COMPETITION LAW NEWSLETTER

1.    PRESENCE OF REAL ESTATE DEVELOPERS IN GURGAON SUCH AS DLF, EMAAR INDIA, GODREJ PROPERTIES, VATIKA GROUP, UNITECH LIMITED, ETC. DOES NOT MAKE OPPOSITE PARTY DOMINANT IN RELEVANT MARKET: COMPETITION COMMISSION OF INDIA

In the information filed with Competition Commission of India ('the CCI'), it has been alleged that M3M ('the OP') started construction of additional 11^th tower in its project, M3M Merlin, without taking prior consent of its residents. It has been further stated that the developer obtained the occupation certificate ('OC') in March 2017 and in the OC issued by Directorate of Town and Country Planning ('DTCP') the number of towers was limited to 10. The OP submitted the deed of declaration in June 2017 wherein the number of towers was mentioned as 10. It has been alleged that the OP did not take consent of the residents before taking the approval of the DTCP for changing the layout and construction of a new tower and the 11^th tower was not included in the original layout plan.

With respect to the alleged dominant position enjoyed by the OP, it has been stated by that in the financial year 2021-22, gross sales of the OP and its subsidiaries was INR 105,000,000,000 (One Hundred Five Billion). As per the Informant, the OP claims to be a leading player in retail, residential and commercial projects, and has about 40 projects to his credit in Gurugram itself. Accordingly, it has been averred by the Informant that the OP has abused its dominant position by its conduct of construction of an additional tower in the project M3M Merlin without obtaining prior approval of the residents.

The CCI in line with its previous decisions in similar matters, was of the view that the relevant geographic market in the instant case may be delineated as 'Gurgaon'. After delineating the relevant market, the next step is to ascertain the dominance of the OP in the relevant market, as delineated supra. The CCI observes that the OP does not seem to enjoy dominant position in the delineated relevant market due to presence of other developers in Gurugram such as DLF, Emaar India, Godrej Properties, Ansal API, Vatika Group, Unitech Limited, Sobha Limited, Adani Group, Eldeco Group, Ashiana Housing Limited, Raheja Developers Limited etc.,, which seem to impose significant competitive constraints on the OP. Accordingly, in the absence of dominance of the OP in the relevant market, the issue of examination of its alleged abusive conduct does not arise.

Hence, the CCI [DG1] held that although the Informant has alleged contravention of Section 3(4) (anti-competitive agreements) of the Competition Act, 2002 [DG2]  ('the Act') in the matter, but the said allegation has not been substantiated. The Commission is of the view that provisions of Section 3(4) of the Act have no application to the facts and circumstances of the present case, as it requires an agreement between two or more enterprises operating at different levels of the same supply chain. Therefore, the matter is directed to be closed forthwith in terms of the provisions of Section 26(2) (procedure of enquiry of complaints) of the Act.

2.    IIISLA, PROMOTED BY IRDAI FOR GRATING OF LICENSE FOR ‘SURVEYORS AND LOSS ASSESSOR’, LIES OUTSIDE CCI'S JURISDICTION: CCI

Information has been filed with CCI under Section 19(1)(a) (inquiry into anti-competitive agreements and dominant position) of the  Act, 2002  against Insurance Regulatory and Development Authority of India 'IRDAI' and Indian Institute of Insurance Surveyors and Loss Assessors 'IIISLA' alleging contravention of the provisions of Sections 3 and 4 (abuse of dominant position) of the Act. The Informant has submitted that it had applied for renewal of the license on November 18, 2019 which has been allegedly withheld by IRDAI for the sole reason that the Informant is not a member of IIISLA. As per the Informant, IRDAI has mandated membership with the IIISLA as an eligibility criterion for grant of renewal by notification published in official gazette on March 22, 2013. The Informant has stated that it had taken membership of IISLA initially, but stopped paying subscription fee / annual membership fee since the financial year 2008-09, as, in his opinion, within three years of its establishment, IIISLA failed to make any noteworthy progress in attaining the objects of its establishment.

The CCI held that, IRDAI is a statutory body created under the IRDAI Act, 1999 and IIISLA is a body promoted by IRDAI in the discharge of its functions under Section 14(2) (k) of the IRDAI Act, 1999. Further, membership of IIISLA has been made mandatory by IRDAI for grant and renewal of licences for Surveyors and Loss Assessors. Such functions, being regulatory in nature, are not per se amenable within the jurisdiction of the CCI as held by the Hon'ble Delhi High Court ('the DHC') in its judgment dated July 02,2023 in the case of Institute of Chartered Accountants of India v. Competition Commission of India & Ors.

3.    THE COMPETITION ACT, 2002 APPLIES TO PUBLIC SECTOR UNDERTAKINGS (PSUs) SUCH AS COAL INDIA LTD. (CIL): Hon’ble Supreme Court of India

In the appeal before the Supreme Court[DG3]  of India ('the SC'), CIL contended that it was a statutory monopoly and that its subsidiary, Western Coalfields Limited, should be immune from the  Act[DG4]  since they are governed by the Coal Mines (Nationalisation) Act, 1973.

The SC  determined that CIL is an "enterprise" for purposes of Section 2(h) of the Competition Act because the term "enterprise" has been defined to expressly include within its ambit a "person" or a "Department of the Government" and only excludes from that definition, a government department carrying out sovereign functions of the Government. The SC ruled that running a mining operation cannot be considered a "sovereign function," and that a "state monopoly" like CIL is nevertheless subject to the Act's provisions. It further held that the existence of other forums, such as the Controller of Coal, where redress can be sought against CIL's activities, cannot result in denial of access to a party complaining of a violation of the Act.

The SC , in an order dated June 15, 2023, held that the Act applies to CIL and that PSUs are not exempt from its requirements. The appeal before the SC  arose from an order of the former Competition Appellate Tribunal (COMPAT) that affirmed the CCI conclusions and findings on various aspects of abuse of dominant position against CIL in violation of Section 4of the Act. The CCI in its order dated April 23, 2017 held that CIL had abused its dominant position by imposing unfair/discriminatory conditions in Fuel Supply Agreements (FSAs) with the power producers for supply of non-coking coal and had imposed a penalty of INR 5,910,000,000 (Five Billion Nine Hundred Ten Million) [DG5] on CIL.

4.    DELHI HIGH COURT SETS ASIDE CCI’S ORDER OF INVESTIGATION INTO THE ALLEGED ABUSE OF DOMINANCE BY INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA (ICAI)

In an order dated June 02, 2023, the DHC  set aside the CCI's order asking the Director General (DG) to examine the alleged abuse of dominance by ICAI under Section 4 of the Act. The CCI found ICAI to have misused its dominant position in the relevant market of 'the market for arranging recognized CPE seminars / workshops / conferences' in violation of Section 4 of the Act in its order dated February 02, 2014. The current disagreement is around the fact that only ICAI and its organs are in charge of organizing organized learning activities and that ICAI has not associated or authorized any other organization to do so. Through the current writ petition, the ICAI argued that because it is a non-profit organization, the CCI lacks jurisdiction over its operations.

The CCI, according to the ICAI, lacks the authority to examine its judgments, policies, or the way it carries out its duties because the CPE program was designed in the exercise of the authority provided to it under the Chartered Accountants Act, 1949 (CA Act). Whether ICAI would fall under the definition of an "enterprise" was the first issue brought up for the DHC's consideration. The DHC ruledthat the ICAI's activities cannot be characterized as sovereign in nature. It was decided that ICAI is not exempt from the expansive definition of the term "enterprise" as specified under Clause (h) of Section 2 of the  Act, even though it performs regulatory duties.

Secondly, the DHC was asked that whether ICAI was, at least on the surface, abusing its dominating position. The DHC agreed with the CCI's conclusions except that there is no other body or institution engaged in the activity of providing professional training to obtain the classification of a chartered accountant or for the continuing education program. As a result, the DHC granted the writ petition to set aside the CCI's order.

5.    CCI DISMISSED ALLEGATIONS PERTAINING TO ABUSE OF DOMINANCE AGAINST LG ELECTRONICS

In accordance with Section 26(2) (inquiry on the complaints) of the Act, the CCI dismissed an information brought by Perfect Infraengineers Limited (PIL/Informant) against LG Electronics Limited (LG) in an order dated June 26, 2023. PIL had filed a complaint with the CCI saying that LG had violated Sections 3and 4of the Act by abusing its dominant position in the Indian market for the production and sale of Variable Refrigerant Flow (VRF) Heating, Ventilation, and Air Conditioning (HVAC) air conditioners.

PIL had proposed to the Delhi Metro Rail Corporation (DMRC) to deliver its Hybrid Thermal Solar (HTS) for integration with LG's VRF ACs installed on DMRC property. LG was accused of violating Section 4 of the  Act  [DG6] by refusing to install PIL's HTS panels on its ACs. While assessing LG's dominance in the relevant market, the CCI stated that the presence of a wide number of participants in the market for the manufacture and sale of VRF HVAC ACs makes the market contestable and gives customers with various options, acting as a competitive constraint on LG.

Furthermore, the CCI stated that, despite the Informant's allegation of a violation of Section 3 of the  Act, it had failed to give any information as to how LG's conduct falls within the purview of Section 3 of the  Act, and thus dismissed the case.

6.    CCI APPROVED THE PROPOSED ACQUISITION OF 4.04% SHAREHOLDING IN ACKO TECHNOLOGY & SERVICES PVT LTD.BY GENERAL ATLANTIC SINGAPORE ACK PTE. LTD.

The CCI approved the proposed acquisition of 4.04% of Acko Technology & Services Pvt. Ltd. (Acko Tech) by General Atlantic Singapore ACK Pte. Ltd (General Atlantic), which already held 15.54% equity in Acko Tech as well as voting rights, information rights, and representation on Acko Tech's board. General Atlantic is a Singapore-based investment holding firm. Acko Tech is an insurance-tech company in India that specializes in general and life insurance.

7.    CCI APPROVED THE ACQUISITION OF SHAREHOLDING OF AMBIT PRIVATE LIMITED BY DAIWA INTERNATIONAL HOLDING INC.

The CCI approved Daiwa International Holdings Inc.'s (DAIWA) proposed acquisition of approximately 16% of the equity shares in Ambit Private Limited (APL) through a mix of primary share subscriptions and secondary share acquisitions from existing owners. Following that, APL will acquire 100% of Daiwa Capital Market's shares from Daiwa. Daiwa is a Japanese investment/financial holding company that operates as an intermediary management holding company. Daiwa Group has a presence in India through its subsidiaries that provide institutional equities services such as stock broking and value-added services such as corporate access and research report preparation in India, as well as investment banking services in the form of M&A advisory services. APL is registered with SEBI as a merchant banker and provides a range of financial services in India.

8.    GOVT. GRANTS EXEMPTION TO REGIONAL RURAL BANKS FROM COMPLYING WITH PROVISIONS OF COMBINATIONS UNDER COMPETITION ACT

In exercise of the powers conferred by Clause (a) of Section 54 (power to exempt) of the Competition Act, 2002, the Central Government, in public interest, hereby exempts the Regional Rural Bank notified under sub-section (1) of Section 23A of the Regional Rural Banks Act, 1976 (21 of 1976), from the application of provisions of Sections 5 (combination) and 6 (regulation of combination) of the Act for a period of five (5) years from the date of publication of this notification in the Official Gazette.