Competition Law

[By Ashutosh Chandra] The author is a student at the Jindal Global Law School. Introduction: Recently the Canadian Parliament introduced the Bill C-18. The law aims to bring about fairness in the Canadian digital news ecosystem and make sure that the system can support itself. This is done by regulating commercial interactions between digital intermediaries and news outlets. If the bill is implemented, digital intermediaries will be forced to pay a certain amount for ‘making available’ news content produced by outlets on their platforms. When the law is analyzed in the context of India, there is a pending case before the Competition Commission of India (“CCI”) against Google concerning its position of dominance in the news market by the Indian Newspapers Society (“INS”). It is contended that creators of news broadcasted in the digital space are not being provided fair value for their efforts and it is Google, the entity controlling the ad-tech value chain due to its dominant position. Noting the pending case and the Canadian law, the paper would try to understand what the law enacted by the Canadian Parliament would reap if a similar law were enacted in the Indian legislation. Additionally, the paper would also analyze if there were mechanisms that the CCI can use to frame guidelines for the operation of such law. Bill C-18 and other similar laws – purpose and impact: As per Section 2(a) of the Bill, news content or any portion of it is made available when it is reproduced. Even if access to the same is facilitated by “any means”, then the news content is made available. And if this is done in the space of a digital intermediary, then the intermediary must provide compensation to the producer of the news. Again, the purpose behind this is to increase “fairness” in the Canadian digital news market. However, at the stage of the pronouncement of the bill, it is unclear how this will be achieved. Even though “fairness” is proposed, it is firstly contended that compensation to the producer would not automatically guarantee fairness. If anything, the paper argues the same would lead to unfairness between the producers through the depletion of opportunities for the new news business and a decrease in net neutrality. Quantum for Payments It is to be noted that the quantum of payment to the news producers is very low. The intermediary does not even need to publish the news on its platform to provide compensation. Merely, providing access through the method of hyperlinking would do. The “any means” part of the bill ensures the same. Going by the consideration of the provision, intermediaries would need to remove complete access to not pay. Before the implementation of the bill, the news producers produced and posted news through their handles on platforms operated by intermediaries. If the same is considered, the parliament’s purpose of payment for news content with consent serves no purpose. In any case, these news outlets provide their consent for their items to be hyperlinked on intermediary platforms like Facebook, as also denoted through the privacy policy of Facebook. Basis for Compensation Further, the blanket of compensation can be interpreted to extend toward all news producers as per the section. It has no qualitative or quantitative basis on which it is decided whether a news producer is to be paid or not. While there may be contracts that the intermediaries and news outlets enter, the problematic portion is that there are no supervising guidelines for the formation of these contracts. The only requirement is that compensation must be necessarily paid. In such a case, the intermediaries may be forced to use their metrics and then decide the compensation amount as a general practice, provided that the intermediary decides to contract with multiple business outlets. This would open another set of problems – which includes the intermediaries to news outlets that do not generate revenue or serve no purpose, and only enter contractual relationships with news outlets. This would then lead to the elimination of those discarded outlets from mainstream social media. Therefore, the proposed bill is silent on these implications of the provisions and would thin out the competition in news in the online sector. Standard of Journalism The other implication is the standard of journalism. Due to compensation being provided regardless of the quality of news published, a news operator may not be motivated to provide high-quality content. This would result in an overall depletion standard of journalism in online news media. Since online platforms are paramount for news outlets in this age and day, it only follows that newer outlets would not be able to find their footing in the industry, as the intermediaries are not motivated to pay everyone and use everyone’s sources. Therefore, there is a clear detriment to competition. Advertising of News Platforms Then there is the question of digital advertising on operators’ platforms. The model suggested would bring about an end to digital advertising on news, as now the operators will have to pay businesses instead for the news produced, as opposed to them taking money from news businesses to spread reach. This model is structured in such a manner that it would lead to a loss of profits for digital intermediaries. Even so, the news intermediaries have other sources for digital advertising. The model is not going to financially cripple the digital intermediaries, even though it may affect them negatively. However, the larger problem also appears harmful to upcoming and less-known news platforms. Now, news outlets may not partake in the process of digital advertising, as now the intermediaries will have to pay for news. And digital intermediaries cannot be expected to advertise for a news business without getting compensation for it. Therefore, the source for them to grow their business through digital advertising and make people aware of the network no longer works for them. Position in India: In the case pending with the CCI, the relief asked is for a just payment system for news creators on

[By Prakriti Singh] The author is a student at HNLU. The Indian Competition Law Regime is bracing for the first amendment to the Competition Act, 2002. The Competition (Amendment) Bill, 2022 has proposed substantial changes for both the arms of the Indian Competition Law Regime, i.e., merger control and cartel enforcement. Cartels are considered to be a heinous offense under the antitrust law. These twenty years of the Competition Act have witnessed a robust anti-cartel drive in India. Unlike the USA, India does not consider cartels to be a crime. However, the imposition of huge penalties is the Competition Commission of India’s (“CCI”) weapon to create a deterrent effect on the cartels. The Amendment Act has proposed several progressive changes to the Competition Act, 2002. In line with the Competition Law Review Committee Report, it has included hub and spoke cartels under the Act. The Leniency Regime goes hand in hand with the Cartel enforcement. The Amendment Act seeks to revamp the leniency provisions by permitting the withdrawal of leniency petition and dealing with the disclosure of multiple cartels. While the Amendment Act has taken an active step in recognizing different categories of cartels and advancing the leniency provisions under the Indian Competition Law Regime, it has failed to cure the existing mischief in the cartel enforcement law in India. The primary objective of cartel enforcement law is to alleviate cartel formation and thereby promote competition in the market. The statistics presented in India Chapter of Asia Pacific Antitrust Review, 2022 clearly demonstrates the failure to achieve this goal. The primary cause is the inconsistency in cartel enforcement on the part of the CCI. In order to prevent the death of enterprises in the wake of the pandemic, the CCI has abstained from imposing penalties in a number of cases. However, this soft approach might be antithetical to the antitrust regime. This article aims to present an analysis of the missing parts in the 2022 Amendment on the cartel enforcement arm. It will suggest some changes in the cartel enforcement provisions in order to strengthen the regime. Cartel enforcement in India Monopolies and Restrictive Trade Practices Act, 1969 is the predecessor of the Competition Act, 2002. One of the mischiefs pointed out in the 1969 Act by the Raghavan Committee was the absence of any provision to reduce cartel activity. The 2002 Act brought in provisions to prevent cartel activities in the economy which are extremely secretive and difficult to prosecute. The CCI (Lesser Penalty) Regulation, 2009 was notified in order to enhance the cartel detection rate which has led to the evolution of the cartel enforcement regime. As opposed to relying on mere circumstantial evidence, the CCI has now transitioned to relying on the evidence gathered from dawn raids. Analysing the inconsistency in the Cartel enforcement- Case Study of the Railway Sector The Railway market is a monopsony market prone to cartel formation. The first ever order of the leniency regime was related to cartelization in the Railway sector. In recent times, cartel detection in this market has been made possible by the exercise of the Leniency application. However, the inconsistent approach of the regulator is problematic. It even bears the threat of discouraging the leniency petitions. On 10 June 2022, the CCI released an order imposing penalties on seven firms. These seven firms were engaged in cartelization in the supply of protective tubes. The detection of this cartel was made possible by one of the member firms in the cartel. The Director General in his report had submitted evidence of cartelization relating to the polyacetal protective tube in the Indian Railways. The CCI, after a detailed analysis, concluded that the communication between the firms clearly demonstrated the existence of a cartel arrangement. The CCI took a harsh stance on the cartel arrangement. The member firms attempted to justify the presence of a cartel in the monopsony Railway market. However, the CCI strictly demonstrated an anti-cartel stance. The monopoly of the Indian Railways is no good ground to engage in cartelization and manipulate the bidding process. Except for the whistleblower, all the firms were penalized. Even in this cartel, there were MSMEs facing economic disruptions caused by the pandemic. However, the CCI, instead of issuing a stringent warning, imposed penalties on these firms. In 2021, in Eastern Railway, Kolkata v. M/S Chandra Brothers and Others, the CCI found evidence of cartel activity in the Axle Bearings market. This cartel was also detected as a result of a Lesser Penalty Application. Even the suppliers, in this case, attempted to justify a cartel in a monopoly market. This cartel also included MSME enterprises bearing the brunt of the pandemic. The CCI abstained from imposing penalty and rather issued a cease-and-desist order. In Re: Chief Materials Manager, South Eastern Railway v. Hindustan Composites Limited and Others, the CCI had found evidence of cartel in the supply of Brake Blocks to the Railways. However, it restrained from imposing any penalty as the MSMEs were adversely affected by the pandemic. In this case, the CCI, analysed the turnover of the Opposite Parties, on the basis of which, it issued a cease-and-desist order. Similar leniency towards MSMEs engaging in cartelization in the supply of cartel brushes to the Railways was demonstrated in Mr. Rizwanul Haq Khan, Dy. Chief Material Manager, Office of the Controller of Stores, Southern Railway v Mersen (India) Private Limited and Another. Thus, within a single market, the CCI’s approach has been replete with inconsistency, that too, while deciding cases with similar circumstances. This inconsistency causes mischief on two counts. Firstly, it dilutes the magnitude of deterrence originally envisioned by the cartel enforcement regime. Secondly, it also dilutes the efficacy of the Leniency Programme. If the applicant has no incentive of getting lenient treatment compared to the other cartel members, the entire process of filing a Lesser Penalty Application would seem to be futile. A stringent approach to cartels- the cure for the mischief of inconsistency? In the past two years,

[By Akrama Javed and Aditya Maheshwari] The authors are students at the Gujarat National Law University. Introduction Recently, after a coon’s age of introduction of the Draft Competition (Amendment) Bill, 2020, the legislature introduced the Competition (Amendment) Bill, 2022 (hereinafter as “Bill”), wherein certain changes in the present legal regime have been incorporated. The Bill so proposed needs to be analyzed in the context of the digital market (hereinafter as “market”) owing to two major reasons. Firstly, the complexity in the regulation of the market owing to its complex and multifaceted nature due to the involvement of data, complex algorithms, and lack of technical tools for regulation. And secondly, the effect of the anti-competitive dominant policies of these Big-Tech on new entrants, as well as the existing competitors in the market. Therefore, in this article, the authors have analyzed the upcoming legal regime pertaining to the rise of the digital market in India. Competition Bill 2.0 – amendments pertaining to Market Some of the indispensable changes in regard to regulating the market are: Inclusion of Technology Experts in the Competition Commission of India  Taking a leaf out of Indian security law wherein the special focus is being made on the expertise of the members with regard to the securities market, the legislature intending to add investigative muscle and professional expertise to intensify scrutiny of Big-Tech companies, introduced the inclusion of expression ‘technology’ under Section 8 of the Competition Act (hereinafter as “Act”) wherein it would be one of the factors for the selection of the chairperson and other members. Moreover, while complementing section 8, an amendment is also introduced in Section 9 of the Act to include ‘technology’ while forming the selection committee. Material influence as part of the control Through the amendment, the legislature intends to amend the definition of ‘control’ to include the lowest threshold of control i.e., material influence. The inclusion of this would keep the digital transactions under the Competition Commission of India’s (hereinafter, “CCI”) supervision as such transactions don’t come under the realm of quantitative criteria provided. Hub and Spoke Cartel Propelling from the traditional cartel i.e., horizontal and vertical cartel, the CCI introduced Hub and Spoke Cartel under Section 3 of the Act. Here, the CCI intends to include such transactions which are done through intermediaries. For instance, the use of price algorithms for anti-competitive activities by companies like Ola and Uber shall be scrutinized under this provision. Demystifying the existing conundrum in the market in India As mentioned earlier, the amendment is introduced keeping in mind various actions being taken by the CCI against Big-Tech and it is pertinent to discuss the same to understand the contemporary contextual issues existing within the domain. The data induced jurisdictional tussle The issue was ignited for the first time when suo-moto cognizance was taken by the CCI against WhatsApp’s Terms and Services relating to Privacy Policy which effectively asked users to accept the sharing of their data with Facebook and initiated an investigation. It should be noted that prior to this, CCI had generally avoided intervening in matters having data privacy undertones to them. However, herein, CCI had held that WhatsApp Inc., through this policy, was arbitrarily degrading the non-price parameters of competition i.e., data, to an extent that it violated Section 4(2)(a)(i) of the Act through the imposition of unfair terms and conditions. In all of this, the idea of the CCI overstepping its jurisdiction to meddle in privacy issues is concerning when there is almost a legal vacuum in the area of data privacy due to the withdrawal of the Data Protection Bill, 2021. The case of apprehensive App Store arrangements The case of apprehensive app store arrangements is exacerbated by dominant tech firms i.e., Apple Inc. and Google, and action was taken against them. Recently, an investigation was launched against Apple Inc. on grounds including App Store Review Guidelines being violative of Section 4(2)(a)(i) of the Act due to its ‘take it or leave it’ nature, the mandatory use nature of the in-app payment system and the tie-in arrangement restricting other developers to develop iOS apps. Likewise, Google has also been found guilty of abusing its dominant position by denying market access, leveraging, and restricting technology to the prejudice of consumers. The problematic allegory of the algorithms The concept of Algorithmic collusion has been addressed by the CCI in two cases. Taking a narrow approach in the case of Samir Agrawal v. ANI Technologies Pvt. Ltd, CCI held that there did not exist hub and spoke agreement because there existed no agreement to set the prices or coordinate the prices between the parties. Secondly, in the case of Re: Alleged Cartelization in the Airlines Industry where the existence of hub and spoke agreement was investigated w.r.t common software algorithm software used by airlines to determine the ticket pricing. In this, the CCI found that the revenue management team of the airline modulated the algorithm, and the role of the algorithm was limited only to aiding the team in arriving at the price which would ensure optimal revenue. Here, the question would again arise in front of the CCI in case there is an employment of a self-learning algorithm. Foreign Approaches Countries around the world getting a move on from the traditional competition laws by reconsidering the present legal regime to include safeguards against modern anti-competitive activities such as tacit collusion. Some of the best safeguards being adopted by various countries are discussed below. Digital Market Act – European Union The European Union recently enacted the Digital Market Act as a means of limiting the ability of major digital firms to respond to and head off the competitive threats posed by their business models. It is enacted to impose a stringent regulatory regime on the gatekeepers. Moreover, investigation regarding the compliance of regulations is provided to give ex-ante effect to it. Moreover, the obligations are imposed on gatekeepers to explain their algorithms and the non-compliance of the same would invite severe penalties. Open Market App

[By Harshit Upadhyay and Sangita Sharma] The authors are students at the Gujarat National Law University, Gandhinagar. A cartel facilitator is an undertaking that ensures the proper functioning and operation of the cartel by providing logistical support to the cartel. The facilitator does not need to have any commercial interest in the relevant market in which the cartel operates. Recently, in the Re: Alleged anti-competitive conduct by various bidders in supply and installation of signages at specified locations of State Bank of India across India (‘SBI Cartel’) case, the Competition Commission of India (‘CCI’) held a company liable for the independent actions of its director for facilitating a bid-rigging cartel. This article argues that the CCI erred in holding the company liable for the independent actions of the director when it could have punished the director individually for his actions under Section 27 of the Competition Act, 2002 (‘the Act’). Moreover, there is a need for greater clarity with regard to the position of the facilitators under the Act, and the same can be resolved with the help of incorporating the principles developed in the European Competition jurisdiction. SBI Cartel Case In March 2018, SBI floated tenders for the supply and installation of signages at its branches, ATMs, and offices for specified metro centers of various circles of SBI across India, which was ultimately carried out on a ‘reverse e-auction’ basis among the eligible bidders. Five companies qualified for the technical and financial bids and were shortlisted for the final bidding. These five companies wanted to distribute the locations amongst themselves. In order to facilitate the same, the companies sought the assistance of Naresh Kumar Desarji (‘Naresh’), Managing Director (‘MD’) of Macromedia Digital Imaging Pvt. Ltd. (‘MMDI’). It is relevant to note here that MMDI is neither horizontally nor vertically aligned to the same market as the other five players. Further, Naresh maintained personal relationships with the MDs of some of these companies. Based on the price inputs and geographical preferences he received from the companies, Naresh laid out how the bidding should be done and who shall bid how much for which location in an email marked to the companies. The companies followed the email and bid accordingly. The CCI took suo-moto cognizance of the anti-competitive conduct of the parties and held all the six parties (including MMDI) involved in the bid-rigging liable. CCI Decision The CCI held MMDI liable for the acts of Naresh in facilitating anti-competitive conduct, stating that under Section 3 of the Act, every person involved in manipulating the bidding process could be held liable. The CCI imposed a penalty of 51 Lakhs on MMDI. Further, it also held Naresh liable under Section 48 of the Act. Analysis On holding a Company liable for the Independent Actions of a Director The CCI, in this case, held MMDI liable even though MMDI was never part of any bid-rigging agreement directly or indirectly, and the actions of Naresh had nothing to do with the day-to-day management or even with the business of the company. This position is contrary to established principles. A company is a distinct legal entity, and a company cannot act beyond the scope of its Memorandum of Association or Articles of Association. A company can carry out the objectives mentioned in its Memorandum of Association or Articles of Association, including anything incidental or conducive to it, although it must be connected to those objectives. Further, the relationship between the directors and the company is analogous to that of agent-principal. An act not within the scope of the agent’s express or implied authority (falls outside the power or apparent scope of his authority and such acts) cannot bind or be attributed to the principal. The authority of directors is specified in the Memorandum of Association or Articles of Association and beyond which it cannot travel. In MRF Ltd. v. Manohar Parrikar, the court held that the actions of the director, which are ultra vires the same, cannot bind the company. In the immediate case, the CCI holding MMDI liable does not provide anything to establish that Naresh was acting within his authority and, therefore, could bind the company. Further, the tender was entirely unconnected to the business of MMDI as it was not engaged in the production of the goods involved in the tender and was in no manner incidental or conducive to the day-to-day functioning of Naresh as MD. The CCI erred in penalizing MMDI under Section 27 of the Act since it requires the company to be ‘involved in such agreement.’ The CCI held Naresh liable under Section 48, which requires the company to be held liable before punishing the individual in charge of and responsible for the company. However, the CCI has the requisite authority to penalize Naresh for his independent actions under Section 27 and Section 3 because of the term ‘person’ in these provisions. Further, Section 27 does not require holding the company liable before punishing the individuals. Unclear Position of Facilitators under the existing Competition Law regime Defining Facilitators The CCI held the ‘facilitator’ liable. But, it failed to define a ‘facilitator’ properly. The jurisprudence surrounding this has yet not evolved under the Indian Competition law. However, the competition authorities in European Union have more evolved principles to deal with cartel facilitators vis-a-vis their Indian counterparts. The General Court in AC Treuhand (later upheld by the top EU court) laid down the following legal test to determine the liability of facilitators: “The Commission must prove that [facilitator] intended, through its own conduct, to contribute to the common objectives pursued by the participants as a whole and that it was aware of the substantive conduct planned or implemented by other undertakings in pursuance of those objectives, or that it could reasonably have foreseen that conduct and that it was ready to accept the attendant risk.” This is a twin test, which requires it to be established that the perpetrator objectively contributed to the implementation of infringing conduct and that the perpetrator intended

[By Ankita Raghunath] The author is a student at the Gujarat National Law University, Gandhinagar. Recently, an inquiry has been directed to BookMyShow under section 26(1) of the Competition Act, 2002 (referred to as “Act”) on the grounds that BookMyShow has entered into anti-competitive agreements with multiplexes and theatres under the provisions of section 3 read with section 4 of the Act which deals with abuse of dominant position. Background of the CCI Order According to Showtyme, the informant in the present case, theatres are unwilling to associate with other online movie ticketing portals due to monetary incentives being provided to them by BookMyShow on zero interest. This is despite the fact that Showtyme charges significantly lower convenience fees in comparison to BookMyShow. Moreover, BookMyShow has engaged in refusal to deal by signing exclusive contracts with these theatres that act as barriers for any new competitors to enter the market. Considering BookMyShow’s dominant position in the market, these agreements effectively allow it to control the market and dictate unfair terms with the business users. BookMyShow, in reply, stated that no monetary incentives were provided to the business. Instead, it was claimed that BookMyShow offers security deposits to adjust ticket prices and revenue share of the theatres. BookMyShow also denied that they have any significant market share and asserted that exclusive agreements are a necessity as BookMyShow is a relatively new entrant to the market. The CCI rejected BookMyShow’s arguments and found that there is a prima facie case of abuse of dominance under section 4 by BookMyShow in its agreements with business users. The Commission found that the terms of the agreements between BookMyShow and the theatres prima facie have the potential to deny market access to competitors as well as potential entrants which can make it anti-competitive under Section 19 (3) of the Competition Act, 2002. The Commission is of the view that the exclusive agreements offered by BookMyShow can restrict the freedom of theatres and multiplexes to contract with competitors of BookMyShow.This limits the consumers’ choices as well. On establishing the existence of a prima facie case, the CCI directed the DG to commence an investigation under Section 26(1) of the Act. Analysis of the case BookMyShow’s capability to induce businesses’ to enter into exclusive contracts with them and adhere to unfair contractual terms, in itself, shows the position of dominance that is enjoyed by the enterprise in the market. This is the main area of concern in the present case. In the e-commerce industry, exclusive contracts can either be agreements where a product is sold exclusively on a single platform or only a single brand is listed in a particular product category. They can drive up the cost of competitors in acquiring business users on their platforms. The CCI in its market study on e-commerce, however, emphasizes that exclusive agreements can generate efficiencies and improve inter-brand competition. Hence, they must be studied on a case-by-case basis. Especially in e-commerce, the number of users already connected to a platform positively affects the value of a network connection for a user. This is otherwise known as network effects. Hence, businesses tend to become dependent on platforms with a large user base like BookMyShow as they significantly widen their access to the market and their potential for growth. The platform, hence, has a higher bargaining power which allows it to set unfair contract terms for businesses and unilaterally revise contract terms. The Commission takes notice of such unfair contracts under section 4 of the Act if the contracting party is a dominant enterprise in the relevant market. In the BookMyShow’s case, there is a need to analyze it from multiple perspectives. Competitors such as the informant have no option of even getting businesses to consider their platform in light of the exclusive agreements. Despite the unreasonable terms in the agreement, from the businesses’ perspective, terminating their exclusive contracts with BookMyShow would cost them more. Notwithstanding the considerable additional cost paid to terminate the contract, they will also not receive the same level of visibility on any other platform. Finally, BookMyShow imposes significantly high convenience fees on their customers, who are also limited in their options. CCI’s Recent Trends in relation to e-commerce The CCI, in connection with P2B contracts in its market study on e-commerce in India, mentions how exclusive contracts in e-commerce raise alarm when they are used to foreclose competition to rivals or impede entry. The market study, however, does not impose any regulations and only makes recommendations. It is left up to the platforms to decide what must be the basic contract terms, penalties imposed for breach, conflict resolution process, etc. The existing jurisprudence in relation to P2B contracts in e-commerce is also lacking. Recently, a few cases involving major e-commerce players have been looked into by the CCI. In January 2020, CCI ordered an investigation into Amazon and Flipkart for preferential listing and deep discounting as well as exclusive agreements. This can affect small sellers on these websites who struggle to gain visibility as well as offline retailers who cannot access the product from anywhere, but the platform. The DG is currently in the process of investigating whether these practices are exclusionary and constitute an AAEC in the market. Following that, in 2021, the CCI touched on the issue of unfair P2B contract terms. The CCI ordered interim relief in favour of two hotel chains that were delisted on MakeMyTrip (MMT) pursuant to an agreement between OYO and MMT. CCI held that there are limits to contractual freedom if it leads to anti-competitive outcomes. Moreover, the hotel chains did not breach any contractual obligations to merit delisting. The CCI found that the agreement between OYO and MMT was exclusionary and created barriers to entry in the market. As recently as 2022, the CCI explored exclusive agreements in conjunction with platform neutrality in the case of Swiggy-Zomato. In addition to low commissions and minimum business guarantees, Zomato offers exclusivity to restaurant partners. The CCI decided it was