CONCEPT OF CONTROL AND GROUP UNDER SECTION 5

The concepts of "control" and "group" under Section 5 of the Competition Act, 2002, are
crucial for understanding when acquisitions, mergers, or amalgamations qualify as
combinations that need to be assessed for potential anti-competitive effects.
Control - Control refers to the ability to manage or influence the affairs or management of an
enterprise or group. This can be achieved through various means, including the holding of
voting rights, appointing directors, or other forms of influence. Specifically, control can be
exerted in the following ways:

1. Controlling the Affairs or Management by one or more enterprises, either jointly or

singly, over another enterprise or group. Similarly, one or more groups can control
another group or enterprise.
2. Control can be established through - Having a significant portion of the voting rights
or shareholding in the enterprise. The ability to appoint or influence more than 50% of
the members of the board of directors.
Legal agreements that confer the power to manage the enterprise.
Group - A Group under the Competition Act, 2002, refers to a collection of two or more
enterprises that are linked through ownership, control, or management arrangements. The
criteria for defining a group include:

1. Voting Rights - The group exercises 50% or more of the voting rights in the other
enterprise.
2. Board of Directors - The group can appoint more than 50% of the members of the
board of directors in the other enterprise.
3. Control Over Management or Affairs - The group has the ability to control the
management or affairs of the other enterprise.

These connections mean that the enterprises within a group are not independent of each other,
and their combined resources and market power are taken into account when evaluating
combinations.
Combination Assessment: When evaluating whether an acquisition, merger, or amalgamation
qualifies as a combination under the Act, both the concepts of control and group are crucial.
They help in determining whether the resulting entity or group of entities meets the asset or
turnover thresholds specified in the Act.
Anti-Competitive Concerns: These definitions ensure that the Competition Commission of
India (CCI) can scrutinize combinations that might result in significant market power,
reducing competition and potentially leading to monopolistic practices.

GUN JUMPING
In the world of mergers and acquisitions (M&A), there are various legal aspects that
companies must adhere to in order to ensure fair competition and protect the interests of
shareholders and consumers at large and one such aspect is ‘gun jumping’.
Gun jumping refers to the premature implementation of a merger or acquisition before
obtaining the necessary regulatory approvals. In the context of antitrust and merger control
laws, when companies engage in the process of merging or acquiring another business, they
are required to seek approval from relevant regulatory authorities to ensure that the
transaction complies with competition laws.
The term “gun jumping” is used because the involved parties metaphorically “jump the gun”
by proceeding with integration or operational changes before receiving official approval from
regulatory bodies.

The primary rationale behind regulatory approval is to assess whether the proposed merger or
acquisition could result in anti-competitive practices, such as creating a dominant market
player that might harm fair competition. Regulatory authorities, such as the Federal Trade
Commission (FTC) in the United States or the European Commission in the European Union,
review these transactions to ensure they comply with antitrust laws. Engaging in gun jumping
is considered a violation of merger control regulations, and it can lead to legal consequences
for the parties involved. Such consequences may include fines, the unwinding of the
transaction (reverting to the pre-merger status), and reputational damage.
Rules and regulations surrounding gun jumping
The rules and regulations governing gun jumping vary from country to country. However,
there are some common elements that can be found in most merger control regimes. This may
include:

• Sharing competitively sensitive information, such as customer lists, pricing data, or

marketing plans.

• Integrating operations, such as merging sales forces or combining IT systems.

• Changing prices or terms of sale.

• Appointing directors or officers to the merged entity.

• The merging parties take steps that are preparatory to implementing the merger, even
if they do not have a direct impact on the market.

Significance of gun jumping in merger control

There are a number of reasons why merger control authorities have strict rules against gun
jumping, some of which can be:
1. by implementing the merger before it has been approved, the merging parties can lock
in customers, suppliers, and other strategic assets. This can make it more difficult for
authorities to assess the impact of mergers and for other companies to compete, and
can ultimately lead to higher prices and less choice for consumers.
2. give the merging entities an unfair advantage over their competitors by gaining access
to confidential information about their competitors or locking in customers of
merging entities.
3. gun jumping can undermine public confidence in the merger control process. When
companies are seen to be flouting the rules, it can erode public trust in the system and
make it more difficult for competition authorities to do their job.
ROLE OF CCI IN COMBINATIONS
The Competition Commission of India (CCI) plays a crucial role in regulating combinations
under the Competition Act, 2002. Combinations include mergers, acquisitions, or
amalgamations that have the potential to affect competition in the market. The primary
objective of CCI in this context is to ensure that such combinations do not lead to appreciable
adverse effects on competition (AAEC) within the relevant markets in India.
1. Certain combinations that meet the thresholds specified under the Act must be
notified to the CCI. These thresholds are based on the assets and turnover of the
combining entities.
2. The entities involved in the combination must file a notice with the CCI in the
prescribed format before consummating the transaction.
3. The CCI reviews the notice and assesses whether the proposed combination would
cause or is likely to cause an AAEC in India.

4. The CCI conducts an initial assessment within 30 working days to decide whether the
combination needs a detailed investigation. If no AAEC is found, the combination is
approved.
If the CCI finds potential competition concerns, it conducts a more in-depth
investigation. This phase can take up to 210 days from the date of notification. The
CCI may seek public comments on the proposed combination to understand its impact
on stakeholders.
5. If the CCI concludes that the combination does not cause AAEC, it grants approval.
The CCI may approve the combination subject to certain modifications or conditions
to mitigate any potential adverse effects on competition. If the CCI determines that
the combination would significantly harm competition and cannot be remedied
through modifications, it can prohibit the combination.
6. For combinations approved with conditions, the CCI monitors the implementation of
the agreed-upon remedies to ensure compliance. The CCI has the power to impose
penalties for non-compliance with its orders or for consummating a combination
without approval.

7. The CCI periodically reviews and updates the asset and turnover thresholds for
mandatory notification of combinations. The CCI provides guidelines and FAQs to
help businesses understand the regulatory requirements and the process for notifying
combinations.
Importance of CCI's Role in Combinations

The CCI's regulation of combinations is vital for maintaining a competitive market structure
in India. By scrutinizing mergers, acquisitions, and amalgamations, the CCI ensures that:
Excessive concentration of market power is prevented, which could otherwise lead to
monopolistic practices.
Consumers are protected from potential price increases, reduced choices, and lower quality of
products and services that could result from anti-competitive combinations.
Small and medium-sized enterprises (SMEs) are safeguarded against unfair competitive
practices from larger, more dominant market players.
Conclusion - The CCI's role in regulating combinations is a critical aspect of its mandate to
promote and sustain competition in Indian markets. Through rigorous assessment and
proactive monitoring, the CCI ensures that mergers, acquisitions, and amalgamations do not
adversely affect competition, thereby fostering a healthy and competitive economic
landscape.
ROLE OF THE CCI IN ADDRESSING ABUSE OF DOMINANCE

1. Investigation and Inquiry - The CCI can initiate an investigation into abuse of
dominance based on information received from any person, consumer, or their
association, or on a reference made by the Central or State Government, or on its own
knowledge (suo moto). The CCI may direct the Director General to investigate the
matter and submit a report.

2. Assessment and Determination - The CCI first defines the relevant market,
considering both the relevant product market and the relevant geographic market. The
CCI assesses whether the enterprise holds a dominant position in the defined relevant
market. If dominance is established, the CCI examines whether the enterprise has
abused its dominant position by engaging in any of the prohibited practices.

3. Orders and Remedies - The CCI can order the enterprise to discontinue the abusive
practices. The CCI can impose penalties on the enterprise found guilty of abusing its
dominance. The penalty can be up to 10% of the enterprise’s average turnover for the
last three financial years. In severe cases, the CCI can order the division of the
dominant enterprise to ensure that it does not abuse its dominant position in the
future.

4. Monitoring and Compliance - The CCI may issue orders to ensure compliance with its
decisions and monitor the enterprise’s activities to prevent further abuse. Periodic
reviews and audits may be conducted to ensure ongoing compliance with CCI’s
orders.
Importance of CCI’s Role in Addressing Abuse of Dominance

- By regulating and preventing abuse of dominance, the CCI ensures a level playing
field for all enterprises, fostering a competitive environment that encourages
innovation and efficiency.

- The CCI's interventions help protect consumers from unfair practices such as high
prices, limited choices, and poor-quality products or services.

- Preventing dominant firms from engaging in exclusionary practices promotes market

entry and expansion by new and smaller players, enhancing overall market dynamism.

- By curbing anti-competitive practices, the CCI helps improve the allocation of

resources in the economy, leading to increased economic efficiency and growth.
Conclusion
The CCI’s role in regulating and preventing abuse of dominance is integral to maintaining a
fair and competitive market landscape in India. Through investigations, assessments, and
enforcement of remedies, the CCI ensures that dominant enterprises do not exploit their
position to the detriment of competition and consumer welfare. This fosters a healthy market
environment conducive to economic growth and consumer protection.

BUILDER ASSOCIATION OF INDIA V. CEMENT MANUFACTURERS

ASSOCIATION
The Builders' Association of India filed an information under Section 19 of the Act against
the Cement Manufacturers’ Association and 11 other cement manufacturing companies.
In their complaint to CCI, they allege violation of the provisions of sections 3 and 4 of the
Act. It is alleged that the cement manufacturers engaged in the monopolistic and restrictive
trade practices in an effort to control the price of cement as firstly by limiting and restricting
the production and supply of cement as against the available capacity of production. The
cement manufacturer’s in connivance with their representative body Cement Manufacturers
Association indulged in collusive price fixing for which they have divided the territory of
India into five zones so as to enable themselves to control the supply and determine or fix
exorbitantly high price of cement by forming a cartel in contravention of provision of Section
3 of the Act. It was also alleged that the Cement Manufacturing companies collectively held
more than 57.23% of the market share in India and thus enjoyed position of dominance and
went on arbitrarily increasing the price of cement and thus has abused their dominance in
contravention of Section 4 of the Act. It was also pointed out that these cement manufacturers
had set up their cement manufacturing units at different places in India and though they were
having different costs of production and transportation. They uniformly and simultaneously
increased prices at the same time and that is the common feature in respect of all the five
zones. It was also urged that the cement manufacturers working as cartel chose to
intentionally under-utilize their plants and continuously produce less than the demand for
cement on account of decreasing capacity utilization from 83.33% in April, 2009 to 79.63%
in March, 2010. The CCI ordered an investigation by the Director General. The Director
General after an investigation came to conclusion that Cement Manufacturer’s Association
(CMA) were guilty of contravention of section 3(1), 3(3)(a) and 3(3)(b) of Act.
Issue: Whether Cement Manufacturer’s Association violated. 3 and 4 of the Competition Act,
2002?
The CCI took note of the fact that cement prices increased immediately after the High Power
Committee Meetings of the CMA which were attended by the cement companies in January
and February 2011. The CCI observed that on a year on year and plant wise basis, the
capacity utilization across the respondents had decreased thereby limiting and controlling
production. Also lower dispatches coupled with the lower utilization established that the
cement companies indulged in controlling and limiting the supply of cement in the market.
According to the CCI, in November-December 2010 the cement companies reduced
production collectively, although during the period in 2009, the production of the cement
companies differed. This was a clear indication of coordinated behavior. The deliberate act of
shortage in production and supplies by the cement companies and almost inelastic nature of
demand of cement in the market resulted into higher prices for cement. Although, the
Commission did not go into the factors set out in section 19(3)(a), (b) and (c), it held that the
increase of price and reduced supply in the market was to the detriment of the consumers. In
view of the evidence and the analysis of the factors mentioned In sections 19(d) to (f), the
contraventions of sections 3(3)(a) and (b) were established.
The Commission observed that “Parallel behavior in prices, dispatch, supply, accompanied
with some other factors indicating coordinated behavior among the firms may become a basis
for finding contravention or otherwise of the provisions relating to anti-competitive
agreement of the Act.”
Finally, acting on the report of Director General, the CCI, imposed a penalty of
approximately 6000 crores on cement manufacturers in India after holding them guilty of
cartelization in the cement industry.
The CCI also directed the companies to ‘cease and desist’ from indulging in agreement or
understanding on prices, production and observed supply of cement in the market. Similarly,
the Cement Manufacturer’s Association (CMA) was directed to disengage and disassociate
itself from collective wholesale and retail prices through the member cement companies.
RAGHAVAN COMMITTEE -
Upon realization of the failure of MRTP Act and the beginning of the LPG era, the Indian
government established firstly a Sachar Committee which reported that MRTP Act cannot
sustain in the integrated market of India. Therefore, the government appointed Raghavan
Committee that repealed the MRTP Act and drafted Competition Act 2002 which was
executed.
The Raghavan Committee Report, was a significant milestone in the evolution of competition
law in India. The committee, headed by Dr. Raghavan, was appointed by the Government of
India in 2000 to review and recommend changes to the existing competition law framework
in the country. The Raghavan Committee Report made several significant recommendations,
which laid the foundation for the subsequent enactment of the Competition Act, 2002. Some
of the key recommendations were:
1. Enactment of a New Competition Law: The committee recommended the repeal of
the Monopolies and Restrictive Trade Practices Act (MRTP Act) and the introduction
of a new competition law framework in India. This led to the subsequent enactment of
the Competition Act, 2002.
2. Establishment of a Competition Commission: The committee recommended the
establishment of an independent regulatory body, the Competition Commission of
India (CCI), to enforce competition law, investigate anti-competitive practices, and
promote fair competition.
3. The committee recommended provisions to prohibit anti-competitive agreements,
cartels, and abuse of dominant market positions. These provisions aimed to prevent
practices that could distort competition and harm consumer interests.

4. The committee recommended the introduction of provisions to regulate mergers,

acquisitions, and other combinations that may have an adverse impact on competition.
This led to the inclusion of provisions related to merger control in the Competition
Act, 2002.
5. Consumer Protection: The committee emphasized the importance of consumer
welfare and recommended provisions to protect consumer interests from unfair trade
practices, misleading advertisements, and deceptive conduct.
BID RIGGING
Bid rigging is an illegal practice in which competing parties collude to determine the winner
of a bidding process. Bid rigging is a form of anticompetitive collusion and is an act of
market manipulation; when bidders coordinate, it undermines the bidding process and can
result in a rigged price that is higher than what might have resulted from a free market,
competitive bidding process. Bid rigging can be harmful to consumers and taxpayers who
may be forced to bear the cost of higher prices and procurement costs. Bid rigging practices
can be present in an industry where business contracts are awarded through the process of
soliciting competitive bids.
The most common practices of bid-rigging occurs when companies decide in advance who
will win a bidding process. In order to execute this, companies may take turns submitting the
lowest bid, a company may decide to abstain from bidding altogether, or companies may
intentionally submit uncompetitive bids as a way of manipulating the outcome and making
sure the predetermined bidder wins.
Section 3 of The Competition Act of 2002 which deals with the concept of anti-competitive
agreements which empowers the Competition Commission of India to prohibit any agreement
between enterprises or persons engaged in identical or similar trade of goods or services,
directly or indirectly resulting in bid-rigging or collusive bidding. These agreements effect
the competition prevailing in the market; hence they are prohibited by Law.
Some forms of bid rigging can be categorized more broadly:
1. Bid rotation: Bid rotation is a form of market allocation that occurs when bidding
companies take turns being the winning bidder.
2. Bid suppression: Bid suppression occurs when one (or more) bidder(s) sits out of the
bidding so that another party is guaranteed to win a bidding process.

3. Complementary bidding: Complementary bidding occurs when companies

intentionally submit uncompetitive bids as a way of guaranteeing that their bid is not
selected and helping to ensure that another preselected bidder is chosen. This is also
called courtesy bidding or cover bidding.
4. Phantom bidding: Phantom bidding is employed in auctions as a way of compelling
legitimate bidders to bid higher than they normally would.
5. Buyback: Buyback is a fraudulent practice used in no-reserve auctions where the
seller of an item buys the auction item to prevent it from selling at too low a price.
RELEVANT MARKET
Market is a broader term per se. It it is a platform where all the individual players enter and
carry out their purpose of businesses.
Relevant market - In order to regulate the competition laws, the Competition Act, 2002 has
established the Competition Commission of India. The CCI investigates a particular market
to check whether any monopolistic trade practices have been carried out by the enterprises.
To do so, the CCI regulates the relevant market, which according to Section 2(r) of the
competition Act is a market which determines monopolistic trade practices, or in other terms,
a relevant market is a platform consisting of all the domestic and international players.
Competing with each other. Relevant market can be divided into 2 other markets:-
Relevant Product Market – According to section 2(j) of the aCt, a relevant product market is
a market which includes all goods and services that are substitutable. In other words, under
relevant product market, the consumers have a variety of options for a Specific goods or
services. The relevant product market can be divided into 2 parts :
Demand side substitution – It refers to increase of price of one commodity which will not be
beneficial for the consumers as the consumers will tend to choose the lower price commodity
having same quality as that of the higher price commodity. In other words, the market players
receive no profit while increasing the commodities’ price. Because the consumers have
different other choices for the same commodity.
Supply side substitution – under supply side substitution the market players are increasing the
supply of the commodity by making it easily available for all the consumers.

Relevant product market consists of goods and services which are easily interchangeable
between themselves. The companies used demand side substitution to lower the price of the
commodity and under supply side substitution they increase the supply of that same
commodity so that it would be easily available to the consumers.
Relevant geographical market - Under relevant geographical market, the goods and services
are available in a particular region. In other words, the supply and demand of certain goods
and services is comparatively high than the neighboring areas.
TESTS OF MARKET CONCENTRATION
Tests of market concentration are essential tools used by competition authorities, like the
Competition Commission of India (CCI), to assess the level of competition within a market.
These tests help determine whether a market is competitive or if it is dominated by one or a
few firms, potentially leading to anti-competitive behavior.
Common Tests of Market Concentration
1. Herfindahl-Hirschman Index (HHI) - The HHI is calculated by squaring the market share
of each firm in the market and then summing the resulting values.

Formula:

Interpretation:
HHI < 1500: Unconcentrated market
1500 ≤ HHI < 2500: Moderately concentrated market
HHI ≥ 2500: Highly concentrated market

Usage: The HHI is widely used in merger analysis to assess the potential impact of mergers
on market concentration.
2. Concentration Ratio (CR) - The concentration ratio measures the total market share of the
top 'n' firms in the market.
Common Ratios: CR4 (top 4 firms), CR3 (top 3 firms), CR5 (top 5 firms), etc.

Interpretation:
Low CR (e.g., CR4 < 40%): Competitive market
High CR (e.g., CR4 > 60%): Concentrated market
Usage: Concentration ratios provide a straightforward measure of market dominance by a few
firms.

3. Lorenz Curve and Gini Coefficient

Lorenz Curve: A graphical representation of the distribution of market shares among firms in
a market.
Gini Coefficient: A measure derived from the Lorenz curve, ranging from 0 (perfect equality)
to 1 (maximum inequality).
Usage: These tools are used to analyze the inequality in market share distribution.
Application in Market Analysis
1. Market Definition
Relevant Market: Identifying the relevant product and geographic market is the first step.
This involves determining the boundaries within which competition is assessed.

Substitutability: Analyzing the substitutability of products and geographic areas to define the
market accurately.
2. Market Share Calculation
Data Collection: Gathering data on sales, revenues, or quantities sold by firms within the
relevant market.
Market Share: Calculating the market share of each firm based on the collected data.

3. Concentration Measurement
HHI Calculation: Squaring the market shares and summing them to get the HHI.
CR Calculation: Summing the market shares of the top firms to get the concentration ratio.
Role of CCI in Using These Tests

- uses HHI and CR to assess the impact on market concentration. If the post-merger
HHI indicates a highly concentrated market, the CCI may require modifications to the
deal or block it entirely.

- Using HHI and CR to determine if a firm holds a dominant position in the market.
Assessing whether the dominant firm’s behavior constitutes an abuse of its position.
 - Regularly analyzing market concentration in various sectors to identify potential anti-
competitive trends.

- Using concentration data to formulate policies aimed at promoting competition.

Conclusion

Tests of market concentration, such as the Herfindahl-Hirschman Index and concentration

ratios, are vital tools for the Competition Commission of India in assessing market dynamics
and ensuring fair competition. These tests help identify potential anti-competitive concerns in
mergers, acquisitions, and market dominance cases, thereby safeguarding consumer interests
and promoting a healthy competitive environment.

PREDATORY PRICING AND DISCRIMINATORY PRICING

Predatory pricing - Predatory pricing is the illegal business practice of setting prices for a
product unrealistically low in order to eliminate the competition. It is a method of pricing in
which a seller sets a price which is so low that other sellers or suppliers cannot compete with
him and they are forced to exit the market. Predatory pricing not only forces other sellers to
leave the market but such an act also restricts others from entering the market. Because of
such a nature, predatory pricing is not allowed and is banned in many countries. Such act is
considered as violation of competition laws.
Predatory pricing violates antitrust laws, as its goal is to create a monopoly. However, the
practice can be difficult to prosecute. Defendants may argue that lowering prices is a normal
business practice in a competitive market rather than a deliberate attempt to undermine the
marketplace.
The Effects of Predatory Pricing - In order to drive all rivals out of a business, the predator
must cut prices below their manufacturing costs. Once the initial competitors have been
eliminated, the predatory company will raise prices back to normal or above normal.
This disadvantages consumers at first, who have no alternatives to the higher pricing.
However, it also creates an opportunity for new, rival companies to emerge or for old
competitors to re-enter the market. At this point, they can offer competitive prices that are
equal to or lower than the original predatory company's.
The explanation of Section 4, defines predatory price.
Discriminatory pricing - Price discrimination is a selling strategy that charges customers
different prices for the same product or service based on what the seller thinks they can get
the customer to agree to. In pure price discrimination, the seller charges each customer the
maximum price they will pay. In more common forms of price discrimination, the seller
places customers in groups based on certain attributes and charges each group a different
price.

This practice can be found in various forms and can have both positive and negative impacts
on market competition and consumer welfare.
Types of Discriminatory Pricing
1. First-Degree (or Perfect) Price Discrimination - Charging each consumer the
maximum price they are willing to pay. Example: Auctions, personalized pricing in
online markets. This can lead to maximum revenue extraction for the seller but can be
 difficult to implement due to the need for detailed knowledge of each consumer's
willingness to pay.
2. Second-Degree Price Discrimination - Charging different prices based on the quantity
consumed or the version of the product. Example: Bulk pricing discounts, tiered
service packages. Encourages higher consumption and can increase total sales,
benefiting both the seller and consumers who buy in larger quantities.
3. Third-Degree Price Discrimination - Charging different prices to different groups of
consumers, typically based on observable characteristics such as age, location, or time
of purchase. Example: Student discounts, senior citizen discounts, peak vs. off-peak
pricing. Can expand the market by making products affordable to different consumer
groups, but may lead to concerns about fairness and equity.
Under the Competition Act, 2002, in India, discriminatory pricing can be scrutinized under
Section 4, which deals with the abuse of dominance. Specifically, a dominant firm may be
found to be abusing its dominant position if it imposes unfair or discriminatory prices
(including predatory pricing).
Regulatory Approach of CCI - The Competition Commission of India (CCI) examines
discriminatory pricing under the framework of abuse of dominance as outlined in the
Competition Act, 2002.

1. Assessment of Dominance - Determining if the firm has a dominant position in the

relevant market. Analyzing the market share and control over market activities.
2. Evaluation of Pricing Practices - Investigating whether the prices charged are unfairly
discriminatory. Evaluating if price differences are justified by corresponding cost
differences.
3. Impact on Competition - Assessing whether the pricing practice harms competition by
excluding competitors or preventing market entry. Considering the impact on
consumers, such as reduced choices or higher prices for certain consumer groups.
4. Remedies and Penalties - Directing firms to stop the discriminatory pricing practices.
Imposing financial penalties for anti-competitive conduct. Mandating changes in
pricing strategies to ensure fair competition.

COLLECTIVE DOMINANCE
Collective dominance When a single dominant entity takes advantage of its dominance in a
specific relevant market through tying or bundling arrangement, price discrimination,
exclusive dealings, exploratory pricing, rebate schemes, it is known to be abuse of its
dominance power. Which is prohibited under Section 4 of Competition Act, 2002. However,
when a group of enterprises, dominant or non dominant, combined together to form a group
and conduct the above mentioned measures to abuse their dominance in the market, it is
known to be collective dominance. In collective dominance, the enterprises having
substantial market share in a particular relevant market. Form a group to control the market
by not considering the consumers' interest and creating trade barriers for new enterprises.
Collective dominance is not recognised under the Competition Act. Rather, it was first
adopted by the European Union under TEFU, Article 102, which states that any single
dominant entity or a group of entities join together (not forming a single entity) cannot abuse
their dominant position in the specific relevant market.
Collective dominance goes unpunished under Indian Competition Act as the law doesn’t
recognise any such abuse. Even if the CC I will detect any collective dominance in the
market, it can only be analyse the enterprises under Section 3 of the Act.

Under section 43 of the Act, any enterprise establishing any anti competitive agreement will
be penalised up to 10% of the total annual turnover. The loophole under Section 3 and
Section 4 is that even if enterprises are involved in collective dominance, they can only be
charged under Section 3 of anti competitive agreement. I’m not under Section 4, which
recognises abuse of dominant power by single entity. Therefore the enterprises pay a
minimum amount under Section 3 when they are involved in collective dominance. In
collective dominance, a monopolistic market where there is several players existing in the
market (Dominant as well as Non dominant enterprises) narrows down to limited players
forming an oligopolistic market. In case of oligopolistic market, since the enterprises are
limited, the trade practice of one enterprise will affect the entire market and other players
have to follow the same to sustain in the market. In the case of collective dominance apart
from single entity dominant enterprise, a group of enterprises having dominant power, also
exists. Due to this, the consumers have limited options and trade barriers become strict for
new enterprises to enter into the market.
The concept of collective dominance was first derived from Italian flat glass case by the
European Court of Justice, in which 3 producers of flat grass manufacturers were accused of
collectively dominating the market and abusing their power by increasing the prices of the
products and providing special services to exclusive customers. As a result, there was sudden
increase in the prices of the product and the customers had less options in the specific
relevant market. Therefore, the European Court of Justice held at the enterprises will be
charged under Article 102 of TFEU with states that any enterprise, whether a single or group
entity joint together, are prohibited to abuse their dominant position and control the market.
REFUSAL TO SUPPLY
Refusal to supply occurs when a supplier, particularly one with significant market power,
refuses to sell goods or services to a customer or a group of customers. This refusal can be
considered anti-competitive if it restricts competition in the market.

The supplier typically holds a dominant position in the market for the specific product or
service. This dominance gives the supplier significant control over the availability of
essential goods or services, which can impact the market dynamics. The refusal can harm
competition by limiting the ability of competitors to access essential inputs or services. This
can potentially drive competitors out of the market or prevent new entrants from establishing
themselves, thus reducing overall competition.
This harm can manifest as reduced consumer choices, higher prices, or stifled innovation due
to the lack of competitive pressure on the dominant firm.
There may be legitimate reasons for refusal, such as issues with non-payment, concerns about
the creditworthiness of the customer, or the supplier's own capacity constraints. These
justifications need to be evaluated carefully to determine if the refusal is reasonable or if it is
being used as a pretext for anti-competitive behavior.
Under competition laws, refusal to supply can be scrutinized as an abuse of dominant
position. The legal framework typically involves evaluating whether the refusal is unjustified
and whether it has a significant adverse effect on competition in the market.
Section 4 of the Competition Act, 2002 (India): This section deals with the abuse of dominant
position and can be applied to cases of refusal to supply. It prohibits practices that limit or
restrict the production of goods or services, deny market access, or use dominance to impose
unfair conditions.
Refusal to supply by a dominant firm can have significant anti-competitive effects,
potentially harming both competitors and consumers. While there can be legitimate reasons
for such refusal, it is crucial for competition authorities to scrutinize these cases carefully to
ensure that dominant firms are not abusing their market power to stifle competition.

BOOKMYSHOW SHOWTYME CASE STUDY

The Competition Commission of India (CCI) on June 16 ordered a detailed investigation into
BookMyShow, an online ticketing platform, following a complaint from Vijay Gopal, who
runs a rival movie ticketing platform called Showtyme. BookMyShow is acting in collusion
with theatres by having exclusive agreements to not sell movie tickets online through anyone
else and giving lakhs and crores of rupees on loans at zero interest, leaving no scope for the
new entrants to enter into the market, Showtyme alleged in its complaint. After studying
Showtyme’s allegations and BookMyShow’s responses to them, CCI noted that there exists a
prima facie case with respect to the conduct of BookMyShow, which requires an
investigation by the Director-General to determine whether the conduct of BookMyShow has
resulted in contravention of the provisions of Section 4 of the Competition Act. Showtyme’s
allegations and BookMyShow’s responses to them, CCI noted that there exists a prima facie
case with respect to the conduct of BookMyShow, which requires an investigation by the
Director-General to determine whether the conduct of BookMyShow has resulted in
contravention of the provisions of Section 4 of the Competition Act.
BookMyShow has been the go-to ticketing app for movies for over a decade now. While
many competitors like Zoonga, Paytm, Insider (now Paytm Insider), etc. have cropped up
over the years, none have been able to gain the popularity of Reliance-backed BookMyShow.
Showtyme alleged that BookMyShow holds at least 90% market share in the movie ticket
booking industry in India and is abusing its dominant position under Section 4 of the
Competition Act by imposing the following unfair and discriminatory conditions on theatres:

• Showtyme alleged that BookMyShow has signed exclusive deals with theatres like
Asian Cinemas, Indra Cinemas, Cinepolis, INOX, and PVR, owing to which these
theatres sell their movie tickets through BookMyShow only. They have also signed
“refusal to deal” agreements ranging between 2-5 years with the theatres to ensure
theatres don’t sell on any other platform, Showtyme added.

• Showtyme alleged that multiplexes and theatres are unable to associate with
Showtyme due to cash loans and monetary deposits given by BookMyShow to the
theatres on zero interest. The complainant claimed that BookMyShow is acting in
collusion with theatres through this conduct.

• Showtyme explained that BookMyShow collects Rs. 25 per ticket as a convenience

fee from consumers and shares 50% of the convenience fee as a commission (up to
Rs. 12-14 per ticket) with multiplexes and up to Rs. 6-8 per ticket in case of single-
screen theatres. On the other hand, Showtyme was looking to charge a lower
convenience fee of Rs. 11 per ticket and share up to Rs. 5 with the theatres. But
 despite these lower fees, theatres are sticking with BookMyShow for the reasons laid
out above, which is detrimental to consumers.
What does Showtyme seek? - Showtyme has asked CCI to grant the following reliefs:

• Declare the agreements between BookMyShow and Asian Cinemas, Indra Cinemas,
Cinepolis, INOX, PVR, and Sudarshan Theatre as illegal and anti-competitive

• Impose penalty as under Section 27 of the Competition Act;

• Direct BookMyShow under Section 28 of the Act to sell not more than 25% of its
tickets of any theatres in the State of Telangana and Andhra Pradesh and not more
than 50% of the tickets in the rest of India on its platform

• Reimburse the litigation cost of Rs. 5000 and Rs. 1 for the mental trauma caused

• Direct BookMyShow and all theatres in India to discontinue practices of “not dealing
with others”.

The Competition Commission of India (CCI) conducted a detailed analysis of

BookMyShow's market practices to assess whether they constituted anti-competitive conduct.
BookMyShow's argued that the relevant market is the "sale of movie tickets in India." The
CCI disagreed, stating that online booking services for movie tickets are not interchangeable
or substitutable with offline modes. Online platforms offer unique intermediation services,
including the ability to search for and compare theatres and movies.
Given BookMyShow's pan-India availability and uniform competitive conditions across the
country, CCI defined the relevant geographic market as the entire country. "Market for online
intermediation services for booking of movie tickets in India."
BookMyShow's provided data on ticket share was inconsistent and untenable for market
share computation. CCI used a Kalagato report, which indicated BookMyShow had a 78%
market share in online movie ticket bookings, with Paytm holding 13% in 2017.
BookMyShow's dominance was further supported by its longer presence in the market (since
2007) compared to newer competitors like Paytm (since 2016).
Thus, BookMyShow prima facie appears to be the dominant player in the relevant market.

BookMyShow's exclusive agreements with theatres could foreclose competition, making it

difficult for rival platforms to compete. These agreements restricted the freedom of
multiplexes and potentially incentivized exclusivity, reducing choice for consumers. Such
agreements have the potential to significantly reduce competition in the market.
CCI said that, the deposit clauses appeared to disincentivize exhibitors from associating with
other platforms, thereby potentially restricting competition.

BookMyShow's agreements with single-screen cinemas reserved exclusive rights to data

collection and ownership, whereas agreements with multiplexes included data sharing.
Exclusive data ownership could strengthen BookMyShow's bargaining power and entrench
network effects, limiting competition.
Over time, this exclusivity could lead to monopoly rents for BookMyShow.
Allegations were made that BookMyShow charged high convenience fees. The CCI noted it
could not act as a price regulator but recognized that exclusivity arrangements could soften
competition, potentially allowing BookMyShow to maintain high fees.

While CCI won't regulate the fees, it acknowledged the potential anti-competitive impact of
exclusivity on pricing incentives.
Overall, the CCI's analysis called for further investigation into BookMyShow's practices to
ensure they do not harm competition or consumer welfare in the relevant market.
BCCI v. ICL CASE STUDY

Facts - The instant complaint was filed by Surinder Singh Barmi, who is a cricket fan, against
the BCCI, to the CCI under Section 19(1) (a) of the Act on November 2, 2010. His
allegations were pertaining to the irregularities in the organization of Indian Premier League
(IPL), Twenty 20 and professional league tournament conducted by BCCI. He alleged
irregularities in the following:

- grant of franchise rights for team ownership;

- grant of media rights for coverage of the league;

- award of sponsorship rights and other local contracts related to organisation of IPL.
BCCI is a society registered under the Tamil Nadu Societies Registration Act, 1975 with the
primary objectives of controlling, promoting, selecting teams to represent India and framing
laws for the game of cricket in India. It is also a ‘full member’ of International Cricket
Council (ICC). Pursuant to the above information, CCI opined that there exists a prima facie
case and directed the DG of CCI under Section 26(1) to investigate the matter. The DG
submitted its report on February 21, 2012.
Issues :
1. Whether the Act is applicable to BCCI? Whether BCCI is an ‘enterprise’ as defined
under section 2(h) of the Act?

2. What would be the relevant market in the said case?

3. Whether BCCI has a dominant position in the relevant market as determined?
4. If so, whether BCCI has abused its dominant position in the relevant market in
contravention of the provisions of Section 4 of the Act?
CCI Order - It opined that BCCI has no statutory status but their actions in terms of laying
down rules of the game and selection fall under the purview of a regulatory role. Given the
implicit recognition by GOI as the national association for cricket, BCCI is a de facto
regulator of cricket in India. It is conclusive that all Sports Associations are to be regarded as
an enterprise in so far as their entrepreneurial conduct is concerned. It went on to state that
the situation where the regulator is also the economic beneficiary is definitely a competition
concern. CCI observed that BCCI’s dominance was a definite factor in ICL’s failure hence
leading to abuse of its dominant position. The order also directed BCCI to stop denying
market access to potential competitors or make such anticompetitive agreements in future.
CCI concluded that BCCI was abusing its dominant position in violation of section 4(2) (c) of
the Act and imposed a penalty at the rate of six per cent of the average turnover of the BCCI
in 2007- 08, 2008-09 and 2009-10 amounting to Rs. 52.24 crores.
Analysis

The current regulation of cricket in India is ineffective. This issue needs urgent attention to
ensure the sport is managed fairly and transparently. There is a need to clearly distinguish
between the governance functions and commercial activities of the governing body (BCCI).
This separation is crucial for preventing conflicts of interest and ensuring fair competition.
Different roles should be assigned to various bodies and committees. This structure will
ensure open tenders for commercial contracts, promoting transparency and fairness. The
BCCI's power should be subject to restrictions to prevent it from using its authority to
unfairly favor events it organizes. Unchecked power can lead to corruption, and it is essential
to impose checks and balances to maintain fair competition.
ULTRATECH AND JAIPRAKASH ASSOCIATES COMBINATION

The Ultratech vs. Jaiprakash Associates case involved a combination (merger/acquisition)

between two major players in the Indian cement industry.
In 2016, Ultratech, a leading cement manufacturer, announced the acquisition of six cement
plants and five grinding units from Jaiprakash Associates (JAL). This deal would
significantly increase Ultratech's market share in the Indian cement industry.

The combination raised potential concerns under the Competition Act, 2002, specifically:
Section 5: Appreciable Adverse Effect on Competition (AAEC): The Competition
Commission of India (CCI) would assess whether the combined entity (Ultratech + JAL
assets) would create an AAEC in the relevant market(s).
The CCI would define the relevant market(s) for the analysis. This could be geographic (e.g.,
national, regional) or product-specific (e.g., different types of cement). The CCI would
analyze the combined market share of Ultratech and JAL after the acquisition.
The CCI would consider the ease of new players entering the cement market. If entry is
difficult, the combined entity might have more power to control prices or limit production.
The availability of alternative building materials would also be considered.
To address these concerns, Ultratech would likely notify the CCI about the proposed
combination. The CCI would then investigate the potential impact on competition.
Depending on the findings, the CCI could:
- Approve the combination without any conditions.

- Approve the combination with certain conditions, such as divesting assets in specific
regions.

- Prohibit the combination altogether if the AAEC risk is too high.

The CCI ultimately approved the Ultratech-Jaiprakash Associates combination in 2016.

However, there's limited publicly available information on the specific reasoning or any
conditions imposed (if any).