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06 October 2011
Two combinations cleared within 15 days
Investigation into international car makers
Twenty-seven film producers fined for forming cartel
Apple and Facebook under commission scrutiny
Investigation into fare rise during Air India pilots' strike
Re-introduction of pre-merger consultation
Tyre, sugar and cement industry under commission scrutiny
No competition issue found in Jet-Kingfisher alliance case
Complaint filed against Microsoft closed
Commencing its new role in the regulation of mergers and acquisitions (M&A) on a positive note, the Competition Commission has approved two cases in under three weeks:
The commission has thereby honoured its commitment to clear M&A cases within 30 days, sending reassuring signals to the corporate world.
The commission has asked the director general to investigate a complaint against international carmakers Honda, Hyundai and Volkswagen for abusing their dominant market position by selling auto parts to customers at high prices and making them available only through their authorised dealers. According to the informant, auto spare parts from Indian carmakers are normally available through any retailer, regardless of whether it is authorised. However, for international carmakers this is not the case, with consumers forced to buy auto parts from the companies from which they bought the car. The matter is under investigation by the director general and notices have been reportedly issued to the car manufacturers.(1)
On May 25 2011 the commission disposed of the first case filed before it(2) by imposing a nominal penalty of Rs100,000 on each of 27 film producers. In its ruling, the commission found them to have been colluding through a cartel to exploit multiplex owners by refusing to distribute the Hindi films that they had produced, due to differences with such owners in the revenue-sharing arrangement.
In 2009 the film producers had collectively decided not to screen their movies in multiplexes because of the conflict over the revenue-sharing ratio. After an investigation conducted through the director general, the commission found the film producers to be in violation of Sections 3 and 4 of the Competition Act 2002, which pertains to anti-competitive agreements and abuse of dominant position. Noticeably, the size of the penalty imposed appears to be indirectly related to the duration of the cartel (ie, April 4 2009 to June 12 2009), as reflected in the fine amount.
Turning the tables on the multiplex owners, on July 31 2011 film producers have now complained to the commission, alleging that a cartel has been formed by multiplex owners and they are imposing unreasonable conditions for screening movies.(3)
The commission has received two separate complaints against Apple Inc and Facebook Inc for abuse of a dominant position under Section 4 of the act. In the first complaint, the informant alleged that Apple is curbing customer choice by limiting the availability of iPhones and iPads in India to a limited number of service providers, in addition to its signature stores. In the second complaint before the commission, consumer rights activist CUTS International urged the commission to investigate the potential misuse of a dominant position by social networking site Facebook. According to the complainant, Facebook can potentially engage in anti-competitive and unfair business practices in the market for virtual goods purchased in social games through its Facebook Credit terms in India.(4)
The commission has decided to investigate why all domestic airlines raised airfares during the 10-day strike by the pilots of national carrier Air India. A notice was issued to all major domestic airlines. The commission had also consulted the aviation regulator, the Directorate General of Civil Aviation, on the matter and has sought information on how fares are fixed. The commission had found evidence of cartelisation by private airlines through the increase of fares during the strike. The commission has referred the matter to the director general for investigation.(5)
Responding to demands from the business chambers and other stakeholders, the commission has re-introduced the provision relating to pre-merger consultations. The pre-merger consultation was initially included in the draft Combination Regulations but was dropped by the commission on publication. The move is expected to allay the industry's concerns on merger regulations and set up a formal process for dialogue with the affected parties. This move by the commission is in accordance with international best practice. The consultations will be purely informal and non-binding in nature.(6)
The commission has issued notices to sugar traders, cement makers and tyre makers following an investigation by the director general. The director general found that the traders were violating the rules by forming a pricing cartel. Lafarge SA and Holcim Ltd, the world's largest cement makers, were accused by the director general of anti-competitive practices (ie, price fixing). The commission has also issued a notice to more than 10 tyre makers for price fixing. The matters are now being considered by the commission.(7)
On August 11 2011 the commission found no competition issue in the 2008 strategic alliance between private carriers Jet Airways and Kingfisher Airlines. It was held that:
"On examining the agreements/arrangements entered into between Jet Airways and Kingfisher Airlines it is noted that none of these agreements can be said to have the effect of either determining the airfares or limiting the supply or allocating the market."
The commission examined the special re-protection agreement, the interline traffic agreement, the interline electronic ticketing arrangement and the technical memorandum of understanding signed between Jet Airways and Kingfisher Airlines. It held that none of these agreements violated any provision of the act. The complaint was accordingly closed.
Law firm Singhania and Partners LLP filed a complaint before the commission alleging that the Indian subsidiary of Microsoft Corporation was engaging in anti-competitive conduct and abuse of a dominant position in the sale of its operating system and Office Suite software. On June 22 2011 the commission found prima facie no substantial material to establish that the differential pricing, which Microsoft had adopted globally in respect of various categories of licence, violated any provision of the act. The commission also did not agree with the complainant that, because of its alleged dominant position in the operating system and its agreements with original equipment manufacturers, Microsoft had driven any competitor out of the market. The commission also found no evidence to support the allegation of alleged resale price maintenance by Microsoft through the dealers' agreements. The complaint was accordingly closed at the prima facie stage, meriting no order for directing investigation by director general. On August 30 2011 an appeal was filed by the complainant firm against the commission's decision.
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