Introduction
CCI and antitrust issues
Comment
Tech companies globally are facing antitrust scrutiny and India is no exception. The country is likely to become one of the key battlegrounds for tech companies, given the relative ease with which a case can be brought before the Competition Commission of India (CCI). Similarly, proposed changes to merger control rules on tech mergers and acquisitions may bring many more transactions before the CCI for scrutiny.
The key enforcement provisions cover:
- anti-competitive horizontal agreements (eg, cartels);
- vertical agreements that negatively affect competition (eg, certain exclusive agreements); and
- abuse of a dominant position.
Regarding merger controls, certain merger and acquisition (M&A) transactions where the parties meet pre-defined financial thresholds and where no exemption applies must be notified to the CCI and cannot be completed until the CCI has given its clearance.
All of the aforementioned factors contribute directly to India's emergence as a major tech antitrust battleground.
There are a several tech-related issues to look out for as the antitrust domain develops:
- The CCI must decide every case that is brought before it. Unlike other jurisdictions where the antitrust and competition regulator can decline cases, which allows parties to pursue their own litigation under private right of action provisions, India's Competition Act (the Act) has no such provision.
- A case cannot be settled or even withdrawn; however, this may change based on some proposed amendments to the Act.
- It easy to start a case in India, as a filed complaint takes on a life of its own. The CCI firstly receives a complaint and subsequently issues a preliminary decision if a breach has been identified. In such a case, the complaint is referred to the CCI's director general (DG), who investigates. The DG issues their report and recommendation, which the CCI is free to accept or reject.
- The Act is not a clone of those of other jurisdictions, as certain actions, such as refusal to deal, do not require a dominant market position (which is the case in the European Union). Global companies must carefully consider the criteria set out in the Act.
- The CCI tends to be narrow in its definitions of relevant markets, which makes dominance or market power more likely. Where a breach decision might be based principally on market definition, parties should keep comprehensive economic reports that correspond with market definition for CCI and appeals proceedings.
- Fines can be high (up to 10% of annual turnover or assets, which can increase for cartel cases) and there is a follow-up damage claim provision, in addition to a class action provision.
- CCI orders are appealable before the National Company Law Appellate Tribunal, with the focus on evidence of consumer harm.
- Proposed amendments as regards merger control may insert a "size of transaction" test. For example, there are many transactions where the target company has little or no turnover and minimal assets, but it has developed important technology. Such a transaction is not be notifiable to the CCI.
With a "size of transaction" test, the number of notifiable cases will increase vastly due to the large number of Indian tech start-ups and later stage companies.
The CCI's and the government's emphasis on improving Indian competition law is a positive development that has streamlined merger control and reduced procedural issues on enforcement cases.
While India's exposure to antitrust is relatively recent, as with many other laws in India, the country has departed quickly from ancient laws in order to deal with its world-leading economy, which is fuelled by its large technology sector.
For further information on this topic please contact Paku Khan or Manas Kumar Chaudhuri at Khaitan & Co by telephone (+91 120 479 1000) or email ([email protected] or [email protected]). The Khaitan & Co website can be accessed at www.khaitanco.com.
This article was first published in the Financial Express.