. had a dominant position within the
meaning of the term
 The facts of this case and the conduct of DLF along with its
resources and the duration during which this abuse has continued to
the advantage of DLF Ltd. and to the disadvantage of consumers,
compelled CCI to impose a heavy penalty
 Thus CCI imposed a penalty at the rate of 7% of the average of the
turnover for the last three preceding financial years
 This decision was upheld by COMPAT in 2014
 Even though DLF appealed against this decision to Supreme Court
no favorable decision has come
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 Builders’ Association of India v. Cement Manufacturers’
Association & Ors. (June 2012)
 The CCI imposed a penalty of approximately Rs. 6300 crores on
certain cement companies after holding them guilty of cartelization
in the cement industry, it also issued a cease and desist order against
them
 This amount is roughly 0.5 times the net profit of such companies
for the two years (2009-11)
 Apart from this the Cement Manufacturer’s Association (CMA) has
been fined 10% of its total receipts for the past two years for acting
as a platform where the cartel activity happened
 CCI decision is triggered by the information filed by the Builders’
Association of India i n July 2010 against the CMA and ACC,
Gujarat Ambuja Cements Limited, Ultratech Cements etc
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 In September 2010, the CCI formed a prima facie opinion on the
contravention of the Competition Act and directed investigations in
the matter.
 In May 2011 , the Director General (DG) submitted his report which
highlighted the violation of provisions by the cement companies.
 The most important issue before the CCI was whether the conduct of
the cement companies violated Sec.3 which deals with anti-
competitive agreements
 The CCI also examined whether there was an abuse of dominant
position (Sec. 4 of the Act)
 CCI found that the market has many players and no single firm or
group was in a position to operate independent of competitive forces
or affect its competitors or consumers in its favour, thus Sec. 4 was
not violated UNNI IIM-C
 One crucial factor that turned decisive was the role of CMAin
collecting competition sensitive data
 CCI held that the competitors were very closely interacting using the
platform of the CMA which provided them a chance to determine
and fix prices
 The CCI observed that cement prices increased immediately after the
High Power Committee Meetings of the CMA which were attended
by various cement companies in January and February 2011
Price Parallelism
 The DG while doing an economic analysis of price data found
that there was a very strong positive correlation in the prices
of all companies and this confirmed price parallelism.
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 CCI noted that given the nature of data exchanged between the
parties, price parallelism could have happened because of collusion
between the companies
 Furthermore with regard to production of cement during the period
on year and plant wise basis, the capacity utilisation across the
cement companies had decreased
 Even though the forces of demand and supply would have ensured a
higher dispatch figures than the corresponding period of the
previous year, the dispatch was lower than the actual consumption
for the corresponding months of 2009
 Thus the cement companies were controlling and limiting the supply
of cement in the market.
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 In November – December 2010 the cement companies reduced
production collectively compared to the same period in 2009,
according to CCI this was clear case of production parallelism
 Price Increase : The deliberate act of cutting production and
supplies by the cement companies and almost inelastic nature
of demand of cement in the market led to higher cement prices.
 Price Leadership: Since there are very few major cement
manufacturers, the price leaders gave price signals by advanced
media reports that helped other manufactures to co-ordinate
their strategies

UNNI IIM-C
 CCI held that the increase of price and reduced supply in the market
was to the detriment of the consumers and the whole economy as
cement is a very crucial input in construction and infrastructure
industry
 Furthermore the defences under the Act dealing with efficiency
were not available as the conduct of the cement companies neither
caused any improvement in production or distribution of goods nor
any promotion of technical, scientific and economic development
 There is no accrual of benefits to customers as the prices of cement
has gone up significantly in the last 2 years
 All the above said factors compelled CCI to rule against the
conduct of cement companies by imposing a heavy fine of about Rs.
6300 crores UNNI IIM-C
 The cement manufacturers had appealed against this decision of the
CCI before the COMPAT
 The COMPAT quashed the CCI's order in December 2015 after
observing that CCI Chairperson, was party to the order despite not
being present during hearings.
 The cement companies argued that the CCI Chairperson was not
present at the time of the hearing but only participated in subsequent
deliberations and signed the order.
 COMPAT thus set aside the CCI penalty on the ground of violation
of principle that 'only one who hears can decide', and has directed
the CCI to hear the matter afresh.

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 Subsequently, the CCI re-heard the Opposite Parties and passed the
August 2016 Order (31/8/2016).
 The August 2016 Order re-affirmed the findings of the 2012 Order,
which imposed a penalty of 0.5 times of the net profits of the
Opposite Parties for the years 2009-10 and 2010-11 for violation of
the cartel provisions of the CA 2002
 The CCI emphasized on price parallelism amongst the cartel
members as the primary indicator of the cartel
 It found that the price correlation was greater than 0.9, which
pointed towards a high degree of correlation amongst the cement
companies

UNNI IIM-C
 CCI further observed that the concentration levels of the
cement market highlight the oligopolistic nature of the
market, which in fact facilitated collusion.
 Additionally, the CCI focused on dispatch parallelism and
found that the Opposite Parties coordinated their actions as
dispatch data for November 2010 demonstrated identical
behavioral pattern.
 Thus the August 2016 order also imposed a fine of more
than Rs.6700 crores on 11 cement companies and CMA for
cartelization

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 Notice under Combination Regulations was jointly given by
Relay B.V, Diageo and United Spirits Limited (USL) in
December 2012, for the proposed acquisition of 27.4% shares
and control of USL.
 Relay set up in Netherlands is a fully owned subsidiary of
Diageo which is a listed company in England
 The proposed combination accordingly relates to an acquisition
of shares and control
 Diageo through the proposed combination, would be able to
effectively participate in India’s large and rapidly growing spirits
market, in which USL is a key player with local knowledge and a
stable of strong brands
 UNNI IIM-C
 Diageo is primarily engaged in the manufacturing and distribution
of spirits, beer and wine in around 180 countries across the world.
 Its main brands which are popular around the world include
Johnnie Walker, Bushmills, Smirnoff, Ciroc, Captain Morgan,
Baileys, Guinness, etc
 In India, Diageo is present through its fully owned subsidiary
Diageo India Private Limited (Diageo India), which is engaged in
the manufacture of Diageo’s products in India
 Relay had no existing business and is an investment company
 USL, a listed Indian company is engaged in the business of
manufacturing and marketing alcoholic beverages (including wines
and spirits), bottled water etc in India and abroad
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USL’s main brands include Antiquity, McDowell’s, Signature,
Bagpiper, Royal Challenge, DSP Black, Black Dog, Whyte &
Mackay, Romanov, White Mischief, Four Seasons etc
 USL is not engaged in the manufacture, sale and distribution of beer
in India or anywhere else in the world.
 The various types of alcoholic beverages can be broadly divided into
three main categories i.e., Beer, Wine and Spirits, which are
primarily distinguished on the basis of ingredients, alcoholic
content and the manufacturing process involved.
 The approximate market size for alcoholic beverages is around 661
million 9 litre cases , out of which spirits account for about 65%
while beer accounts for 34% and wine about 1%

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 Within the spirits segment country made liquor accounts for about
42% while branded liquor share was about 58%
 Branded spirits can also be broadly categorised into five main
segments which include Whisky, Rum, Vodka, Brandy and Gin
 They can further classified into locally manufactured spirits and
spirits imported into India
 The spirits imported into India are labeled as either Bottled in India
(BII) or Bottled at Source (BAS).
Relevant Product Market
 The market for alcoholic beverages comprises of different types of
spirits, across various price segments, and is therefore, considerably
differentiated and driven by the consumer’s preference for different
products UNNI IIM-C
 USL does not operate in the Beer segment in India and that Diageo
is not present in the Brandy segment in India.
 Therefore, for the purpose of competitive assessment of the
proposed combination, the segments relating to Beer, Country
Liquor and Brandy in the overall alcoholic beverages market in
India have not been taken into consideration.
Relevant Geographic Market
 USL and Diageo are stated to operate on a pan-India basis, the
relevant geographic market for the purpose of the assessment of the
proposed combination is considered to be the whole of India.

UNNI IIM-C
Evaluation of Competition
 Consumers of spirits while making a choice generally have a
preference for a particular spirit, and within a given category of
spirit say rum, vodka, whisky etc.
 They may have a preference for a brand that meets a certain quality
and affordability constraint.
Whisky Segment
 Within the Indian branded spirits, Whisky alone accounts for
60 per cent of the total sales volume, and constitutes the
largest segment.
 Whisky can further be segmented into Indian Made Foreign
Liquor (IMFL) Whisky, Scotch Whisky and Imported Whisky
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 Here IMFL whiskey has around 98.5% market share
 All the IMFL Whisky brands are priced below Rs. 800 and that none
of Diageo’s Whisky brands are significantly present below this price
point,
 Thus there is no significant market concentration in the IMFL
Whisky segment, post-combination
 The Scotch Whisky and the Imported Whisky segments, together
constitute less than 2 per cent of the overall Whisky segment and are
characterized by the presence of a large number of brands positioned
across various premium and luxury price points starting from Rs.
800/ to Rs. 10000/ and even higher

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 In the INR 800 to INR 1600 price segment, both USL and Diageo
are present with their strong brands like Black Dog 12 Years Old,
Black Dog (BII) and Whyte & Mackay in the USL portfolio and
brands such as Johnnie Walker Red Label, Black & White and VAT
69 in the Diageo portfolio,
 However, in this price segment, there is also a significant presence
of other brands like Pernod Ricard’s 100 Pipers, Beam Global’s
Teacher’s and its variants, WM Grant’s Grant’s Family Reserve etc
 Thus consumers have reasonable choice available at various price
points in this segment and this minimizes any concern of
elimination of competitive constraint.

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 The Compounded Annual Growth Rate (“CAGR”) of most of the
competitors’ brands of about 25% in this price segment is greater
than the total CAGR of this entire segment
 This shows that the competitors’ brands in the above segment have
high growth rates and these brands are therefore, considered to be
effective competitors to the brands of the parties to the combination
in the above segment
Vodka
 The Vodka segment constitutes around 4 per cent of the overall
branded spirits segment in India and has shown a high growth
CAGR of around 22 per cent in the period 2007-2011

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 Here close to 90% of the Vodkas sold are priced below Rs. 500
 Diageo, with its brand Smirnoff and its variants, is present in the
Rs. 500+ price segment and USL, with its flagship brand
Romanov and its variants, is present in the price range of below
Rs. 500.
 Below Rs. 500/ another competitor Radico Khaitan is also present
with its brand ‘Magic Moments’ which has demonstrated a strong
CAGR of around 33 per cent in the period 2007 – 2011
 Vodka brands of both USL and Diageo would also continue
to face stiff competition at different price segments from
many other brands and their variants, such as Pernod
Ricard’s Absolut and its variants,
UNNI IIM-C
Rum, Gin and Wines
 In these segments Diageo has an insignificant presence with
0.05%, 0.34% and 0.1% respectively and there was no threat of
any AAE on competition because of the combination
Final Opinion by CCI - CCI allowed the combination
unconditionally by noting that
 Diageo’s acquisition of USL may give a boost to the
premiumisation strategy.
 Thus, new premium brands of the established brands and new
premium brands are likely to be introduced in the market for
spirits.

UNNI IIM-C
 The combination may increase and improve consumer choice and
since the combining parties produce distant substitutes, the
synergy of the firms will not detract competition
 Thus the proposed combination is not likely to have an
appreciable adverse effect on competition in India
Criticism of CCI Order
 CCI has defined relevant market is wherein it has segmented the
market to a very granular level.
 The way segmentation is done leads to non-overlap of USL and
Diageo brands
 Acquisition of USL by Diageo will lead to concentration in
Whisky and Vodka segments of Branded spirits
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 In May 2013 CCI received a notice under Competition Act given by
Etihad Airways and Jet Airways
 The notice was given pursuant to an Investment Agreement (IA), a
Shareholder’s Agreement (SHA) and a Commercial Co-operation
Agreement (CCA) all executed in April 2013
 It has been stated in the notice that the proposed combination relates
to acquisition of 24% equity stake and certain other rights in Jet by
Etihad
 Etihad, a company incorporated in the United Arab Emirates (UAE),
is the national airline of UAE and is based in the emirate of Abu
Dhabi.
 Etihad is wholly-owned by the Government of Abu Dhabi and is
primarily engaged in the business of international air passenger
transportation services. UNNI IIM-C
 Jet, a listed company incorporated in 1992 under the Companies
Act, 1956, is primarily engaged in the business of providing low
cost and full service scheduled air passenger transport services
to/from India.
 Etihad’s acquisition of 24 % percent stake empowers it to nominate
2 directors, out of the 6 shareholder directors , including the Vice-
Chairman, in the Board of Directors of Jet
As part of the CCA Etihad and Jet would frame co-operative procedure
in relation to
(i) joint route and schedule coordination;
(ii) joint pricing;
(iii) joint marketing, distribution, sales representation
(iv) joint/reciprocal airport representation
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1. Etihad would recommend candidates for the senior management of
Jet
2. Jet would use Abu Dhabi as its exclusive hub for scheduled services
to and from Africa, North and SouthAmerica and UAE
3. Jet would refrain from entering into any code sharing agreement
with any other airline that has the effect of bypassing Abu Dhabi as
the hub for traffic to and from the above said locations
Relevant Market
 CCI found that the relevant market for the purpose of this
transaction is the market for international air passengers on the
Origin &Destination (O&D) pairs originating from or ending in 9
cities in India to/from UAE
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 The O&D pairs originating from or ending in India to/from
international destinations on the overlapping routes of the parties
 CCI noted that here are 38 routes to/from India to other destinations
where Etihad and Jet fly and there is at least one competitor on the
route.
 Of these, on only 7 routes Jet Etihad have a combined market share
of greater than 50 percent
 In all the routes, passengers have a major carrier to choose from
other than Jet and Etihad which can constraint the pricing behavior
of Jet and Etihad and ensure that the passengers can select between
more than one airline even after the combination

UNNI IIM-C
 CCI went beyond the O&D approach for competition assessment
and gave due consideration to the potential of network effects of
the proposed combination
 CCI recognizes that competition between airlines is shaped by
some peculiar features of the airline industry, in particular its
network character.
 Airlines have technologies in which the costs are affected not
only by the number of passengers, but also by the network
structure (the linkages/ routes that the airlines fly)
 When considering network effects, the competition assessment is
carried out beyond gateway traffic and is not just restricted to
O&D pair
UNNI IIM-C
 Jet-Etihad combined market share on AUH-DEL andAUH-BOM
route would not mean that competition is absent on west bound
traffic from India and in fact, competition would be present from
alternative networks
Abu Dhabi as the Exclusive Hub
 One of the clauses of the CCA requires Jet to use Abu Dhabi as its
exclusive hub for scheduled services to and from Africa, North and
South America and the UAE (the exclusive Territories), and there
will be certain O&D pairs where Jet cannot code share with other
airlines like Mumbai-Chicago, New Delhi-Chicago, New Delhi-
New York etc

UNNI IIM-C
 Cancellation of code share agreements can lead to market
foreclosure and abuse of dominance on such routes in the absence of
other strong competitors.
 However, all such routes face competition from other credible
players such as American Airlines, Air India, Emirates, South
African Airways, Qatar Airways etc which would constrain the
market power of Etihad-Jet combination
 On the majority of such O&D pairs, the combined market share of
Jet and Etihad is less than 30% and there are other strong players
present on such routes
 Jet’s share is negligible on such routes and post transaction change
in market share is negligible.

UNNI IIM-C
Potential Efficiencies
 Airline alliances create substantial opportunities for generating
economic benefits, many of which are dependent at least in part
on the closer integration achievable
 One of the benefits of the proposed transaction would be lower
fares for passengers travelling to smaller cities in India through
one of 9 major destinations served by Etihad
 The possibilities to coordinate pricing, fares and inventory/yield
management will eliminate inherent inefficiencies to pricing and
enable the members to offer more attractive fares to customers.

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 In addition to the potential efficiencies of the proposed combination
on account of the synergies expected to be generated, the CCI also
considered the importance of the proposed equity infusion and its
implication for the Indian aviation sector.
 Etihad’s equity infusion will be beneficial to Jet as it will strengthen
its operational viability and reduce its huge debt burden of about
Rs. 9000 crores which created a severe financial crisis for Jet
 After evaluating all these factors including the recently signed
bilateral air services agreement between India and Abu Dhabi, CCI
arrived at the opinion that the proposed combination is not likely to
have AAE on competition in India and finally it approved the
combination in November 2013

UNNI IIM-C
Shamsher Kataria v. Honda SIEL and others – Spare Parts Case ,
(August 2014)
 A group of fourteen Automobile Manufacturers (AM) including
Honda, TATA Motors, Toyota, Volkswagen etc were recently fined
an amount of Rs. 2545 crores for their practices in the sale of their
spare parts.
 Amongst the 14 companies Tata Motors was fined Rs. 1340 crores
while Maruti Suzuki was fined Rs. 400 crores
 The complaint filed by the informant Kataria was based on the fact
that the spare parts for the cars made by these AMs were not
available in the open market and were sold at exorbitant prices
through their exclusive outlets thereby making it extremely difficult
for consumers to carry out repairs on their vehicle.
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 Thus CCI had to determine whether there was any anti-competitive
vertical agreement and/ or abuse of dominant position by theAMs
 The anti-competitive vertical agreements pertained to those between
AMs and Original Equipment Suppliers (OES) and authorised
dealers that restricted OESs from directly selling spare parts to the
independent repairers and car-users in the open market
 Furthermore AMs were not providing technological information,
diagnostic tools and software programs to independent repairers that
are required to maintain, service and repair technologically advanced
automobiles
 Director General of CCI found all AMs guilty of abuse of dominant
position and found their agreement with OES and authorized dealers
to be anti-competitive
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 With regard to abuse of dominant position the Relevant Markets
identified for the purpose of this case were three
1. primary market for sale of passenger vehicles in India
2. aftermarkets for sale of spare parts including the diagnostic tools,
technical manuals, catalogues etc. for the aftermarket usage in India
3. after sale service of repair and maintenance in India.
 Each AM is the only source of spare parts of their brands and there
is less chance of interchangeability of spare parts; therefore, each
AM is in dominant position
 AMs are abusing their dominance by non-availability of spare parts
and diagnostic tools in open market by imposing unfair terms on
independent repairers which results in denial of market access in
violation of various provisions of CA 2002
UNNI IIM-C
 Agreements between AMs and authorized dealers do not allow
them to deal in competing brands of cars or to sell spare parts
and diagnostic tools to independent repairers and these
agreements come under the category of exclusive distribution
agreement and refusal to deal
 Furthermore authorized dealers are required to source spare parts
directly from AMs or their approved vendors only, which is in
the nature of exclusive supply agreement
The important questions raised before CCI were
1. Whether the automobile market as whole, from manufacturing to
aftermarket service, is a single unified “system market” or there
exists separate relevant markets at different stages?
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2. Is there abuse of dominance by OESs in spare parts market?
3. Whether the AMs are entitled to benefit arising out of statutory
exemption provided to agreements related to Intellectual
Property Rights (IPRs) ?
Relevant Market
 The Commission agreed with the finding of the DG that primary
market of “manufacture and sale of cars” and aftermarkets “sale
of spare parts, diagnostic tools etc.” and “service of repair and
maintenance” are three separate relevant markets.
 It rejected the contention of unified “system market” and opined
that Indian car owners do not engage in “whole life costing”
because they do not have access to relevant information for such
analysis.
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 CCI noted that there is no intra or inter-brand interchangeability and
compatibility between spare parts of one brand/model of car and
spare parts of another brand/car.
 Thus customers do not have choice to switch and each AM acts
independently of its competitors
 The AMs strength in primary market through manufacture and sale
of cars enables it to affect the competitors in the secondary market
i.e. independent service providers
 This limits consumer choice to AM recognised authorised dealers
only and compels the consumers to react in a manner which is
beneficial to each AM

UNNI IIM-C
 The CCI held that all the AMs restrict the availability of the
diagnostic tools/repair manuals etc, which are required to
effectively repair models of their respective brand of automobiles,
to independent service providers and multi brand retailers
 There is a high mark up margin in prices of aftermarket spare parts,
disproportionate to the economic value of the products supplied
and the prices are exploitive and unfair under CA2002
 Vertical agreements between AMs and OESs have restrictions on
OESs from supplying spare parts in the independent after market
without the approval of the AM.
 However the DG couldn’t find even a single instance where such
an approval had been given.

UNNI IIM-C
 The agreements entered by AMs with authorized dealers require the
latter to source spare parts from AMs or their approved vendors only
 The authorized dealers are not allowed to deal in competing brands
of cars and cannot sell spare parts and diagnostic tools “over the
counter” resulting in exclusive distribution agreement and refusal to
deal as per relevant provisions of CA 2002
 Such agreements restrict access to genuine spare parts and
diagnostic tools and which results in the usage of spurious spare
parts compromising safety of users of such vehicles
 The manufacturers relied upon the defence under the Competition
Act which allows them to lay down reasonable conditions as are
necessary for the protection of rights conferred by the various
Intellectual Property (IP) laws
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 According to them these measures constituted a reasonable
condition that were necessary for the protection of the various IP
Rights
 The CCI rejected the safe harbour of protection of intellectual
property rights to agreements between AMs and OESs.
 The CCI held that CA 2002 only recognises protection to those
IPRs which have been conferred under those Indian legislations
which are listed in Act.
 None of the AMs could provide sufficient evidence to establish their
claim over a particular type of IPR
 Finally CCI imposed a heavy fine on theAMs

UNNI IIM-C
 The automobile manufacturer appealed before the COMPAT, which
upheld the decision of the CCI
 COMPAT in its order dated 9 December 2016 found that the
automobile manufacturers were guilty of abusing their dominant
position and entering into anti-competitive agreements with their
OES and authorised service providers.
 However COMPAT reduced the penalty imposed by the CCI by
directing the OEMs to pay 2% on the average annual turnover of
spare parts in the aftermarket, for the period immediately preceding
three years before the year of enquiry by the CCI
 CCI had imposed a penalty of two per cent on total turnover of
companies and thus the COMPAT order gives some relief to the auto
companies who would pay 2% penalty on the average annual
turnover of spare parts sale in India.
UNNI IIM-C
 In March 2015 , CCI approved a proposed merger between
the Indian units of French cement company Lafarge and
Switzerland’s Holcim with certain conditions
 CCI while approving the deal had proposed certain
modifications to the deal, including the sale of some assets in
eastern India to eliminate anti-competition concerns.
 Holcim’s through its Indian subsidiaries ACC Ltd and
Ambuja Cements Ltd, have a combined annual capacity of
58.75 million tonnes (mt) of cement, making it the country’s
second-biggest maker of the building material.
 Lafarge has a total cement production capacity of 11mt in
India
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 UltraTech Cement of Aditya Birla Group is India’s largest cement
maker by capacity with 60.2mt.
 In December 2014, UltraTech agreed to buy two cement plants of
Jaiprakash Associates Ltd in Madhya Pradesh, which would take its
capacity to 65 million tonnes per annum (mtpa).
 UltraTech is executing other projects that are aimed at raising its
capacity to 71mtpa when they are completed.
 CCI after noting all these factors approved the merger with
the condition that Lafarge sell two of its cement plants, (one
each in Chhattisgarh and Jharkhand), which had a total
capacity of 5.15 mtpa with valuation of about Rs. 5000
crores, to address monopoly concerns.
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 Cement is considered to be a regional product by the CCI as its
transportation beyond a distance doesn’t make economic sense.
 Hence, the CCI considered the divestment of 5.15 mt capacity of
Lafarge sufficient to avoid an “Appreciable Adverse Effect” on
Competition' (AAE).
 For the same purpose it also put a restriction that the eligible bidder
should not have operational capacity which is more than five per
cent of the total installed capacity in the region comprising of four
states of Bihar, Jharkhand, Odisha and Chhattisgarh, with an
aggregate capacity of 45 mt.
 Birla Corp first emerged as the most eligible buyer and successfully
won the bid.

UNNI IIM-C
 However Lafarge could not sell those plants as the Mines and
Minerals (Development and Regulation) (Amendment) Act 2015
barred the transfer of rights of limestone mines attached with cement
plants.
 This prompted Lafarge to present a fresh proposal from divesting its
entire assets(i.e 11 mtpa), which was approved in February 2016.
 The re-approval was challenged in COMPAT by Dalmia Cements on
the ground that CCI did not have the power to approve a merger for
a second time when the terms of the first approval had not been
complied with and in April 2016 COMPAT stayed the CCI’s
February 2016 order
 Surprisingly in May 2016 Dalmia Cements instead of pressing the
matter made an application for withdrawal of the appeal which was
granted by COMPAT. UNNI IIM-C
 After the withdrawal of the appeal by Dalmia before COMPAT the
stage is set for the final leg of the transaction
 Finally in July 2016 detergent major Nirma emerged as the
successful buyer of the said cement plants for an amount of Rs. 9400
crores
 In the meanwhile the Parliament in May 2016 amended the
provisions of Mines and Minerals Act (MMA) to remove clauses
which prohibited transfer of mining rights and effectively foiled the
deal between Lafarge and Birla Corp in 2015
 The latest amendment to MMA eliminates the uncertainty that held
up many M&As of companies dependent on natural resources like
limestone
UNNI IIM-C
 The proposed combination involves the merger/amalgamation of
telecommunications businesses of Vodafone India Ltd. (VIL),
Vodafone Mobile Services Ltd. (VMSL ) and Idea Cellular Ltd.
(Idea) under Section 230 to 232 and other applicable provisions of
the Companies Act, 2013
 The notice of combination was given to CCI in April 2017
 Following completion of the Proposed Combination, the
shareholders of VIL, the Aditya Birla group (Idea’s promoter) and
public shareholders of Idea will respectively hold 45.10 percent, 26
percent and 28.90 percent of the equity share capital of the Merged
Entity
 The new entity will continue to be listed on Indian stock exchanges
and be jointly controlled and managed by the Vodafone Shareholders
and the Aditya Birla group
 VIL is a wholly owned subsidiary of Vodafone Group Plc, which is
listed on London Stock Exchange
 VMSL is a wholly owned subsidiary of VIL.
 Both VIL and VMSL are licensed telecom serviceproviders,
(TSPs)
 Both provide a range of telecommunication services in India, while
VIL provides services in Mumbai circle, VMSL provides services
across the other 21 telecom circles in India.
 Idea, a member of Aditya Birla group and listed on BSE and NSE
is a pan-India integrated TSP providing a range of
telecommunication services across all 22 telecom circles in India

UNNI IIM-C
 Based on product overlaps between the Parties in India, CCI
identified following product segments for the purpose of
competition assessment.
1. Retail Mobile Telephony Services;
2. Enterprise Services;
3. Internet Service Provider Services (“ISP Services”);
4. National Long Distance Services (“NLD Services”);
5. International Long Distance Services (“ILD Services”);
6. Provision of passive infrastructure services through telecom
towers;
7. Provision of passive infrastructure services over fibre optic
network;
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8. Intra Circle Roaming Services (“ICR Services”); and
9. Mobile wallet services
Retail Mobile Telephony Services
 With regard to the relevant geographic market, CCI decided
that the same may be defined in terms of each of 22
overlapping telecom circles in India
Concentration Analysis
 As per the DoT Merger Guidelines, in case of
merger/acquisition proposals that result in market share in any
service area exceeding 50 percent, the resultant entity should
reduce its market share to 50 percent
 This should be done within a period of one year from the date
of approval of merger or acquisition or amalgamation
 As regards holding of spectrum by a TSP, CCI noted that the
spectrum holding in a licensed service area is subject to cap of 25%
percent of the total spectrum assigned
 Furthermore TSP cannot hold more than 50 % of the spectrum
assigned in a specific band.
 Accordingly, as a first step in assessment of the impact of the
proposed combination on competition, CCI examined the level of
concentration in each market and impact of the proposed
combination on the same
 CCI observed that the market share estimates based on (i) gross
revenue for the FY 2016-17 as modified by considering Jio revenue
based on ARPU (Average Revenue Per User) of the Parties; and (ii)
quantum of spectrum are better reflective of competitive constraints
UNNI IIM-C
 CCI after considering revenue based market shares observed that
market is highly concentrated with pre-combination HHIs
(Herfindahl–Hirschman Index) exceeding 2000 in all telecom
circles
 Then CCI examined the impact of the proposed combination on the
level of concentration as reflected in incremental HHI, in 14 circles
where the combined market share was estimated to be more than
30%.
 CCI observed that the change in HHI was significant in respect of all
the 14 telecom circles, ranging from around 400 in Andhra Pradesh
to around 1500 in Kerala
 CCI observed that the Proposed Combination is likely to result in
significant combined market share of the parties while also causing
significant change in concentration in 14 of 22 telecom circles
UNNI IIM-C
 Based on examination of spectrum holding of different TSPs in all
telecom circles, the CCI noted that the spectrum seems to be fairly
distributed between the various TSPs.
 CCI noted that there is a significant quantity of unsold spectrumin
each telecom circle which may also obviate any access issues
Buyer Power
 The Commission noted that approximately two third of customers
tend to have multiple SIMs
 Customers can therefore easily and quickly switch from a primary
to a secondary SIM and vice versa, when the relative price of one
of their SIM providers increases or decreases, by changing the
selection of the SIM in their handset.
UNNI IIM-C
 Further, as a result of the Mobile Number Portability Regulations,
2009 subscribers are able to switch their primary SIM / service
provider seamlessly while retaining their existing mobile telephone
number
 The near zero switching cost ensures that there is price competition
amongst the TSPs to retain customers.
 The presence of competitive constraints from buyer side are also
reflected in the churn rates for the Indian retail mobile telephony
services market in general and parties in particular.
 CCI noted that the churn rate of the parties at pan India level is
more than 60 percent and exceeds 50 percent for most of the
telecom circle

UNNI IIM-C
Extent of competition likely to be maintained after the Proposed
Combination
 The retail mobile telephony services market, post the Proposed
Combination would have at least five private TSPs, BhartiAirtel
(including Telenor), RCOM & Aircel, Reliance Jio, Tata Tele
Services and one state owned TSP i.e., BSNL/MTNL in all
telecom circles
 CCI examined the size and resources of these competitors and is
of the opinion they are in a position to exercise adequate
competitive constraints on the Merged Entity and to eliminate
any likelihood of appreciable adverse effect on competition
resulting from the combination.
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 CCI took note of certain efficiencies resulting from the Proposed
Combination,
They include
I. consolidation of spectrum holdings,
II. reduction in overlapping national infrastructure,
III. de-duplication of fresh equipment etc.

 However, considering that the industry is witnessing a stage of

consolidation, CCI wanted to assess the impact of reduction in
number of competitors on the competition
 CCI noted that out of 220 countries 213 countries have 4 or less
operators, 6 countries have 5 TSPs and only India will have
more than 5 TSPs
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 Based on the totality of factors particularly the buyer power and
extent of competition likely to be sustained post CCI held that the
proposed combination, is not likely to have any appreciable adverse
effect on competition in the market for retail mobile telephony
services
 CCI’s assessment was mainly confined to Retail Mobile Telecom
Services
 The other eight segments like Enterprise services / Mobile Wallets
etc were not really important as it was clear from the data that the
combination was not likely to significantly change the level of
concentration or cause any appreciable adverse effect on
competition in India
 Finally the CCI approved the said merger between Vodafone and
Idea in July 2017
UNNI IIM-C
 Jitesh Maheshwari v NSE (NSE Colocation Case 2019)
• The information in this case was filed by an Advocate Jitesh
Maheshwari against the NSE alleging abuse of dominance in the
sense of unfair and discriminatory treatment in the "market for
providing services of trading in securities to the trading members in
India".
 NSE provides the services of co-location to the trading members,
who avail this facility as consumers on payment of prescribed fees
 The trading members who avail these services get access to
information about traded prices of shares ahead of other traders, which
makes a huge difference to the proprietary and high-frequency traders
 The fees levied by NSE for these co-location services are the same
and accordingly the trading members availing the services are expected
to be kept in the same footing.
NSE Colocation Case

• However, the informant alleged that from 2010-2014, instead

of providing equal and fair access to all the trading members,
NSE provided preferential and unfair access to some trading
members and this benefited the trading members to whom
the preferential treatment was granted, in getting the price
feed and other data.
 The informant proposed the relevant market as the "market for
providing services of trading in securities to the trading
members in India" and contended that NSE is the dominant
player based on its market share, dependence of consumers and
regulatory barrier of entry of new stock exchange
NSE Colocation Case
• The Commission acknowledged that the grievance of the informant
is that the NSE by giving unfair preferential access to some trading
members of its co-location services, has limited and restricted the
provisions of services to other trading members availing the co-
location services which resulted in 'denial of market access' to
others.
The CCI, however, has decided not to go into the merits of the case
and has closed the case mainly for the reason that the 'NSE Co-
location Case' is currently under investigation by the Securities
Exchange Board of India (SEBI)
The CCI recognized that the genesis of the NSE Co-location case
dates back to 2015, when a whistle-blower wrote a letter to SEBI
alleging that NSE gave preferential access to a few high-frequency
traders and broker to its trading platform.
Meru v Uber (2019)
❖ The case against Uber was filed in 2015 before the CCI by radio taxi
operator Meru
❖ The allegation was that Uber pays its driver partners / car owners on
its network in Delhi unreasonably high incentives in addition to the
trip fare received from the passengers, which results in a per trip net
loss of INR 204 to Uber – amounting to predatory pricing by a
dominant enterprise.
❖ The CCI dismissed the complaint (February 2016)
❖ However COMPAT reversed CCI's order in an appeal and ruled that
Meru had placed sufficient material before the CCI to justify an
investigation (December 2016)
❖ COMPAT pointed out that for evaluating the issue of dominance
factors other than market share would be very important and thus the
case should be re-examined in terms of impact of the funding, related
global developments, network expansion etc.
Meru v Uber (2019)
❖COMPAT noted the magnitude of discounts and incentives
provided by Uber raised strong concerns which
necessitated an investigation by the DG-CCI
❖The order of COMPAT was challenged by Uber in Supreme
Court
❖In September 2019 the Supreme Court while dismissing
Uber’s appeal has upheld the said COMPAT order
❖This means that DG will investigate against the alleged
abuse of dominance by Uber on account of its unilateral
conduct of deep discounts and subsidized cost of trips to
finish competition
 In Samir Agrawal v ANI Technologies Pvt. Ltd – 2020
(Cab Aggregator Case)
• The informant alleged that the drivers who were associated with
Ola/Uber’s platforms were not their employees, and they were
independent third party service providers and this resulted in a Hub
and Spoke system where aggregators were acting as ‘Hub’ and drivers
were acting as ‘spokes’ and there was collusion between the two on
pricing
• It was further alleged that since the drivers were independent
contractors, who did not share any agency/employee relationship, they
did not function as single economic entity and the cooperation
between drivers orchestrated by Ola/Uber resulted in concerted action
under the relevant provisions of the Act
•
 Cab Aggregator Case 2020

• The CCI noted that the alleged hub and spoke arrangement covered the
exchange of sensitive information between competitors through a third
party that facilitated the cartelistic behaviour of such competitors.
• It was necessary that the spokes used a third party platform (hub) for
exchange of sensitive information, including information on prices
which can help price fixing.
• Here the existence of a collusion to fix prices was essential for the
existence of Hub and Spoke arrangement
• According to CCI the use of algorithmically determined prices by the
platform (Ola/Uber) could not be said to be amounting to collusion
between the drivers.
• CCI noted that in every a hub-and-spoke cartel there should be an
agreement between all drivers to set prices through the platform, or an
agreement for the platform to coordinate prices between them.
Cab Aggregator Case 2020

• CCI pointed out that the estimation of fare through App was done by
the algorithm on the basis of large data sets depending on several
factors
• Thus the algorithmically determined pricing for different riders was
different and that such pricing was not similar to the traditionally
understood ‘hub and spoke’ arrangement.
• The second allegation dealt with minimum resale price maintenance
agreement between Cab Aggregators and their drivers as the latter
cannot reject the price calculated by the algorithm or offer their
services at a price lower than the said price.
• In the context of app-based taxi services, the cab-aggregators do not
sell any good/service to the drivers that the drivers resell to the riders.
Cab Aggregator Case 2020
• While the drivers offer the physical service of transportation to the
riders and are legally independent entities, they are effectively
extensions or agents of the aggregators when they operate through
their platforms.
• A single transaction takes place between the rider and Ola/Uber, who
provides a composite service of the driver-rider matchmaking, the
ride, GPS tracking etc. and price is generated only once.
• CCI noted that in the absence of any resale of services, the allegation
of resale price maintenance is not tenable
• According to CCI the dynamic pricing can drive the prices to levels
much lower than the fares that would have been charged by
independent taxi drivers.
 Cab Aggregator Case 2020

• CCI also rejected comparison of the Ola/Uber App with Airbnb,

Trivago and Zomato etc. as the sellers on those platform have their
own identities or brand value vis-à-vis the consumers
• The consumers buying through Zomato /Swiggy have a preference for
a particular restaurant, and consumers booking hotels through
Trivago/Makemytrip wishes to know the options available in terms of
their offerings and characteristics etc.
• The abovesaid features are not here in a Cab Aggregators’ app where
the consumers have no material information about the drivers
available in its area of demand.
• Based on all these reasons CCI dismissed the compliant and
subsequently the appellate body NCLAT and the Supreme Court also
upheld the decision of CCI
Akash Kumar v Google (Google Meet case) - 2021
• The allegation by the informant was that Google, a dominant player
in the internet-related services / products, has integrated the Meet
App into the Gmail App and this integration amounts to abuse of
dominant position by Google (abusing its dominant position in one
relevant market to enter into other relevant market )
• Google denied the claim it has worldwide dominance in relevant
markets for "internet related services and products", because there is
no relevant market for internet related services and products and even
if such market exists, it would not be dominant in such a market.
• Google also contended that Gmail is not dominant in 'emailing and
direct messaging" in India because there exists strong competition
from a variety of messaging services that have comparable or
superior position to Gmail.
• Adding functionality to the Gmail app is just a product improvement
that will help Gmail users
Akash Kumar v Google - 2021

Google pointed out that its rivals like Facebook and Microsoft already
provide similar functionality and introduction of a Meet tab on Gmail
accounts is just a way of dealing with competition
As per Google introducing a Meet tab is not anti-competitive because
Gmail users
(a) are not forced to use Meet
(b) can easily turn off the Meet tab
(c) can use video-conferencing services provided by a competitor and
thus there was no foreclosure of rivals
Decision of CCI
• CCI held that, the conduct of Google, regardless of whether it is
dominant for providing email services in India, does not appear to
violate the provisions of the Act
Akash Kumar v Google - 2021
• According to CCI Gmail users are not compelled to use Google
Meet, and there are no penalties imposed by Google on the users of
Gmail (such as withdrawal of Gmail or any of its functionalities or
other services) if they fail to use Google Meet,
• A Gmail user is absolutely free to use any of the rival VC apps like
Zoom, Microsoft Teams or Cisco Webex
• CCI observed that anybody having a Google Account, not a Gmail
account, can create an online meeting with the help of Google Meet
and for setting up a Google account, the user need not be a user of
Gmail.
• This means that the Google Meet is available as an independent app
outside the Gmail ecosystem also
• Based on all these reasons the CCI dismissed the case filed against
Google regarding Google Meet integration
 Dr. V.K. Unni
Professor
Indian Institute of Management Calcutta
E-mail: unniv@iimcal.ac.in

UNNI IIM-C