August 19, 2010
From our friends at the leading Indian firm Luthra & Luthra.
Merger control
The provisions relating to regulations of combinations (which includes acquiring of shares, voting rights, assets or merger/amalgamation- it can be broadly referred to as ‘merger control’) have not yet been made effective by the Government of India. Till a month ago, the media reports indicated that the Government may promulgate an Ordinance by the President. Of late, it is being contemplated that the Government instead of an ordinance, will now move a Competition Amendment Bill shortly in the Parliament in order to address concerns relating to timelines of clearance of the notifiable transactions and also to provide additional filter of local nexus for a transaction to make the provisions applicable. These clearly indicate that M & As provisions will take some more time before they come into force.
In the month of June and July, 2010, on the enforcement of provisions relating to anti competitive agreements and abuse of dominance, the following developments took place:
CCI stays ban on ‘Ravana’ screening
On an application/information of Reliance Big Entertainment (RBEL), the CCI, instituted an Inquiry and by an interim order of June 18th 2010, stayed a ban imposed by the Karnataka Film Chamber of Commerce (KFCC) on the screening of the movie Ravana. KFCC, a lobby comprising of local film makers, had initially allowed the movie to be screened in 21 theatres in Bangalore and 4 theatres outside the capital and subsequently reduced it to be screened only in four multiplexes. It was also alleged that KFCC had sought an undertaking from RBEL that the restricted release was being done voluntarily. On June 24th, the Commission upheld its interim order. The KFCC later filed a petition before the Karnataka High Court challenging the CCI order but the petition was subsequently withdrawn.
Presently, the DG is seized of carrying out investigation to find out details of alleged infringement of the Competition Act, 2002.
Non payment of commission to travel agents by foreign airlines-enquiry against 9 airlines
The Travel Agents Association of India (TAAI) reportedly filed a petition with the CCI alleging that large number of foreign airlines including Lufthansa, British Airways, Singapore Airlines etc. have stopped paying commission to travel agents for booking air tickets. The CCI before forming its prima facie view, sought views of Directorate General of Civil Aviation (DGCA ) and the latter reportedly informed that transaction fee mechanism in lieu of commission, is not in consonance with the law.
The CCI has instituted an Inquiry and directed its Director General to carry out investigation against all the 9 airlines and submit its report within 60 days for further consideration
Appeal against prima facie decision to institute enquiry – ruling of Supreme Court awaited
The Supreme Court is seized of questions (a) whether an appeal should or should not be allowed against a prima facie decision to institute an enquiry against an alleged delinquent enterprise by the CCI; and (b) whether such decision should indicate the reasons which persuaded the CCI to arrive at such prima facie order.
The CCI in its appeal against CAT’s order has contended that (i) allowing appeal against conduct of enquiry and consequent investigation by the Director General will frustrate its functioning, (ii) the law explicitly does not provide for appeal and (iii) indicating reasons for such decision will hamper/dilute its investigation.
Kingfisher plea for stay on CCI inquiry- rejects Supreme Court
The Supreme Court declined to stay an inquiry initiated by the CCI into an alleged anti-competitive agreement between Kingfisher Airlines (KF) and Jet Airways, the two domestic airlines. Kingfisher had approached the Apex Court after the Bombay High Court dismissed its writ petition whereby it challenged enquiry by the CCI on the ground that its October 2008 agreement with Jet predates CCI provisions coming into force. The provisions prohibiting anti competitive agreements and abuse of dominance as contained in the Competition Act, 2002 became effective from 20.05.2009. The High Court held that a trade agreement is subject to scrutiny by the CCI in case it is acted upon after the day the relevant provisions of the Act came into force. CCI has not been able to move ahead with its investigation of the case after Kingfisher initiated judicial proceedings.
Schott Glass, a German glass maker, probed by CCI
Schott Glass India Pvt. Ltd, a wholly owned subsidiary of German multinational Schott Glasswerke Beteiligungs GmbH, (Schott AG), is being probed for alleged indulgence in anti-competitive business practices against rival Kapoor Glass Pvt. Ltd, according to an initial assessment by the CCI, India’s antitrust watchdog.
The alleged anti competitive conducts in India of Schott AG, a global leader in the production of specialized glass used for pharmaceutical packaging, are being investigated by Director General (DG) and its Investigation Report will thereafter be enquired into by the CCI in terms of the provisions of the Competition Act, 2002.
CCI to probe into OMC cartel charges
The Competition Commission of India has ordered an investigation into the alleged ‘anti-competitive arrangement’ entered into by leading public sector oil producing/marketing companies like Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation in supply of aviation turbine fuel (ATF) to Air India.
Reliance Industries Ltd had reportedly approached the Commission alleging that the OMCs had formed a cartel to supply ATF to Air India as the current market dynamics were heavily skewed in favour of the big oil companies led by IOC, HPCL and BPCL. RIL’s contention is that such cartel inter-alia results in denial of market access to other participating player in the relevant market.
Chemists & Druggists Associations under CCI scanner
The CCI has, reportedly instituted enquiry against Drug Trade Associations across the country for imposing (a) restraints on marketing of new products unless demanded margin is given by the pharmaceutical maker and (b) requirement to obtain no objection certificate/letter of consent (NOC/LOC) from the Association before appointing any new stockiest or changing territory of operation of an existing stockiest etc. Such practices do hinder competition in the distribution markets of drugs and these practices are palpably prejudicial to Industry as well as to the ailing members of society.
The DG is carrying investigation into such alleged anti-competitive practices of trade associations operating in the State of Karnataka, Goa, Gujarat and Himachal Pradesh.
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