Enforcement proceedings in dominance in India

Enforcement proceedings

Which authorities are responsible for enforcement of the dominance rules and what powers of investigation do they have?

Under the Act, the CCI is responsible for enforcement of the provisions of the Act. Pursuant to a notification of the government, the COMPAT has been merged with the NCLAT with effect from 26 May 2017. Consequently, the appeals to the decisions of the CCI lie before the NCLAT and the Supreme Court of India. Investigative powers of the CCI include:

• summoning and enforcing the attendance of any person and examining him or her on oath;
• requiring the discovery and production of documents or material objects;
• receiving affidavit evidence;
• issuing commissions for the examination of witnesses or documents (a commission in this context refers to an officer to examine witnesses or documents that cannot be brought to the office of the investigating authority for some reason); and
• requisitioning of any public record or document, or copy of a public record or document, from any office.

The investigation wing of the CCI also has powers of search and seizure, which include the use of reasonable force to enter premises, examination of seizure of documents and electronic equipment, and the taking of statements in relation to the subject matter of the investigation.

What sanctions and remedies may the authorities impose? May individuals be fined or sanctioned?

Under the Act, the CCI is empowered to:

• impose a penalty not exceeding 10 per cent of the infringing dominant enterprise’s average turnover for the preceding three financial years;
• pass cease-and-desist orders;
• order the division of a dominant enterprise to prevent an abuse of such dominant position; and
• pass any orders the CCI deems fit.

Further, the CCI has the power and jurisdiction to pass appropriate interim orders pending investigation. Contravention of the CCI’s orders can invite further financial penalties and even criminal sanctions punishable by additional fines or imprisonment of up to three years, or both. The CCI may also impose significant fines for withholding information and providing false information.

Under the provisions of section 48 of the Act, individuals in charge of an enterprise contravening the provisions of the Act, or individuals aiding the commission of such contraventions, shall be liable to be proceeded against and punished under section 27 of the Act. The CCI has previously penalised individuals for being in charge of a company found to have abused a dominant position. Having said that, presently, there are challenges pending before the High Court of Delhi on whether individual liability under the Act is for contravening the provisions of the Act or the liability arises only in the event the CCI’s orders are not complied with.

The highest fine ever imposed by the CCI for abuse of dominance was in the Auto Parts case, where a cumulative fine of 25.44 billion rupees (ie, 2 per cent of average annual turnover) was imposed on 14 car manufacturers. On appeal, however, the COMPAT mandated the companies to pay a 2 per cent penalty on the average annual turnover of spare parts in the aftermarket. The CCI is yet to determine this amount. The COMPAT’s judgment was stayed by the Supreme Court on appeal. The highest fine ever imposed by the CCI for abuse of dominance on individuals was in Shivam Enterprises v Kiratpur Sahib Truck Operators Co-operative Transport Society Limited and Ors (2015), where a cumulative fine of 112,297 rupees was imposed on eight individuals.

Can the competition enforcers impose sanctions directly or must they petition a court or other authority?

The CCI and the NCLAT can directly impose sanctions without recourse to courts or other authorities.

What is the recent enforcement record in your jurisdiction?

This year, the CCI’s approach to cases involving abuse of dominance was market friendly and less interventionist as it adopted a ‘hands off’ approach in disruptive (high tech and new) markets. Consequently, the enforcement record for this year has been light, and there have not been any significant updates in the jurisprudence on abuse of dominance.

In a complaint filed against Flipkart entities (e-commerce platforms), it was alleged that by way of extending discounts and manufacturing products under private labels, Flipkart was engaging in discriminatory practices, denial of market access and using their position in one market to enter into another market. The CCI dismissed all allegations, holding that Flipkart did not enjoy dominance in the market for ‘services provided by online marketplace platforms for selling goods in India’.

In June 2018, the CCI directed an investigation in relation to a complaint filed by the Indian National Shipowners’ Association (INSA) against the Oil and Natural Gas Corporation Limited (ONGC) in relation to a charter hire agreement of offshore support vessels. The complaint alleged that the termination and arbitration clauses in the charter hire agreement are one-sided, unfair and hence, abusive. The CCI also granted interim relief sought by the INSA, directing that ONGC will not invoke the unilateral termination clause until further order. This is one of the very few interim relief orders passed by the CCI.

In the market for smartphones in India, a complaint filed against OPPO Mobiles MU Private Limited (OPPO) was dismissed by the CCI as OPPO was not found to be a dominant player.

Taxi aggregators such as Ola and Uber continue to be subject to abuse of dominance allegations. The most recent complaint was filed by an individual alleging that Ola and Uber use personalised data of riders to manipulate prices, resulting in price discrimination, and implement resale price maintenance by imposing minimum prices on the taxi drivers. The CCI dismissed the complaint, observing that the allegation of price discrimination was misplaced and unsupported by evidence, and in absence of ‘resale’ of any goods or services by the taxi drivers to the riders, Ola and Uber cannot engage in resale price maintenance.

Where a clause in a contract involving a dominant company is inconsistent with the legislation, is the clause (or the entire contract) invalidated?

Following a finding of abuse of dominance, under section 27 of the Act, the CCI is empowered to:

• impose a penalty not exceeding 10 per cent of the infringing dominant enterprise’s average turnover for the preceding three financial years;
• pass cease-and-desist orders;
• order the division of a dominant enterprise to prevent an abuse of such dominant position; and
• pass any orders the CCI deems fit.

The CCI, in Belaire Owner’s Association v DLF Limited (2011), held that DLF abused its dominant position in the market for ‘high-end residential properties in Gurgaon’ by imposing unfair conditions in the Apartment Buyer’s Agreement (ABA) for the sale of its services to consumers. Further, the CCI held the unfair conditions to be in contravention of section 4 and thus, ordered modification of the same. On appeal, the COMPAT (2014) upheld the CCl’s order that DLF abused its dominant position in the market. However, the COMPAT refused to look into and consider the validity of the ABAs, which were entered into prior to the Act coming into force, and were voluntarily executed, without the element of compulsion.

In this regard, inference can be drawn from the COMPAT’s decision in the Auto Parts case. The COMPAT, in the Auto Parts case, directed the automotive manufacturers to remove all restrictions on supply of spare parts, rather than invalidating the entire supply contracts or modifying the relevant clauses that were held to be in contravention of section 3(4).

To what extent is private enforcement possible? Does the legislation provide a basis for a court or other authority to order a dominant firm to grant access, supply goods or services, conclude a contract or invalidate a provision or contract?

The CCI and the NCLAT are exclusively responsible for enforcing the provisions of the Act.

Do companies harmed by abusive practices have a claim for damages? Who adjudicates claims and how are damages calculated or assessed?

Under section 53N of the Act, any person, enterprise or government harmed by the conduct of an enterprise under section 4 can approach the NCLAT for compensation on the basis of an order of the CCI or NCLAT finding a contravention of the Act.

The Act further provides that class actions for compensation may also be instituted. The procedure to be followed in such cases will be the same as the procedure for class actions already present under Indian civil procedure.

Presently, the NCLAT is considering a number of compensation claims. A claim has been filed by MCX Stock Exchange Ltd against the NSE, on account of alleged losses suffered owing to the zero-pricing strategy adopted by the NSE in the currency derivatives segment. Another compensation application pending before the NCLAT is against Coal India on the basis of the CCI’s decision in 2014, finding Coal India guilty of abuse of dominance. Initially, the claimant raised claims of approximately 9 billion rupees which, after the decision of the COMPAT in 2016, was increased to approximately 15 billion rupees to account for alleged losses suffered till 2016. The NCLAT is also considering a compensation application against the Ghaziabad Development Authority, a statutory authority for housing and development, for losses suffered by allottees of flats under a housing scheme on account of imposition of unfair conditions and price for the allotments. Though not arising from an abuse of dominance case, Maharashtra State Power Generation Co Ltd has filed a compensation claim against coal liaisoning agents, namely Nair Coal Services Pvt Ltd, Karam Chand Thapar & Bros and Naresh Kumar & Co for entering into a cartel.

To what court may authority decisions finding an abuse be appealed?

Under section 53A of the Act, the CCI’s decisions finding an abuse may be appealed to the NCLAT. Further, under section 53T of the Act, any decision or order of the NCLAT may be appealed to the Supreme Court of India only on the point of law. By way of a government notification, the COMPAT was merged with the NCLAT with effect from 26 May 2017.