Competition Law: INFORMATION, UPDATES AND ANALYSIS, Mar 2017
Republic of India (comprising of pronouncements on anti-competitive agreements, abuse of dominant position)
CCI dismisses allegations of anticompetitive conduct against Dhanlaxmi Bank Limited. Case No 66/2016 Dated February 21, 2017.
The Informant alleged that the OP i.e. Dhanlaxmi Bank Limited had increased the floating rate of interest with the increase in repo rate by the Reserve Bank of India (‘RBI’). However, when the RBI reduced the repo rate, the OP did not reduce its rate of interest. When the Informant requested the OP to cut the rate of interest on the loan availed, it refused to do so. Being left with no option, the Informant subsequently closed the loan account. In view of the same, the OP imposed a pre-payment penalty at the rate of 2 percent. The CCI in order to assess the market power of the OP defined the relevant market as “market for provision of loan against property in Delhi”. The CCI however noted that the OP is relatively a small player in the relevant market and that there are many large banks such as SBI, HDFC, ICICI etc. operating in the relevant market. Since the OP was not in a dominant position in the relevant market, the CCI did not find any merit in the allegations pertaining to abuse of dominant position by the OP. The case was accordingly dismissed.
CCI finds DLF Group guilty of abusing its dominant position. Case No. 1/2014 Dated January 04, 2017.
The Informant alleged that DLF Limited, DLF Home Developers Limited and DLF New Gurgaon Homes Developers Pvt Ltd (collectively ‘DLF Group’) is abusing its dominant position by imposing highly arbitrary, unfair and unreasonable conditions on the apartment buyers through the apartment buyer’s agreement with respect to its housing project ‘New Town Heights’ in Sector-86, Gurgaon. It was alleged that the various clauses in the agreement were heavily skewed in favour of the OPs for instance under the agreement the OPs have the right to forfeit Earnest Money Deposit (‘EMD’) without any notice to the allottee, the agreement provides no fixed schedule for handing over of possession etc. It was alleged that the agreement has been made non-negotiable and thus in violation of Section 4(2)(a)(i) and 4(2)(d) of the Competition Act, 2002. CCI defined the relevant product market as the market for the ‘provision of services for development/sale of residential apartments’ in line with its earlier decisions against the DLF Group. The relevant geographic market was defined to be Gurgaon. The CCI held that the terms and conditions imposed by the DLF Group on apartment buyers have been previously examined by the CCI most notably in Belaire Owner’s Association v DLF Limited, Case No 19/2010. The terms and conditions imposed on the allottees were held to be abusive in nature and in contravention of Section 4(2)(a)(i) of the Act. However, since the CCI had already imposed a penalty of INR 630 Crores on the DLF Group in previous cases, no penalty was imposed in the present case. In light thereof, only a direction to cease and desist was issued by the CCI.
European Union – European Competition Commission (‘EC’)
European Commission fines three companies Euro 68 million for car battery recycling cartel. Dated February 08, 2017.
Between the years 2009-2012, four recycling companies namely Campine Recycling (Beligium), Eco-bat Technologies (U.K), Johnson Controls (US) and Recyclex SA (France) participated in a cartel to fix the purchase price of scrap lead-acid automotive batteries in Belgium, France, Germany and Netherlands. However, unlike in most cartels where companies conspire to increase the sale prices, the four recycling companies colluded to reduce the purchase price paid to scrap dealers and collectors for used car batteries. It was held by the EC that by coordinating to lower the prices they paid for scrap batteries, the four companies disrupted the normal functioning of the market and prevented competition on price. It was noted that the behavior was intended to lower the value of used batteries sold for scrap, to the detriment of used battery sellers. The companies affected by the cartel were mainly small and medium sized battery collectors and scrap dealers. Since the cartel related to collusion on prices, the EC used the value of purchases to set the level of fines rather than the value of assets. Eco-Bat Technologies was fined 32,712,000 Euros by the EC after a 50% reduction in the fine on account of cooperating with the investigation. Recylex SA was fined 26,739,000 Euros after a 30% reduction for cooperating with the investigation whereas Campine Recycling was fined 8,158, 000 Euros and given 5% reduction in the fine as it only played a minor role in the cartel. Johnson Controls received 100% immunity for revealing the existence of the cartel.
United States of America (‘US’) - Federal Trade Commission (‘FTC’)
FTC approves final order preserving competition for physician services in St. Cloud, Minnesota. Dated January 06, 2017.
FTC has approved a final order settling charges that CentraCare Health System (‘CentraCare’) acquisition of St. Cloud Medical Group (‘SCMG’) would be anticompetitive. CentraCare is a non-profit health system in St. Cloud, Minnesota that includes a multi-specialty physician practice group. SCMG is a physician-owned, multi-specialty practice group that operates four clinics in and around St. Cloud. CentraCare’s acquisition of SCMG would combine the two largest providers of adult primary care, pediatric and OB/GYN services in the St. Cloud area. According to the complaint, the acquisition would likely increase CentraCare’s bargaining power with respect to commercial health plans, allowing it to raise reimbursement rates and secure more favorable terms. The acquisition may also result in loss of quality and service benefits to patients. Under the terms of the proposed settlement order, CentraCare is required to allow a number of adult primary care, pediatric, and OB/GYN physicians to leave the health system and work for other local providers or establish a new practice in the area, and to provide certain financial incentives to a number of departing physicians.
United States of America (‘US’) - Federal Trade Commission (‘FTC’)
FTC files complaint against Qualcomm Inc. for engaging in anticompetitive practices in supply of key semiconductor device used in cell phones. Dated January 17, 2017.
FTC has filed a complaint in the federal district court alleging use of anticompetitive tactics by Qualcomm Inc. (‘Qualcomm’). Qualcomm is the world’s dominant supplier of baseband processors which are used in cell phones to manage cellular communications. Qualcomm also holds standard-essential patents in the telecommunications industry. In exchange of having its patented technologies included in the standards, participants commit to license their patents on fair, reasonable, and non-discriminatory or ‘FRAND’ terms. When a patent holder that has made a FRAND commitment, negotiates a license, ordinarily it is constrained by the fact that if the parties are unable to reach an agreement, the patent holder may have to establish reasonable royalties in court. The complaint alleges that Qualcomm:
- Maintains a “no license, no chips” policy under which it supplies its baseband processors only on the condition that cell phone manufacturers agree to Qualcomm’s preferred license terms. It is alleged by FTC that this policy forces cell phone manufacturers to pay elevated royalties to Qualcomm on products that use a competitor’s baseband processors. The complaint states that this is an anticompetitive tax on the use of rivals’ processors.
- Refuses to license standard-essential patents to competitors. The complaint states that Qualcomm has consistently refused to license standard-essential patents to competing suppliers of baseband processes, despite having undertaken its commitment to license standard-essential patents on FRAND terms.
- Extracted exclusivity from Apple in exchange for reduced patent royalties. Recognizing that any competitor who won Apple’s business would become stronger, Qualcomm used exclusivity to prevent Apple from sourcing baseband processors from Qualcomm’s competitors from 2011 to 2016.
FTC is seeking a court order directing Qualcomm to cease its anticompetitive conduct and take actions to restore competitive conditions.
FTC approves merger of Enbridge Inc. and Spectra Energy Corp. subject to conditions. Dated February 16, 2017.
Energy infrastructure companies Enbridge Inc. (‘Enbridge’) and Spectra Energy Corp. (‘Spectra’) have agreed to settle FTC charges that their proposed merger would likely harm competition in the market for pipeline transportation of natural gas in three production areas off the coast of Louisiana. Canada based Enbridge is the sole owner and operator of the Walker Ridge Pipeline. Houston based Spectra indirectly owns a 40% interest in the Discovery Pipeline through its indirect stake in DCP Midstream Partners, LP. The complaint alleged that the merger is likely to reduce natural gas pipeline transportation competition in three offshore natural gas producing areas in the Gulf of Mexico namely Green Canyon, Walker Ridge and Keathley Canyon. According to the complaint the pipelines of Enbridge and Spectra are the two pipelines located closest to certain wells and therefore are likely to be the lowest cost gas transportation options for those wells. According to the complaint the proposed merger will give Enbridge, an ownership interest in both pipelines; access to competitively sensitive information of the Discovery Pipeline; and significant voting rights over the Discovery Pipeline. The complaint stated that this would provide Enbridge with the incentive and opportunity to unilaterally increase pipeline transportation costs for natural gas producers located in the affected areas. Further, the FTC was of the opinion that competition from a new pipeline or from expansion of an existing one appears unlikely since pipeline applications face a lengthy regulatory review and laying new pipeline infrastructure in the Gulf of Mexico is expensive. The proposed consent order resolves anticompetitive concerns by requiring Enbridge to establish firewalls to limit its access to non-public information about the Discovery Pipeline. Also as per the terms of the order, Enbridge must notify FTC before acquiring an ownership interest in any natural gas pipeline operating in the Green Canyon, Walker Ridge and Keathley Canyon areas or increasing the 40 percent ownership interest of Spectra affiliate DCP Midstream Partners, LP in the Discovery Pipeline. The proposed order will remain in effect for 20 years and allows FTC to appoint a monitor to ensure that Enbridge complies with the order.
Republic of India – Competition Commission of India (‘CCI’)
CCI approves acquisition of Ibibo Group Holdings by MakeMyTrip Holdings. C-2016/10/451 Dated January 18, 2017.
The combination pertaining to the provision of travel services in India relates to the acquisition of 100% share of Ibibo Group Holdings (Singapore) Pte Ltd. (‘Ibibo’) by MakeMyTrip Limited (‘MakeMy Trip’) from MIH Internet SEA Pte Ltd. The CCI noted that travel services in India can be availed through three alternative channels being (i) travel agencies (ii) direct suppliers and (iii) online travel aggregators. It was observed that the majority of travel channels operate on a ‘hybrid model’ having both online and offline presence. While defining the product market, the CCI noted that the characteristics of products and services available with the different travel channels as well as the price are comparable and therefore substitutable from a consumer’s point of view. Substitutability of products was also observed between online and offline modes within and across travel channels and that it was easy for a consumer to switch. Thus the relevant product market was defined as the market of “sale of travel and travel related services”. With regard to the geographic market, it was observed that the conditions of competition were homogenous throughout India. The CCI noted that the combined market share of Ibibo and MakeMyTrip is less than 11 per cent in the defined market and lesser in the narrower sub-segments. Further, there were also significant competitors operating in the overall market for travel products. Accordingly, it was observed that the combination was not likely to have any appreciable adverse effect on competition in India and therefore approved.
CCI approves acquisition of Titawi Sugar Complex by Indian Potash Limited. C-2016/12/466 Dated January 31, 2017.
The combination pertained to the acquisition of Titawi Sugar Complex, a unit of Mawana Sugar Limited as a going concern on a slump sale basis by Indian Potash Limited. Titawi Sugar Complex and Indian Potash Limited are hereinafter referred to the ‘Parties’. The notice for the combination was filed pursuant to a Business Transfer Agreement dated 18.11.2016 executed between the Parties. The CCI noted that there was a horizontal overlap between the Parties to the combination in the manufacture and sale of sugar and its by-products viz. molasses, bagasse and press mud in the state of Uttar Pradesh. Further, there is a horizontal overlap between the Parties with respect to sugar and its by-products. The CCI in the present case left the delineation of the market open as the proposed combination was not likely to raise any competition concerns. It was noted that the proposed combination was not likely to cause any competition concerns given the insignificant presence of the Parties and the presence of a large number of other players engaged in the manufacture and sale of sugar and its by-products. The combination was accordingly approved by the CCI.
United Kingdom (‘UK’) – Competition and Market Authority (‘CMA’)
Dover Corporation/Wayne Fueling Systems Ltd. Merger Inquiry. Dated December 19, 2016.
Dover Corporation (‘Dover’) has agreed to acquire Wayne Fueling Systems Ltd. (‘Wayne’) (the ‘Merger’). Dover and Wayne are together referred to as the Parties. Both Dover and Wayne are manufacturers of fuel dispensers used at petrol forecourts, associated payment and fuelling automation systems. Wayne distributes fuel dispensers in UK and provides a range of aftermarket services including maintenance. Dover also supplies fuel dispensers in UK through another company. CMA assessed the competitive effects of the Merger in the following frames of reference:
(a) the supply and distribution of fuel dispensers and aftermarket services in the UK;
(b) the supply of forecourt solutions (forecourt controllers, point of sale (POS) systems, back office systems (BOS) and wetstock management software) in the UK;
(c) the supply of tank gauges in the UK;
(d) the supply of payment systems to petrol stations in the UK; and
(e) the supply of remote wetstock analytic services at a global level.
CMA found that the Parties are two of the three major suppliers of fuel dispensers to customers in the UK the third major supplier being Gilbarco. The CMA was of the opinion that the constraint posed by other suppliers was limited primarily due to their small shares of supply. The CMA was of the further opinion that there are significant barriers to entry and expansion in the supply of fuel dispensers in the UK. CMA therefore held that the Merger is likely to give rise to a realistic prospect of substantial lessening of competition (SLC) in the supply of fuel dispensers in the UK as a result of horizontal unilateral effects. CMA has accepted the undertaking given by the Parties that Dover will sell the distribution business of Wayne to one of the small competitors of the Parties, Petrotec S.G.P.S. S.A. Therefore the merger will not be referred for an in-depth investigation.
European Union (‘EU’) – European Competition Commission (‘EC’)
EC clears acquisition of Alere Inc. by Abbott Laboratories. Dated January 25, 2017.
The EC has approved the acquisition of Alere Inc. (‘Alere’) by Abbott Laboratories (‘Abbott’) (the ‘Parties’) who are both suppliers of clinical test systems. Abbott and Alere are both US-based companies active in in vitro diagnostics (‘IVD’) systems. The EC noted that there are two broad categories of IVD systems: (i) Laboratory systems used in hospitals and laboratories (ii) Point of care systems used in emergency rooms, hospital wards, ambulances and other near patient settings with samples assessed at the same location. The EC noted that the Parties activities are largely complementary, as Abbott has a broader portfolio of laboratory and Alere a focus on point of care. However, existences of overlaps were observed in particular for point of care analysers used in the testing of blood gases and cardiac markers. It was also noted by the EC that the proposed merger risks affecting the ability of Danaher Corporation, another supplier of IVD systems to compete for laboratory systems running B-type natriuretic peptide tests (‘BNP’), since Danaher Corporation relies on Alere for the manufacture and sale of BNP test used on its laboratory machines. In order to address the concerns raised by the EC, Abbott offered to (i) fully divest Alere’s global Epoc business including its manufacturing site in Ottawa, Canada. (ii) fully divest Alere’s global Triage business, including its manufacturing site in San Diego, US. (iii) fully divest the Alere BNP business that commercialises a BNP test with Danaher. Since the commitments offered by the parties fully address the concerns raised by the EC, the merger was approved.
EC approves acquisition of ABB’s High Voltage Cable and Cable Accessories Business by NKT. Dated February 27, 2017.
The EC unconditionally approved the acquisition of ABB High Voltage Cable Business (‘ABB’) by NKT Holdings A/s (‘NKT’). Both NKT and ABB’s high voltage cable businesses develop and supply power cables and cable accessories. As part of the competitive analysis, the EC looked at the effects of the removal of one competitor on competition and whether the transaction would make it more likely that the remaining players could co-ordinate their competitive behavior. The EC’s investigation focused on the parties’ overlapping activities for high voltage power cables, in particular, on AC (alternate current) submarine power cables and DC (direct current) submarine power cables. These cables are used to connect transmission grids separated by water and to bring onshore the energy generated by wind farms at sea. NKT is a potential entrant in the market for DC submarine power cables. Based on the results of its extensive market investigation, the EC found that the proposed acquisition would not result in a significant reduction in competition on account of the large number of strong competitors that will remain post-transaction. Significantly, the EC’s investigation revealed the recent and successful entry of competitors from Asia, such as LS Cables and Sumitomo. These companies are now helping to drive and ensure competition in the high voltage cable and power cable accessories markets. Accordingly, the acquisition was approved.
In house contributors:
Avsi Malik Sharma
Doc ID: CL/19/17
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