Competition Law

[By Arjun Kapur & Akash Hogade] The authors are students of National Law University, Mumbai.   Introduction As airlines look to streamline operations and cut costs, mergers between airlines are becoming more frequent. However, as fewer competitors mean higher prices and poorer customer service for consumers, airline mergers can also raise concerns about the state of the market. The Competition Commission of India (CCI) enforces India’s competition law. When assessing an airline merger, the CCI considers various factors, such as how will it affect consumer demand, competition, and the aviation sector as a whole. This raises several potential competition issues, including decreased competition on domestic and international routes, the foreclosure of competitors, and increased airline coordination.  On September 1, 2023, the CCI approved the merger of Air India and Vistara, subject to a few conditions. The requirements address the concerns about competition that the merger and the market participants in the airline industry have raised. The effects of the merger on consumer welfare and airline industry competition in India are still being felt. However, the merger’s approval by the CCI is expected to significantly affect the Indian aviation industry. In this blog post, we’ll discuss the potential competition issues raised by the merger of Air India and Vistara. We’ll look further at the merger from a wider angle, considering what airline mergers mean for competition law and the global aviation sector. The aviation sector is at a critical juncture where it must carefully balance the benefits of market competition with the need for consolidation. The CCI’s decision will influence the industry’s future landscape and create a standard for similar mergers and acquisitions. Impact on Competition in the Indian Context The recent merger that the CCI has approved has certain complications that the competition watchdog should have considered. These complications include an adverse effect on competition in the aviation sector. The Competition Act, 2002 (The Act) under S.20 enumerates the factors the commission should consider while approving any combination. The factors determining the appreciable adverse effect on competition (AAEC) in the aviation sector were not considered by the CCI. This merger of two big giants owned by the same parent company (Tata Group) has the potential to affect the prices of air tickets and create barriers at the entry level of the market, which will be the second most significant player in the aviation industry after Indigo in terms of market share. The resulting merger will also have India’s leading airline with a fleet of 218 aircraft. S.20 lists factors which will affect the competition in the market. The merger has the potential to restrict rapid expansion and create entry barriers. The fact that there are very few players in the domestic aviation market leads to very restricted competition. In this close-knit competition, the merger is seen as a giant that stops new players from entering the market. The fact that the merger will acquire a large percentage of passengers and fleet will discourage players from entering the market. The domestic aviation industry has only ten players in the market after GoFirst declared bankruptcy. The aviation industry is also prone to many external factors that affect any airline’s stability. There have been many instances in the past where many airlines have declared insolvency and left the aviation industry. The merger will also have the possibility of other airlines failing, an apparent factor under S.20 that causes AAEC. The merger will acquire a significant share of the market, which affects other airlines and might affect the stability of other players. The CCI did not investigate these possibilities to allow the merger. The Competition watchdog invoked the doctrine of necessity to approve the merger. The doctrine has been invoked because there is no necessary quorum existing in CCI. These mergers, which potentially might affect the airline industry and the CCI by invoking the doctrine of necessity, also show an escapist attitude on their part. The competition watchdog also faltered by basing that there will be no entry barriers only on the example of Akasa Air. The assumption that the merger will not create entry barriers just because Akasa Air could manage to set foot right in the industry is also flawed. The merger has been approved, provided both companies have fulfilled their commitments. The commitments given by both companies have been enumerated in the annexures attached to the report. These commitments are also subject to certain limitations, which have been enumerated in the order. There are ten limitations listed by both companies wherein they won’t be able to fulfil the commitments. CCI has ignored the possibility of non-fulfilment of the commitments under limitations. There is no strict interpretation of these limitations; this gives the companies an enormous scope to have an ambiguous interpretation of them and not fulfil their commitments. The fact that CCI has approved this merger and overlooked the restrictions imposed on the conditions showcases the prematurity of the decision. A possible scenario would have been  if the companies falter and do not fulfil their obligations after the merger, it would be excruciatingly difficult for CCI to undo a herculean merger. A viable path that should have been taken by the CCI would be to see whether all commitments have been fulfilled by the companies first and then approve the merger. These possibilities had to be considered by the CCI, considering the ramifications of the merger showcasing that CCI has committed a grave error in approving the merger. Analyses of the Global Airline Merger Market The merger is likely to have a significant impact on the competitive environment and change how Indian airlines operate around the world. Globally, competition authorities are approaching airline mergers with more scepticism. This is a result of various factors, concerns about how mergers will affect prices, choice, and innovation are fueled by the airline industry’s growing concentration, the dominance of a small number of major airlines on specific routes and markets, and the growing dominance of these airlines. In several cases involving airline mergers in

[By Vrinda Gaur] The author is a student of Dr Ram Manohar Lohiya National Law University Lucknow.   INTRODUCTION The Competition Commission of India (CCI) has recently issued a warning to those using the Green Channel Route (GCR) for mergers and acquisitions. The Green Channel Route was created to make the merger process more efficient and faster and facilitate ease of doing business after Regulation 5A was added to the Combination Regulations, 2011 by the Competition Commission of India (Procedure regarding the Transaction of Business relating to Combinations) Amendment Regulations, 2019 (Combination Regulations). However, in light of the recent warning raised by the CCI with regard to its possible misuse and transparency concerns, it becomes imperative to delve into the plight of the parties opting for this route and evaluate the circumstances that challenge the ease of doing business landscape. The aim of this article is to delve into the intricacies of the present mechanism and provide solutions henceforth. UNDERSTANDING THE NORM GCR is a means by which parties opting for mergers will be granted automatic approval of the CCI subject to the condition that the transaction does not adversely affect the competition landscape. This principle was first put to deliberation by the Competition Law Review Committee. It was given effect by the insertion of a new Regulation 5A under the Combination Regulations vide an amendment dated 13 August 2019 (Amendment). Schedule III of the Amendment lays down certain qualifying conditions which require the parties to the transaction, their respective group entities and/or any entity in which they, directly or indirectly, hold shares and/or control to (a) not produce/provide similar or identical or substitutable product(s) or service(s) (Horizontal Overlaps)  (b) not engaged in any activity relating to production, supply, distribution, storage, sale and service or trade-in product(s) or provision of service(s) which are at different stage or level of the production chain (Vertical Overlaps) and (c) are not engaged in any activity relating to production, supply, distribution, storage, sale and service or trade-in product(s) or provision of service(s) which are complementary to each other (Complementary Overlaps). The provisions give the parties the liberty to conduct a self-assessment regarding the fulfilment of the above criteria and on the satisfaction of the same, file form I along with the declaration form in Schedule IV that the transaction in question will not cause any adverse impact on competition. If, to the satisfaction of the CCI, the transaction complies with all the pre-requirements for making a party eligible under Section 5A, it may pass an order deeming approval of the same under section 31(1) of the Competition Act, 2002. On the contrary, if the CCI is satisfied that the application made under section 5A  fails to meet any of the qualifying conditions, it may retract the approval granted and direct the combination to be dealt as per the old route. IS IT REALLY EASE OF DOING BUSINESS? Previously, parties had to go through a tedious application process under the competition regime, which took a total of 210 days before the transaction could be finalized and deemed approved. However, this mechanism was introduced to speed up economic transactions by relieving the parties from this lengthy process. However, progress in this direction has been unsustainable, and there are mainly two contentions. The Competition Act initially upheld a two-tier mechanism in sharp contrast to a three-tier qualification under Section 5A. The additional complementary overlap under section 5A has diluted the speed of application disposal as parties are imposed with an increased burden to assess their complementary patterns with each other and this so-called self-assessment is a mind-wrecking and resource-draining process. Further, there is a lack of consensus amongst experts on the connotation of the term “complementary” and interpretations, explicit or implicit, are absent in statutes and case laws. Though a clarification has been issued by the CCI regarding complementary overlaps, it does not adequately address the complexity of the matter. The clarification gave the example of ink and cartridge as goods that would fall within the transaction of Complementary overlaps. However, such an example is too simplistic for parties to understand as most corporations function in complex areas of operation and diversified investments. This would lead to subjective conclusions on the part of the parties opting to avail this route and authorities enforcing the same and it is likely that applications may get rejected due to this duality in the application of mind in interpreting the true connotation of the term. If the application is rejected due to non-compliance with the complimentary requirements, the parties involved will have to spend additional time filing under the previous system, in addition to the time already invested under the new mechanism. This goes against the original purpose of the GCR, which was to expedite the processing of applications. Subsequently, the provision fails to impose any strict time limitation on the CCI while disposing of the application. As a result, applications may languish in limbo and authorities may take more than reasonable time to dispose of the same leading to parties holding off on investments or other strategic operations while awaiting regulatory approvals. This would not only compromise the integrity of the review and approval process but also hinder economic growth and the ability of businesses to adapt to changing market conditions to their advantage. Moving forward, the scope of corporations likely to fall within the purview of this mechanism has been outlined in an extremely narrow sense. The Combination Rules give no regard to the fact that all large corporations and enterprises engage in maintaining a heterogeneous investment portfolio which caters to the long-term needs of risk mitigation, capital preservation and ensuring stability at times of market fluctuations. Due to such diversification of investments, they are more likely to fall within the complementary overlap category.  Hence, though it might be easier for small-scale enterprises to effectuate under such compact combinations, the same is unlikely for larger corporations, depriving them of the benefits of this route. Additionally, the overlaps are

[By Siddharth Chaturvedi] The author is a student of National Law University, Jabalpur.   Introduction Many airlines in India are increasingly relying on Code Sharing Agreements in order to run their businesses. Code Sharing Agreements refer to a unique understanding between airlines where one airline places its code on another airline ( the airline that operates) and then markets and sells tickets for that flight. Such an agreement helps to expand any airline’s presence, market reach, and competitive ability. In this piece, the author dissects the Code Sharing Agreements in India by taking note of how the European Union and USA have grappled with the same challenge and then moves to examine relevant provisions of the Competition Act in India. Lastly, it concludes that with the rise in India’s aviation sector, CCI is likely to deal with many cases that deal with Code-Sharing Agreements and it must assess those agreements on certain parameters that have been suggested in the piece. These parameters have been suggested by the author after taking into consideration the best  regulatory practices that emerge after referring to the existing jurisprudence in USA and Europe. View from Abroad Convention on International Civil Aviation  Chicago Convention forms one of the bedrocks of legal instruments concerning international aviation. India was one of the earliest signatories to the convention. It is important to note that Article 6 of the Chicago Agreement states that “no scheduled international air service may be operated over or into the territory of a contracting state, except with the special permission or authorisation from the state and in accordance with terms of such permission.” However, there is no explicit mention of the prohibition of code-sharing agreements. In the USA, it is at the discretion of the Department of Transport whether it wants to approve any application of code sharing agreement after taking into consideration economic concerns which also include anti-competitive concerns. In some instances, there has also has been an establishment of firewall by Department of Justice in order to ensure that there is no exchange of sensitive information between the two airlines. The European Union has been proactive in dealing with the issue of code-sharing agreements. In February 2011, the EU Commission launched an antitrust investigation into the code-sharing agreement between the Brussels and Lisbon route. The three primary concerns of the EU were a) capacity reduction b) unlimited rights to sell each other’ seats c) aligning fare structures as well as ticket prices. Such a decision was taken after taking into consideration empirical evidence that there was an elimination of competition in prices and capacity between the two airlines. In another case concerning Lufthansa Airlines and Turkish Airlines, it was noted by the EU Commission that there was no anti-competitive conduct since both the airlines did not have access to each other’s seat inventory. Thus, the EU Commission’s parameters are objectively defined in order to decide the issue on a case-to-case basis. India In India, Code Sharing Agreements can possibly be covered under the ambit of horizontal agreements and vertical agreements. Horizontal agreements are those that are entered into by parties which are operating at the same level in the market and are considered to have an appreciable adverse effect on the competition under Section 3(3) of the Competition Act.[i] For example- Any Code Sharing Agreement between two airlines gets covered under the ambit of a horizontal agreement since the airlines are operating at the same level in the market. However, in order to show there exists a horizontal agreement in India, various factors need to be fulfilled, such as price fixation, cartel, etc. In contrast, Vertical Agreements are those agreements which are entered amongst various enterprises or persons in actvities such as supply, distribution, storage, sale etc.[ii] Code Sharing Agreements can also be covered within Vertical Agreements since there is a restriction on marketing carrier’s ability to distribute the tickets. India’s National Aviation Civil Aviation Policy highlights various aspects related to code-sharing agreements. Under commercial operations, flight operators are permitted to enter into code-sharing agreements. Liberalised rules allow international airlines to enter into agreements, and there is only a single requirement to inform the  Ministry of Civil Aviation 30 per days  prior to starting the Code Sharing Agreement. Thus, there is no presumption that code-sharing agreements have any anti-competitive effects. For example- Air India and American Airlines recently entered into a code-sharing agreement, whereby a new service operated by American Airlines will be launched between New Delhi and New York. In turn, American Airlines’ code will appear on 29 domestic flights that are operated by Indigo Airlines. Prima facie, there appears to be no case of anti-competitive conduct. However, such issues may arise if there is a case of price fixation or the sharing of geographical markets, which is automatically prohibited by virtue of causing an appreciable adverse effect on competition. Thus, CCI can delve into this aspect while deciding on any issue considering price fixation.  It is interesting to note the view of CCI while deciding the case of the Jet-Etihad deal. CCI had taken a positive view of Code-Sharing Agreements in India and stated that code-share agreements allow customers in multiple cities of India to seamlessly travel across various destinations around the globe. However, in the above case, the issue concerning the code-sharing agreement was not a primary issue and thus CCI’s observation on the sharing Agreement cannot be taken to be final. Thus, it remains to be seen from the Indian Context how code-sharing agreements are executed. Conclusion After going through the above discussion, it becomes clear that Code Sharing Agreements can potentially cause anti-competitive conduct if they cause detrimental effects on market pricing and other factors such as the fixation of seats. It is recommended that India take into consideration other relevant factors such as access to each other’s seat inventory while deciding whether code-sharing agreements are causing anti-competitive conduct or not. With a rise in India’s aviation sector, there is a likely increase in the number of

[By Shubhankar Sharan & Soumyabrata Chakraborty] The authors are students of Gujarat National Law University, Gandhinagar.   Introduction Over the latter half of the previous decade, reasonable disputes have arisen concerning the jurisdictional overlap between the Patents Act 1970 (Patents Act) and the Competition Act 2002 (Competition Act). The instant ambiguity centers around the recent judgement of a Division Bench of the Delhi High Court in Tekefonaktiebolaget LM Ericsson v. Competition Commission of India (Ericsson-II), holding the Patents Act to have an edge over the Competition Act. Precisely, the judgement recorded questions about the Competition Commission of India’s (CCI) capacity to ascertain the validity or legality of Fair, Reasonable, and Non-Discriminatory (FRAND) terms in Patent Licensing Agreements (PLAs), however, left it unanswered. Even though the judgement has attempted to clear the jurisdictional overlap, it is fraught with unclear reasoning and has failed to consider several decisive factors. Given the same, this piece would try to outline how FRAND assurances come under the definition of “agreement” stated in the Competition Act. That moment forward, it aims to delineate the powers of the CCI to inquire into such agreements. The piece establishes how CCI needs to hold its ground in adjudicating matters related to FRAND agreements in the likely event of an appeal against Ericsson-II. What has changed? Delhi High Court’s Ericsson-II judgement is diametrically opposite to its single-judge decisions of 2016 and 2020 in similar matters. The Court has now ruled that the Patents Act would prevail over the Competition Act in issues involving a patentee’s abuse of a dominant position in exercising its rights under the Patents Act. The Judgement empowers the Controller of Patents (Controller) to have overriding jurisdiction over CCI in matters of anti-competitive agreements and abuse of dominant position in the domain of exercise of rights by a patentee. The Court adopted a method of examining the legislative intent behind the two statutes (and their amendments) to resolve the jurisdictional conflict. The Court’s reasoning can best be described as restrictive as it relied merely on legislative intent and the precedence of special law over general law or subsequent law over prior law and not a thorough examination of the scope of the two statutes to remedy or prevent anti-competitive practices. The Ericsson-II judgement lacks a thorough comparative analysis of the CCI’s and Controller’s powers to inquire into FRAND terms and their powers to remedy anti-competitive practices. Notably, FRAND assurances in PLAs and the question of them being anti-competitive formed a significant part of the factual matrix before the Court. The Judgement is marked by a lack of reasoning regarding examining and remedying anti-competitive practices in FRAND terms. Instead, it focuses merely on the conflict of jurisdiction. A reading of the two statutes clearly shows that the CCI is better equipped than the Controller to inquire into, remedy, and penalize for abuse of dominant position and anti-competitive agreements concerning FRAND terms. FRAND assurances are agreements by nature FRAND assurances are voluntary agreements that are enforceable in a court of law. Though it is unclear in the Indian jurisprudence, foreign jurisdictions have matured to recognise it. Such reliance on foreign jurisprudence is not detrimental but facilitator of the development of jurisprudence. The same was pointed out by the Delhi High Court in Intex Technologies (India) Ltd. v. Telefonaktiebolaget LM Ericsson (Intex judgement) in paragraph number 38. In the USA, for instance, several courts have observed that Standard Essential Patents (SEP)  implementers or licensees are third-party beneficiaries of agreements between SEP holders and the Standard Setting Organisations (SSOs) and have a right to enforce the SEP holders’ obligations in the Court of Law. Generally, SEPs are granted by the SSOs on specific conditions carried through voluntary agreements requiring the SEP Holder to grant licenses on FRAND terms to the prospective licensees. For instance, Article 6 of the European Telecommunications Standards Institute’s (ETSI) Intellectual Property Rights policy (Article 6 of the IPR Policy) requires the IPR holder or the Declarant to give an irrevocable written undertaking that it would be granting licenses on FRAND terms. Moreover, the Court of Justice of the European Union (CJEU) in Huawei Technologies Co. Ltd. v. ZTE Corp. held that the declaration given by Huawei to ETSI under Article 6 of the IPR Policy for negotiating FRAND terms is binding. The IPR Policy of ETSI, an SSO, has also gained prominence in Indian jurisprudence.  Its reference dates back to 2013 when the CCI touched on Clause 6.1 of the IPR Policy. Additionally, it ascertained the IPR Policy as the overarching framework for companies making a declaration. In furtherance of it, the CCI considered such statements to be binding. Though not the same but similarly, the Delhi High Court (¶36) has rightly recognised the essentiality of FRAND declaration for ensuring access to standardised technologies for SEP Implementers on FRAND terms. However, legislative acts have not recognised or included FRAND agreements in the statutory framework. FRAND agreements and the Competition Act Despite underlining reasonability and fairness, FRAND agreements have often come across as discriminatory. The telecom giants have regularly been hauled to courts for unreasonable terms in FRAND agreements. It must be noted that the Indian position rests possibly on Sections 3 (Anti-competitive Agreements), 4 (Abuse of Dominant Position), and 19 (Inquiry into certain agreements and dominant position of enterprise) of the Competition Act for adjudication over FRAND agreements. While the Competition Act is silent on FRAND Agreements, a cursory reading of the above-mentioned sections indicate their possible application on FRAND Agreements. Section 19(1) of the Competition Act empowers the CCI to inquire into any alleged contravention of Section 3(1) or Section 4(1). Section 3(1) of the Competition Act affirms restraint from entering into agreements causing an Appreciable Adverse Effect on Competition (AAEC). Section 3(2) in conjunction with Section 3(1) of the Competition Act renders such agreement void. Similarly, Section 4(1) proscribes abuse of dominance by an enterprise in the competition landscape of India. In furtherance, Section 3(4) and Section 4(2) list various instances when an enterprise

[By Oorja Newatia] The author is a student of National Law School of India University, Bengaluru.   INTRODUCTION Recently, on the sidelines of the BRICS Competition Conference, the Competition Commission of India’s (‘CCI’) Chairperson has declared that the CCI is looking at ways to integrate sustainability dimensions into the competition law framework. India has declared an ambitious target to achieve carbon neutrality by 2070 and an emissions-intensity target of 45% below 2005 levels by 2030. To achieve these reduction targets, it is necessary to create a society that combines economic growth with the reduction of environmental burdens. Collaborate efforts by enterprises are the only efficient means for companies to achieve their sustainability goals so as to avoid first-mover disadvantages. Thus, to ensure that enterprises build green businesses without having to face anti-competitive barriers, it is critical to have a clear framework to assess ‘anti-competitive agreements having sustainability dimensions’. However, for much of its history, competition law has been largely focused on promoting consumer welfare by promoting competition in the markets. Broader public interest objectives such as sustainability were considered outside the ambit of competition law. This article, by borrowing from various international jurisdictions seeks to argue that environmental concerns can be taken into account to assess the validity of restrictive agreements. In doing so, it first, explores the complex relationship between sustainability and competition, second, analyses the approaches adopted by various competition regimes to integrate sustainability in competition law and finally, suggests amending the Competition Act 2002 (‘the Act’) to make it sufficiently flexible to allow anti-competitive mergers or restrictive arrangements that may have sustainability benefits to proceed without needing to change the objectives of competition law. COMPETITION LAW AND SUSTAINABILITY: A COMPLEX RELATIONSHIP Competition law is not considered the primary policy tool for promoting sustainability because firstly, the OECD has warned that having multiple objectives applied to competition law increases a number of risks including inconsistent application of competition policy and the public interest constraining the independence of competition regulators. Secondly, assessment of sustainability considerations often requires the ability to measure difficult trade-offs between environmental and commercial interests. Thirdly, at times there may be a conflict between sustainability and competition. For instance, a competition agency could decline a merger or take action against an arrangement that has potential environmental benefits because of its likely impact on competition. In essence, competition law is a disincentive to cooperation between firms. In most cases this promotes consumer welfare i.e. where collaboration reduces competition, but it may also prevent industry-wide measures to achieve significant changes in the long-term interests of the public. Collective agreements related to environmental schemes can produce substantial benefits from a sustainability perspective, while simultaneously limiting competition (example; agreements to improve efficiency of refrigerators)  In such cases, the crucial question is whether competition concerns can be balanced with sustainability objectives. INTERNATIONAL APPROACHES TO INTEGRATING SUSTAINABILITY IN COMPETITION LAW The CCI has finally joined the debate on how sustainable dimensions can be integrated within the competition regime. Fortunately, it can benefit by exploring the approach adopted in various foreign regimes. Countries such as Japan, Netherlands, Australia, New Zealand, Greece, Germany have tackled anti-competitive agreements having green dimensions by drafting guidelines. Consider Japan which has recently adopted draft guidelines on how competition law can promote sustainability. These guidelines consider that most activities seeking environmental sustainability are unlikely to restrict competition. However, in cases where business activities have both anti-competitive as well as pro-competitive effects (such as innovation and creation of new technologies resulting in say reduction of greenhouse gas), the guidelines envisage a threefold test: (i) whether the objective of the impugned measure is legitimate; (ii) whether the said measure is reasonable; and (iii) balancing test between the anti-competitive effects and the pro-competitive effects of the measure. However, strict restrictions, such as price restrictions, restraints on new entry and exclusion of existing players cannot be justified in the name of sustainability. Similarly, the Dutch guidelines suggest that in cases where agreements promoting sustainability restrict competition, the sustainability benefits must outweigh the disadvantages caused by such agreements. It necessitates that the parties qualitatively or quantitatively justify the benefits arising. Such an integration of sustainability in competition law can also be viewed in the orders by New Zealand and Australia’s Commerce Commissions (‘NZCC’ and ‘ACCC’ respectively). In Refrigerant License Trust Board (RLTB) case, RLTB sought authorisation for an arrangement under which up to 100% of New Zealand refrigerant wholesalers may agree to supply refrigerants only to customers that are trained and licensed or certified to safely handle refrigerants. The NZCC granted authorisation on grounds that the net benefit of such an arrangement in the form of reduction in the amount of ozone depletion outweighed any detriment to the exclusionary provision. Likewise, the ACCC in 2018 granted authorisation to the Tyre Stewardship Scheme which envisaged dealing with only accredited businesses along the tyre supply chain because it aimed at increasing the recycling of tyres and use of products made from recycled tyres. CRAFTING A FLEXIBLE REGULATORY FRAMEWORK To promote sustainability, the CCI needs to create a competition regime which is sufficiently flexible to look beyond a consumer welfare standard to consider broader wider economic and social impacts. In doing so, it could observe the EU’s approach. The EU Guidelines (2004) read ‘public interest objectives that are pursued by other provisions of European treaties’ into Article 101(3) of the Treaty on the Functioning of European Union (‘TFEU’) which provides exemptions to anti-competitive agreements. Along the same lines, this article suggests that a flexible framework requires restricting the ambit of section 3 of the Act which deals with anti-competitive agreements. This can be done by creating a second proviso to section 3(3). The proviso could be framed as follows: “Provided that nothing contained in this sub-section shall apply to any agreement entered into by two or more entities if such agreement furthers public interest objectives pursued by other existing laws in India.” Public interest covers a broad range of issues including environment, culture, public health and

[By Sanidhya Bajpai & Akash Gulati] The authors are students of Dr. Ram Manohar Lohiya National Law University, Lucknow.   Introduction The award for innovation in the modern world is your commercial exclusivity to that creation. In the pharmaceutical sector, innovation in drugs and consumables is endowed with patents granting a temporary monopoly. However, such temporary monopolies are sometimes virtually elongated with the use of trademark and trade dress rights for foreclosure of competition. All major brands use trademarks and trade dress rights to make a product so distinct that any generic substitute seems like a different drug. Pharmaceuticals contribute 43.2% to the total out-of-pocket expenditure on health in India. While around 17.7% of the pharmaceuticals market in India (in terms of value) is under price regulation, competition is the major source of price control for the rest of the market. This piece delves into trademarks and trade dresses in the healthcare sector, how they affect competition, and the need for a more balanced approach between the two to maintain fair competition in the market. Trademarks and Trade Dress in Pharma Consumers are often caught in a paradox of choosing from a branded manufacturer, seldom being the innovator itself or any other major brand, which ensures safety, or a bioequivalent generic drug, which came later in the market due to patent protection to the innovator drug. The ignorance in consumers often leads to consumers opting for branded high-priced medicines despite the presence of cost-efficient bioequivalent generics. Using color as a distinctive feature is another tool pharmaceutical manufacturers use to indicate their brand. The definition of trade dress under the Indian Trademark Act is found in Section 2 (1) (zb), which encompasses shape, packaging, and color combination in general. The courts have denied trade dress to Pharmaceutical manufacturers in India and the USA in some cases on the grounds that there can be no color monopoly and that the design or color is functional (essential to the use or the purpose of the article without which the cost or quality will be affected), respectively. The significant role of the trademarks and trade dress in this affair is further discussed in toto. How trademarks affect competition As discussed above, a trademark’s function is to attribute the maker’s identification to the product or service. This identification helps the consumer to buy a specific product from a specific maker.  The pharmaceutical sector sees a peculiar case, where the trademark itself becomes the predominant identity of the drug. Branding is used to differentiate identical drugsConsequentially, the consumer seeks that particular trademarked brand in the market. The consumers are generally unaware of the drug’s generic chemical name or international non-proprietary name (“INN”) in most cases. For example, a consumer might know of “Benadryl” as a medicine to a list of symptoms but might not know its generic name, diphenhydramine. For the consumers, the name “Benadryl” is the medicine itself and not the producer’s identification. The patent period establishes the dominance of trademarks Patents inherently “create market power positions that can adversely affect the system’s economic performance.” Moreover, when a product is sold in the market by a single producer and under a particular name for twenty years (being the patent period), the consumer becomes more than familiar with the product’s name (trademarked names in our case).  This familiarization accumulates into consumers assuming the brand trademark as the product’s name. Trademarks elongate the monopoly established by patents post-expiration After the patent’s expiration, consumers and doctors are likely to remember only the trademarked name, even in the presence of bioequivalent generic substitutes. If aware of generic substitutes, consumers would doubt their efficacy due to dissimilar names. Even prescriptions by doctors play a huge role in the dominance of trademarks owned by Big Pharma. A known ill of the sector is that pharmaceutical companies incentivize doctors unethically to prescribe drugs of certain brands. A patient who is availing the services of a doctor would not usually go against the mandated drugs in the prescription. How excessively priced medicines outcompete lesser-priced medicines A monopoly of big brands persists instead of relatively exorbitantly priced branded medicines compared to generics and competing smaller brands. Usually, when a brand charges higher for a similar product, it tends to lose its market share given that other brands are selling the identically same product with lower prices. So, when both brands and generics are available at lower prices in the healthcare sector, why do the top brands continue to dominate? A major part of it may have to do with marketing and advertising, both solidifying their trademarks, establishing trademarked names as distinct drugs. The rest is taken care of by doctors prescribing drugs under the monetary influence of the brands. How Trade dress affects competition In addition to the trademarked name, the shape and color also contribute to giving the innovator firm a competitive edge after the patent expiry. The drugs with distinct colors when associated with the drug’s identity steer consumer choice. How does trade dress affect consumer choices? It is now well accepted through various research and reports that color combinations help shape consumer choices, making trade dress a significant market strategy. The importance of color-coded asthma treatment in patient education is widely accepted. By habit, the patient will stick to the inhalers from the same brand with the same color coding for efficiency and perceived utility. This principle extends to medicines, especially where the patients have to take several medicines regularly, making them recalcitrant to the change in color or shape of medicines as it has an adverse effect on compliance. In Ives Lab., Inc. v. Darby Drug Co. defense of functionality by the generic manufacturers though first reversed, was successfully upheld after several appeals. While upholding appeals, the US courts enumerated several significant findings, including association of appearance of medication with its therapeutic effects, denial of equivalent drugs by some patients even after their doctor’s testimony and benefits of color combination for patients who co-mingle their drugs in a container

[By Sanidhya Bajpai & Akash Gulati] The authors are students of Dr. Ram Manohar Lohiya National Law University, Lucknow.   Introduction Committed to maximizing profits, some mega-hospital chains have adopted unfair measures, and the patients often face the brunt of such measures. Through their numerous manoeuvres, these private super specialty hospitals have gone on to maximize their profits while the patients swallow the pill. Case in point, Max Hospital (“Max”) prima facie found to be abusing its dominant position to exploit the in-patients. In 2015 the Competition Commission of India (hereinafter “CCI”) ordered Director General’s investigation into the matter. The matter still awaits final adjudication by the CCI. This piece delves into the prima facie anti-competitive practices adopted by Max and some general practices of other hospitals to exploit in-patients and distort competition, specifically through their in-house pharmacies and the inherent monopoly over the restricted choices of in-patients; it further proposes rectifying the status quo. How Hospitals Abuse Dominance via In-House Pharmacies To scrutinize the discernible abuse of dominance by Max, CCI considered the market for ‘provisions of healthcare services/facilities for in-patients by private super specialty hospitals in Delhi’ as the relevant market. The private super specialty hospitals including Max enjoy a dominant position in the said relevant market w.r.t Section 19(4) and have been prima facie abusing it through their in-house pharmacies with exploitative pricing of medicines, collusion with pharma manufacturers and seemingly exclusive supply agreements, which is further discussed in detail. Dominance Over The In-Patients Max enjoys absolute dominance over the in-patients, once they are admitted to these hospitals, it becomes obligatory for them to avail the subsequent services from these hospitals even if they are available at a discounted price elsewhere. This creates a locked-in effect for the in-patients and equips the hospitals to abuse their dominant position, which amounts to a contravention of the provisions of Section 4(2)(a)(ii) of the Act. The DG also observed the same in the Max Hospital case. Price Disparity Of Medicines, How Hospitals Collude With Pharma Manufacturers The hospitals abuse their dominant position by charging exploitative prices for the medicines they procure from the pharmaceutical giants at a lower rate than the market, often through exclusive supply agreements. The pharmaceutical manufacturers compete to have their medicines and other products stocked at the pharmacies by offering high retail margins to the pharmacies. The hospital’s in-house pharmacies, from where the in-patients are mandated to buy the medicines, become a blooming ground for such anti-competitive agreements as the in-house pharmacies sheathe the patients from the retail competition, and consequently allow the pharmacies to extract exorbitant profits through exploitative prices. Printing Of Higher MRPs For Medicines To Be Sold By The In-House Pharmacy As mentioned above, the pharmaceutical manufacturers offer a higher retail margin to be stocked at hospitals, and these higher retail margins for non-scheduled drugs that are outside the scope of regulation, are clinched by higher M.R.P.s. An analysis by National Pharmaceutical Pricing Authority (N.P.P.A.) reveals that the most reputed private hospitals are making profits of 1,737% from drugs, consumables, and diagnostics. These profits are extracted by imposing inflated M.R.P.s; the profits on drugs which are not under price control range from 160% to 1200%, on consumables (which are also not under price control) range from 350% to 1700%, and the profits were from 115% to 350% for drugs under price control. The biggest beneficiaries of this trade are the hospitals, who, on the one hand, extract high retail margins from manufacturers and, on the other hand, impose inflated M.R.P.s on the patients. This unequivocally shows that the competition of retail margins at the manufacturing level neither fosters competition at the retail level nor results in competitive prices for consumers; rather, it aids hospitals in making exorbitant profits through anti-competitive agreements and abuse of dominance. Exclusive Supply Agreements Among Hospitals And Manufacturers High-end hospitals such as Max generally have arrangements in exclusive supply agreements with manufacturers. These agreements restrict the patients from availing of other alternatives in the hospital, and the situation becomes even dire when you’re an in-patient and have no recourse but to avail of the available services. The commission in the ‘Hiranandani’ case held that the exclusive contract contravened Section 3(1) of the Act as it had an appreciable adverse effect on competition. The same was criticized by the COMPAT, citing that such exclusive agreements are not anti-competitive as there were other suppliers, and patients were free to avail of their services. However, the present situation is distinct regarding in-patients in context, as they don’t have any liberty to avail the services outside the hospitals. This makes the exclusive supply agreements anticompetitive and aids hospitals in abusing their dominant position. The recent amendments to Section 3(3) and the introduction of the hub and spoke cartels ensure that the selling side is liable for such anti-competitive agreements. A Case for Aftermarket Abuse Apart from a prima facie case of abuse of dominance the current scenario also exhibits the symptoms of an aftermarket abuse. An aftermarket is usually a chronologically succeeding market that emerges to utilize the primary product/service properly or further. In Shamsher Kataria, the CCI explained aftermarkets as a market for complementary goods and services for a primary durable product or service. In conventional scenarios, such aftermarkets are usually of the nature of spare parts and repairs. In the Kodak Case, the US Supreme Court illustrated the market of service & repair as an aftermarket of the primary product of photocopying machines sold by Kodak. Similarly, when we consider healthcare service at a super-specialty hospital as the primary product, the succeeding market complementing the treatment with pharmaceuticals and associated products can be viewed as the aftermarket to the primary market. It is pertinent to note that aftermarket abuse does not necessarily require the perpetrator to be dominant in the primary market. The lock-in effect caused by the provision of the primary product/service provides the perpetrator the ability to acquire a dominant position in the aftermarket. It is this dominant

[By Mohd. Fahad Ansari] The author is a student of National University of Study and Research in Law (NUSRL) Ranchi.   Introduction Recently, the Competition Commission of India (CCI) has initiated investigative operations targeting technology giants such as Amazon, Whatsapp, Zomato, and others. This move has been prompted by the increasing prevalence of dominant practices among online platforms. In response to rising consumer demand for online services and the resulting antitrust apprehensions, the CCI’s investigative actions may be interpreted as its endeavors to examine means of mitigating the unchecked dominance of digital platforms. In this context, the CCI has been actively involved in broadening the definition of the ‘relevant market’ to encompass online platforms within the purview of competition law. Consequently, it has presented an expansive yet somewhat ambiguous interpretation of this term. While the rationale behind this broader interpretation is rooted in the purposive understanding of the ‘relevant product market‘ and the socio-economic needs of the nation, there are concerns that it might inadvertently result in adverse and undesirable consequences. Approach of CCI to Online Intermediaries: Restrictive or Expansive? The Competition Act, 2002 (Act) offers a comprehensive framework for curbing anti-competitive behavior by entities operating in India. However, owing to the intricate technicalities within the legal framework, the significance of the CCI as a regulatory authority has become increasingly prominent within the evolving socio-economic landscape. In this context, the CCI’s approach to addressing online intermediaries can be categorized as either ‘restrictive’ or ‘expansive.’ In the case of Ashish Ahuja v. SnapDeal (SnapDeal case) and in preceding rulings, the CCI has consistently adopted a limited viewpoint.. In this perspective, it viewed online and offline market segments as distinct distribution channels rather than a unified market entity. This interpretation can be attributed to the fundamental principle of interpreting statutes based on their plain and literal meanings, as well as considerations related to the socio-economic context aimed at safeguarding traditional offline markets. However, subsequent to 2016, there was a notable shift in the stance of the CCI, exemplified in the Rubtub Solutions Pvt. Ltd. v. Makemytrip India Pvt. Ltd. & Anr case. In this juncture, the CCI embraced a more comprehensive perspective, considering both online and offline segments as distinct markets. This shift was predicated on the recognition of dissimilar standards and technical intricacies inherent in the delivery of services within these segments. Subsequently, this broader perspective was consistently applied in various instances, leading to the classification of applications such as Google (in the domain of online general web search), Whatsapp (pertaining to OTT messaging apps through smartphones in India), and Apple (in relation to app stores for iOS in India) as separate and distinct markets. Comparing Substitutability Tests: Cross Elasticity vs. SSNIP Approach The paramount factor in ascertaining the relevant market for a product is the concept of ‘substitutability’ or interchangeability of the product. This criterion finds its origins in the United Brands case, a landmark decision rendered by European courts. In this pivotal case, it was firmly established that a product’s resemblance should be evaluated concerning products within the market rather than those external to it. It is crucial to underscore that there exist two approaches for assessing the ‘substitutability’ of a product: (a) the Demand Substitution method, often referred to as the Cross Elasticity Test; and (b) the Small but Significant Non-Transitory Increase in Price (SSNIP) Test. The Cross Elasticity Test was initially introduced in the Cellophane case, where factors such as price and product quality were deemed pivotal to its application. Conversely, the SSNIP Test posits that if an increase in the price of one product leads to a shift in the demand for another, these products are considered substitutable. While both of these tests remain valid, the effective application of the former necessitates a thorough evaluation of consumer preferences rather than relying solely on conjecture. In this context, conducting a comprehensive survey of consumer preferences within the Indian market appears to be an undertaking yet to be realized. Conversely, the latter test has already found substantiation through the observable shift in consumer preferences toward online shopping, driven by disparities in prices thereby justifying the narrow approach of the CCI. Adapting to the Digital Age: CCI’s Expansive Approach and Its Consequences Based on the preceding examination, it is reasonable to conclude that the implementation of a more expansive definition of the relevant market appears challenging, and the CCI position predominantly leans towards a ‘protectionist’ stance, aimed at ensuring equitable competition within the nation. The adoption of this approach during the early stages of the online market’s evolution served a dual purpose. It, on one hand, safeguarded emerging online startups, and on the other, acted as a deterrent against the misuse of dominance, in accordance with the provisions of Section 4(2)(e) of the Act. Consequently, this approach managed to strike a balanced equilibrium, offering both incentives and prevention, with a discerning application on a case-by-case basis. Nevertheless, the dynamics have shifted in contemporary times, with online startups now holding dominant positions within various markets. In light of this, the prevalence of online players’ dominance can only be mitigated by their endeavors to enter or safeguard other relevant markets. Furthermore, the adoption of a more expansive approach renders the relief provided under Section 19 of the Act inapplicable in instances of unilateral agreements, owing to the condition stipulated in Section 19(5). This outcome, in turn, has adverse repercussions on offline retailers. Nonetheless, it appears that the broader approach adopted by the CCI has not posed a substantial impediment to its regulation of the online market. The Indian regulatory authority has been actively addressing contemporary concerns by pursuing allegations of discriminatory practices and by invoking measures to prevent other market participants from entering the arena. While the actions taken by the CCI may offer interim solutions, they tend to constrain the utilization of the diverse legal remedies made available by the Act. Moreover, in contrast to previous circumstances, the contemporary challenges extend beyond the mere abuse of dominant positions, encompassing

[By Monesh R B] The author is a student of Tamil Nadu National Law University, Tiruchirappalli.   Introduction: In the year 2018, the Ministry of Corporate Affairs of India constituted the Competition Law Review Committee (CLRC) in order to check and assess the implementation of the Competition Act of 2002 (hereafter ‘the act’). The CLRC submitted a report on 26 July 2019, highlighting the issues revolving around the current legislation, various policy changes, assessing new age markets and tackle mechanisms, etc. The report paved the way for introduction of the concept of ‘Deal Value Threshold’ (DVT) as the government brought in an amendment to the act, making it the Competition (Amendment) Act, 2023. In the pharmaceutical industry, incumbents frequently conduct acquisitions and shut it down when the technology or innovation of the target is still in its infancy, also popularly termed as ‘Killer Acquisitions.’[i] The Organisation for Economic Co-operation and Development (OECD) defined Killer Acquisitions as “an incumbent firm acquiring an innovative target and terminating the development of the target’s innovations to prevent future competition.” In most cases, these types of acquisitions, especially in the Pharma sector, do not get notified to the Competition regulators as the value of these acquisitions will fall well below the traditional asset or turnover based threshold values as these target firms are in their nascent stage. Even though the rationale behind introducing Deal-value based threshold was to tackle this issue,  due to the lack of sector specific threshold values, there remains a gap that needs to be addressed by the law makers. Thus, this article will attempt to critically analyse the role of DVT with regard to ‘Killer Acquisitions’ in the Indian pharmaceutical industry. It will try to address the issues surrounding the absence of sector-specific threshold values, especially by highlighting the issues in the Indian pharmaceutical sector. What is Deal Value Threshold? Following the recommendations made by the CLRC, the legislature by Section 6 of the Competition (Amendment) Act 2023, inserted two new clauses to the already existing section 5 of the 2002 Act by which mergers, acquisitions and amalgamations will trigger a notification to the Competition Commission of India (CCI), if; “(i) the value of the transaction exceeds rupees two thousand crores (i.e., for acquisition, merger or amalgamation) (Approx. USD 242 Mn.) and; (ii) the target enterprise has “Substantial Business Operations in India.” The Ministry of Corporate Affairs, from its submissions before the Standing Committee, clarified that DVT is primarily meant for digital and new-age markets, where the target entity may have minimal assets and turnover, but may possess significant potential in terms of data, technology, innovation, etc. However, the text of the amendment does not restrict the application of DVT to any particular sector.[ii] Deal Value Threshold vis-á-vis  The Indian Pharma Sector: In the Pharmaceutical Industry, firms developing innovative technologies are often purchased by larger firms which provide R&D space, resources and money to develop their innovation into drugs. However, these small firms may become a potential competitor to the larger firms due to their innovation and hence becoming the targets of killer acquisitions. Competition in the pharma sector is important because it can motivate brands to create new and advanced medicines and encourage generic companies to offer less expensive alternatives.[iii] Taking a look at the deal value of pharma mergers that has taken place in India in the year of 2022 (as per data provided by the Times of India)[iv], except 2 out of 16 mergers, the rest of them will not meet this currently prescribed deal value threshold of INR 2000 crores (Approx. $242 Mn. USD). As per the CLRC’s report, the rationale behind this amendment was to bring the mergers/acquisitions under the ambit of CCI, that causes an Appreciable Adverse Effect on Competition (AAEC) in the Indian market but goes unnotified to the CCI as they do not meet the asset or turnover based threshold as prescribed in section 5 of the act. But this rationale is being completely defeated when it comes to specific sectors, like  pharmaceuticals, as the deal value of these mergers does not exceed the prescribed threshold values in most cases, because these firms are in their nascent stage and do not possess a significant market share. Thus, these mergers will not be under an obligation to notify the CCI neither under the asset and turnover based threshold nor the DVT. One may pose an argument that Killer acquisitions may be curbed down within the ambit of section 4 of the Competition Act. But the problem in doing so is that, section 4 of the act can be brought in only when the damage has already been inflicted but not prevent such activity. Thus, there is a significant gap with regard to the currently prescribed deal value of INR 2000 crores when it comes to specific sectors like pharma. If not Sector-based threshold, then what? Even though one cannot assume that every merger or acquisition will result into a Killer Acquisition, it is necessary to take some steps, with a particular focus on specific sectors, by fixing certain requirements for examination by the Competition Regulators or granting them ‘Residuary Powers’ to investigate into mergers that does not meet the prescribed threshold values for mandatory notification. As of now, no country has sector-specific threshold values for notification of combinations. But, the Competition regulators and their respective legislatures across the world are implementing various measures, in order to curb down killer acquisitions and other such anti-competitive practices.[v] In Europe, the European Commission (EC) has determined in the case of Novartis/GlaxoSmithKline Oncology Business, that drugs undergoing phase III clinical trials are potential competitors to the drugs existing in the market and thus, an incumbent acquiring the target firm in the same therapeutic category as the existing products of the incumbent, would be considered as a horizontal overlap. This is a very welcoming move in order to curb down or prevent killer acquisitions in the initial stage itself as this practice generally prevents any incumbent from acquiring a target which