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CCI Allows Relaxation in Competition Rules for Consumers' Interests


Author: Manav Sanghvi & Prachi Yadav


The authors are students at the Gujarat National Law University, Gandhinagar

I. Introduction


The COVID-19 pandemic has forced the world to stay indoors, in order to break the cycle of the virus. The restrictions on movement and suspension of activities have served as a blow to multiple sectors by burning a big hole in the pockets of the customers, as well as accounting for huge losses for businesses, which has led to difficulties in sustaining economic families. The large-scale demand and severance in the supply chain have led to firms engaged in providing essential commodities facing setbacks.


The Competition Act, 2002 (Act) plays a significant role in preventing rapacious and illegal practices by enterprises in India. With the spread of the virus in India and its adverse impact on the Indian market, the Competition Commission of India (CCI) decided to allow co-operation among rival companies to fulfil the demands for essential products.[1]The CCI has clarified that the Act has provisions which prevent any sanctions against companies which conduct business in coordination with rivals to maintain efficiency in troubled times.


To enhance supply, companies are partnering with competitors and non-competitors. One example is the partnerships entered into by the food delivery players, Zomato and Swiggy with Marico Ltd. to deliver a variety of products during the lockdown. This was done to facilitate the delivery of essentials in Delhi-NCR and Bangalore. The services will be extended to Mumbai, Kolkata and Ahmedabad.[2] Another example is Uber’s partnership with Flipkart to enable the delivery of basic necessities efficiently.[3]


II. Advisory Issued by the CCI in View of the Pandemic


In its advisory dated 19th April 2020[4], the CCI laid down certain guidelines for firms and has clarified to what extent coordination is permissible among companies across various sectors to bridge the gap between demand and supply. Keeping in mind the extraordinary situation in the country, the trade regulator said that sharing of information on stock, distribution networks, operations, transportation and R & D will help to ensure the distribution of products in an equitable manner and ensure a constant supply. The CCI’s focus is mainly on healthcare products such as masks, gloves, sanitizers, ventilators, vaccines and other essential services and products.[5]


Section 3 of the Act [6] prohibits agreements between enterprises which will have a substantial adverse effect on competition in the market.[7] Section 3(3) of the Act lists various actions which may result in an appreciable adverse effect on competition within India. [8] However, this section does not apply to joint ventures if the joint venture agreements increase efficiency.[9] The power to exempt companies from Sections of the Act lies with the Central Government under Section 54, which specifies the conditions when exemptions can be granted. [10]


Further, even when CCI conducts an inquiry into possible violations of Section 3, it must consider improvements in production and efficiencies, and the accrual of benefits to the Indian consumer under Section 19(3) of the Act.[11]


While the CCI has relaxed enforcement of competitor agreements, it has made it clear that only conduct which is proportionate to deal with the pandemic problems will be allowed. The advisory clearly warns that firms must not exploit the current situation to gain profits. The advisory was issued in light of the demonstrated difficulties that businesses are facing due to shortage of labour, lack of operational material and more importantly, the uncertainty as to how long will the activities be suspended, and the concern that customers do not have to bear the brunt of the economic slowdown.

III. The Approach was Undertaken by Trade Regulating Bodies in Other Countries


The pandemic has forced the governments of various countries to shut down some businesses and impose strict restrictions on others amid lockdown. To sustain the supply and demand chain, the antitrust agencies of competing economies across the world have allowed partnerships among rival companies.


A majority of the Malaysian economy depends on SMEs and allowing an exemption to them can enable those firms to cooperate and fulfil demand in difficult times. The object of the exemption was to allow companies to share resources and technologies and compensate for the low financial capacity of the individual SMEs. The decision was taken to prevent price surges due to hoarding and black marketing rampant during the pandemic. Further, the Malaysian Competition Act 2010 will be in force to prevent corporate lobbying before the government and exploitation by dominant market players. [12]


The European Commission lifted restrictions and allowed pro-competitive cooperation among companies. On 8th April 2020, the Commission released an interim framework providing antitrust guidelines for companies in the medical equipment industry. In a comfort letter issued on the same date to Medicines for Europe, a trade association of prescription drug manufacturers; the letter approves a project that would analyze the spikes for intensive care unit (ICU) medicines for the treatment of COVID-19, to ensure the supply of those medicines where they are most needed.[13] It allowed supermarkets to enter into partnerships so that essentials are made easily available to the consumer. To ensure that the temporary measures announced to address insufficiency in supply are implemented successfully, the Commission has decided to closely monitor relevant market developments for breach of EU antitrust law and it will not tolerate any practices seeking to exploit the crisis through abuse of dominant position. It has, therefore, encouraged citizens to report cartels and antitrust violations in their knowledge.[14]


Germany[15] and the UK[16] have also allowed co-operation amongst firms and businesses to ensure a steady supply of essentials. They have relaxed competition law norms but at the same time have not exempted unfair business practices, unethical activities, and abuse of market power and dominant position in the market. The Competition Authority of Norway has approved a tie-up between two airline companies to ensure transportation of essentials.[17]


Similarly, in the US, the Department of Justice and the Federal Trade Commission have laid down advisory measures. They have allowed legitimate joint ventures where sharing of technical know-how is possible which in turn helps in achieving pro-competitive benefits as per Competitor Collaboration Guidelines. Temporary collaborations for manufacturing critical medical gear are allowed. Unlike other countries, US antitrust law allows, and always has allowed, joint lobbying and meetings with government officials and agencies. In this case, the lobbying may be to address emergency issues.[18] It is essential to note that the guidelines established by foreign regulatory authorities have influenced the response of the Indian regulator.


IV. Analysis of CCI’s Relaxation Measures


The aim of the foreign trade regulatory institutions is to prevent price-gouging of essential medical commodities. The CCI, on the other hand, has two goals. First, it aims to prevent hoarding. Second, it aims to prevent an artificial shortage in the market of essential commodities, since this results in an increase in prices of products. To deal with this, the Indian government has amended the Schedule of the Essential Commodities Act, 1955, which now declares hand sanitizers and masks to be essential goods till 30th June 2020 to ensure that they are readily available at reasonable prices and to keep a check on hoarding.[19]


The trade regulator is concerned that some firms may form cartels and establish minimum resale price maintenance, which is prohibited under Section 3 of the Act. Abuse of dominance by way of price gouging is prohibited under Section 4 of the Act. The current circumstances require collaboration and collective efforts by companies, especially those dealing with essential products and services, and therefore, the trade regulator has to strike a balance while enforcing antitrust regulations. It does so by providing exemptions.


The Central Government, under Section 54 of the Competition Act, has the power to give exemptions to firms in the interest of the security of the State or in the public interest.[20] The Centre, however, has not granted a complete exemption under Section 3 by exercising power under Section 54 of the Act. The steps are focused on preventing long term damage to the market. Any company having an advantage in such circumstances could gain profits through unfair competitive activities which will lead to adverse effects on the Indian economy.


The CCI has the authority to undertake inquiry if it suspects that companies are indulging in anti-competitive practices and agreements. It thoroughly examines the facts and circumstances peculiar to the consequences of a specific agreement, and its effect on competition in the market. If it has an adverse effect, the CCI takes the necessary steps to avoid an adverse effect on competition. Conversely, the CCI allows certain activities if they lead to improvements in production and supply.


V. Conclusion


The decision of the regulatory authority is welcomed in India because it supports solutions to eliminate the shortage of essential supply. Companies can now collaborate to sustain the economy and supply the essential needs of the Indian consumer. The temporary relaxation of competitive standards allows for a more efficient supply of critical materials. But companies need to be vigilant not to exploit collaborative opportunities to harm competition in the market now. And they will need to be vigilant when the crisis is over to conform to the normal dictates of competition law.

[1] Samrat Sharma, Coronavirus brings business competitors on one table; CCI allows firms to work together, Financial Express, https://www.financialexpress.com/industry/coronavirus-brings-business-competitors-on-one-table-cci-allows-firms-to-work-together/1933729/ (last visited May 15, 2020).

[2] BusinessLine Bureau, Marico essential products to be home delivered by Zomato, Swiggy, The Hindu BusinessLine, https://www.thehindubusinessline.com/companies/marico-essential-products-to-be-home-delivered-by-zomato-swiggy/article31250636.ece (last visited on May 15, 2020).

[3] Writankar Mukherjee, Flipkart ties up with Uber for delivery of essentials, TechCrunch, https://techcrunch.com/2020/04/06/uber-partners-with-flipkart-and-bigbasket-in-india-to-deliver-essential-items/ (last visited May 16, 2020).

[4] Advisory to Businesses in Time of COVID-19, Competition Commission of India https://www.cci.gov.in/node/5088 (last visited May 18, 2020).

[5] Id.

[6] The Competition Act, 2002, § 3, No. 12, Acts of Parliament, 2003 (India).

[7] Id.

[8] The Competition Act, supra note 6, at § 3(3).

[9] The Competition Act, supra note 6, at proviso to § 3(3).

[10] The Competition Act, supra note 6, at § 54.

[11] The Competition Act, supra note 6, at § 19(3).

[12] Beng Chai Tay et. al., Malaysia: Business Cooperation During COVID-19 Crisis and Competition Law, Mondaq, https://www.mondaq.com/antitrust-eu-competition-/926930/business-cooperation-during-covid-19-crisis-and-competition-law (last visited May 17, 2020).

[13] European Commission, Temporary Framework for assessing antitrust issues related to business cooperation in response to situations of urgency stemming from the current COVID-19 outbreak, European Commission, Competition: Antitrust (April 8, 2020), https://ec.europa.eu/info/sites/info/files/framework_communication_antitrust_issues_related_to_cooperation_between_competitors_in_covid-19.pdf.

[14] Id.

[15] Ciarán Donohue et. al., COVID-19: Competition Law During the Crisis, McCann Fitzgerald, https://www.mccannfitzgerald.com/knowledge/antitrust-competition/covid-19-competition-law-during-the-crisis (last visited May 17, 2020).

[16] Angus Rodger et. al., FCA’s Statements about Insurance and the Coronavirus: Competition Considerations, Steptoe, https://www.steptoeantitrustblog.com/2020/05/fcas-statements-about-insurance-and-the-coronavirus-competition-considerations/ (last visited May 18, 2020).

[17] COVID-19: Competition Law, supra note 15.

[18] Joint Antitrust Statement Regarding Covid-19, The United States Department of Justice, https://www.justice.gov/atr/joint-antitrust-statement-regarding-covid-19 (last visited May 18, 2020).

[19] Hand sanitizers, masks declared essential commodities to control price, check hoarding, The Print, https://theprint.in/india/hand-sanitisers-masks-declared-essential-commodities-to-control-price-check-hoarding/380923/ (last visited May 17, 2020); Ministry Of Consumer Affairs, Food And Public Distribution,

Department of Consumer Affairs, Control Order Issued Under Essential Commodities Act, 1955, March 13, 2020, https://consumeraffairs.nic.in/sites/default/files/file-uploads/essential-commodities-order/1087.pdf.

[20]The Competition Act, supra note 10, at (a).

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