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January 30, 2013 9:18 pm

Addition of concept of “collective dominance” to Indian Competition Act will strengthen country’s antitrust regulator

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This article is provided to FT.com readers by PaRR (Policy and Regulatory Report)— a newly launched product of The Mergermarket Group providing proprietary intelligence and research on competition law and sector-specific regulatory changes around the world. www.parr-global.com

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* Oil marketing companies, banks likely to come under CCI’s radar

* Collective dominance where high degree of transparency exists in pricing and other competitive behaviour

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A proposed amendment to India’s Competition Act 2002 to include “collective dominance” will strengthen the position of the Competition Commission of India (CCI), Kaushal Kumar Sharma, the founder of the KK Sharma Law Offices and former DG & Head of Merger Control and Antitrust at CCI told PaRR.

It could also increase the number of antitrust cases investigated by the CCI, Sharma told PaRR.

Oil marketing companies and banks are likely to come under the CCI’s radar once the amendment comes into force, said a Delhi-based lawyer. However, he envisaged few cases of abuse of collective dominance because the regulator needs to look at the unilateral part of the transaction and not just price matching.

The sectors impacted can only be those offering homogeneous products, Sharma told PaRR, citing the steel and cement sectors as being more likely to be covered under the new amendment.

The proposed amendment to Section 4(1) of the Act is more in the nature of a clarification, since the intent of the Act has always been to encapsulate abuse of dominance either by an undertaking in its individual capacity, or by two or more undertakings collectively, said Piyush Gupta, a Partner at Kochhar & Co. This is in line with internationally accepted and administered principles in both the EU and the US, which have well-settled jurisprudence on the abuse of dominance process and analysis, he added.

At present, the section provides that no enterprise or group shall abuse its dominant position, but the definition of group is restricted to entities under the same management or control. By inserting the wording “jointly or singly,” the amendment seeks to bring the group of independent and unrelated enterprises holding a dominant position within the scope of Section 4.

“In principle, if the CCI is able to find a collective dominant position where no single dominance exists, it could find an infringement of competition law where the evidence is not strong enough to support the finding of an anti-competitive agreement between the parties, Suzanne Rab, partner at King & Spalding, told PaRR.

Even if the proposed amendment becomes law, it should not be used to find a breach of the Competition Act without a significant amount of market analysis, as is done in other jurisdictions like the European Union (EU), said Arshad Paku Khan, Executive Director of competition law at Khaitan & Co.

“In the EU, collective or joint dominance is found where there is a high degree of transparency in terms of pricing and other competitive behaviour and that the allegedly common ‘policy’ of the jointly dominant entities is sustainable for relatively long durations with no meaningful threat of disruption by a maverick competitor, or even consumers,” Khan said.

Collective dominance is not often found in other jurisdictions, such as the EU, Khan said, noting that it remains to be seen whether “the market conditions in India are so different that joint/collective dominance will be found, if the amendment is implemented”.

Abuse of a dominant position “by one or more undertakings” is prohibited under Article 102 of the Treaty on the Functioning of the EU, said Rab. The concept of collective dominance has typically been difficult to prove in EU cases, since it involves a detailed fact-based economic assessment, she added.

“The practical difficulty is that businesses are entitled to adapt their own market strategy to the existing or anticipated conduct of their competitors without there being an infringement,” Rab told PaRR, citing Case C-7/95P, John Deere v Commission, [1993] ECR I-1375.

Sharma went on to cite the Italian Flat Glass case (OJ[1989] L33/44,[1990] 4 CLMR 535) in which three independent producers of flat glass in Italy were held to have a dominant position and to have abused it.

While in the EU it took quite some time for the concept of abuse of collective dominance to emerge through jurisprudence, Indian law has leapfrogged in time with this amendment, Sharma said.

To establish a collectively dominant position under EU law, it is necessary to assess any “economic links” between competitors, particularly structural links, on a case-by-case basis to ascertain whether anticompetitive parallel behaviour is likely, Rab explained. There is no need to find an agreement between the parties as is required under Article 101 TFEU (equivalent to India’s Section 3), she added.

Similarly, Gupta told PaRR that US antitrust legislation (section 2 of the Sherman Act) provides that: “[E]very person, who shall monopolize, or attempt to monopolize or combine or conspire with any other person or persons to monopolize any part of trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony.”

The Central Government on 10 December 2012 moved a Competition (Amendment) Bill in the Lok Sabha (Lower House) to amend the Competition Act 2002. The Bill has to be passed by both houses of Parliament before it comes into force. The proposed amendments to the Act, moved by the Ministry of Corporate Affairs, are aimed at fine tuning the provisions to meet present day competition needs, given CCI’s experience over the last few years.

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