Competition Law: INFORMATION, UPDATES AND ANALYSIS March, 2018
India – Competition Commission of India (‘CCI’) Competition Act, 2002 (‘Act’)
CCI imposes penalty on Ghaziabad Development Authority (GDA) for Abuse of its Dominant Position Dated.
February 28, 2018
Shri Satyendra Singh (‘The informant’), an allottee of the residential flat under the Pratap Vihar residential housing scheme (‘the scheme’) announced by the Ghaziabad Development Authority (‘OP’) in 2008 for the Economically Weaker Sections (‘EWS’), in the Information stated that the OP had increased the sale price of the flat from ₹ 2,00,000/- to ₹ 7,00,000/- without any enabling provision to that effect in the Brochure of the Scheme or in the allotment letter dated 04.05.2009. It was alleged by the Informant that the OP was in abuse of its dominant position by imposing unfair conditions on the allottees by arbitrarily raising the sale price of the flat. The CCI, thereby, ordered the Director General (‘DG’) to investigate the matter. It was concluded by the DG that the consumers in the relevant market were predominantly dependent upon the OP and requiring the allottees to pay interest @ 10.5% per annum in case of delay in payment without any corresponding financial liability on OP to compensate the allottees in case of delay in delivery the possession of the flats was unfair especially since, the OP had not provided for any new facilities or improvements. The OP on the other hand stated that it was not an ‘enterprise’ as per the provisions of the Act and that the CCI had no jurisdiction in the matter and that escalation of such a manner was standard in such projects. On perusal of the facts of the case, the CCI, however, was of the opinion that the activities performed by the OP were not restricted to statutory duties and obligations and that the OP indulged in various economic activities, inter alia, for commercial consideration. The CCI also noted that the allottees were from EWS and the OP was very well aware of the fact that the allottees had little or no recourse in this situation. On perusal of the facts of the case, the CCI was of the opinion that such a project would have gone through various stages of approvals and examinations without which no scheme of such a magnitude could have been launched. The CCI also noted that the condition for levying a penal interest of 10.5 percent per annum in case of delay in the payment of the quarterly instalments by the allottees without a corresponding provision for GDA in case of delay in giving possession of the flats, was abusive and one-sided. Therefore, CCI held that such conduct of OP was in violation of Section 4(1) read with Section 4(2)(a)(i) of the Act. Resultantly, CCI imposed a penalty of ₹ 1,00,60,794/- (Rupees one crore sixty thousand seven hundred ninety-four only) on the OP for their anti-competitive conduct.
CCI issues order against Google for search bias, imposes penalty.
February 08, 2018
The information report was filed by Matrimony.com (‘the informant No. 1’), a marriage alliance website and Consumer Unity and Trust Society (CUTS, the informant No. 2), a non-governmental organization (together referred to as ’informants’) against Google LLC and Google Private Limited (‘Google’) alleging inter alia contravention of Section 4 of the Act. According, to the information filed by informants, Google, a multi-national technology giant, was manipulating the search engine results page (‘SERP’) and steering users to its own products under its vertical partners and search sites. It was also alleged, that given the magnitude of influence and dominance that Google enjoyed in the search market, Google was clearly in contravention of the Act by using a specific algorithm that allowed its vertical partners to be the top results in any search conducted by the user which captured consumers attention more prominently. The CCI, thereby, ordered the Director General (‘DG’) to conduct an investigation into the matter. In the Investigation Report (‘IR’), the DG ascertained that the technology-based market structure and size of technology industry conferred upon Google a position of competitive strength and also that Google’s market shares had been consistently high, which meant that Google also had a considerable standing economically. The CCI was of the opinion that Google was dominant in both the relevant markets i.e. market for online general web search services and market for online search advertising services in India. CCI also observed that the algorithm was causing harm to the consumers at large by giving them search results that were not based on their own preferences but those that favored Google and its vertical partners. Consequently, CCI imposed a penalty at the rate of 5 per cent of Google’s average total revenue generated from India operations for the financial years 2013, 2014 and 2015 which amounted to ₹ 135,86,00/- for contravention of Section 4 (2)(a)(i) of the Act. However, CCI did not agree with the IR and did not find any contravention to the Act regarding Google’s specialised search design, Ad Words (online advertising service by Google, where third parties pay for displaying brief advertising copy) and for online distribution agreements.
United Kingdom (‘UK’) – Competition and Market Authority (‘CMA’)
CMA clears anticipated merger by Aviagen Group Holding Inc. of Hubbard Holding SAS Inc.
February 28, 2018
Aviagen Group Holding Inc. (‘Aviagen’) had agreed to acquire most of the business of Hubbard Holding SAS Inc. (‘Hubbard’) (‘proposed merger’) (together referred to as, ‘the parties’). Aviagen, a company registered in Alabama, USA, is a wholly owned subsidiary of Earth Water Gmbh. Aviagen is active in 130 countries in the production of pure lines of chicken with specific genetic characteristics- primarily in conventional chicken parent stock. Hubbard is an eminent player in the market for broiler stock breeding and has operations around the world. However, Hubbard’s only activity in the UK was the supply of slow-growing chicken parent stock. Both the parties are prominent players in the broiler industry, where chickens are reared and prepared for meat consumption. In the investigation, the CMA found that Aviagen has a high share of supply in conventional chicken parent stock but the increment brought on by the merger would not be enough, to cause any substantial lessening of competition (‘SLC’) in the relevant market. The CMA noted that Hubbard did not provide a material constraint on Aviagen in regard to chicken stock and the CMA found that there was no realistic prospect that Hubbard would do so in the foreseeable future. The CMA also noted that Hubbard had a high share of supply in slow-growing chicken parent stock but Aviagen did not supply this type of product in the UK and hence, there was no overlap in this market either. Consequently, the CMA found that there was no realistic prospect that the merger would cause any adverse constraint in the relevant market for chicken stock and approved the merger between the parties.
United States of America (‘US’) - Federal Trade Commission (‘FTC’)
Alimentation Couche-Tard divests 10 fuel stations in order to acquire Holiday Companies Inc.
February 16, 2018
Alimentation Couche-Tard (‘ACT’) is a multinational convenience store operator with around 15,000 stores around the world. Holiday Companies Inc. (‘HC’) also has a large presence in the US and owns over 500 gasoline and convenience stores. The acquisition of HC by ACT entailed acquiring over 380 retail fuel outlets with attached convenience stores of HC in 10 states. The complaint received by the FTC regarding the acquisition, however, alleged that the proposed acquisition would have increased the risk of both unilateral and coordinated anti-competitive effects in all of the ten states that HC were getting acquired by ACT and would allow ACT to raise prices unilaterally. ACT and its affiliate CrossAmerica Partners LP, thereafter, agreed to divest 10 fuel stations in Minnesota and Wisconsin to address the anti-trust concerns mentioned in the complaint. FTC was of the opinion that the divestiture in those certain areas would decrease any chances of anti-competitive activities following the acquisition. Consequentially, FTC accepted the proposal of ACT and approved the said acquisition, subject to the thirty-day public comment period.
Seven & I Holdings Co Ltd to divest 26 retail fuel outlets in relation to $3.3 Billion acquisition.
January 19, 2018
7-Eleven is a Japanese-owned American international chain of convenience stores, headquartered in Irving, Texas, that operates, franchises, and licenses approximately 64,319 stores in 18 countries. Seven & I Holdings Co is the Tokyo-based parent company of the 7-Eleven network of convenience stores. Sunoco LP (‘Sunoco’) is a master limited partnership that distributes motor fuel to convenience stores, independent dealers, commercial customers and distributors located in more than 30 states at approximately 9,200 sites in the USA. The FTC received a complaint regarding the proposed acquisition of Sunoco by 7-Eleven which stated that there were competition concerns in 76 local markets across 20 metropolitan statistical areas in the US. The complaint also alleged that the acquisition would adversely affect the consumers, as 7-Eleven could unilaterally raise prices or that the small number of remaining competitors could increase prices by coordinating their actions in the relevant market. The complaint also alleged that, without a remedy, inter alia, the acquisition would result in a highly concentrated market in 76 local markets, wherein in 18 states, there would be a monopoly and in 39 states, the number of competitors would be reduced from three to two, and in 19 states, the number of competitors would be reduced from 4 to 3 competitors. To combat the competition concerns raised in the complaint, 7-Eleven agreed to a consent agreement wherein, under the terms of the agreement, 7-Eleven was required to sell 26 retail fuel outlets that it owns to Sunoco, and Sunoco was required to retain 33 fuel outlets that 7-Eleven otherwise, would have acquired. According to the agreement, Sunoco will have full control over fuel pricing and supply at all of these locations. The FTC is still to decide whether or not to make the proposed consent order final, following a thirty-day period, where the consent agreement will be subject to public comment.
Republic of India – Competition Commission of India (‘CCI’) Competition Act, 2002 (‘Act’)
CCI approves merger of Shree Renuka Sugar Ltd. by Wilmar Sugar Holdings Ltd.
February 02, 2018
A single notice was filed by Wilmar Sugar Holdings Ltd (‘WHS’), a company incorporated under the laws of Singapore, which is a wholly owned subsidiary of Wilmar International Limited (‘Wilmar Group’), under Regulation 9(4) of the Act. Shree Renuka Sugars Ltd (‘SRS’) is a company incorporated under the laws of India, engaged in the business of refining raw sugar; production, sale, distribution and branding of sugar and ethanol. As per the information given in the notice, each of WSH and the original promoters of SRS, i.e. the Murkumbi Group (‘Original Promoters’) (together referred to as ‘the parties’) held approximately 27 per cent of the shareholding of SRS. The parties had previously entered into a joint venture agreement (‘JVA’) with respect to the mutual rights and obligations of WSH and the Original Promoters as shareholders of SRS. The existing JVA was proposed to be terminated and certain changes in the board of directors was to be affected so that the funds to be infused by WSH would be utilized by SRS towards the ongoing debt restructuring with its lenders following the acquisition. Thereafter, due to increased voting rights, termination of JVA and subsequent reconstitution of the board of directors, WSH would acquire sole control over SRS (‘proposed combination’). CCI also noted that in India, the parties had overlapping businesses, only in relation to the sugar market. The CCI noted that WSH is already a shareholder in SRS having joint control over its operations along with its Original Promoters. The CCI also noted from the information given in the notice that, in India, Wilmar Group is active in the business of trade of raw sugar and refined sugar, whereas SRS is active in the business of manufacture and distribution of sugar, ethanol and power generation. Consequentially, the Commission was of the opinion that the proposed combination was not likely to have an appreciable adverse effect on competition in India. Therefore, the Commission approved the proposed combination under sub-section (1) of Section 31 of the Act.
Reliance Aerospace Ltd merger with Thales India Private Limited approved by the CCI.
February 09, 2018
Reliance Aerostructure Limited (‘Reliance Aero’) promoted under the Reliance Group, in India, is the leader in the direct placement of first line to middle management aviation maintenance, logistics, engineering and manufacturing professionals. Thales India Private Limited (‘TIPL’) is the Indian subsidiary of the Thales Group (‘Thales’) which is a global technology leader for Aerospace, Transport, Defence and Security markets (‘the parties’). The parties sent a joint notice under sub-section (2) of Section 6 of the Act to the CCI. The notice was sent pursuant to the execution of Shareholders’ Agreement dated November 28, 2017 between the parties and Joint venture agreement between the parties. According, to the information submitted by the parties, the joint venture (‘proposed combination’) would entitle Reliance Aero to hold 51 per cent equity share capital and the remaining 49 per cent equity share capital would be held by TIPL. The CCI also noted from the information given in the notice that Reliance Aero and Thales, through TIPL, agreed to constitute the proposed combination for implementation of part of the offset obligations related to the Inter-Governmental Agreement between the Government of India and the Government of France dated September 23, 2016 for purchase of Rafale (fighter aircraft) in fly-away condition. The CCI, was of the opinion that the proposed combination was not likely to have an appreciable adverse effect on competition in India as the parties were not engaged in any activity relating to the production, supply, distribution, storage, sale and services or trade in products or provision of services which were at different stages or levels of the production chain. Consequently, the CCI approved the proposed combination under sub-section (1) of Section 31 of the Act subject to the information provided by the parties.
United Kingdom (‘UK’) – Competition and Market Authority (‘CMA’) Competition Act, 1998 (‘Act’)
Cott Facility merger by Refresco raises competition concerns.
January 17, 2018
Refresco Group N.V (‘Refresco’), headquartered in Rotterdam, Netherlands, is one of the largest independent bottler of beverages for retailers with large production units in Europe, North America and Mexico and has over 9,500 employees. Cott Incorporation Ltd. (‘Cott’) is a route-based service company with a leading volume-based national presence in the North America and European home and office bottled water delivery industry and a leader in custom coffee roasting, blending of iced tea, and extract solutions for the U.S. foodservice industry (together referred to as ‘the parties’). According to the parties, Refresco’s acquisition of Cott (‘proposed combination’) created a compelling industry proposition for retail and branded customers who would benefit from greater scale, a seamless service across geographies and access to a broader portfolio of soft drinks and fruit juices in key markets. The CMA in its phase 1 investigation, revealed that there was one specific product category, namely “form concentrate” juice drinks in PET using a special aseptic production process that allows them to be sold preservative-free without refrigeration (‘APET’). In the UK, these products are produced only in two factories, Bridgwater (a Refresco facility) and Nelson (a Cott facility). Refresco had already entered into a legally binding agreement to divest the APET facility in Nelson, Lancashire, including the freehold for the land and buildings, the APET production line, all associated facilities and personnel responsible for APET production in the UK and all existing APET UK customer contracts and revenues (‘Divestment Business’) as a going concern to the proposed combination on terms approved by the CMA. This agreement, however, was conditional on formal CMA approval of the proposed purchaser of the facility and acceptance by the CMA of the undertakings. However, the CMA was of the opinion that even with the commitments offered by Refresco, substantial lessening of competition in the relevant could still arise, following the merger. Consequently, the CMA referred the matter for a Phase 2 investigation under section 33(1) of the Act.
European Union (‘EU’) – European Competition Commission (‘Commission’)
European Commission fines maritime car carriers and car parts suppliers a total of €546 million.
February 21, 2018
The intercontinental car and car parts carriers, Chilean CSAV, the Japanese carriers “k” line, MOL and NYK and the Norwegian/Swedish carrier WWL-EUKOR (together referred to as, ‘Parties’) formed a cartel for almost 6 years from late 2006 to late 2012 in the market for maritime transportation of motor vehicle through Europe and other continents. The Commission’s investigation revealed that, the carrier’s sales managers were in constant contact with each other throughout those years. The managers, then coordinated prices and exchanged commercially sensitive information that affected pricing and allocation of customers. The investigation also revealed that the parties had agreed to maintain status quo in the market and to respect each other’s traditional businesses on certain routes. The carriers were also accused of quoting artificially high prices or not quoting at all, in tenders issued by vehicle manufacturers so as to aid their own cartel members. This practice caused great harm to consumers and also affected European car importers. The gravity of the situation was such that in 2016, 6.3 million vehicles were exported to non-EU countries whereas around 3.4 million motor vehicles were imported from non-EU countries. The Japanese maritime carrier MOL, a member of the cartel, in 2017, tipped the Commission by submitting an immunity application to the Commission. In its investigation, the Commission, was aided by the Competition Authorities of various countries including Australia, Canada, Japan and the US. Consequently, the Commission fined the parties a total of €546 million for anti-competitive activities, that included, inter alia, forming cartels.
Mergers: Commission approves Discovery’s acquisition of Scripps, subject to conditions.
February 06, 2018
Discovery Communications Inc. (’Discovery’) is a United States of America (‘USA’) based television (‘TV’) producer and distributor. The TV/ Media giant owns various popular channels like TLC, Animal Planet and the Discovery Channel. Scripps Network Interactive Inc. (‘Scripps’) is also a USA based TV producer and distributor and runs various national channels such as HGTV, Food Network and the Travel Channel. Discovery agreed to acquire Scripps (‘proposed combination’). The proposed combination was to result in Discovery controlling around 20 percent of ad-supported, pay-TV audiences in Europe. In light of the proposed combination, Discovery agreed to concessions in order to get the Commission’s approval. One of the concessions included, Discovery, to allow third-parties to distribute two Polish TV channels — TVN24 and/or TVN24 BiS – on a non-exclusive, unbundled basis as part of the agreement. This was because, in Poland, the proposed transaction risked increasing Discovery’s bargaining power vis-à-vis TV distributors because of the acquisition of certain channels that were particularly important in distributors’ basic pay-TV channel packages which would have allowed Discovery to increase its licensing fees to the detriment of Polish consumers. However, the Commission rejected the request from Poland to refer the merger to the Polish competition authority for assessment under Polish competition law in light of the commitments/concessions made by Discovery. In other parts of Europe, the Commission was of the opinion that the proposed transaction would raise no competition issues given the limited overlap between the companies’ activities. Resultingly, the Commission was of the opinion that the proposed combination did not pose any competition problems and cleared the proposed acquisition of Scripps by Discovery subject to full compliance of the commitments offered by Discovery.
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Doc ID: CL/25/18