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COMPETITION LAW UPDATES (OCTOBER 2011 TO MARCH 2012)
 
AUSTRALIA
  • ACCC ALLOWS PROPOSED ACQUISITION OF MOTOROLA MOBILITY HOLDINGS INC WITH GOOGLE INC.

    The Australian Competition and Consumer Commission (ACCC) conducted an informal review and allowed the proposed acquisition of Motorola Mobility Holdings with Google Inc. The ACCC considered markets related to Mobile Devices and internet advertising and concluded that the acquisition would not lead to substantial reduction of competition in any market. The ACCC based its conclusions on the incentives for Google to maintain its supply of Android to third party manufacturers and the small market share of Motorola in the context of competition from established industry players in the Mobile Devices supply.

  • SYDNEY COURT PENALISES KOREAN AIRLINES FOR PRICE FIXING CARTEL

    ACCC had issued proceedings against Korean Airlines in 2010, as part of its continuing efforts against airlines that engage in cartel conduct in relation to carriage of air freight. Korean Airlines became the eighth international airline to settle proceedings against the ACCC when the Federal Court in Sydney imposed a penalty of $5.5 million on it for price fixing as part of the cartel. With this decision, the combined amount that airlines have had to pay in similar cases in penalties totals up to $52 million. Korean Airlines admitted to making and giving effect to the illegal price fixing understandings with other international airlines.

    The Court also made orders restraining Korean Air Lines from engaging in similar conduct for a period of five years and to pay a contribution towards the ACCC's costs of $200,000.

    The ACCC has also initiated proceedings against other airlines including Singapore Airlines, Cathay Pacific, Emirates, Air New Zealand, Malaysian Air Lines and Thai Airways International.

  • ACCC APPROVES VISY ACQUISITION OF PET AND PLASTIC ASSETS OF HP ENTITIES

    The ACCC decided not to oppose the acquisition of PET and Plastic Assets of HP by Visy Industries Australia Pty Ltd. The ACCC conducted an informal review of the markets related to PET and non-PET plastic containers but did not go into the definition of exact boundaries of the markets identified. It concluded that it was unlikely that the proposed merger would lessen the market competition in any of the relevant markets identified. ACCC also considered the relationship between Visy and PACT group Pty Ltd. It noted that post acquisition, the merged firm and PACT would be the two largest manufacturers of non-PET rigid plastic container in New South Wales and it would also result in the removal of a significant competitor in the manufacture and supply of PET containers in NSW and Victoria. However, it said that the existence of several alternative manufacturers and suppliers in both markets would act as a constraint. ACCC had commenced review on the proposed acquisition on 23rd December 2011, however, the ACCC timeline was suspended in January to allow provision of further information from the parties.

  • ACCC APPROVES ACQUISITION OF APERIO GROUP PTY LTD BY AMCOR

    ACCC approved and decided not to oppose an informal review of the acquisition of Aperio Group Pty Ltd by Amcor. Both Aperio Group Pty Ltd and Amcor are involved in the flexible packaging material industry. ACCC identified that the principal area of overlap between the parties to the merger as the supply of value-added flexible packaging to manufacturers of fast moving consumer goods (FMCG). ACCC conducted detailed market enquiries and noted that the firms account for a huge amount of the sales of value added flexible packaging in Australia. However, it concluded that it was unlikely to substantially lessen competition in the national market for value-added flexible packaging on the basis of industry data and data from direct market enquiries that the actual and potential competition for imports would act as a constraint for the merged firm, along with other factors like the existence of alternative domestic suppliers willing to invest and expand and the degree of countervailing power that FMCG customers have vis-a-vis the merged firm.
CANADA
  • SEVEN FINED FOR GASOLINE PRICE FIXING CARTEL ON THETSFORD MINES

    Following investigations by the Canadian Competition Bureau into price fixing of gasoline at the pump at Thetford mines, Quebec, seven individuals who pleaded guilty to conspiring to fix prices have been sentenced by the Bureau. Charges had already been laid against 38 individuals and 14 companies in June 2008 and July 2010 for fixing the price of gasoline at the pump in various mines in Quebec. The seven individuals who pleaded guilty and were fined include territorial managers and service stations owners. Territorial managers Gary Neiderer and Fabien Chouinard, both employed by Sonic, were fined $3000 and $4000 respectively and the remaining five accused service station owners operated under the Shell or Esso banners and were fined $5000 each. In March, another territorial manager for Sonic (now retired) was sentenced to a fine of $7500 in relation to the same case.

  • CONSTRUCTION COMPANIES PLEAD GUILTY TO BID RIGGING FOR CHICOUTIMI HOSPITAL:

    Three construction companies pleaded guilty to charges of bid rigging in the Quebec Supreme Court in relation to the expansion of the Chicoutimi Hospital in 2003. The companies included were Construction GTRL, Acoustique JCG Inc and Enterprises de Construction OPC Inc. According to the court order, Construction GTRL were imposed a penalty of $50, 000 and the other two companies were fined $25, 000 each. The Bureau had in November, 2008 announced that the companies and some of their executives were to be charged with rigging bids that were that were submitted in relation to the expansion and refitting of an emergency room in the Chicoutimi Hospital following an investigation undertaken by the bureau. The investigation had found that the companies had entered into an agreement to determine beforehand the winner of the bid for the Chicoutimi Hospital Contract.

  • COMPETITION BUREAU LAYS CHARGES AGAINST SEWER SERVICES CARTEL:

    Six companies and five individuals were charged with criminal charges with respect to the rigging of bids for specialized sewer services for municipal and provincial contracts in the greater Montreal area. The present charges related to a total of 37 calls for tender in 2008 and 2009, for a value of $3.3 million.

    MSC rehabilitation Inc pleaded guilty for 12 calls for tenders in different municipalities in the Quebec Supreme Court and was fined $75, 000 as a penalty. In addition, it is also bound by a court order for a period of three months. Following an investigation in to the matter by the Bureau it was found that the companies had entered into covert agreements to coordinate their bids so that they could determine the winner of the contract beforehand. The Commissioner of Competition stated that the scheme was devised with the objective of circumventing the requirements in the government procuring process that were built in to protect taxpayer’s money.

  • GASOLINE COMPANIES PLEAD GUILTY TO RETAIL PRICE FIXING IN ONTARIO:

    Three companies have pleaded guilty in front of the Ontario Superior Court in Brockville for fixing the price of retail gasoline in Ontario. Upon investigation the Bureau had found that the competing companies, namely Pioneer Energy LLP, Canadian Tyre Corporation and Mr. Gas had agreed to set the prices of gasoline sold to consumers at the pump. Investigation revealed evidence that gas retailers and representatives in local markets phoned each other and decided on agreements to determine the prices to be charged on consumers for gasoline at the pump.

    The companies were fined a total of $2 million under the Competition Act for price fixing. In addition, the companies were under court order for ten years and were to educate their employees about the Act.

    The investigation of the Competition Bureau into price fixing in retail gasoline in the Southeastern Markets is set to continue.
EUROPEAN UNION
  • COMMISSION APPROVES ACQUISITION OF BRITISH MIDLANDS BY IAG

    In March, the European Commission (EC) approved the acquisition of British Midlands Limited by IAG. IAG is currently the holding company of British Airways and Iberia. The proposed merger has been cleared by the EC under the EU Merger regulation but has been made subject to certain commitments on behalf of IAG (International Consolidated Airlines Group) to carry connecting passengers to feed the long-haul flights of competing airlines out of London Heathrow and the release of 14 daily slot pairs at London Heathrow in order to facilitate new entry. Subject to these requirements the Commission concluded that the merger would not result in substantial reduction in competition.

    Upon investigation, the EC found that the merger would lead to high market shares and monopolies on domestic, international and European routes out of London Heathrow. However, the Commission was of the opinion that the commitments taken up by IAG adequately address these competition concerns.

  • COMMISSION ORDERS IN DEPTH INVESTIGATION INTO PROPOSED ACQUISITION OF EMI RECORDED MUSIC BUSINESS BY UNIVERSAL

    Upon initial market investigation under the EU merger regulation by the EC, it was gathered that the proposed merger between EMI and Universal would result in competition concerns in the wholesale of physical and digital recorded music in several member countries of the European Union as well as in European Economic Area as a whole. The EC came to this conclusion in the context of the high market shares and market power the merged entity would possess in the recorded music market.

  • COMMISSION FINES PRODUCERS OF WINDOW MOUNTINGS FOR PRICE FIXING CARTELS

    The EC fined nine producers of window mountings for price fixing cartels that were in breach of EU anti-trust rules. The total fine amounted to € 85 876 000 and was imposed on companies Roto, Gretsch-Unitas, Siegenia, Winkhaus, Hautau, Fuhr, Strenger (all of Germany), Maco of Austria and AGB of Italy, for agreeing on common price increases.

    Mountings are a significant component of windows and window-doors that are sold throughout Europe. The size of the market was estimated to be about €1 billion and the companies were holding above 80% of the market shares. The Commission found that the cartel had been functioning in a systematic manner from November 1999 through July 2007, through regular meetings known as "Permanent Conferences".


  • COMMISSION CONFIRMS UNANNOUNCED INSPECTIONS IN THE BEARING SECTOR

    The EC confirmed that officials of the Commission undertook the inspections in the premises of companies in the industry of bearings for automotive and industrial use. The inspections took place with the presence and cooperation of the relevant national competition authorities. The Commission stated that the inspections by themselves do not lead to the conclusion that the companies have been involved in anti-competitive behaviour. Unannounced inspection are a preliminary step and were undertaken on the basis of the Commission’s concerns that the companies had acted in violation of EU anti-trust rules that prohibit cartels and restrictive trade practices, in particular Article 101 of the Treaty on the Functioning of the European Union.
ASIA (EXCLUDING INDIA)
JAPAN
  • CEASE AND DESIST ORDER AND SURCHARGE PAYMENT ORDERS AGAINST AUTOMOTIVE WIRE HARNESS MANUFACTURERS:

    The Japan Fair Trade Commission (JFTC) found that three automotive wire harness manufacturers namely the Yazaki Corporation, Sumitomo Electric Industries and Fujikura Ltd., had been acting in concert with one another by appointing a designated successful bidder and succeeding in getting a planned contractor to obtain the order. Accordingly, the JFTC issued a cease and desist order and surcharge payment order (amounting to a total of about 12. 9 billion yen) under Article 7(2) and Article 7- 2(1) of the Antimonopoly Act.

    The JFTC had issued advance notifications to the enterprises concerned and accorded to them an opportunity to present their views and submit evidence. The JFTC issued the orders on the basis of the evidence presented by the enterprises.

  • JFTC APPROVES TWO PROPOSED MERGERS IN THE HARD DISK DRIVE SECTOR

    The JFTC has reviewed and approved two proposed mergers in the Hard Disk Drive Sector; namely the acquisition of Viviti technologies Ltd by Western Digital media through acquisition of shares and the acquisition of the HDD business of Samsung Electronics Company Ltd by Seagate Technology International. The JFTC has, after the review, reached the conclusion that the acquisition of shares and acquisition of business in these cases would not result in any substantial restraint in the competition in any sector given the remedies including the divestiture of HDD business, offered to the JFTC by WDI. The remedies proposed by WDI would result in the combined market share of WDI and HGST come up to around 40%, which falls within safe harbor standards for business corporations. Although the acquisition of business by Seagate Technology International would not meet safe harbor standards, the JFTC was of the opinion that the unilateral conduct by Seagate or coordinated conduct with its competitor would not substantially restrain competition in particular field of trade.

  • JFTC APPROVES THE PROPOSED MERGER BETWEEN NIPPON STEEL CORPORATION AND SUMITOMO METAL INDUSTRIES

    The JFTC has approved the merger between Nippon Steel Corporation and Sumitomo Metal Industries engaged in the manufacture of steel products, after conducting an examination of the plan of merger. The JFTC has completed its investigation on this matter and has concluded that it will not issue cease and desist orders vis a vis the proposed merger. As the JFTC initially viewed that the merger may substantially restrain competition, the parties proposed remedies related to stable supply of UO pipes and supply of automatic vending machines and technical guidance regarding their operation. At the end of its investigation the JFTC came to the conclusion that in the context of remedies relating to non-oriented electrical steel sheets and the high-pressure gas pipeline engineering business the merger is unlikely to restrain competition in any particular field of trade.
SINGAPORE
  • CCS CLEARS PROPOSED ACQUISITION BY JOHNSON & JOHNSON OF SYNTHES INC.

    The Competition Commission of Singapore (CCS) has approved the merger of Johnson and Johnson and Synthes Inc, both entities being engaged in the business of manufacture and supply of orthopedic medical devices and orthopedic biomaterials. The specific areas of overlap in the markets between the activities of the entities involved in the merger is manufacture and supply of spine and trauma devices, which are types of orthopedic medical devices, and bone graft substitutes, which are a type of orthopedic biomaterial. After taking into consideration the significant buyer power of customers in the market for orthopedic medical services, who consist mainly of private and restructured hospitals and surgeons in private practice, as well as their ability to switch between suppliers, the CCS concluded that in the light of these constraints there would not be a substantial lessening of competition in the country and would not fall under the prohibition under S. 54 of the Competition Act.

  • CCS INFRINGEMENT DECISION AGAINST 10 MODELLING AGENCIES:

    The Competition Commission of Singapore (CCS) has issued an Infringement Decision against 10 modeling agencies for contravening Section 34 of the Competition Act (Cap.50B), which prohibits, inter-alia, price-fixing activities. The 10 modeling agencies have been found to be engaging in anti-competitive conduct by entering into an agreement to fix the rate of modeling services in Singapore. The agreement was in existence from 2005 and continued till 17th July, 2009. CCS had undertaken investigations on the basis of complaints against the Association of Modeling Industry Professionals and on conclusion of investigation, the CCS found that the main objective of the Association was to collectively raise rates for modeling services charged by the Agencies. It is illegal for businesses to engage in such practices for fixing prices. Businesses may determine their own prices independently and not in concert with each other.

  • CCS CLEARS ACQUISITION OF HDD BUSINESS OF SAMSUNG ELECTRONICS BY SEAGATE TECHONLOGY PUBLIC LTD COMPANNY

    Seagate and Samsung are both engaged globally in the in the design, manufacture and marketing of HDDs, for use in the Enterprise, Desktop, Mobile and Consumer Electronics segments. In November, the CCS has cleared the acquisition by Seagate Technology Public Limited Company of the HDD business of Samsung Electronics Company Ltd. after a Phase 2 review. CSS took into consideration the rapid innovative nature of the HDD industry as well as the significant buyer power and ability of buyers to switch between competing suppliers. Through the review, the CCS also identified there was spare capacity in the market. The CCS concluded that the merger would not fall under the prohibition under S. 54 of the Competition Act, and would not lead to substantially less competition in any particular field in Singapore.
INDONESIA
 
  • KPPU APPROVES ACQUISITION OF ASMIN BARA BY PAMAPERSADA:

    The KPPU (Commission for the Supervision of Business Competition) has approved the acquisition of PT Asmin Bara Bronang and PT Asmin Bara Jaan by PT Pamapersada. PT Pamapersada is the coal mining division of Astra’s PT United TractorsTbk (UNTR). The KPPU concluded that the acquisition was not in breach of anti-monopoly law. For assessing the proposed merger, the KPPU identified the relevant markets and market concentration. It also used the coal mine stockpile analysis approach to identify the Indonesian Coal Market. At the end of its assessment the KPPU concluded that the acquisition would not result in monopoly practices and unhealthy business competition in Indonesia. The consolidated assets that would result from the acquisition of PT Asmin Bara Bronang and PT Asmin Bara Jaan by PT Pamapersada would amount to a total of about Rp16.26 trillion.

  • KPPU CLEARS ACQUISITION BY PE PENTAMINA HULU ENERGI OF INPEX JAVA

    The KPPU has approved the acquisition of Inpex Java by Pentamina Hulu Energi. The valuation of the companies have been placed at Rp13 billion and Rp12 billion respectively.

    HHI (Hirschman Herfindahl Index/Market Concentration Index) was used for conducting the valuation, which was done on the basis of Government Regulation No 57/2010 concerning Procedures for Notification and Assessment of Merger, Consolidation and Acquisition.

    The said acquisition involved four markets; namely, petroleum exploration market, petroleum production market, natural gas exploration market, and natural gas production market. However, the KPPU on examination and review concluded that the merger did not trigger any monopoly or unfair trading practice.
SOUTH KOREA
 
  • CABLE FIRMS FINED FOR COLLUSION:

    The Korean Fair Trade Commission (KFTC) fined instant noodle manufacturers and issued remedial orders against them for engaging in a cartel to collectively raise the price of instant noodles. The companies against whom action was taken were: Nongshim, SamyangFoods Co. Ltd, Ottogi Co. Ltd, and Korea Yakult Corporation. The combined surcharge that was imposed on the companies came up to a total of KRW 135.4 billion. The companies had jointly raised the price of instant noodles six times and shared sensitive price information among each other.

    The KFTC made it clear that it would continue focusing on illegal concerted acts that may possibly arising in markets tending to people’s daily necessities.
INDIA
  • Competition Commission of India (CCI) gives clean chit to Steel Authority of India Limited (SAIL), represented by Luthra & Luthra Law Offices over the agreement with Indian Railways (IR):

    In October 2009, Jindal Steel & Power Ltd. (JSPL) filed information under Section 19 read with Section 26(1) of the Competition Act, 2002 (Act) before the CCI alleging that: (1) SAIL had, entered into an exclusive supply agreement with IR for the supply of rails. SAIL was alleged to have abused its dominant position (having 96% market share for making rails that are compliant Research Design & Standards Organization, Ministry of Railways specifications) in the market (Section 4); (2) deprived others of fair competition by entering into an anti-competitive agreement (Section 3) and therefore, acted in violation of this law; and (3) Furthermore, the Memorandum of Understanding (MoU) between SAIL and IR has the effect of restricting IR’s ability to fulfill its requirements for rails of better quality, at more competitive rates from sources other than SAIL. SAIL sought time to file the relevant information but the Commission (without considering any further information on record) opined that there, in fact exists a prima facie case which requires investigation by the Director General (DG).

    The DG submitted an investigation report which has been summarized as follows: (1) SAIL and IR are dominant enterprises within their markets; (2) IR had made earnest efforts to develop indigenous sources for procurement of rails and that JSPL did not participate in the tendering processes in 1997; (3) JSPL was not in a position to supply long rails using gassing technique till April 28, 2008; (4) The commitment to buy total requirements of IR from SAIL forecloses completely for the competition in the market for the manufacturers of long rails to the effect relationship, though the cause of the abuse lies in the relevant market of procurement of long rails; (5) The MoU is not open for any review of procurement therefore it is a perpetual agreement whereby IR cannot procure long rails from any other source except SAIL, which makes the foreclosure effect more severe; (6) The MoU was an attempt to counter the threat of competition from JSPL and is in contravention section 4(2)(b) of the Act; (7) IR by adhering to its own specifications as laid down by RDSO has limited and restricted technical or scientific development relating to manufacture of long rails and is thus in contravention of section 4(2)(b)(ii) of the Act; (8) the decision to enhance SAIL’s production capacity to meet IR’s requirements was taken in 2001 whereas JSPL had informed about its intention to set up production units in 1999, this thus is a denial of market access in contravention of section 4(2)(a)(i) of the Act; (9) There is a denial of market access by SAIL to other purchasers in violation of section 4(2)(c) of the Act; (10) The exclusivity clause in the MoU creates a vertical restraint in contravention of section 3(4)(d); and (11) There is an appreciable adverse effect on competition under the terms of section 19(3) of the Act.

    Findings of the Commission:

    • IR is a departmental undertaking of the Ministry of Railways;

    • MoU between SAIL and IR as an agreement to supply rails on a continuous basis, is rational both on price and non-price considerations and is not anti-competitive;

    • SAIL abusing its dominant position is based on 3 conditions – a) open ended contract b) removal of review clause c) lack of an exit clause does not hold ground on the reading of the MoU and the actual processes on ground;

    • The Commission therefore, finds that the MoU between SAIL and IR is not anti-competitive and does not foreclose the market.


  • CCI clears the Float Glass Manufacturers of the charge of cartelization:

    The erstwhile MRTPC took suo-moto cognizance of a matter on the basis of an article published in the Magazine “The Outlook Business” dated 16th & 19th April 2008 alleging cartel-like practices of leading Indian manufacturers of float glass. Consequent upon the repeal of the MRTP Act, the case was received on transfer by the CCI under Section 66(6) of the Act.

    After thorough investigation and based on the submissions made by various companies, the DG found that although there was an increase in price of float glass during reference period, however, the cost of inputs had also increased which might have contributed to the rise in price of float glass.

    DG has concluded that there is no indication of existence of a cartel in the matter. Further, no evidence of a cartel in terms of allocation of market could be found during the course of investigation. After taking into account all the facts & evidences gathered during the course of investigation, the DG has also concluded that there is no case of any formal/informal understanding of fixing up of prices by glass manufacturers in the Indian Market in and the same does not result in contravention of Section 3 of the Act.

    The commission after taking into consideration the conclusions drawn by the DG felt that there is no reason to disagree with the said findings. The Commission observed that the conclusions of DG appears to be correct that the reasons for increase in price of float glass during the period under reference was due to the increase in cost of raw materials and not due to any Cartelization. The commission also feels that there is no evidence to establish that any appreciable adverse effect on Competition was caused in the market of float glass manufacturers.

    Therefore in the absence of any evidence of determination of price, limit on supply or production of supplies in the market or sharing/allocation of market arising out of any agreement or action in concert, the Commission held that, no case of violation of provisions of Section 3 is made out in the matter for period under investigation and the proceedings deserve to be closed forthwith. Luthra & Luthra represented Gujarat Guardian Limited, one of the leading float glass manufacturers in this case.

  • No cartel amongst the Domestic Airlines:

    The order relates to a reference dated 06.05.2011 received by the Commission from the Ministry of Corporate Affairs, Government of India under Section 16(1)(b) of the Competition Act, 2002. The reference stated that due to the strike called by the pilots of Air India with effect from midnight of 26th April, 2011, different airlines had started charging exorbitant fares for the tickets. Also, in normal course one could not buy tickets online even though seats were available and tickets had to be bought at higher prices closer to the departure date. The CCI was asked to consider the possibility of passing an order under Section 33 of the Act.

    The CCI called a representative of DG of Civil Aviation on 09.05.2011 in order to ascertain the practice adopted by various airlines. A report from DG was received on 9.5.2011 and the Commission concluded that there exists a prima facie case and passed an order under Section 26(1) directing the DG to cause an investigation. Representatives of airlines were directed to file written submissions appear before the Commission to explain their position.

    The DG has observed that out of airlines in the domestic market, no airline has market share of more than 20%. Even if Jet Airways & Jetlite are taken together they do not cross more than 27% for both the months of April & May 2011. According to DG this shows that no player is dominant and in a position to independently drive the market. On the basis of available facts and evidences collected in course of investigation, DG has concluded that there is no express or tacit agreement, resulting in cartelization amongst the airlines. However, it is evident that during the period of strike by the pilots the load factor of other airlines had increased. Also a regular practice adopted by Airlines, also acknowledged by them is hike in the price where due to the excess demand and restrictive supplies, the airlines increased their no. of seats in higher price band, thereby the last moment customers are to pay higher than the normal price. Therefore, according to the DG, the various reasons stated are anti consumer and anti competitive and contravene Section 3(3) of the Act.

    The Commission however noted that the DG has not found any agreement resulting in cartelization amongst the airlines. What has been considered as violation of provisions of Section 3(3) of the Act is the ‘practice’ followed by all the airlines of shifting seats to a higher price bucket which amounts to control over supply of seats and results into higher fares. The Commission on the basis of facts observed that the concept of yield management and dynamic pricing principle would mean that the fares and availability of tickets in each aircraft in each sector may change dynamically. The fare would move from lower to higher levels as the occupancy increases and the departure date comes closer. The Commission also observed that in a condition wherein fares are adjusted by the airlines on the basis of demand, inventory position of flights and competitive pricing by each airline it is natural that fares would generally be higher during peak periods as compared to lean periods. Therefore, the Commission is of the view that this rather than being an anti competitive practice is a business model of pricing which is followed not only in India but internationally.

    The commission finds force in the arguments of the Airlines that the increase in fares during the end April and beginning of may 2011 when Air India pilots proceeded on strike was more of a result of response of Airlines to the factors of general market conditions, reasonability and not due to an anti competitive practice followed by the airlines.

  • CCI levies penalty on Kingfisher Airlines Ltd. for non-compliance:

    Information shared by informant (Sh. MP Mehrotra) against Jet Airways India Ltd & Kingfisher Airlines Ltd stated that they have entered in to an anti competitive agreement involving code sharing, joint fuel management, common ground handling, joint network rationalization, etc. which is adversely affecting the competition in the market and is violating sections 3 & 4 of the Act. The informant therefore prayed for instituting an enquiry against opposite parties. The CCI referred the matter to the DG after having formed an opinion that there exists a prima facie case. However, due to non furnishing of the required information by one of the opposite party (Kingfisher Airlines) as per direction of the DG, the investigation was delayed. Therefore, the DG recommended initiation of proceedings against it under Section 43 of the Act. Further, the commission duly considered the replies files by the Kingfisher Airlines along with the DG’s request. The CCI then instructed the two parties to appear before the CCI for a detailed examination. However, the counsel for M/s Kingfisher Airlines expressed his inability to appear. Meanwhile, the DG issued a notice to the party to furnish the information, however, the party stated that it had filed a SLP before the Hon’ble Supreme Court and therefore would not comply with the requirements of the notice. As such there was no reasonable cause for non compliance in terms of the notice. It was noted that the party on its own chose to withdraw the SLP.

  • Jute industry under CCI lens for alleged cartelization:

    The CCI has initiated a probe into alleged cartelisation between the Gunny Traders Association and the Indian Jute Mills Association (IJMA) in the jute industry. The complaint was initiated by the sugar industry that claims that excessive prices are being charged by the jute industry in the absence of competition. It is mandatory to use jute in the packaging of sugar in India. The CCI found a prima facie case in August this year and initiated investigations.

  • CCI to probe Coal India role in stagnant output:

    The CCI plans to probe whether state-run coal miners have thwarted competition in the sector, robbing it of growth despite the country holding record reserves of the fuel. Domestic coal reserves rose 37% in two years to 74 million tonne in 2011, but this could not be matched with a faster pace of production. Coal production growth in fact slowed to 0.19% in 2011 from 7.9% in the previous year, delaying industrial projects and causing rolling blackouts as coal-based power generators sat idle. The CCI is considering a suo moto investigation into whether the state's virtual monopoly in the sector is responsible for this slowdown. The CCI is probing abuse of dominant position by the state-run monopoly, which has the backing of the coal ministry, under Sections 3 and 4 of the Act.

    Restrictive practices have effects not only on production but also on prices. The wholesale price index for coal increased by 13.25% in the September quarter compared with 7% in the year ago period. The coal import bill also gets inflated due to inefficient tapping of mines. According to government data, the country imports more than 100 million tonne of coal every year.

  • CCI fines 48 LPG cylinder makers for Rs 165 cr:

    The Competition Commission of India (CCI) imposed a penalty of Rs 165.58 crore on 48 LPG cylinder makers for forming a cartel while bidding during the tenders floated by Indian Oil in 2010-11. The competition watchdog imposed the penalty after finding them guilty of manipulating the bids and quoting "identical rates in groups through an understanding and collusive action". The ruling was based on the findings of the Director General, Competition Commission of India (DG). The CCI decided to impose a penalty on each of the contravening company at the rate of 7 per cent of the average turnover of the company.

    At present, only 37 large players out of 48 entities control the supply and act as a cohesive group making it difficult for new players to enter the market. The CCI took cognizance of the case following submission of an investigation report by the DG in a case relating to gas cylinder supply on a complaint by the Indian Oil. In the case it was reported by the DG that in a tender floated by IOC for the supply of 105 lakh 14.2 KG capacity LPG cylinders with SC valves, the manufacturers of LPG cylinders had manipulated the bids and quoted identical rates in groups through an understanding and collusion action. Indian Oil invites bids for empty LPG cylinders from private players.

  • CCI slaps fine on regional film bodies:

    Various informations were filed in this case by a group of producers and distributors as well as the FICCI – Multiplex Association of India (represented by Luthra & Luthra Law Offices), which were then clubbed into one due to similar allegations, against the Karnataka Film Chamber of Commerce (KFCC), Central Circuit Cine Association (CCCA), Motion Pictures Assoication (MPA) and other film bodies and associations, associated with the distribution and exhibition of films in India. The major allegations were relating to anti-competitive conduct by the various regional associations in violation of Sections 3 and 4 of the Competition Act, 2002 (Act).

    The Commission, in this case, found that the Articles of Association and rules and regulations framed by the various associations prohibit their members from dealing with non-members. For instance, if a member deals with a non-member, he is suspended, penalized, blacklisted or boycotted. Hence, the claim that the membership of the association is voluntary is fallacious since it is impossible for anyone, who is not a member, to carry out the business of film distribution or exhibition in the market. The CCI held that the conduct of the associations was anti-competitive and in violation of Section 3(3) of the Act since it limited the market for distribution and exhibition of films. The Commission also noted other anti-competitive practices of the association like refusal to screen films not registered with them, restriction on number of screens for non-regional films, restrictions on time gap between release of movie in theatre and DVD.

    It was held that in effect, the non-members who are the competitors of the members of the association are prevented from effectively competing in the market and their collective intent and behavior constitutes a horizontal agreement under Section 3(3) of the Act since it has the effect of limiting the supply and distribution of the supply of films in the territory under their control.

    It was found that the conduct of the associations was causing restrictions on free and fair competition in the market. The Commission also observed that the acts and conducts of the association did not bring about any improvement in production or supply of films in any manner. Instead, it created entry barriers in the market and caused detriment to consumers. Hence, the Commission held that the conduct of the associations caused an appreciable adverse effect on competition. Hence, the Commission imposed a penalty on each of the associations at the rate of 10% of the average of their three years total receipts and further directed them to cease and desist from their anti-competitive practices.

  • CCI scrutinizing cases against property developers:

    The CCI is scrutinizing several cases against developers for allegedly abusing their dominant position based on the information received by customers, investors and NGOs. Such information is being filed with the CCI in the wake of the information filed by the Belaire’s Owners Association against construction major DLF in May 2010, challenging the delay in possession and alleged arbitrary changes to the building plan and structure. DLF's project Belaire was to originally consist of five towers with 19 floors each, but DLF later increased it to 29 floors and for imposing arbitrary and unfair conditions in its apartment buyers agreements.

  • Railways is 'enterprise', falls under CCI's ambit - Delhi High Court:

    The Delhi High Court held that the Indian Railways is an 'enterprise' and the CCI is empowered to hear complaints against it for alleged abuse of its dominant position in the goods transport sector. Holding that there is a "commercial angle" to the services rendered by the railways, Justice Vipin Sanghi dismissed the railway ministry's plea challenging the CCI jurisdiction to decide cases related to it. The petitioner (Ministry of Railways) is also carrying out an activity of running the railways, which has a commercial angle and is capable of being carried out by entities other than the state, as is the case in various other developed countries. It is not an inalienable function of the state and the submission of the petitioner that it is not covered by the definition of enterprise has no merit and is rejected. The railways had taken a plea that it was not an "enterprise" as defined under the Act and the CCI lacked jurisdiction to hear a complaint that it was allegedly abusing its dominant position in the trade of goods transport. The judgment, which broadened the ambit of the panel by bringing railways' commercial activities under it, came on the plea of the public carrier against a CCI verdict. The CCI, earlier, had rejected the railways' plea, allowing a private firm's allegation that the public carrier had abused its dominant position through its various acts/ conduct, viz, by increasing charges for various services; by not providing access to infrastructure such as rail terminals, etc.

  • Notice on Merger filed by Siemens VAI Metals Technologies Private Limited (SWAI), Morgan Construction Company India Private Limited (Morgan) and Siemens Limited (SL).

    Merging entities: SVAI and Morgan with SL.

    SL is a public listed company engaged in business of providing automation products and systems, electro technical, medical and machinery undertaking turnkey projects. SVAI is a private listed company engaged in providing equipment, process technology and erection and commissioning services. It is stated that the parties for combination operate in different market areas and both are currently a part of Siemens AG having offices, worldwide operating in areas of energy and healthcare. The ultimate control of the business activities conducted by SVAI, Morgan and SL rests with Siemens AG and would continue to rest with Siemens AG post the proposed combination.

    It was held that the combination is not likely to have an appreciable adverse effect on competition in India. Hence, the CCI approved the proposed combination.

  • Notice for Acquisition filed by KKR Mauritius Direct Investments I Ltd. (KKR FII)

    Acquirers: KKR Mauritius Direct Investments I Ltd. (KKR FII)

    Acquired Enterprises: Magma Fincorp Limited (Magma)

    Magma is registered with the Reserve Bank of India as a non- deposit accepting, non- banking financial company. The equity shares of Magma are listed on BSE and NSE. It offers its customers a range of financial products and services, through commercial vehicle finance, construction equipment finance, car and utility vehicle finance, suvidha loans and tractor financed. KKR FII is a sub-account of foreign institutional investor and is registered with SEBI and offers alternative asset management services to public and private market investors and provides capital market solutions to its other affiliates. Zend Mauritius VC Investments (Zend Mauritius) already holds 14.95 % equity shares which in combination with the 10% shares being acquired by the KKR FII amounts to a total of 24.95% which, however, will not lead to any change in control of the board of Magma.

    The combination is not likely to have an appreciable adverse effect on competition in India. Hence, the CCI approved the proposed combination.

  • Notice for merger filed by Nippon Steel Corporation (NSC) and Sumimoto Metal Industries (SMI).

    Merging entities: NSC and SMI

    NSC is a company listed on stock exchange of Japan which is engaged in manufacturing and sale of variety of iron and steel products. Its other businesses include engineering, construction, urban development, chemicals, new materials and system solutions. In India, NSC is merely engaged in steel production. SMI is a company listed on the stock exchange of Japan and is engaged mainly in sale of steel products and does not have manufacture or other capabilities. Through the proposed combination both entities wish to integrate all of their businesses including the core business of steel making and steel fabrication mainly comprising of manufacturing and sale of various iron and steel products. As per the details filed, SMI will merge into NSC and NSC being the surviving company, which after the proposed combination will be called ‘Nippon Steel and Sumitomo Metal Corporation’.

    The Indian steel industry is characterized by presence of large integrated as well as non-integrated steel producers having the required capacity and technology to produce the wide variety of steel.

    As per the details provided by the parties with regard to the sales volume it is noted that the percentage of combined sales volume of the parties to the combination in India in respect of each distinct variety of classified steel products is negligible. For each class of steel products there exist global as well as domestic producers thus indicating ample opportunity for alternative choices.

    Therefore, the CCI is of the view that it is not necessary to define individual market sectors for the purpose of arranged combination notwithstanding the fact that the parties have stated that they engage in production of similar types of steel products. Also the combined sales volume of both the parties is very low when not only compared to the apparent consumption of finished steel products but also to the volume of imports. Consequently the pre-merger competitive condition is unlikely to be affected.

    The combination is not likely to have an appreciable adverse effect on competition in India. Hence, the CCI approved the proposed combination.

  • Notice for merger filed by Akzo Nobel India ltd. (AN India), Akzo Nobel Chemical (India) Limited.(AN Chemicals), Akzo Nobel Coatings India Private Limited (AN Coatings), Akzo Nobel Car Refinishes India Private Limited (AN Car)

    Merging entities: AN Chemicals, AN Coatings and AN Car into AN India

    AN India is incorporated as a part of the UK based Imperial Chemical industries Limited (ICI) which was acquired by Akzo Nobel N.V., Netherlands (AN Group) in 2008. AN Coatings is engaged in the business of supplying coatings varnishes and waxes and is a wholly-owned subsidiary of Akzo Nobel Coatings International B.V., Netherlands, which is a wholly-owned subsidiary of the AN Group. AN Car is engaged in the business of paints, research and developmental facility offering services and solutions for car refinishes and commercial vehicles. AN Car is also a wholly-owned subsidiary of Akzo Nobel Coatings International B.V., Netherlands. AN Chemicals is engaged in the business of manufacturing and supplying of polymerizations initiators, organic and inorganic chemicals. 97. 64% shares of AN Chemicals are held by Akzo Nobel Chemicals International B.V., Netherlands, which is a wholly-owned subsidiary of the AN Group.

    As is evident, it has been stated that these entities are not engaged in providing similar services or the manufacture of similar goods. Moreover, the market share of AN India among the major players in paints and coatings industry is in miniscule; therefore, the proposed combination does not give rise to adverse competitive concern. The combination is not likely to have an appreciable adverse effect on competition in India. Hence, the CCI approved the proposed combination.

  • Notice for Acquisition filed by Standard Chartered Bank India Branch. (SCB India) and Barclays Bank PLC, India branch (Barclays India)

    Acquirer: SCB India

    Acquired Enterprises: Credit card business of Barclays India

    The credit card business proposed to be acquired by SCB India includes selected sale accounts, customer relationship, customer data, files and outstanding receivables of identified cardholders. SCB India is not acquiring any of the processes, assets, infrastructures or employees of Barclays India, also the credit card customers will be duly informed and those expressing objections will not be issued credit cards by SCB India. SCB India is a banking company engaged is providing customer, priority, private wholesale banking services across 70 countries, its ultimate parent being SCB PLC incorporated in England and Wales. SCB India provides financial services like personal, preferred, priority sector, private, SME, wholesale, loans and mortgages, NRI Banking, Insurance and investment services including credit cards. Barclays India provides services like credit card facilities retail banking, premier banking, corporate banking and other similar services.

    It has been noted that the credit card business in India is fragmented with many players and the aggregate share of SCB India and Barclays India post the proposed combination would be very small. Further, they do not have an arrangement for production, supply, distribution, storage, sale and service or trade in products or provision of services which is at different stages or levels of production chain in credit card business in India.

    The combination is not likely to have an appreciable adverse effect on competition in India. Hence, the CCI approved the proposed combination.

  • Notice for merger filed by Tata Chemicals Limited (TCS) and Wyoming 1 Mauritius private Limited (Wyoming 1)

    Merging entities: TCS and Wyoming 1

    It was submitted by the parties to the combination that the said transaction would not require notification with the commission as it Item 8 under Schedule I the combination regulations, which relates to acquisition or control of shares or voting rights or assets by one person or enterprise of another person or enterprise within the same group, which falls within the list which need not normally be filed. It was also submitted that Item 10 of Schedule I of the combination regulations would apply since it relates to combinations occurring outside India with insignificant local nexus and the same ought to be exempted from filing on that ground as well.

    The Commission clarified the position in law on the aforesaid and held that since the proposed combination falls under the scope of section 5(c) of the Act and is pursuant to a scheme of amalgamation and not acquisition, therefore the question of applicability of item 8 schedule 1 does not arise. Further, since the parties meet the threshold relating to assets/turnover in India, Item 10 of Schedule I would not apply.

    TCS is engaged in manufacture of inorganic chemicals, fertilizers, other agri inputs and others. Wyoming 1 is a wholly owned subsidiary of TCL which does not have assets or turnover in India. Moreover it is not engaged in production, supply, storage, sale or trade of any kind of goods or services. Therefore both the companies are not engaged in the production of similar kind of goods or services. Moreover, Wyoming 1 is a wholly owned subsidiary of TCL, incorporated solely for holding off-shore business interest of TCL and post the execution of proposed combination, there would be no change in control.

    The combination is not likely to have an appreciable adverse effect on competition in India. Hence, the CCI approved the proposed combination.

  • No regulatory vetting of M&As involving up to 25% control:

    Relaxing the rule on mergers and acquisitions to be vetted by it, the CCI has exempted acquisitions resulting in a cumulative control of up to 25% of shareholding or voting rights from such scrutiny. The current practice sets the limit at 15%. Analysts say the change is in sync with market watchdog SEBI’s new takeover code, which raised the open offer trigger from 15 to 25% of the shares acquired. Besides, intra-group mergers or amalgamations involving enterprises wholly owned by group companies will escape CCI vetting. However, companies that need to undergo CCI scrutiny will now have to spend several times more as the fee for normal M&A scrutiny has been raised from Rs 50,000 to Rs 10 lakh and from Rs 10 lakh to Rs 40 lakh in cases where intense scrutiny is required. The amendment to the Competition Commission of India (Procedure in regard to the transaction of business relating to combination) Regulation, 2011 attempts to provide relief to corporate entities from making filings for combinations unlikely to raise competition concerns, reduce compliance requirements, make filings simpler and to move towards certainty in the application of the Competition Act. Since July 2011, the Competition Commission has cleared 28 merger and acquisition applications. In none of those did it find any possibility of an adverse impact on competition.

  • Notice for merger filed by Orchid Research Laboratories Ltd. (ORLL) and Orchid Chemicals and Pharmaceuticals Ltd. (OCPL)

    Merging entities: ORLL and OCPL

    The notice of the proposed merger was given under Sec 6 (2) of the Competition Act pursuant to a scheme of amalgamation under Section 391 to 394 of the Companies Act, 1956. The Commission found that OCPL is a 100 %export oriented unit, engaged in the business of manufacture of pharmaceutical ingredients, including branded and regulated generics while ORLL is a wholly owned subsidiary of OCPL, which is engaged specifically in the area of discovery and development of new therapeutic drugs like anti-infectives, anti-inflammatory etc. Moreover, the ultimate control over the activities carried out by the parties to the combination, before and after the proposed combination, remains with OCPL. Therefore, the CCI held that the proposed combination is not likely to have an appreciable adverse effect on competition. Hence, the CCI approved the combination under Section 31(1) of the Act.

  • Notice for merger filed by DLF Construction Limited (DCL), DLF Hotels and Apartments Private Limited (DHAPL) and DLF Projects Limited (DPL)

    Merging entities: DPL, DCL and DHAPL

    The notice of the proposed merger was given under Sec 6 (2) of the Competition Act. The notice relates to the proposed combination, wherein both DCL and DHAPL will merge into DPL pursuant to a scheme of amalgamation under Sections 391 to 394 of the Companies Act, 1956, approved by the Board of Directors of each of the parties to the combination.

    The Commission found that DCL is engaged in the business of construction and project development for the DLF Group companies. DHAPL is engaged in the business of undertaking interior fit-outs/ furnishings in the apartments constructed by the DLF Group companies. DPL is engaged in the business of construction and project development/ management for the DLF Group companies. The Commission noted that DCL, DHAPL and DPL are all, directly or indirectly, wholly owned subsidiaries of DLF Limited. Moreover, the ultimate control over the activities carried out by the parties to the combination, before and after the proposed combination, remains with DLF Limited. Therefore, the CCI held that the proposed combination is not likely to have an appreciable adverse effect on competition. Hence, the CCI approved the combination under Section 31(1) of the Act.

  • Notice for merger filed by Viscount Management Services (Alpha) Limited (VMSA) and Reliance Capital Limited (RCAP)

    Merging entities: VMSA and RCAP

    The notice of the proposed merger was given under Sec 6 (2) of the Competition Act. The notice relates to the proposed combination, wherein VMSA would merge into RCAP pursuant to a scheme of amalgamation under Sections 391 to 394 of the Companies Act, 1956, approved by the Board of Directors of each of the parties to the combination.

    The CCI found that RCAP is a public limited company, registered as a Non-Banking Finance Company under the Reserve Bank of India Act, 1934 and is engaged in the business of asset financing, lending and investment. Its activities include asset management, mutual funds, pension funds, private equity and proprietary investments, stock broking and depository services, investment banking, wealth management, home and commercial finance, financial products distribution, venture capital etc.

    RCAP has 100% economic interest in VMSA and is therefore in a position to exercise absolute control over VMSA. 50% of the equity share capital of VMSA is held by Viscount Management Services Ltd. (VMS), 18% by Reliance Land Private Ltd. (RLPL), another 18% by RCAP and its nominees and the remaining 14% by Reliance Share and Stock Brokers Private Limited (RSSBPL). Moreover, VMSA, VMS, RLPL and RSSBPL are all part of the RCAP group and RCAP exercises ultimate control over all of them.

    Further, it is noted that VMSA is currently not carrying on any business activity except for holding 47.89% equity shares in Reliance Life Insurance Company Limited (RLIC) and 13% equity shares in VMS.

    This amalgamation scheme is subject to the condition that on or before the scheme becoming effective, RCAP will hold the entire issued, subscribed and paid up share capital of VMSA. Moreover, RCAP will acquire all the shares of VMSA held by VMS, RLPL and RSSBPL, thereby making VMSA a wholly owned subsidiary of RCAP.

    In light of the fact that VMSA is not carrying on any business activities except for holding investments in group companies and the fact that ultimate control over the management of VMSA, before and after the proposed combination remains with RCAP, the CCI held that the proposed combination is not likely to have an appreciable adverse effect on competition. Hence, the CCI approved the combination under Section 31(1) of the Act.

  • Notice for merger filed by Sundaram-Clayton Limited (SCL), Anusha Investment Limited (AIL) and Sundaram Investment Limited (SIL)

    Merging entities: SCL, AIL and SIL

    The notice of the proposed merger was given under Sec 6 (2) of the Competition Act. The notice relates to the proposed combination pursuant to a Composite Scheme of Arrangement under Sections 391 to 394 of the Companies Act, 1956, approved by the Board of Directors of each of the parties to the combination.

    The CCI found that AIL and SIL are wholly owned subsidiaries of SCL and all the three companies are engaged in automotive and non-automotive businesses. AIL is registered with the RBI as a Non-Banking Financial Company under S.45-IA of the RBI Act. AIL is an investment company which holds investments in both automotive and non-automotive related businesses. AIL presently holds 48.56% of the paid up equity share capital of TVS Motor Co. Ltd., in which SCL holds 8.84% of the paid up equity share capital. Subsequent to the proposed amalgamation, SCL will directly hold 57.40% in TVS Motor Co. Ltd.

    The CCI noted that the proposed amalgamation of AIL into SCL and the subsequent transfer of non-automotive related business of SCL into SIL involves consolidation and division of the existing businesses within the same group. The CCI observed that the scheme simply involves reorganization of the businesses of SCL and the ultimate control over the business activities carried on by the parties to the combination, before and after the proposed combination, remains unchanged. Hence, the CCI held that the proposed combination is not likely to have an appreciable adverse effect on competition and the combination was approved under Section 31(1) of the Act.
G.R. BHATIA is a Partner and KANIKA CHAUDHARY and NIDHI SINGH are Associates at Luthra & Luthra Law Offices.
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