Competition Law

[By Arjun Nayyar and Jayadeep Manchikalapudi]  The authors are students at NALSAR University of Law, Hyderabad and Hidayatullah National Law University, Raipur, respectively. Setting the Context Recently, allegations over Google’s actions have brought it under the scrutiny of the Competition Commission of India.[i] With an appeal against a previous anti-trust order still pending in the Apex court, the internet giant has been flagged this time for promoting its payment app Google Pay unfairly through the Google Play Store.[ii] This method allegedly utilises search manipulation, a practice that Google has been accused of in the past.[iii]Such manipulation of search results enables Google’s vertical payment partner to appear predominantly when searching for payment apps from the GooglePlay Store. This is a textbook case of an enterprise leveraging dominance in one relevant market to enter into or protect its product in another relevant market; a practice that is expressly proscribed under Section 4(2) of the Competition Act of 2002.[iv]However, such instances of anti-trust complaints are not limited to Google, with accusations being leveled against other internet giants as well. Apple also faced a similar issue recently, when Spotify filed an official complaint with the European Union against the discriminatory pricing policy adopted by the company’s App Store between Apple music and other music streaming services.[v] Both Apple and Google essentially have a dual role as a platform: They distribute their own apps (such as Apple Music and Youtube) on their app stores (App Store and Google Play Store respectively); and They provide a platform for apps where third-party app developers offer their products and services directly to users. Most of the complaints deal with the abuse of this dual role, whereby the powerful enterprises attempt to leverage their dominant position in an upstream market (here, the platform) via favoring their downstream division (the apps). This is done at the cost of the competitors in said downstream market, using pre-existing affluence in one market to bolster the success in another. For a complaint dealing with the abuse of dominance, the establishment of three things is necessary, which are: Proving the market is a relevant one(comprising of relevant product); The enterprise occupies a dominant position (using factors mentioned under Section19(4) of the Competition Act)[vi]; and The conduct amounts to an abuse of said dominant position. Relevant Market The test for determining the relevance of a market is elucidated in Section 2(r) of the Competition Act[vii] and is based on the products and/or services, along with the location at which these are provided. In the present complaint against Google, the appropriate relevant market would be the market for app stores for android mobile operating systems. This was established in the matter of Umar Javeed v. Google LLC,[viii] through which the Competition Commission of India listed a number of different app stores available for Google Android devices. These include the Play Store, the Amazon AppStore, Samsung’s Galaxy Apps store, Aptoide, the Opera Software ASA’s Mobile Store, and the Yandex Store. The Commission concluded that these different app stores for Google Android devices (“Google Android app stores”) belong to the same product market. Dominant Position While different app stores do exist in the market for android mobile operating systems, Google is the distinguished leader. The Dutch Authority for Consumers and Markets (ACM)conducted a market study of mobile app stores, with the twofold goal of understanding how app developers get their products in app stores, and the influence which these stores have on the selection of apps for the users.[ix]It concluded that the Apple App Store and Google Play Store have their “app-ecosystems” closed by design, leaving virtually no feasible app stores as alternatives within either of these ecosystems. This was reiterated by the EU Anti-trust regulator, stating Google clearly is a dominant player with over 90% of market share in a high entry barrier market.[x] Abusive Conduct If a firm holds a dominant position, it has a special responsibility to ensure that its conduct does not impair genuine and undistorted competition in the common market. This was established as a standard in the EU as early as 1983,[xi] and was extended by the Competition Commission of India to include online platforms and digital markets in Fast Track Call Cab Pvt Ltd v. ANI Technologies Pvt Ltd.[xii] Assuming the alleged conduct of Google to be true, a question arises as to whether the act of promoting its own app over others amounts to abuse under the Act. The answer lies in the regulatory stance adopted by the Competition Commission of India. The emphasis under section 4(1) of the Act[xiii] is on “abuse”, though the word itself has not been defined under the Act, with the legislature wisely choosing to leave it open to be interpreted on a case-to-case basis. Having said this, the Government of India in 1999 constituted a high-level committee led by Mr. SVS Raghavan to suggest changes to Competition Law framework in the country in order to bring it at par with the advanced international standard. In its report, the committee elaborated on the meaning of “abuse”, stating that “discriminatory behaviour and any other exercise of market power leading to the prevention, restriction or distortion of competition would obviously be included in the definition of abuse”.[xiv] In the present complaint, Google’s conduct of using its platform to promote its own payment app over others duly qualifies as discriminatory behaviour, thus falling under the definition of abuse under the Competition Act. The Lack of Possible Defences As per accepted EU law,[xv] there is no threshold for the purpose of determining abuse of a dominant position, as the mere misuse of the same is not justified. Moreover, the only defence available under the Competition Actis to prove the abuse by other market players, which is not the case in the present complaint. Also, the dominant enterprise in the first market need not possess a dominant market position in the second market. The Competition Act does not necessitate a high degree of associational link between the market in which a dominant

[By Ashna Chhabra and Anuja Chaudhury] The authors are students at ILS Law College, Pune Introduction The Ministry of Corporate Affairs published the Draft Competition Amendment Bill, 2020[i] on 12th February 2020 based on the recommendations of the Competition Law Review Committee (CLRC). One of the proposed changes is the insertion of S.4A which extends the Intellectual Property Rights (‘IPR’) exemption to abusive practices by dominant enterprises under Section 4 of the Competition Act, 2002 (‘The Act’). Earlier, this exemption was restricted only to the anti-competitive agreements under Section 3(5) of the Act. The earlier provision granted a protection from Section 3 to agreements entered into by any person for restraining any infringement or imposing any reasonable conditions, imperative for the protection of IPRs. This provision conferred a protection to IP holders, specifically in licensing agreements; acting as a shield to uphold the proprietary rights of the holders and simultaneously promote inventions. It further provides that Section 3 will not act as a bar to the right of a person to undertake export of goods from India to a certain extent.   The newly inserted S.4A aims to extend the same exemption to abusive conduct by dominant entities done to protect their IPR. This article aims to analyse the proposed amendment extending the IPR exemption to dominant entities and to identify the prospective enforcement concerns arising from the same. Balancing ‘Rights’ under IP & ‘Abuse’ under Competition Law The regimes of IPR and competition law have always been considered antithetical to one another. While the former confers exclusive monopoly rights, the latter checks upon the unreasonable exercise and abuse of those rights. At the same time, their complementary objectives cannot be overlooked, since competition law and IP, in synergy, promote efficient competition and innovation. The extension of the IPR exemption to abuse of dominance (‘AOD’) cases will tip the equibalance between the two laws in the favour of the IPR regime. This will eventually induce an exponential rise in cases where dominant enterprises (such as patent or copyright holding entities) will attempt to objectively justify their abusive behaviour (such as imposing restrictive licensing or franchise clauses) under the guise of protecting their IPRs. As early as 1988, the European Union (‘EU’) Commission, in the case of AB Volvo v. Erik Veng (UK) Ltd.[ii] decided that even an exercise of an IPR right by an enterprise will be considered abusive in the following circumstances: Existence of no other substitute for the product which has a specific, constant, and regular potential demand on the part of the consumers; Refusal to supply the information leading to the prevention of the creation of a new product for which there is potential consumer demand; No objective justification for such refusal; Reservation of the secondary/downstream market to themselves by excluding all the competition in the market. Although the proposed provision contemplates the above scenarios by not providing a blanket exemption, it runs the risk of becoming a template defence used by the entities to escape liability under Section 4 of the Act.[iii] It would result in enterprises in monopolistic markets indulging in practices such as the creation of a market-standard based on IPR licensing, excessive pricing, refusal to deal, refusal to license, or dominating the downstream market by refusing necessary information for entry, under the garb of ‘protection of IPR’. This necessitates the striking a fine balance between private proprietary rights and promotion of economic growth and competition. Peeking into the future: Prospective enforcement issues in AOD cases The extension of the IP defence to AOD cases is sure to raise several pertinent concerns and enforcement issues. Firstly, there remains ambiguity regarding the determination of the ‘relevant market’ which forms the very foundation of Section 4. In 2014, CCI in the Super Cassettes case,[iv] concluded the relevant product market by considering the SSNIP test instead of holding the entire IPR as the relevant market. However, for the purpose of Section 4A, in determining the establishment of a dominant position, there is a requirement of due consideration of whether the ‘relevant geographic market’ would be commensurate to the extent of the territorial protection granted to the IPR or the extent of usage of that IPR in the market. The clarification of the same will warrant an addition to the factors required to be satisfied for determining the ‘relevant market’ under Section 19(5) and (6), for example, if the relevant market will include products made from license or technology transfer of the IPR. Secondly, The threshold for proving AAEC is more flexible and has a broader scope under the relative ‘rule of reason’ approach adopted by CCI in AOD cases due to the presence of various objective justifications for the abusive practices. The extension of the exemption to Section 4 will provide an additional scope, broader to satisfy the ‘objective justifications’ for the abusive conduct by a dominant enterprise. Thirdly, the CCI has failed to provide an appropriate and succinct definition of what constitutes ‘reasonable conditions’ under Section 3(5). In 2017, CCI in the K Sera Sera case,[vi] concluded that exclusive agreements with distributors to prevent agreements with repeated IPR infringers constitute a ‘reasonable condition’. In 2015, CCI in the Shamsher Kataria case,[vii] provided two requirements to be satisfied for any entity to claim exemption under Section 3(5) namely: Whether the right which is put forward is correctly characterized as protecting an intellectual property; and Whether the requirements of the law granting the IPRs are being satisfied. While clarifying the first criteria, the CCI stated that the concept of protection of an IPR is qualified to be ‘necessary’ where, in the absence of the restrictive conditions; the IPR holder is unable to protect his IPR. However, the extension of the same to AOD cases will require a more variable and clear definition of what constitutes ‘reasonable conditions’ as the possibility of misuse of the provision is higher. The Bill also lacks an adequate mechanism to address the issues which can arise from the non-compulsion of provision Fair, Reasonable & Non-Discriminatory (FRAND)terms to

[By Shreya Chandhok] The author is a student at National Law Institute University, Bhopal Introduction The Covid-19 pandemic has pushed the global economy into a slump, leading to a shrinking economy with weakened growth. The increased uncertainty caused by the disruption in demand and supply chains is discouraging transactions, leading to companies filing for bankruptcy worldwide. Even though the government and the competition authorities are working towards providing relaxations to such undertakings, there remains a possibility of an increase in the number of Mergers & Acquisitions (M&A) transactions, particularly rescue deals in the market. The better-positioned companies with sufficient financial resources will be tempted to seize a unique opportunity to acquire a struggling competitor. Even the Organisation for Economic Cooperation and Development (‘OECD’) acknowledges that in times of financial crisis, it is natural for distressed companies to improve their condition by merging with a healthier competitor. In India, such acquisitions must comply with the requirements under the Insolvency and Bankruptcy Code, 2016 (IBC) which eventually depends on the resolution plan chalked out by the insolvency resolution professional. According to the proviso under Section 31(4) of the IBC, an applicant is supposed to take prior approval from the Competition Commission of India (CCI), before the approval of the Committee of Creditors (CoC) is obtained if the resolution plan has a provision for ‘combination’. Essentially, this acquisition becomes a part of combination under Section 5 of the Competition Act, 2002. To relax this long procedure of approvals, the CCI in 2019 amended its  ‘Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011’ (Combination Regulations)to legitimise a self-assessment channel, known as the ‘Green Channel Clearance’ for M&A filings. Under the green channel, mergers or acquisitions between unrelated parties that are not involved in similar businesses, horizontally or vertically will be deemed to be approved by an automatic system for speedy approval of combinations. Recently, the government promulgated an ordinance to suspend sections 7, 9, and 10 of IBC for a period of 6 months, which can be extended for a period of one year. This would imply that the merger requests reaching the CCI will not go through the severity of the IBC, to determine if the firm was actually under a financial distress. In pursuance of this, the CCI will likely be asked to assess M&A which might be anti-competitive but may nonetheless fall under the ‘failing firm defence’, permitting a failing firm to merge with a healthy competitor. Therefore, the question is, how will the CCI examine the ‘failing firms’ in the current scenario? This post attempts to find an answer to this question, firstly, by examining the application of ‘failing firm defence’ in India vis a vis other jurisdictions and secondly, by analysing CCI’s role in the upcoming merger requests. Failing-firm defence The failing firm defence provides a way to clear mergers in cases that would otherwise be characterised by significant anti-competitive effects. Before starting with the substantial discussion, it is important to distinguish between two concepts, the ‘failing firm’ and the ‘flailing firm’. ‘The failing firm’ is a firm that has exhausted all its options for survival and is on the brink of exiting the market, whereas the latter has simply become a weaker competitor. Therefore, there is a higher burden on the parties to prove that they are close to bankruptcy, rather than just weakened by the current economic situations, pertaining to the proposed merger. The European Union (‘EU’) for that matter, in the case of Kali und Salz, gave a three-fold test to determine the applicability of the failing-firm defence- (i) the failing firm would be forced out of the market if not taken over by another entity; (ii) this was the least anti-competitive measure; and (iii) the assets of the failing firm would leave the market in the absence of the said merger. Accordingly, to satisfy the first condition, the firms must establish their financial difficulties by showing denied access to requisite funds or failed attempts of restructuring. The second condition can be satisfied by showing that there are no alternative buyers available in the market, or that the acquisition by another company does not lead to a less-competitive result. Therefore, from a buyer’s perspective, between exploring alternative options and allowing a merger, the latter is the least anti-competitive resort available to the undertaking. To establish the third condition, it requires the notifying party to demonstrate that if the target company fails, its entire share would inevitably exit the market and/or its market share will go the competitor. The Aegean/Olympic II case in the EU deliberated on all these conditions and satisfied that if the merger was not allowed, Olympics’ market share would retire from the market, leading to a reduction in competition, and therefore allowing the merger was the least anti-competitive alternative available with the authorities. Following the same, recently, the Competition and Markets Authorities (CMA) in the United Kingdom, approved Amazon’s investment in Deliveroo, a British restaurant and grocery delivery platform that attained a significant share in the market, was likely to lose its share due to the Covid-19 pandemic if Amazon did not invest, eventually leading to a loss of competition in the market. In the United States, the US Department of Justice (‘department’) has been disinclined to compromise the standards of this defence, and is only helping the undertakings by expediting the review process. Nevertheless, the authorities are honouring the requests on a case to case basis, by giving due regard to the nature of the industry and their position in the society, when evaluating a merger request. Recently, the department allowed for an acquisition in the milk industry, following the unprecedented challenges they were facing. Therefore, in a nutshell, the authorities across the borders are trying to accommodate the requests of such undertakings, by evaluating their requests based on the current crisis. Even though India has not dealt with the failing firm directly, it is noteworthy to mention that the S.V.S. Raghavan

[By Naga Sai Srikar] The author is a student at Christ (Deemed to be University), School of Law Introduction The Unified Payments Interface (UPI) has been India’s greatest achievement in the digital payments sector so far. It is no secret that the demonetization of banknotes announced by the Union Government on 8th November, 2016 acted as a great catalyst in promoting digital payments across the country. While large Peer-to-Peer (P2P) wallet providers such as Paytm, Freecharge, and Mobikwik were compelled to introduce UPI to their existing infrastructure owing to scalability and ease of use, others such as Phonepe and Google Pay went on to build their payment services solely on the UPI platform. Seeing this as a great opportunity, Facebook Inc. owned messaging giant WhatsApp too joined the bandwagon and demonstrated its intent to foray into the digital payments market. On 16th February, 2018 the National Payments Corporation of India (NPCI) which spearheaded the UPI granted an in-principle approval for WhatsApp’s pilot project.[i] According to the consent, WhatsApp could roll out UPI for a limited userbase of 1 million and with a stipulated per transaction limit. However in July, 2018 a legal think tank named Centre for Accountability and Systemic Change (CASC) filed a PIL before the Hon’ble Supreme Court stating that WhatsApp had failed to comply with the data localization rules notified by the RBI thereby violating the privacy of citizens.[ii] WhatsApp’s reluctance to comply finally came to a hold when the Supreme Court ordered RBI and NPCI to submit reports of compliance thereafter which WhatsApp assured the Court that they would comply to the data localization rules before rolling out their full-fledged payments feature.[iii] The latest order explicitly mentions – “It is made clear that there will be no stay of the proceedings with respect to the application of respondent No.3 (i.e. WhatsApp) by the Government, which shall be processed in accordance with law”[iv] indicating NPCI and RBI to go ahead with its regulatory approvals if conditions are met. Subsequently, it has been reported that the Competition Commission of India (CCI) has been reviewing antitrust complaints against WhatsApp Pay.[v] Therefore, a question arises as to whether the CCI would now knock the doors of WhatsApp? The Abuse of Dominance Conundrum A. Relevant Product Market Before delving into the discussion regarding the possible abuse of WhatsApp’s dominant position, the relevant market has to ascertained. In the instant case, it must be noted that WhatsApp which is predominantly an instant messaging application would enter the Digital Payments Market (offering only UPI initially) by enabling the said feature on its existing application. Thereby, WhatsApp is said to utilize its already existing userbase to push its digital payments presence. Taking into account factors such as interchangeability, characteristics of the product or service, their prices, consumer preferences and intended use as provided under Section 2(t) and Section 19(7) of the Competition Act, 2002 (the Act), two markets emanate for discussion. Firstly, the ‘Instant Messaging Services’ market. Although the focus is on WhatsApp’s payment feature, yet it is opined that WhatsApp’s primary market, i.e. instant messaging, has to be assessed in the instant case as the UPI feature (popularly called as WhatsApp Pay) is being added as an extension to its existing application. The second market that is relevant here is that of ‘Digital Payment Systems’ offering UPI as a feature. B. WhatsApp’s Scale of Dominance In the Instant Messaging market, WhatsApp holds 33.37% of global market share with more that 2 billion active users.[vi] Of this mammoth subscriber base, 400 million users are from India making it the largest market for WhatsApp.[vii] A study indicates that WhatsApp is installed on 95% of Android Devices and 75% of the users use the app on a daily basis in India.[viii] The statistics above clearly indicates WhatsApp as the market-leader and in a position to dominate. As far as the Digital Payment Systems market offering UPI as a feature is concerned, a leading payment gateway provider’s report indicates that Google Pay holds a market share of over 61% followed by PhonePe and PayTM with shares of 24% and 6% respectively.[ix] In terms of number of users, Google Pay boasts of 67 million active monthly users[x] followed by PhonePe with 55 million users. With an average of 790 million UPI transaction per month[xi] (as per data for January, 2019 to September, 2019), the addition of UPI feature onto its messaging platform would enable WhatsApp with a 400 million subscriber base to instantaneously penetrate into the payments market. Even the slightest translation of instant messaging users to the UPI feature would dent the other players in the market. Therefore, factors such as position of strength, operations independent of competitive forces and effect on its competitors in the relevant market is opined to be satisfied in the instant case and thus falls squarely within the ambit of “dominant position” as explained under Section 4 of the Act. C. The Abuse of Dominant Position Charge It well known that a market-player’s dominant position is not per se prohibited under the Act. However, the abuse of a player’s dominant position is prohibited. Section 4(2)(e) of the Act expressly states that – There shall be an abuse of dominant position if an enterprise or a group “uses its dominant position in one relevant market to enter into, or protect, other relevant market.” In the instant case, WhatsApp’s dominant position in the Instant Messaging Services market is being utilized to enter the payment services market, clearly violating the said provision. Similarly, Section 4(2)(c) of the Act categorizes practices resulting in denial of market access in any manner as an abuse of dominant position. It is opined that WhatsApp’s integration of UPI into its existing app forms a market denial practice since the user is incentivized to utilize the UPI feature without having to download additional applications. The mere fact of WhatsApp’s mammoth subscriber base would create a large network effect thereby affecting the already existing players in the market. Although there is

[Deepti Pandey and Sushant Singh] The authors are fourth year students of WBNUJS, Kolkata. Introduction The global increase in the foothold of the online platforms has considerably accelerated leading to a significant share in the relevant market.[i] The areas where these businesses have flourished in India include food delivery services, hotel and travel bookings, cab services and delivery of products through e-retail inter alia.[ii] On one hand, it has contributed to convenience and market efficiencies.[iii] On the other hand, it has raised eyebrows of the regulatory authorities across jurisdictions specifically in relation to the Price Parity agreements.[iv] In particular, these have tremendously impacted the competition which is why several cases have emerged in Germany, the European Union and India among others challenging the cartelization, abuse of dominance and anti-competition.[v] A commonly accepted definition of price parity agreement (also known as ‘Across Platform Parity Agreement’[vi] or ‘Most Favoured Nation Agreement’) is an agreement between a service provider and an intermediary where the service provider guarantees to abide by a minimum price threshold while selling its own product or service to any other intermediary.[vii] It essentially provides an assurance to the intermediary who is a party to the agreement that he/she is offered the terms at least as favourable as other intermediaries.[viii] Depending upon the intensity of the containment/restraint, such agreements can be classified as ‘wide’ (here, restraint applies to other channels – both online and offline) or ‘narrow’ (here, the restriction applies to the extent of service provider’s own website).[ix] There is a difference in approaches as regards the two forms of price parity agreements across jurisdictions. While there is some degree of unanimity regarding invalidating wide price parity clauses, certain jurisdictions do confer validity to narrow price parity agreement.[x] The controversy regarding their validity has become crucial particularly from India’s standpoint especially after the release of the 2020 Report on E-Commerce (“Report”) where the Competition Commission of India (“CCI”) has vaguely referred to the competition crisis by the price parity agreements while refraining from their categorical invalidation. The concerns are intensively hiked in light of the increased cases filed particularly against online hotel booking sectors wherein the CCI has to step in and conduct the analysis on abuse of dominance.[xi] In this backdrop, this article seeks to analyze the validity of the price parity agreements and their effect on competition. Price parity agreements and their relevance in online intermediation  The primary motive for adopting these clauses as identified by the CCI is to preclude free-riding (a practice that allows the sellers/service providers to freely exploit the labour of online platform operators for gravitating customers otherwise available at cheaper alternative prices). In certain way, it may foster innovation in the online services catering greater to the demand side and thereby expands the consumer base.[xii] In marketing terms, it should be viewed as an incentive provided for the marketing services of online channels. These channels in various instances help drive the prices for the goods/services.[xiii] The market and promotion advantage furthers the objective of the sellers/service providers to give in to the price parity agreements.[xiv] Various sectors (especially the hotel industry) have realized that there is a great potential in online platforms to integrate the consumer demands into a framework for tailorized services as well as to cater appropriately to the consumer perception regarding a steady and stable pricing.[xv] The enhanced information symmetry coupled with more innovative means to cater to the consumers helps the demand side which in turn creates returns for the supply side leading to the growth of the concerned sector.[xvi] India’s contribution to the jurisprudence on price parity in e-commerce  An attempt to provide an understanding on how the Competition Act, 2002 (“the Act”) regulates price parity agreements is made by the CCI. Based on the given Report, it appears that there is no clear cut response given to the status of price parity agreement and they are subject to a fact-specific inquiry which is grounded upon the factors under Section 3 and 4 of the Act. The rationale for according this uncertainty is evident from paragraph 93-95 of the Report where the CCI discusses both the pros and cons of price parity and seeks to arrive at a balancing approach. So far so good: The MakeMyTrip case and a Vigilant CCI Not all the cases involving the online intermediaries are impugnable. A dominant market is required to be proven and a case shall lie under Section 3 or Section 4 of the Act. A detailed analysis is required to ascertain whether the agreement has the effect of causing appreciable adverse effect on competition or is creating a dominant market. However, the subject-matter has recently come into the foray due to which there is not enough jurisprudence and judicial precedence. The two cases cumulatively discussed hereunder are the CCI’s analysis of the price parity agreement between hotel chains and online booking platform with reference to Section 3(4) and 4 of the Act. The first case is the In Re: Rubtub Solutions Pvt. Ltd. and MakeMyTrip case (“MMT”). In the given case, MMT entered into a chain agreement containing price parity clause with Treebo Hotels. This agreement is challenged by Treebo as an infringement of Section 3(4) and Section 4(2)(a)(ii) of the Act. In its analysis, CCI relied on the previous case – In Re: FHRAI and OYO (“OYO”). The OYO case involves allegation against the MMT for abuse of dominance on various factors – one such is the wide price parity clause it entered into with hotel companies. While ascertaining the abuse of dominance,  the CCI closely peruses the following factors:- 100% acquisition of Ibibo Group Holdings by the MMT, annual growth of the MMT in past three years, the MMT’s market share post the acquisition (around 63%). Based on these factors, it infers a prima facie abuse of dominance. It further reaffirms that the price parity agreement is wide in nature. This, in the opinion of the CCI, causes a repulsive effect by acting as a

[By Lavanya Jha and Shreya Jha] The authors are students of WBNUJS, Kolkata and Amity Law School, Delhi respectively. Introduction The growth in anti-competitive concerns due to the rapidly evolving business landscape in India, has led to amendments being proposed in the Competition Act, 2002 (“Act”) by the Ministry of Corporate Affairs. One of such proposed amendments includes the expansion of the scope of cartels. Earlier, under the Act, only market players on a horizontal level were included in the definition of cartels. The (Draft) Competition (Amendment) Bill, 2020 (“Bill”) now seeks to include those enterprises which facilitate the operation of cartels, thereby extending the scope of cartels to hub-and-spoke agreements. This article focuses on an analysis of hub and spoke agreements and its inclusion in the Bill. What is a Hub-and-Spoke agreement? Hub and Spoke refers to a type of collusion wherein ‘spokes’ are the colluding competitors and, ‘hub’ refers to the facilitator of this collusion by the spokes. This horizontal agreement amongst the spokes is referred to as the rim – as it connects the spokes. An example of collusion can be seen in the case of United States v. Masonite decided by the U.S. Supreme Court. A patent-holder for hardboard entered into an agency agreement with nine competitors to sell the Masonite hardboards. In the agency agreement, each agent knew that the others were entering into an identical agreement with Masonite, thus inferring the existence of a horizontal agreement amongst the agents. Types of Hub-and-Spoke arrangement Hub-and-Spoke arrangements are primarily of two types: Downstream Hub-and-Spoke Cartel– This form of cartel can be illustrated with the help of US case Interstate Circuit, Inc. v. United States. In this downstream hub-and-spoke arrangement – Interstate Circuit, the exhibitor of motion picture movies and theatres acted as a ‘hub’ and entered into anti-competitive agreements with various movie distributors (spokes) by making them agree to raise prices of second-run theatre, where the prices were generally low. Thus, collusion was achieved between the downstream firm Interstate (Hub) and the movie distributors as spokes. Upstream Hub-and-Spoke Cartel– This form of a cartel can be illustrated with the help of Toys’ case. In 2003, three firms Hasbro, Argos, and Littlewood were fined by the then UK Competition Law Enforcer, Office of Fair Trading for entering into an anti-competitive agreement. Hasbro, a toy manufacturer had acted as a ‘hub’ and entered into anti-competitive agreements with catalogue retailers Argos and Littlewood by independently identifying the common products in their catalogue and persuading them to charge a recommended retail price. Thus, the manufacturer acting as a hub and retailers acting as spokes represents an upstream hub-and-spoke cartel. The Hub-and-Spoke arrangement in the digital landscape The digital economy is often characterized as an algorithm-driven economy. Algorithms play various roles in furthering an anti-competitive arrangement. In most cases, they strengthen an already existing cartel. It was in the Eturas case where the Hub and Spoke arrangement was first recognized in the online world. According to the facts of this case, an administrator of a Lithuanian online travel booking system sent an electronic notice to its travel agents, declaring a new technical restriction that put a cap on discount rates. The Court of Justice of the European Union (“CJEU”) observed that the travel agents who knew of the message presumed to have participated in the cartel, unless they publicly distanced themselves from the message. In this case, the knowledge was presumed to exist among the travel agents. Thus, the Court inferred the existence of a horizontal agreement among the travel agents. In recent times, taxi aggregators like Uber have often been quoted as examples of a hub-and-spoke conspiracy because of their business model which does not allow individual taxi operators to charge their own prices, and instead is decided by Uber itself. These prices are based on calculations made by its own algorithms. According to Mark Anderson and Max Huffman the fact that the drivers chose to enter into an agreement in order to determine sale price with Uber knowing that similar pricing arrangement exists with other drivers qualify as a horizontal cartel. However, the Competition Commission of India (“CCI”) held a different view in the case of Samir Agarwal v. ANI Technologies Pvt. Ltd. It was held that the unilateral decision of individual drivers to adopt algorithmic pricing determined by Uber did not raise an anti-competitive concern. This decision is premised on the observation that in cab aggregators, the pricing is based on various personalized information of the riders like time of the day, traffic situation, special conditions, etc. It was further clarified that for a hub-and-spoke cartel to exist it would require an agreement between all drivers to set prices through the platform, or an agreement. Understanding tacit collusion in the Hub-and-Spoke Model In an online marketplace an increasing number of pricing algorithms are being employed by the market players. There is greater market transparency as well as the availability of consumer data in the online forum. Greater availability of data subsequently leads to algorithmic collusion. Algorithmic collusion is of two types – algorithmic express collusion and algorithmic tacit collusion. In express collusion, there is “direct and express” communication about an agreement as demonstrated in the Poster Cartel case. However, in the evolving digital landscape, the issue of tacit collusion is gaining increasing importance. In tacit collusions, a substantive part of the collusive agreement is achieved without express collusion. The large-scale use of similar algorithms by the competitors or the use of available data may lead to a hub-and-spoke conspiracy. In other words, a single provider for algorithmic pricing- hub might lead to tacit collusion among spokes i.e. the competitors. For instance, in 2018, an investigation was led by the CCI pertaining to a hike in the Chandigarh-Delhi flight fares due to “Jat agitation”. The CCI had suspected inflation in price due to collusion among the pricing algorithms of various airlines. Such collusion is made possible after the algorithms gather data related to ticket prices, availability of seats,

[By Sumit Jain] The author is a Senior Resident Fellow at the Centre for Competition Law and Economics. Introduction The Competition Act, 2002 (“Act”) was introduced in order to keep pace with economic reforms and pay due focus on sectoral expertise in the country. One such industry which has gained prominence since the Competition Commission of India’s (“the Commission” or “CCI”) inception, is the Indian sports industry.  The Act has changed India’s economic regulatory framework, and it remains important to chart the Commission’s evolution since its inception in the said sector. Background The sports sector has observed a tectonic shift in its development post liberalization. From a nationalized industry, the said sector has attracted large investments from private players, majorly in order to exploit the entertainment aspect of it. With the advent of events like Indian Premier League and Go Kabaddi, the organization of sports leagues have seen complete commercialization, thereby leading to an exponential rise of the sports sector in the share of the Indian economy. This sudden increase has also led to invitation of various economic regulators which ensure the infusion of capital into the industry happens in a sustained manner. The increase in investment is also important from the perspective of majority of the sports being played by multiple countries, and governed by a pyramid structure. The structure is ruled by an international regulator at the top, and member countries like India and/or the UK subscribing to it through their respective sports association. This brings efficiency to the game, but at the same time sees continuous influx of regulations across the border. This sometimes leads to a deflection where the policy goals set by the national government may be different from the objects of the international regulator. CCI’s decisions in the chronological order 1. Surinder Barmi v. Board of Cricket Control of India (BCCI) – 8 February 2013[i] The Commission first looked into the sports sector in September 2010, where one Surinder Barmi alleged that BCCI was abusing its dominant position in the relevant market of private professional leagues to impose unfair conditions on the various business stakeholders. The informant claimed that the said organization had intentionally auctioned media rights for a period of 10 years in order to foreclose competition for other players in the market. The Commission held BCCI in contravention of the law, and said that there is an inherent conflict of interest in positioning of the Board where it acts as a de-facto regulator for the sport in India, and at the same time accrues financial gains on behalf of conduction of events like IPL. CCI made a clear distinction between regulation of national/first class cricket by the Board, where the primary aim of the event was to play for honour of the game, and organization of IPL where the same was done to exploit the popularity aspect of it. It held that the organization of private cricket professional league should be treated as a separate Relevant Product Market (“RPM”) given that the entertainment offered by it is unique, and is incomparable by other TV programmes and/or national and first-class cricket. The CCI took due cognizance of the pyramid structure of the cricket regulating body, where the national body has to abide by the instructions issued by the international organization, and at the same time show compliance with the national legislative framework. 2. Dhanraj Pillai v. Hockey India – 31 May 2013[ii] Dhanraj Pillai, among other players, alleged that Hockey India (“HI”) was abusing its dominant position as de-factor regulator of the sport in the Indian market, and imposed unfair conditions on the players while promoting the said sport. Facts of the matter included one Indian Hockey Federation (“IHF”) which organized the World Series Hockey League (“WSH”) in collaboration with Nimbus Sport, and HI along with International Hockey Federation (“FIH”) which had imposed restrictions on Indian players as the said league was an ‘unsanctioned’ event. The CCI held, that HI is not acting in contravention of the law, and certain restrictions imposed by the said body are justifiable in the light of efficiency brought by them. The Commission paid due emphasis on pyramid structure of the sport, and paid heavy reliance on by-laws framed by FIH before concluding the said case. 3. DLF City Club Members Welfare Association v. DLF Limited – 1 July 2013[iii] The third case was initiated by DLF City Club Members Welfare Association against DLF Ltd. for violation of Section 4 of the Act, alleging appreciable adverse effects on competition. The informant in the said case alleged that the opposite party promised club facility along with the apartment through various advertisements and promotions in the newspapers, however post allotment, DLF started operating the same on a purely commercial basis where it charges exorbitant membership fee from the club users. The Commission closed the matter and held that DLF does not enjoy position of dominance in the delineated RPM, and therefore the question of abuse does not arise. 4. Pan India Infra Projects Private Limited v. BCCI – 16 January 2014[iv] The fourth case, the relief sought by the informant was quite similar to the one claimed in Surinder Barmi case. The Commission while closing the matter paid due reliance on the said case law. 5. Om Datt Sharma v. Adidas A.G. – 13 May 2014[v] The informant in the instant case alleged that Adidas, through various acquisitions occupied a dominant position in the delineated relevant market, and was abusing the same by granting less commission rate to the informant, as compared to other dealers in the market. The Commission held that no case for violation of the Act could be brought out by the informant. It recognized the right of the opposite party to enter into an agreement best favorable to its business requirements. It also questioned the inconsistency of allegations on informant’s part where it waited for five years to point out the alleged abuse, and used the same reasoning to rule in favour of Adidas. 6. Ministry of Youth Affairs &