Antitrust Enforcement In Digital Markets: CCI On Interim Reliefs

Ashima Obhan and Samridhi Poddar

26 Nov 2021 1:53 PM GMT

  • Antitrust Enforcement In Digital Markets: CCI On Interim Reliefs

    Recently, the Alliance of Digital India Foundation (ADIF), a Delhi-based think tank with members from India's start-ups and entrepreneurs, filed a petition with the Competition Commission of India (CCI) seeking interim relief against Google's policy of collecting commission on payments made on Playstore apps, which takes effect in March 2022.

    The CCI has the authority to grant interim relief under section 33 of the Competition Act, 2002 (the Act). The Act's ability to give interim relief is a seldom utilized provision, with the CCI only using it in 5 (five) cases since its inception in 2009. The CCI has recently used this provision to address competitive damage in the market for online intermediation services for hotel bookings in India, by passing an interim order on 9 March 2021 in the ongoing case involving a complaint against MakeMyTrip, Goibibo and Oyo (MMT/Ibibo) alleging anticompetitive practices under sections 3 and 4 of the Act, 2002. In this article, we draw on certain aspects of the CCI's enforcement of interim reliefs, its necessity where digital markets are concerned and ascertain areas of concern for the future.

    Difference Between a Prima Facie Order and an Interim Relief Order

    In the case of CCI v. Steel Authority of India Limited (SAIL case), the Supreme Court of India provided specific observations on the CCI's competence to grant interim relief. It should be noted that the CCI may only give interim relief while an inquiry is underway. If the CCI is satisfied that an act in violation of section 3 (anti-competitive agreements), section 4 (abuse of dominance), or section 6 (merger control provisions) has been, is being, or is about to be committed, it may temporarily restrain any party "without giving such party notice" if it deems it necessary.

    The Act does not define the term "inquiry". The word inquiry is defined in Regulation 18(2) of the Competition Commission of India (General) Regulations. When the Director General is directed to undertake an investigation in accordance with Regulation 18(2), the inquiry is assumed to have begun. In other words, when the CCI issues a prima facie order under section 26(1) of the Act instructing the Director General to examine the case, the law presumes that an inquiry has begun. The Director General is only expected to conduct an investigation in response to the CCI's instruction; after then, the inquiry is assumed to have begun, and it continues with the Director General's submission of the report. Following that, the CCI must review the report as well as any objections or suggestions made by any parties. The inquiry under the Act will continue until the CCI issues a final ruling in compliance with the law. The CCI can only apply its powers under section 33 of the Act after the inquiry has commenced.

    Analyzing the Approach in the SAIL Case

    In the SAIL case, the Supreme Court held that at the stage of a section 33 proceeding, the CCI must record a satisfaction that there has been a violation of the Act's provisions of sections 3, 4, or 5, and that such violation has been committed, is being committed, or is about to be committed. This satisfaction must be distinguished from what is necessary when expressing a prima facie opinion under section 26(1) of the Act. The former is a definite expression of the satisfaction recorded by the CCI as a result of careful consideration, whereas the latter is a simple directive to the Director General to investigate, similar to a departmental procedure. In the SAIL case, the Supreme Court specifically stated that the CCI should issue a reasoned order that includes:

    • record its satisfaction (which has to be of much higher degree than formation of a prima facie view under section 26(1) of the Act) in clear terms that an act in contravention of the stated provisions has been committed and continues to be committed or is about to be committed;
    • it is necessary to issue order of restraint, and
    • from the record before the CCI, there is every likelihood that the party to the lis would suffer irreparable and irretrievable damage, or there is definite apprehension that it would have adverse effect on competition in the market.

    Competition Issues in Digital Markets

    In certain aspects, competition in significant digital marketplaces differs from competition in traditional markets. Platform-based business models, multi-sided marketplaces, network effects, and economies of scale are common in this industry, making competition issues more complicated. In contrast to other economic sectors, high rates of investment and innovation characterize digital marketplaces, resulting in fast technical advancement and greater disruptive innovation. Because the digital economy's effect goes beyond information goods and services to other parts of the economy, competition authorities are increasingly concerned about issues relating to the digital economy. As a result, in order to restore competitive damage in dynamic markets, prompt and effective action is required. Denial of market access in any way that restricts an enterprise's ability to compete successfully in the market is a violation of the Act. In dynamic markets, where the best performers may take a huge portion of the potential rewards while the other rivals are left with very little, denying market access can have the irreversible consequence of tipping the market in favour of market incumbents with strong market strength. In such marketplaces, timely and early intervention to rectify competitive harm is critical since any delay in corrective action runs the risk of permanently distorting the competitive environment by stunting the emergence of inter-platform rivalry.

    The advent of the digital age has caused the CCI to increasingly question whether they are equipped with the right tools to effectively enforce competition rules. Digital markets, in particular, represent a paradigm shift, forcing regulators throughout the world to reconsider their approaches. In light of this, regulators' capacity to respond quickly and avert possibly irreparable damage to competition will be greatly limited unless they can effectively use their power to adopt interim reliefs. The experience of the CCI in applying interim relief in the MMT/Ibibo case, demonstrates that regulatory efficiency does not only come from issuing decisions based on a robust assessment, but also from speed of action.

    Ashima Obhan is a Partner and Samridhi Poddar is an Associate at Obhan and Associates.Views are personal.

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