Competition / Antitrust Law – Year in Review 2023

IMPORTANT CASES & JUDGMENTS

1. Delhi High Court dismisses writ petition filed by UltraTech against impleadment of Builders’ Association of India (BAI) by the CCI.

Case Title: Ultratech Cement Ltd. v. Competition Commission of India & Ors., (W.P.(C) No. 9854/2023)

In a writ petition, Hon’ble Delhi High Court in 2022 allowed Builders Association of India (“BAI”) to approach CCI for impleadment as a party (under Regulation 25 of the CCI (General) Regulations, 2009) in cement cartel case. On the basis of application filed by BAI, CCI allowed BAI to participate in the proceedings before the CCI and also allowed BAI to inspect non-confidential records of the case and provided a copy of the DG Report to BAI.

Aggrieved by BAI’s impleadment as a party in the cement cartel proceedings, UltraTech Cement Limited (“UltraTech”) filed a writ petition under Article 226 and 227 of the Constitution of India before the Hon’ble Delhi High Court challenging CCI’s decision to allow the impleadment of BAI in suo motu proceedings initiated regarding alleged cartelisation by cement manufacturers in the country. The main ground for challenge by UltraTech was that if BAI is impleaded as a party, it would have access to commercially sensitive information of UltraTech and that would be detrimental to their commercial interest. UltraTech also challenged CCI’s order of impleading BAI on the grounds that the CCI in passing the order has violated the principles of natural justice by not providing an opportunity of hearing to UltraTech at the time of passing the impleadment order and also that the CCI has not provided sufficient reasons in the impleadment order as to why BAI holds substantial interest in the proceedings.

Vide order dated December 18, 2023, the Hon’ble Delhi High Court dismissed UltraTech’s writ petition and held that as per the impleadment order, BAI is only allowed access to and inspection of the non-confidential version of the case records and therefore the UltraTech’s contention of BAI getting access to the commercially sensitive information is not sustainable. The Court noted that UltraTech was aware of the fact that BAI has been provided with the copies of non-confidential version of the DG report and its response to the same was sought by the CCI. The impleadment order had only formalised the impleadment of BAI. Noting the above the Hon’ble Delhi High Court held that UltraTech had sufficient time of almost a year, to file its objections before the CCI against the impleadment of BAI. Further the Court also held that the CCI had provided sufficient reasons in the order for the impleadment of BAI and noted that any cartelization in the cement industry would largely impact BAI, as its members, collectively are the largest consumers of the cement industry.  BAI was represented by Anu Monga and Rahul Goel.

2. Madras High Court invokes doctrine of committee of courts and entertainability of writ petition to dismiss writ petitions against impleadment of Builders Association of India in cement cartel case

Case Title: Dalmia Cement (Bharat) Ltd. v. CCI & Ors. (W.A. No. 2227 of 2023) and India Cement Ltd. v. CCI & Ors. (W.A. No. 2218 of 2023)

In a writ petition, Hon’ble Delhi High Court in 2022 allowed Builders Association of India (“BAI”) to approach CCI for impleadment as a party (under Regulation 25 of the CCI (General) Regulations, 2009) in cement cartel case. On the basis of application filed by BAI, CCI allowed BAI to participate in the proceedings before the CCI and also allowed BAI to inspect non-confidential records of the case and provided a copy of the DG Report to BAI.

Aggrieved by BAI’s impleadment as a party in the cement cartel proceedings, Dalmia Cement (Bharat) Limited (“Dalmia”) and India Cements Limited (“India Cements”) filed writ petitions under Article 226 and 227 of the Constitution of India before the Hon’ble Madras High Court challenging CCI’s decision to allow the impleadment of BAI in suo motu proceedings initiated regarding alleged cartelisation by cement manufacturers in the country.

The main ground for challenge by Dalmia and India Cements was that if BAI is impleaded as a party, it would have access to commercially sensitive information of Dalmia and India Cements and that would be detrimental to their commercial interest. Dalmia and India Cements also challenged CCI’s order the grounds that the CCI in passing the order has violated the principles of natural justice by not providing an opportunity of hearing to Dalmia and India Cements at the time of passing the impleadment order and also that the CCI has not provided sufficient reasons in the impleadment order as to why BAI holds substantial interest in the proceedings.

While adjudicating upon the writ petitions filed by Dalmia and India Cements, the Hon’ble Madras High Court noted that the Hon’ble Delhi High Court, in a writ petition filed by UltraTech, challenging the CCI’s order has been reserved for judgement. The Hon’ble Madras High Court applied the doctrine of ‘comity of courts’ and held that if one High Court has examined the case on merits, the same being examined by another High Court would result in conflicting judgments. Further, it was also observed that since the order of impleadment of BAI was in pursuance of Hon’ble Delhi High Court’s order (granting liberty to BAI to approach CCI), the writ petition should not be entertained by the Hon’ble Madras High Court. The Hon’ble Madras High Court dismissed the writ petitions filed by Dalmia and India Cements.

Aggrieved by the Ld. Single judges’ order, Dalmia and India Cements filed appeals before the Division Bench of the Hon’ble Madras High Court, challenging the order of the Single Judge. The Division Bench of Hon’ble Madras High Court while adjudicating on the appeals held that, by the time the appeals were filed, BAI had already conducted the inspection and received the non-confidential version of the investigation report. Therefore, the writ petitions have become infructuous. BAI was represented by Anu Monga and Rahul Goel.

3. Delhi High Court bars the jurisdiction of CCI in examining disputes relating to licensing of patents

Case Title: Telefonaktiebolaget LM Ericsson v. CCI (LPA 247 OF 2016)

The Hon’ble Delhi High Court, while dealing with challenge to the power of CCI to investigate/ inquire into the issue of patentee rights held that in an issue of abuse of dominance by a patentee in the exercise of their rights under the patent, the Patents Act, 1970 (“Patents Act”) will prevail over the Act. The Hon’ble Delhi High Court by the placing reliance on the maxim generalia specialibus non derogant and by the maxim lex posterior derogat priori, held that the Patents Act must prevail over the Competition Act on the issue of exercise of rights by a patentee under the Patents Act.

The Hon’ble Delhi High Court opined that in order to determine the inconsistencies between competition laws and the Patent Act, three essential aspects must be considered: (i) the subject matter in question; (ii) the intendment of the statutes; and (iii) whether the scheme and relevant provisions of either of the statutes apprise of any clauses to show that one overrides the other. While perusing the relevant provisions of the Patents Act, the court opined that Chapter XVI of the Patents Act, which was amended in the year 2003, pertains to unreasonable conditions in agreements of licensing, abuse of the status as a patentee, and inquiry in respect thereof. The court held that “While the Competition Act deals with these subjects generally, the Patents Act deals with these subjects specifically in the context of patents. The legislature, in its wisdom, after enacting the Competition Act, amended the Patents Act to introduce Chapter XVI and has chosen to keep the effect of the orders of the Controller in personam. It is not for this Court to comment on the propriety thereof, nor does this persuade us to permit exercise of powers by CCI contrary to legislative intent.”

The Hon’ble Delhi High Court held that it would be contrary to legislative intent to permit CCI to conduct inquiries in allegations of anti-competitive agreements concerning patents and therefore, CCI’s jurisdiction would be excluded and the Patent Controller would have jurisdiction to conduct an inquiry in the matter. Additionally, the court also took the view that once a settlement has been reached between informant and the person against whom the information has been filed, the very objective of the proceedings by CCI is lost. Accordingly, the appeals filed by Ericsson were allowed and proceedings before the CCI were quashed.

4. Supreme Court holds that activities of Coal India Limited can be examined under the Competition Act

Case Title: Coal India Ltd v. CCI (C.A. No. 002845-002845 Of 2017)

The CCI vide an order dated December 12, 2013, found Coal India Limited (“Coal India”) to be abusing its dominant position in the market by imposing discriminatory and unfair conditions for the supply of non-coking coal to the thermal power producers. Coal India filed an appeal against this order of the CCI before the erstwhile Competition Appellate Tribunal (“COMPAT”). The COMPAT vide order dated December 09, 2016 affirmed CCI’s findings.

Aggrieved by the order of the COMPAT, Coal India along with its subsidiary Western Coalfields filed an appeal before the Hon’ble Supreme Court. The main contention of the appeal before the Hon’ble Supreme Court was that Coal India was incorporated with the objective of achieving common good and public interest as provided for under the provisions of Article 39(b) of the Constitution of India (“Constitution”) and has achieved a statutory monopoly under the Coal Mines (Nationalisation) Act, 1973 (“Nationalization Act”), therefore, Coal India does not fall within the purview of the Act.

The Hon’ble Supreme Court while adjudicating on the matter carefully considered the objectives and the scheme of the Act and noted that Coal India falls within the definition of ‘enterprise’ as it involved in an economic activity pertaining to the production and distribution of goods and services and also because the definition of enterprise includes governmental bodies as well as government companies and public sectors undertakings.

The Hon’ble Supreme Court in its judgement dated June 15, 2023, while recognising the possible conflict between achieving ‘common good’ under Article 39(b) of the Constitution and Section 4(2) of the Act, held that in the current economic regime, subjecting a state monopoly to competition law would not defeat the common good objective, which also happens to be an objective of competition law in India. The Hon’ble Supreme Court further noted that the enactment of the Act is more recent than the Constitution and the Nationalization Act and was enacted keeping in mind all the other laws and takes into account the more recent economic trends and intends to achieve economic growth.

The Hon’ble Supreme Court in the order also held that the CCI can take into account the factors under Section 19(4) of the Act while considering the dominant position of Coal India and subsequently, Coal India could raise all its objections and defences against the allegation of abuse of dominance.

The Supreme Court clarified that the reason why it rejected the Coal India’s arguments/ submissions was because of Coal India’s rights to defend the allegations and its actions under the law. The judgement of the Supreme Court only addressed the issue that whether the provision of the Act would be applicable to the actions and operations of Coal India, and the Hon’ble Supreme Court is yet to adjudicate upon the merits of the case.

5. Delhi High Court clarified the jurisdiction of CCI in regulating statutory bodies

Case Title: Institute of Chartered Accountants of India v. CCI And Ors., (W.P.(C) 2815/2014)

CCI vide an order dated February 28, 2014, passed a prima facie order under section 26(1) of the Act, directing the DG to conduct an investigation in the alleged abuse of the dominant position by the Institute of Chartered Accountants of India (“ICAI”) by mandating the members of ICAI to necessarily attend the ‘Continuing Professional Education’ (“CPE”) program conducted by it, while disregarding all the other programmes conducted by other such institutes.

ICAI approached the Hon’ble Delhi High Court challenging the order passed by the CCI and contended that ICAI is a statutory body conducting the program for continuing professional education, in furtherance of its statutory functions  under the Chartered Accountants Act, 1949 (“CA Act”).

The Hon’ble Delhi High Court in its order dated June 02, 2023, held that ICAI carries out economic activities and therefore, it falls within the definition of  an ‘enterprise’ under Section 2(h) of the Act. The Hon’ble Delhi High Court took note of the statutory functions and responsibilities of the ICAI and held that under the CA Act, ICAI has been empowered to specify a strict code of conduct and ethics, which is required to be followed by all its members. The Hon’ble Delhi High Court also held that ICAI, mandating its members to the CPE programme is in the capacity of a regulatory authority and not that of a service provider and therefore, such decisions and mandates of ICAI is not amenable to review by the CCI.

Hon’ble Delhi High Court held that it would be erroneous to assume that if any activity of a statutory authority falls within the broad definition of economic activity it would be necessary to create an open market for the same and therefore, the CCI cannot compel any organisation or an enterprise to outsource its activities to a third party. Accordingly, the writ petition filed by ICAI was allowed and the proceedings before the CCI quashed.

6. NCLAT holds CCI’s order breach Principles of Natural Justice

Case Title: Balrampur Chini Mills v. CCI & Ors. (Competition Appeal (At) No. 86 Of 2018)

India Glycols Limited and Ester India Chemicals Limited, filed information before the CCI, alleging bid-rigging by suppliers of ethanol. Public Sector Oil Marketing Companies (“OMCs”) on January 02, 2013, issued tenders for the procurement of anhydrous alcohol ethanol and allegedly several sugar manufacturing companies quoted exorbitant prices for supply of ethanol to OMCs. Vide order dated September 18, 2018, the CCI found the sugar mills guilty of cartelization, against which an appeal was preferred by the sugar mills before the NCLAT. Sugar manufacturing companies argued that the CCI’s order is in violation of principles of natural justice – as the final hearing was conducted by 5 members; however the final order under Section 27 of the Act was signed by only 3 members.

The NCLAT vide order dated October 10, 2023, held that the order of the CCI had to be signed and authenticated by all the 5 members of the CCI, who have adjudicated on the matter and constituted the quorum, and the failure to do so has resulted in the violation of principles of natural justice. Further the NCLAT, held that there has been a delay of 13 months from the conclusion of the final hearing in the matter to the issuing of the order, which makes the order inordinate and beyond the scope of reasonability. The NCLAT also held that the CCI should have given the parties an oral hearing on the supplementary investigation report of the DG, as it was in pursuance of the main investigation.

The NCLAT while disposing of the writ petition, set aside CCI’s order dated September 18, 2018, and directed the CCI to conduct a fresh hearing in the matter.

7. NCLAT sets aside the penalty imposed on the ITC by CCI for gun-jumping violations

Case Title: ITC Limited v. CCI, (Competition Appeal (At) No. 11 Of 2018)

The CCI imposed a penalty amounting to Rs. 500,000 on ITC Limited (“ITC”) for failing to notify the CCI about a transaction involving the purchase of the trademarks of ‘Savlon’ and ‘Shower to Shower’ from Johnson and Johnson vide its order dated December 11, 2017. The purchase included the entire inventories, the technical knowhow and the promotional materials of the two trademarks. ITC appealed the imposition of the penalty before the NCLAT and contented that in terms of the notification on the ‘de minimis’ exemption dated March 04, 2011, and the revision notification dated March 04, 2016 issued by the MCA, transactions wherein the of value of the assets is  below INR 3.5 billion and the turnover is below INR 10 billion, does not necessitate the requirement of notifying the CCI. Additionally, the MCA, vide notification dated March 27, 2017, clarified that in order to determine the threshold for notifying the CCI of any transaction under Section 5 of the Act, the value of assets and the turnover of only the division or business being acquired, would be relevant and therefore, should be taken in consideration.

The NCLAT in its order dated April 27, 2023, noted that a collective reading of the 2011 and 2016 ‘de minimis’ notifications, along with the 2017 notification, establishes that the ‘de minimis’ exemption for the jurisdictional threshold under Section 5 of the Act for notifying transactions to the CCI, would only be limited to the assets and turnover of the business being acquired and not that of the entire company. Noting the same, the NCLAT held that the asserts and relevant turnover of the trademarks being acquired by ITC do not breach the threshold under section 5 of the Act, basis the ‘de minimis’ exemption, and therefore, did not warrant notifying the CCI.

Author: Rahul Goel and Anu Monga