A positive development is the CCI’s and the Government of India’s emphasis in improving Indian competition law.
By Arshad Khan & Manas Kumar Chaudhuri
Tech companies are facing antitrust scrutiny everywhere. India is no exception. India is likely to become one of the key global battlegrounds for tech companies, given the relative ease in which a case can be brought before the Competition Commission of India (CCI). Equally, for tech M&A, proposed changes to merger control rules may likely bring many more transactions within the CCI’s scrutiny.
The key enforcement provisions cover anti-competitive horizontal agreement (e.g., cartels), vertical agreements which negatively affect competition (e.g., certain exclusive agreements), and abuse of a dominant position.
On the merger control side, certain M&A transactions where the parties meet pre-defined financial thresholds and no exemption applies, must be notified to the CCI and cannot be consummated until the CCI gives its clearance.
All of these are directly relevant to the importance of India as a major tech antitrust battleground.
Here are some things to keep in mind in watching these tech issues before the CCI:
- The CCI must decide every case brought before it. Unlike other jurisdictions where the antitrust/competition regulator can decline to take a case, allowing parties to pursue their own litigation under private right of action provisions, the Competition Act has no such provision.
- A case cannot be settled or even withdrawn. That may change based on some proposed amendments to the Competition Act.
- It’s easier to start a case in India, since a complaint, once filed, takes a life of its own. The CCI gets a complaint and makes a preliminary decision if there is a breach. If so, it’s referred to the CCI’s Director General (DG), which investigates. The DG issues its report and recommendation, which the CCI is free to accept or reject.
- The Competition Act is not a clone of other jurisdictions. Certain actions like refusal to deal do not require a dominant market position unlike the EU. Global companies need to carefully consider the distinctions in the Indian act.
- The CCI tends to define relevant markets narrowly, making dominance or market power more likely. Where a breach decision might be based principally on market definition, parties should have a strong economics report dealing with market definition introduced in the record for CCI and appeals proceedings.
- Fines can be high (up to 10% of annual turnover/asset size and even higher for cartel cases), and there is a follow-on damage claim provision, in addition to a class action provision.
- CCI orders are appealable to the National Company Law Tribunal, with the focus on evidence of consumer harm.
- On merger control, proposed amendments may insert a “size of transaction” test. There are many transactions where the target company has little or no turnover and minimal assets but has developed important technology. Today, that transaction would not be notifiable to the CCI.
With a “size of transaction” test the number of notifiable cases will increase vastly, given the large number of Indian tech start-ups and later stage companies.
A positive development is the CCI’s and the Government of India’s emphasis in improving Indian competition law. Merger control has been streamlined, and procedural issues on enforcement cases have been reduced.
Nonetheless, India is in its early days of antitrust. But, like many other laws in India, the country has moved at light speed from ancient laws to deal with a world-leading economy, fueled by a massive technology sector.
The authors are Respectively, executive director, and partner, Khaitan & Co
Views are personal