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29 August 2019
On 7 January 2019 the Competition Commission of India (CCI) decided not to investigate allegations that the National Stock Exchange (NSE) had abused its dominant position due to a potential jurisdictional conflict with the Securities Exchange Board of India (SEBI).
This decision was a surprise turn from the CCI's position in many earlier cases and is likely to have been influenced by the Supreme Court's 5 December 2018 judgment in CCI v Bharti Airtel, in which the court warned the CCI against deciding technical issues relating to the terms of a licence granted by the Telecom Regulatory Authority of India (TRAI) (for further details please see "Supreme Court ends jurisdictional conflict between CCI and TRAI"). However, as the Supreme Court did not prohibit the CCI from dealing with anti-competitive issues and acknowledged the possibility of coordination between the relevant telecoms players, the CCI is still free to determine whether anti-competitive practices have taken place after the TRAI has determined any technical issues.
Jitesh Maheshwari submitted information against the NSE alleging an abuse of dominance in the form of unfair and discriminatory treatment in the market for providing securities trading services to trading members in India.
The NSE provides co-location services to trading members on their payment of the prescribed fees. These services are offered in the form of both full and half racks. The trading members that use these services can access information about share trade prices ahead of other traders, which gives them a significant advantage. The fees levied by the NSE for these co-location services are the same; thus, the trading members that use these services are expected to have an equal footing. However, Maheshwari alleged that from 2010 to 2014 the NSE had provided preferential and unfair access to some trading members, which had enabled them to access the price feed and other data.
The CCI acknowledged that the NSE had given unfair preferential access to some trading members, which had limited and restricted the provisions of services to other trading members using the co-location services and denied others from accessing the market.
However, the CCI decided to close the case and not examine it on the merits, primarily due to the NSE co-location case under investigation by the SEBI. The CCI recognised that the case dated back to 2015, when a whistleblower wrote to the SEBI alleging that the NSE had given preferential access to its trading platform to a few high-frequency traders and brokers. The CCI accepted that the SEBI is looking at similar issues to those alleged in this case, although the exact role of the NSE with respect to the preferential discriminatory services is still under investigation.
Although the CCI observed that the discriminatory and abusive conduct falls within its jurisdiction and that it can examine such conduct based on cogent facts and evidence, it held that the allegations against the NSE had yet to be established in the appropriate proceedings and that there was also a lack of sufficient information about the NSE's role for it to arrive at a prima facie view. Accordingly, the CCI closed the case in accordance with Section 26(2) of the Competition Act.
For further information on this topic please contact MM Sharma at Vaish Associates by telephone (+91 11 4249 2525) or email (firstname.lastname@example.org). The Vaish Associates website can be accessed at www.vaishlaw.com.
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Man Mohan Sharma