Competition Law

[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 &

[By Srishti Suresh] The author is a third year student of NALSAR, Hyderabad. Introduction The outbreak of COVID-19 has disrupted markets and economies over the world. India too, is facing its fair share of disruption and apprehension, owing to the uncertainty that surrounds the pandemic. Businesses and large scale enterprises facing significant losses due to reduced revenues, might seek to palliate the commercial damage caused, by resorting to collaboration and cooperation with their competitors. But the question that ensues, is whether, Horizontal agreements and cartels by manufacturers and enterprises in the FMCG sector are restricted by Section 3(3) of the Competition Act? Such an agreement to collaborate has the potential to cause an Appreciable Adverse Effect on the Competition (“AAEC”) regime? Section 54(a) of the Competition Act gets attracted owing to the unanticipated circumstances? For the sake of clarity, the difficulty is deposed in the given factual scenario. The difficulties faced by enterprises engaged in the FMCG sector, relates to the decrease in the procurement and supply of essential goods to the markets, owing to various relevant factors such as significantly reduced work force, shutting down of factories due to inaccessible transportation and logistical support, and the difficulty in obtaining approvals and permissions to allow workers to oversee plants, in creating buffer stocks of inventory.[i] Consequently, in the non-essential sector, both demand and supply have plummeted, as opposed to the essential sector, where the demand for FMCG is steadily increasing, with the supply decreasing exponentially. Under the Competition Act 2002 (“the Act”), a general prohibition is imposed under Section 3(1) of the Act, when an agreement creates a direct AAEC, as envisaged by Section 19 of the Act. Accordingly, while determining the appreciable adverse effects on competition, any or all of the factors enumerated from clause 19(3)(a)-(f) can be considered by the Competition Commission of India (“CCI”) while adjudging its impact on the market. This includes an agreement to improve production or distribution of goods or provision of services. It also specifies certain important criteria to be met such as creation of barriers for new entrants, driving out existing and operating competitors within the same field etc.[ii] The conception of ‘Appreciable Adverse Effect’ is not an objective stand-alone yardstick, which can effectively oust players in the market for anti-competitive practices. It necessarily involves a case by case analysis, within a given economic and social contexture. CCI, in the case of Builders Association of India v. Cement Manufacturers’ Association had categorically held that the presumption of anti-competitive agreements can be inferred from the intention or conduct of parties, by virtue of any circumstantial evidence.[iii] This would include evidence of parallel changes in price fixing and information sharing with other similar enterprises, without an explicit agreement, thereby creating an anti-competitive cartel. The AAEC test is coded within the Act and is relied on judiciously as a robust test to discern any anti-competitive behaviour, as most cartels or price fixing correspondences are meticulously hidden or destroyed, to escape the plausible consequences of legal infringement. But in the present case, the uncertainty and gravity of the spread of the pandemic has led to a further extension of the national lockdown. Consequently, a few classes of citizens are able to procure and cache the earlier stock inventory stored in the warehouses. Most essential goods are getting exhausted at an unprecedented rate, making accessibility almost impossible for the larger part of the community. With workers reasonably fearing their safety, manufacturing and distribution of FMCG has almost come to a standstill. Enterprises, having already run into deep losses, are facing an arduous situation in distributing essential goods to the markets, for the common benefit. As a result, prices of various essential goods have increased manifold, even up to 30% in the local markets. This has further increased the burden on the end consumer in procuring essential goods, just as a consequence of the play of forces of demand and supply.[iv] As of March 31st 2020, the notification issued by CCI requires all filings related to anti-competitive agreements and abuse of dominant position to be suspended until further notice. Moreover, any submission or proceeding under the Act, is to remain in abeyance until notified.[v] The main concern is whether in light of the exigent situations, and with the operations of the CCI remaining in suspension, can the FMCG sector enterprises enter into bona fide Horizontal Agreements for the purposes of sharing markets and sources of production and effective utilization of resources, in order to effectively percolate into the market in providing essential goods? Section 4 of the Act prohibits companies from abusing their dominant position in the market, which might adversely affect its competitors and end consumers. In essence, enterprises that possess the resources can exercise an overarching power on smaller and less equipped competitors without the competitive force restraint, in driving their rivals out of the market- this is envisioned as the abuse of the dominant position. But under Section 54(a) of the Act, such a dominant position, if utilized by enterprises for the purposes of public interest, in the form of horizontal agreements and cartels, cannot be deemed anti-competitive under the Act. A Tie-Up and Distribution Agreement within a group of competent companies, for ensuring the disbursal of essential goods at a reasonable price, accessible to citizens at large cannot be construed as an unethical price-fixing correspondence or deal. Moreover the scale of competition and the number of competitors has reduced owing to the dearth of demand and supply for goods and services. Therefore, the ‘driving out of rivals’ is a result of natural economic forces in light of the pandemic, as opposed to an active participation by dominant players in ousting the rivals. As the CCI has abstained from issuing any notice or statement with respect to such tie up agreements with private dominant enterprises in the FMCG sector, in the growing disarray of the market, the only recourse would be for the Central Govt to issue an exemption notice to such acts, provided

[By Yashvardhan Singh] The author is a second year student of National Law University, Odisha and can be reached at [email protected]. Introduction Exchange of information between competitors has been a cause of concern for competition regulators in various jurisdictions. The flow of ‘commercially sensitive information’ such as pricing strategies, future prices of products etc. which may lead to ‘elimination of uncertainty from the market’ has been held to be anti-competitive regulators in multiple jurisdictions like India and the European Union (“the EU”). This article attempts to analyze the approach of competition regulators in India and international jurisdictions, with respect to anti-competitive exchange of information. Further, it aims to study the recent observations of the competition authorities and contemplates methods which the Indian competition regulator can adopt to create an effective competition policy in the domain of exchange of information. Understanding Exchange of Information Information exchange is a feature that pervades any competitive market. Competitors exchange commercially viable information on various platforms such as associations, consortiums and while entering into agreements. On one hand, the effect of such exchange has been found to be advantageous for the market as it solves problems like information asymmetries, provides a stable framework for competitors to develop practices and also leads to accrual of benefits to consumers as the market functions in an informed manner. On the other hand, such an exchange of information may facilitate collusive practices as the market players are better equipped with the strategies of their fellow competitors. For instance, the exchange of commercially sensitive information like data pertaining to sales and production, future market strategies, profit ratio etc., can aid the competitors to control the practices in market. The exchange of such information allows the competitors to reach a ‘focal point’ for coordination. Firms might use the available platforms to remove strategic uncertainty from the market and can use the exchanged information as ‘signals’ to facilitate anti-competitive practices. For example, a firm can make regular public announcements of its future prices on its website or in the trade press just a few weeks before implementing such prices. Such public exchange of information can facilitate other market players to observe these prices and align their pricing strategies accordingly. This form of activity had raised concerns in the EU in the past specifically in the liner shipping industry. Therefore, it is pertinent that the competition policy of any jurisdiction in this complex area should be carefully balanced keeping in mind the pro-competitive and the anti-competitive effects of information exchange. The Indian Approach Section 3(3) of the Competition Act, 2002 (“the Act”) deals with the exchange of information between enterprises, persons or association of enterprises. This Section restricts itself to competitors engaged in similar or identical trade of goods or provisions of services. The Act itself nowhere defines what constitutes ‘exchange of information’. The cornerstone against which the anti-competitive exchange of information between firms is analyzed is that of ‘appreciable adverse effect on competition’ (“AAEC”).[i] AAEC refers to those economic factors which are indicative of a negative effect on the market. The approach of the Competition Commission of India (“the Commission”) regarding exchange of information can be traced through its decisional practice. The most recent case in this regard is In re: Alleged Cartelization in Flashlights Market in India (“Flashlight case”). In this case, the Commission analyzed information exchange between four manufactures of battery-operated flashlights through a common platform, namely, the Association of Indian Dry Cell Manufacturers and other electronic mediums. The competitors exchanged commercially sensitive information like data relating to their production and sales, information related to increase in prices, wholesale prices, margins, discount schemes etc. The Commission concluded that though the evidence reflected exchange of commercially sensitive information among the four players, there was hardly any evidence to show that the data thus exchanged resulted in an effective determination of prices among the competitors. Hence, the Commission held that exchange of commercially sensitive information can be regarded as a plus factor to indicate anti-competitive behavior of the firms. However, it also held that mere exchange of information cannot be regarded as a conclusive evidence to deduce concerted action unless the competitors have acted on the exchanged information. This case was a significant departure from the earlier stance of the Commission on concerted practice and information exchange. In Builders Association of India v. Cement Manufacturers Association and Ors. the Commission held that ‘mere exchange’ of commercially sensitive information can be treated as an anti-competitive practice under Section 3 of the Act. Further, the National Company Law Appellate Tribunal in Ambuja Cements Limited & Ors v. CCI observed that exchange of strategic information can be regarded as a concerted practice aimed at reducing uncertainty from the market. This matter is currently sub judice before the Supreme Court of India. A clear distinction is observed between the above cases on exchange of price information. Firstly, the Flashlight case diluted the stance of the Commission towards cartel regime in India; and secondly, a notable feature of the current trend is that the Commission delineated the existence of a cartel and its actual effect on the market i.e. whether the cartel acted upon the exchanged information. The European Approach Article 101 of the Treaty on the Functioning of the European Union (“TFEU”) governs information exchanges between the competitors in the EU and also assess concerted practices.[ii] In the EU, concertation is understood as a form of coordination which though, has not reached the stage of an agreement, but, still is inherently anti-competitive in nature. The laws in the EU have developed in a manner where three components have been identified to conclusively establish concerted practices. They are: concertation; subsequent conduct of the competitors; and a cause and effect relationship between the two. ‘Concertation’ is understood as a form of coordination between the competitors in which without even reaching the stage of an agreement, all the players substitute the practical cooperation among them for the risks of competition. This coordination then culminates into active conduct of

[By Aditya Goyal] The author is a fourth year student of National Law Institute University, Bhopal and can be reached at [email protected]. Introduction Lately, there have been growing concerns over the exploitation of buyer’s power, which has raised issues concerning the sphere of functioning of Competition law in India. The Competition Act, 2002, (“the Act”)  was introduced to streamline growing industrial practice in India and to provide a robust institution to deal with ever-increasing anti-competitive practices. The erstwhile Monopolies and Restrictive Trade Policies Act, 1969, was amended as it became redundant with time and provided various escape routes to enterprises to interfere with the market forces and capitalize at the expense of buyers. However, after almost two decades of operation of the new Act, it has started to wear out on new avenues that have opened up — one of such areas being the emergence of cartels with respect to buyers. Understanding ‘Cartel’ A plain and outright reading of the substantive law on cartelization in the Act [i] shows that the drafters had a ‘seller-oriented cartel’ in mind. This could be inferred from the fact that the definition of cartel provided in the Act is an inclusive one and mentions explicitly the aspects related to a seller. Section 2 (c) of the Act defines cartel as “an association of producers, sellers, distributors, traders or service providers who, by agreement amongst themselves, limit control or attempt to control the production, distribution, sale or price of, or, trade in goods or provision of services”. The definition limits its scope to other emerging venue of a possibility of a cartel being formed by buyers. It is a settled principle that the basic premise of an anti-competitive practice is that it has an appreciable adverse effect on competition. This principle is mainly neutral as it does not specifically state as to who should be behind that anti-competitive practice, i.e., it could be a seller as well as a buyer. Buyers, as a group have the equal potential of making an appreciable adverse effect on competition. There have been examples where the buyers have formed ‘buyer groups, ‘ which is nothing but a disguised form of a cartel as it tends acting in concert with an objective, that is to say, get the lowest prices and have the upper hand as a negotiating party. The examples may include a co-operative society which may exert pressure to lower the prices. Further, the number of buyers in an oligopsonistic form of the market may severely affect the position of sellers, and it is the buyer group, indeed, which appreciably affects the competition adversely. The purpose of the Competition Act is to create an environment for healthy competition in the market, and no exchange is complete without interplay between buyers and sellers. Therefore buyers have an equal opportunity to exploit the market and the game therein for their benefits. In the US, the buyer’s cartel has been well recognized under anti-trust laws. In United States v. Crescent Amusement Co.,[ii] the buyers colluded to pay a specific price for a particular commodity at an auction and thereby decided to reallocate the goods among themselves through a second auction. This agreement within the buyers was held to be violative of the anti-trust laws because such conduct ultimately affected the efficiency and purpose of the bidding process and hence, anti-competitive. Analysis of Indian position on buyer’s cartel The Competition Commission of India (“CCI”) had various avenues to identify and punish the cartels formed by buyers. However, they lost all opportunities. In the case of Pandrol Rahee Technologies Pvt Ltd. v. Delhi Metro Rail Corporation and Ors.,[iii]the CCI had to deal with the anti-competitive activities allegedly undertaken by the respondents in the buying process of metro rail fastening system for ballastless tracks wherein they allegedly nominated only one type of proprietary system and therefore foreclosing competition. The CCI observed that the term ‘trade’ under Section 2 (x) of the Act deals with “production, supply, distribution, storage or control of goods” and therefore, does not include the aspect of buyer. Although the Courts in the US have held the buyer’s cartel as anti-competitive, the Competition law in India loses out on this particular aspect and leaves for the court to open an interpretation of the provisions that can fit well to a buyer’s cartel. However, given the specific terminology of producers, distributors, traders, or service providers, the courts in India are having a tough time reading a ‘buyer’ in the given definition. However, this does not mean that an activity of a buyer’s cartel is unchecked. A plain reading of Section 4 of the Act can accommodate a group of buyers as a ‘group in a dominant position’ and, therefore, accounts for abuse by them. This, however, is mere interpretation advanced by the author as the CCI, as well as the appellate authorities, have at no single instance used these provisions against a buyer’s group. One of the significant issues in incorporating a provision related to a buyer’s cartel is that there is a thin line of difference between a buyer’s group and a buyer’s cartel. A buyer’s group, on one hand, always aims at getting the best prices for its members, i.e., caveat emptor, whereas on the other hand, a buyer’s cartel has an element of collusion between them, irrespective of existence of an agreement. Conclusion There has always been a concern regarding the protection of legitimate buyers group which may knowingly or unknowingly pose a challenge to a competitive market by manipulating the supply and demand curves. [iv] Therefore, it is necessary that the buyers cartel is well addressed through some settled principles. It is to be noted here that the Competition Law Review Committee was set up in the year 2018 to look into the required amendments according to the economic needs of the country. The Committee, chaired by Shri Injeti Srinivas (Secretary, Corporate Affairs, Government of India) recommended, among other things, that the definition of cartel under Section 2(i) of the Act should be

[By Rashmi Birmole and Sahaja Burde] The authors are third year students of ILS Law College, Pune and can be reached at [email protected]. Introduction In what appears to be a complete overhaul of the Indian merger approval process, the Competition Commission of India (“CCI“) recently introduced a deemed approval mechanism called the “Green Channel” by way of its 7th set of amendments (Amendment Regulations 2019) [i] to the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 [ii] (“Combination Regulations“) in an attempt to move towards an increased disclosure based regime [iii] regarding mergers and acquisitions and promotion of ease of doing business in India. The recent amendments have come into effect from 15th August, 2019 and are in line with the recommendations of the Competition Law Review Committee, constituted in 2018 to strengthen and re-calibrate the Competition Act, 2002 (“The Act“) to address emerging competition concerns and economic challenges in India. Through this post, the authors seek to analyze the Green Channel mechanism and its implications on the evolving M&A landscape in India. Background Under the Act, a combination is defined as the acquisition of one or more enterprises by one or more persons or mergers or amalgamation of enterprises [iv]. The Competition Regulatory Authority, i.e., the CCI is vested with the power [v] to approve mergers or combinations falling within certain deal value threshold limits, not eligible for any available exemptions and not causing any appreciable adverse effect on competition (“AAEC”) in the relevant market. Prior to the amendments, the parties involved were obligated to file mandatory pre-merger notifications for approval with the CCI, a cumbersome process [vi] that involved a number of phases and took a minimum of 210 days to be completed.  Under the recently introduced Green Channel, parties can get their proposed combination automatically and expeditiously approved on filing of notification with the CCI and fulfillment of certain eligibility criteria and subsequently give effect to them. Report of the Competition Law Review Committee- an Overview The Report of the Competition Law Review Committee [vii] (“The Committee”)  while considering mergers as a means for companies to effectively compete and gain welfare-enhancing efficiencies, observed that a delay in merger implementations leads to an increase in costs borne by the merging parties in particular and the society in general. The ideation of the Green Channel by the Committee was based fundamentally on two premises. Firstly, the data gathered from the Annual Reports [viii]   of the CCI showed that a majority of the combinations were approved without modifications and secondly, that merger control increased costs and caused delayed transactions. The Committee sought to introduce the Green Channel route to ensure a vital balance between adequate regulatory control and a greater ease of doing business. Among the recommendations for the Green Channel include self-assessment by the parties, envisioning a disclosure based regime for combinations that are unlikely to result in any AAEC. Opting for the Green Channel route would imply the waiver of the 210-day standstill period and result in the consummation of the proposed combination on mere intimation to the CCI. The possible downside of allowing parties to waive off the 210-day standstill period by opting Green Channel, as observed by the Committee, would be the difficulty involved in untangling the assets and business relationships when required. The pre-filing consultation, as suggested by the Committee, would minimize the above anticipated risk. Amendment Regulations 2019- Salient Provisions In light of the Committee’s recommendations and enduring deliberations with the Ministry of Corporate Affairs [ix], the CCI notified the 7th set of amendments to the Combination Regulations materializing the proposed Green Channel [x] as an automatic clearance channel for certain type of transactions added in Schedule III of the Combination Regulations. Provisions specifically relating to the Green Channel are as follows: Criteria for eligibility and permitted transactions The parties to the combination are required to self-assess and determine the applicability of the Green Channel route to the transaction [xi]. While determining their eligibility for the Green Channel, the parties are required to declare the absence of any horizontal and vertical overlapping between the respective group entities and any entity in which they, directly or indirectly, hold shares and/or exercise control. The absence of overlapping must be ascertained after considering all reasonable alternative market definitions. In addition to the horizontal and vertical overlapping, Schedule III also requires the parties to not engage in any activities which are complementary to each other. Eligible transactions will be deemed approved upon receipt of acknowledgement of the filing. Structure of the Form Form I in Schedule II has been replaced with a simpler form including standard declarations attesting to the lack of possible overlapping and non-causation of an AAEC. The sole objective of making the Form simpler and less cumbersome is to encourage parties to opt for the Green Channel. Additionally, sub-regulation (1A) under Regulation 13 was altered and substituted making the word limit of the summary of the combination, not consisting of confidential information, from 2000 words to 1000 words. Sub-section (1B) which required the parties to submit an additional 500 word summary is omitted, hence resulting in only one necessary submission. Penalties On occasions where the Committee finds the non-fulfillment of the eligibility criteria i.e., if the combination does not fall under Schedule III and/or declaration filed under sub-section (1) is incorrect, the notice and approval granted under the Green Channel will be held void ab initio[xii]. The Commission, retaining its regulatory power, will deal with such combinations in accordance with the power vested upon it by virtue of Section 44 and Section 20(1) of the Act, wherein the filing of wrong/incomplete information may attract penalty and such notification may be looked into by the CCI in order to assess the ability of the combination to cause an AAEC up to one year from the date of effect. The parties however, will have an opportunity to be heard before deciding on the matter. Comment While the institution of the Green Channel marks a commendable step towards facilitating

[By Shreya Jha] The author is a fourth year student of Amity Law School, Delhi and can be reached at [email protected]. Introduction In general parlance, the concept of “algorithm” refers to the set of rules which should be followed in order to carry out a certain task. They can be represented in the form of plain language, diagram, codes, programmes, etc. The advent of the digital economy has led to the increasing use of “algorithms” in businesses to improve decision-making and predictive analytics. This is because the algorithms have the ability to process and create value out of large data sets in the form of targeted advertising, data-driven innovations, product recommendation, etc.For example, firms like Amazon and Flipkart employ “dynamic pricing” which allows them to monitor and alter the prices of goods due to changes in demand and supply. Similarly, Uber uses algorithms to adjust the price of car rides based on the demand for cab services and supply of drivers. Given its increasing use, firms’ use of algorithms has garnered the attention of antitrust regulatory authorities across jurisdictions. In India, the competition watchdog, Competition Commission of India (“CCI“) is conducting a study to understand and examine the algorithmic trends in the digital market and its antitrust implications. The use of these algorithms to fix prices might lead to unintended collusion of prices as similar prices are set across the board, leading to “tacit” collusion. How Algorithms can be used to Collude? According to Ariel Ezrachi and Maurice Stucke, there are four ways in which algorithms may be used for collusion. First, is the “Messenger” where specific algorithms are used to implement the will of humans beings who agree to collude.An example of this is the Poster Cartel case in which David Topkins, the founder of Poster Revolution and his co-conspirators were prosecuted by the US antitrust authorities for agreeing to price coordination by adopting specific algorithms for the sale of posters in the Amazon marketplace. The second type of algorithmic collusion is the “Hub and Spoke” where the same algorithm is adopted by the market players. In this type of collusion, the spokes are colluding competitors and hub is a facilitator of collusion by the spokes. There is a horizontal agreement among the spokes which is referred to as the rim as it connects the spokes. An example of this is United States v. Masonite Corp., in which Masonite, a patent-holder for hardboard entered into agency agreement with nine competitors to sell Masonite hardboards. According to the agency agreement each agent knew that others were entering into an identical agreement with Masonite. Thus, the Court inferred a horizontal agreement among the agents in this case. Third, in the case of “Predictable Agent” type of collusion, there is no agreement among competitors. Each firm unilaterally adopts its own pricing algorithm and they act as predictable agents who monitor and adjust to each other’s prices. Therefore, even though same algorithm is not used by the competitors, by programming algorithms to adjust to each other’s price, tacit collusion is affected. Fourth, is the “Digital Eye” collusion which involves machine learning algorithms who are not programmed to adjust to each other’s price or market data, but by virtue of self-learning, they collude on their own. According to an OECD Report, it is not clear how machine learning algorithms may reach a collusive outcome, however, once it has been asserted that the market conditions are prone to collusion, it is likely that algorithms learning faster than humans are able to achieve a cooperative equilibrium. Legal Framework Section 3(3) of the Indian Competition Act, 2002 (“the Act“) prohibits collusion. The Section has a broad scope as it includes both horizontal agreements as well as those practices which are done in a collusive manner. Section 3(3)can be broken down into three components: “agreement entered into”, “a practice carried on” or “decision taken”; by persons, an association of persons, enterprises or association of enterprises which directly or indirectly determines the purchase or sale prices; shall be presumed to have an appreciable adverse effect on competition. Applying the Legal Framework to Algorithmic Express Collusion Express Collusion is when anti-competitive price is achieved through “direct and express communication” about an agreement. There exists a mutual understanding among the competitors in the market. Section 3(3) of the Act is applicable in the first two scenarios of “express collusion” which involve express collusion as the algorithm merely implements the collusive structure. The Messenger Scenario In this case, algorithms are employed to simply implement the anti-competitive agreements which have been previously entered into by the human market players. The programmers feed specific instructions to achieve collusive outcomes. Hence, these fall under “agreements” entered into by “persons”. The Hub and Spoke Scenario In the Eturas case, the Court of Justice of the European Union considered the coordination of discount rates by travel agencies through a third-party intermediary’s common electronic platform. The third-party intermediary, in this case, had sent a notice to the travel agencies to vote on discount rates. Even though no agent replied, the third party intermediary unilaterally limited the discount to 3%. The Court held that this behaviour would constitute a concerted practice under Article 101 of the TFEU. Following the Eturas Case, in case of usage of a common third party algorithm for price coordination, the persons infringing Section 3(3) of the Act can be held responsible. Applying the Legal Framework to Algorithmic Tacit Collusion Algorithms, without human interference, are capable of tacit collusion where a substantive part of the collusive agreement is achieved without express communication. A recent example of this is the sudden rise in airfares for flights between Delhi and Chandigarh during the Jat agitation. The rise in airfares was attributed to the collusion among self-learning algorithms. This has been a cause of concern among competition authorities. The Predictable Agent Scenario The act of programming algorithms in a certain way to meet market stimulants would amount to “action in concert” and “practice”. Further, for the predictable agent the

[By Prerna Kapur] The author is a fifth year student of National Law University, Orrisa. Background The Competition Commission of India (“CCI”) vide order dated 28.02.2019 dismissed the allegations against one of India’s largest multiplex chains, Inox Leisure Ltd­. and its beverage partner, Hindustan Coca-Cola Beverages Private Limited (“parties”). The allegations concerned contravention of provisions prohibiting tie-in arrangement, exclusive supply and distribution agreements under Section 3(4)(a), 3(4)(b), and 3(4)(c)of the Competition Act 2002 (“the Act”) respectively. These allegations were two fold- First, that the agreement between the parties of selling Cola-Cola’s products with the exclusion of any of its direct competitors amounted to an exclusive supply agreement which crafted ‘Appreciable Adverse Effect on Competition’ under Section 19(3) & Section 3(4) of the Act. An informant revealed that difference between the price of Diet Coke and Minute Maid Pulpy Orange Can sold at multiplexes versus that sold other local retail stores in Hyderabad is approximately Rs. 22.00/- and Rs. 34.00/- respectively. Emphasis was also placed on the legislative intent of the Legal Metrology (Packaged Commodities) Rules 2011 which was recently amended to prohibit the mischief of dual pricing of identical products of the same brand and quality in India. The collusion between the two parties had resulted in vertical restraint since Inox (as a retailer) and Coca-Cola (as the sole supplier of beverages) fell into different levels of the supply chain. And second, despite the absence of a tie-in agreement in the literal sense, viewers were compelled to purchase essential commodities like packaged water bottles and other beverages of only one brand provided to them by the multiplex, thereby limiting their right to choose. Consequently, the informant sought relief before the CCI against the malpractice of execution of such anti-competitive agreements. CCI, however, decided to exculpate the opposing parties based on the flexibility of the agreement entered between them which was earlier characterised as an “exclusive supply agreement” by the informant. Not only was the term “Exclusive Partner of Beverages” omitted from the initially drafted agreement of the parties entered in 2008, but clauses like, “the agreement entered by the parties can be terminated by giving a 60 days’ notice” was also incorporated alongside. These adjustments were seen to decimate entry and exit barriers to eliminate any competition concerns. Hence the CCI observed that market power does not rest with the manufacturer simply because the distributor can switch to sell the brands of competitors, if it were offered a better commercial deal. However, it is worth mentioning here that the supply agreement between the parties has been lingering for over eleven (11) years now. Statistics further sided with Inox as it claimed to own only one hundred and twenty eight (128) multiplex properties with over five hundred and twenty (520) screens across India limiting the possibility of executing similar agreements. That said, its competitors like PepsiCo. by 2011 alone had entered into such agreements with a large number of multiplexes having about six hundred (600) screens (namely that of Big Cinemas, Cinemax and Waves Cinema) thereby distributing its market share to avoid a dominant status. CCI’s after thought that there is no explicit condition that consumers have to necessarily buy these goods to watch a movie were seen as attempts to justify its decision and to further that there is no tie in agreement within the realms of Section 3(4)(a) of the Act. Lock-In and Lock-Out Arrangement This decision could possibly stir into a catalyst of agreements between manufacturers and sellers encompassing lock-in of consumers and lock out of competitors. While CCI maintained its position that purchasing beverages is not indispensable to the “movie theatre experience”, let’s face it – how often do we really enjoy a movie without enjoying a beverage at hand? The agreement between Inox and Coca-Cola is moulded to portray fluidity but, Inox’s beverage partner has remained unchanged since 2008. The retailer’s ability to charge above-competitive prices for its aftermarket service product depends largely on the availability of substitutes provided to the customer. But in the present scenario there are none available. Competition law compels market players to search for better permutations and combinations for providing greater efficiency and fluidity in the market structure. Shuffling and re-shuffling of product resources results in output maximization paving way for the finest consumer valuation. In fact, in 2011, the CCI had expressed its concern on the issue that Inox and such other multiplexes enjoy complete economic power, in the sense that its consumers are completely dependent on the food and beverages they provide [i]. The US Supreme Court in the case of Eastman Kodak Co. v. Image Technical Services, Inc. defined market power as, “the power to force a purchaser to do something that he would not do in a competitive market.” It further held that in some instances one single brand product can constitute a separate market in itself. The narrative that CCI poses sits well only because the relevant market here has been extended to all multiplexes at large. Based on this, let’s assume that the relevant market in the CCI’s impugned order is not extended to all multiplexes at large but to those of a single multiplex brand like the aforementioned Supreme Court order permitted. Would that not resultantly increase the market share of Coco-Cola at any given Inox multiplex to a 100%? By broadening the horizons of Inox’s relevant market, CCI resultantly ignores the test of substitutability which has been the tombstone for numerous standards set by the CCI in its earlier decisions. When the question came before CCI in the Snapdeal case as to whether ecommerce websites shall exist as a distinct relevant market as that compared to the offline market, CCI embraced a neoclassical reasoning. CCI clarified that offline and online markets differ because they provide a different shopping experience in terms of discounts and customer service. Similarly, buyers weigh the options available to them in both the markets and decide accordingly. Therefore, if the price in the online market increases that would