Section 3(4) of the Competition Act provides a non-exhaustive list of vertical agreements that have the potential to cause an AAEC. These are tie-in arrangements, exclusive supply agreements, exclusive distribution agreements, refusals to deal and resale price maintenance. The Explanation to Section 3(4) of the Competition Act provides a brief description of these agreements, as follows:

1. Tie-in arrangement: any agreement as a result of which a purchaser of goods has to purchase some other goods as a condition of purchase.
2. Exclusive supply agreement: any agreement which restricts the purchaser in the course of his trade from acquiring or otherwise dealing in any goods other than those of the seller or any other person.
3. Exclusive distribution agreement: any agreement to limit, restrict, or withhold the output or supply of any goods or allocation of any area or market for the disposal or sale of the goods.
4. Refusal to deal: any agreement which restricts, or is likely to restrict, by any method the persons or classes of persons to whom goods are sold or from whom goods are bought; and
5. Resale price maintenance: any agreement to sell goods on condition that the prices to be charged on the resale by the purchaser shall be the prices stipulated by the seller unless it is clearly stated that prices lower than those prices may be charged.

Amongst the various types of vertical agreements listed above, exclusive agreements (including exclusive distribution agreements and exclusive supply agreements) are fairly common and many such agreements have been assessed by the CCI in the past 10 years, since the Competition Act has been in force in India.

Meaning and Scope of Exclusive Agreements

The various types of exclusive agreements covered in Section 3(4) of the Competition Act are essentially vertical agreements through which the procurement, dealing, and supply / output of products is limited or restricted. Under such agreements two or more enterprises agree that one or both will deal exclusively with the other and refuse to deal with other parties for some commodities or services.^[1]

To be considered as a vertical agreement for the purposes of competition law, the agreement should be between members at different levels of the production chain,^[2] and not with an end customer.^[3] Additionally, the agreement should not be between enterprises or persons which form part of a single economic entity^[4] or which have a principal – agent relationship.^[5]

Once is it determined that an agreement exists, the primary requirement for it to fall foul of the provisions of Section 3(4) of the Competition Act is that such an agreement should cause or be likely to cause an AAEC in India. Section 19(3) of the Competition Act sets out the factors to which the CCI is to have due regard while determining whether an agreement has an AAEC, as follows:

1. the creation of barriers to new entrants in the market;
2. driving existing competitors out of the market;
3. foreclosure of competition by hindering entry into the market;
4. accrual of benefits to consumers;
5. improvements in production or distribution of goods or provision of services; and
6. promotion of technical, scientific and economic development by means of production or distribution of goods or provision of services.

The first three of these are negative factors which tend to point towards an AAEC being caused and the latter three are positive factors which may be used to demonstrate that there is no AAEC. In its assessment of whether an AAEC is likely to be caused, the CCI must consider these factors. In line with this expectation, the National Company Law Appellate Tribunal, while setting aside a previous decision of the CCI, recorded non-consideration by the CCI of the factors set out in Section 19(3) of the Competition Act as one of the reasons for setting aside the CCI’s order.^[6]

Apart from a consideration of these factors, the focus of the CCI has been on whether the parties to the agreement possess market power. The relevance of market power, and the decisional practice of the CCI with regard to exclusive agreements, is discussed in further detail in the sections below.

While the term exclusive agreement may seem to have a negative connotation to it, such agreements can in fact lead to pro-competitive effects, by, for instance, curtailing free riding and reducing costs of distribution. As such, the intent behind exclusive agreements may not be to reduce competition in the market, and may be entirely bona fide. The CCI has demonstrated an understanding of this aspect, and possibly as a result there have been almost no cases where the CCI has finally found an exclusive agreement to lead to anti-competitive effects.

The CCI’s Jurisprudence

Agreement

Prior to an AAEC analysis, which is the crux of cases on exclusive agreements, the presence of an agreement is required for a Section 3(4) case to be made out.^[7] In addition to the wide and inclusive definition^[8] of the term ‘agreement’ under the Competition Act, and in line with the practice followed in other jurisdictions, the CCI has previously held that the existence of an agreement can be inferred from conduct as well. This could extend to the imposition of a unilateral policy where the level of coercion to impose the unilateral policy in combination with the number of distributors actually following the policy would point towards tacit acquiescence.^[9]

Appreciable effect

Once an agreement is found to exist, whether or not it causes or is likely to cause an AAEC is based on a rule of reason analysis, and there is no presumption that all vertical agreements lead to anticompetitive effects.^[10]

In its decisional practice, the CCI has repeatedly stressed the fulfilment of the statutory requirement of an AAEC being caused / likely to be caused for an agreement to be violative of Section 3(4) of the Competition Act.^[11] The CCI is also required to establish an AAEC at the prima-facie stage as well, while it determines whether or not to direct a detailed investigation into allegations of potentially problematic conduct. A recent decision of the Bombay High Court has also considered this aspect and has taken the view that it is essential for the CCI to arrive at a prima facie finding of an AAEC prior to directing an investigation.^[12] The element of appreciability is of significance and the CCI, through its decisional practice, has made it abundantly clear that it will not prohibit vertical agreements of minor importance,^[13] as their effect on competition is unlikely to be “appreciable”. This pragmatic approach is also in line with the Indian Government’s push to improve the ease of doing business in India.

In fact, despite noting the existence of vertical restraints, the CCI has refrained from even passing orders initiating investigations in several cases,^[14] where it found that there was no likelihood of an AAEC being caused as a result of the otherwise restrictive agreements in question in these cases.

This is because, similar to jurisdictions such as the EU and the US, the CCI’s effects based approach requires the demonstration of actual or likely harm to competition in India. In assessing the foreclosure caused by a vertical restraint, the CCI has also considered what proportion of the market may be affected by the vertical restraint in question and for how long. The CCI has repeatedly taken the view that agreements which impact only a small part of the market are unlikely to cause an AAEC.^[15]

• Market Power

In assessing whether a vertical agreement causes an AAEC, apart from the statutory factors set out in Section 19(3) of the Competition Act, the CCI’s primary focus has been on market power, which is the ability to maintain prices above competitive levels, or to maintain output, product quality and variety or innovation below competitive levels, for a not insignificant period of time. The CCI has relied upon the European Commission’s standard to come to the broad view of “no market power, no problem” and has on many occasions held that AAEC concerns due to vertical restraints will not arise where the enterprise concerned does not enjoy market power or a position of strength in the market.^[16]

Early on in its decisional practice,^[17] the CCI took note of the European Commission’s practice of not intervening in vertical restraint cases unless either party possesses at least 30% market share in their respective markets.^[18] The CCI has, however, been prepared to consider lower market shares. In a recent decisions^[19] the CCI directed an investigation to be undertaken where the opposite party had a market share of 28%, on the basis that its conduct, prima facie, was likely to cause an AAEC. Therefore, while there is no fixed market share above which the CCI is likely to intervene, in practice enterprises with over 20-25% market share in their relevant market need to be more careful in relation to their conduct with upstream and downstream business partners.

In more recent times, the CCI has assessed market power in a manner similar to its assessment of dominance in abuse of dominance cases, i.e., while market shares are usually referred to as a proxy for market power, the CCI also considers other factors set out in Section 19(4) of the Competition Act.  Consequently, the CCI’s decisional practice indicates that it considers several other factors (such as size and resources of the enterprise, size and importance of the competitors, economic power of the enterprise including commercial advantages over competitors, and dependence of consumers on the enterprise) when determining whether an enterprise possesses market power.^[20]

This approach provides for a holistic assessment, which is important especially in new age markets where market shares may not be fully reflective of market power and other factors like entry barriers and position of competitors are critical. These are discussed in greater detail below.

Depending on the level of market power, the same set of facts may be assessed under Section 4 of the Competition Act (dealing with abuse of dominant position) as well. In fact, several vertical restraint cases also contain abuse of dominance allegations, and these two areas of competition law are somewhat intertwined.

• Relevant Market

Given that the market power and impact of an agreement needs to be assessed in a specific market, the delineation of relevant market(s) (comprising the relevant product market and relevant geographic market) becomes critical and is the first step in assessment of cases involving alleged vertical restraints under Section 3(4).

In line with the statutory definition of relevant product market,^[21] the CCI has considered aspects such as substitutability, interchangeability, consumer preferences, characteristics, and end use of the products while delineating the relevant market in cases pertaining to exclusive agreements. The CCI has also clarified that the purpose of defining the relevant market is to identify competition and the competitive constraints prevalent in the market and the market definition should not be based on the harm caused.^[22] Further, the CCI has clarified that the market cannot be restricted to a particular period.^[23] These clarifications lead to an expectation of an accurate market delineation by the investigating authorities in future cases.

While defining markets to assess vertical restraints, the CCI follows a pragmatic approach and defines as many markets as required. Accordingly, upstream as well as downstream markets are defined separately in some cases,^[24] and only one market is defined where this approach would suffice. Naturally, separate upstream and downstream market delineation is not required in every case, and as such, a case by case view needs to be taken.

While delineating the geographic market, the CCI has restricted itself to the territory of India. Though there have been cases where a global market definition could have been adopted on account of competition from outside India, imports into India, etc., the CCI has to date not considered the market to be wider than India in any case pertaining to exclusive agreements.

• Statutory analysis of effects

The CCI has closed various cases^[25] pertaining to exclusive agreements at the prima facie stage itself, on the basis that the agreements were unlikely to cause entry barriers, foreclosure effects, and/or harm to consumers, or where various other players imposing competitive constraints were present in the relevant market(s). Similarly, in recent cases the CCI has considered factors set out in Section 19(3) of the Competition Act, and the likelihood of harm being caused, while ordering its investigative arm to conduct an investigation into a matter. ^[26]

In its assessment, the CCI has been mindful of the need to assess the balance between the anti-competitive and pro-competitive effects and has not interfered in cases where anti-competitive effects were unlikely, or where the pro-competitive effects outweighed the anti-competitive effects. Various objective justifications have also been accepted by the CCI in its decisional practice.

• Anti-competitive effects of Exclusive Agreements

By their very nature, exclusive agreements reduce the number of suppliers and/or distributors for a particular product or service in the relevant market. Accordingly, concerns pertaining to foreclosure of the market, barriers to entry, and driving existing competitors out of the market, all of which ultimately impact consumer choice and welfare, become most relevant to the assessment of exclusive agreements.

Additionally, exclusive supply agreements may lead to a reduction in inter-brand competition where a manufacturer supplies to only one distributor or distributors are not permitted to deal in competing products. Such practices may also foreclose more efficient distributors from entering the market for the supplier’s products.  Similarly, exclusive distribution agreements may also result in a reduction in intra-brand competition, where exclusive dealers are allocated specific territories and restricted from active and/or passive selling outside their territories. Such conduct, if adopted by most competing suppliers also raises the risk of collusion in the market.

The CCI has also considered factors such as the presence and position of other players in the market,^[27] short term duration of the agreement with the option to terminate for no cause at short notice,^[28] and lack of entry and exit barriers^[29] while concluding that the exclusive agreements in question do not violate the provisions of the Competition Act.   Accordingly, and rightly so, the CCI has not interfered in such agreements, which could hamper day to day business practices, as there is enough competition in the remaining part of the market.

• Pro-competitive effects of Exclusive Agreements

Exclusive agreements can also have pro-competitive effects, and this aspect has also been recognized by the CCI.^[30] They can curtail one distributor free riding on efforts made by another distributor. Similarly, relationship-specific investments can be protected and encouraged by granting exclusivity to distributors, at least for the initial period of a relationship, until the investments are recouped. Such agreements may also reduce costs as they allow a distributor to achieve economies of scale, and create efficiencies in the overall distribution channel since the resources of the distributors would not be split across various competing products.

Exclusive agreements are likely to be a useful tool in cases relating to new products and complex products – which may require relationship specific investment, efforts to create awareness regarding the product and a market for the product, and potential investments in providing aftersales support. Such agreements could also be justified in cases involving experimental  or high-end products – which would require a close check on quality and reliability which would be easier to monitor when there are a limited number of distributors.

• Objective Justifications

In its decisional practice relating to exclusivity cases, the CCI has also been sympathetic to parties’ arguments regarding justifications for their conduct.

Justifications and/or reasons such as market growth due to sharing of know how between parties to the agreement,^[31] need for security of continued supply of the product in question,^[32] preventing risk of leakage of IP and technical know-how to globally competing companies,^[33] certainty of adequate infrastructure support and genuineness of product,^[34] prevention of free-riding and ensuring that funds meant for products of one supplier are not diverted,^[35] maintaining brand image and goodwill,^[36] protection of relation specific investments,^[37] ensuring quality and safety requirements, grant of exclusive rights in a territory to compensate for restrictions activities in another,^[38] and efficiencies such as convenience to customers^[39] have been accepted by the CCI in concluding that the vertical agreements in question do not violate the provisions of Section 3(4) of the Competition Act.

These practices make it abundantly clear that, in some contrast with its approach in other areas, the CCI is following a very light touch approach regarding vertical agreements.^[40] This approach most likely stems from the fact that vertical agreements are unlikely to be as problematic and cause as much potential harm as horizontal agreements or abusive conduct by dominant enterprises. In any event and irrespective of the reasons for this approach, the CCI’s practices and views regarding vertical agreements are not very different from other jurisdictions with much older and more evolved competition law regimes.

Exclusivity in Digital Markets

Digital markets and big data is currently an important area of focus area for regulators around the world. Competition law across jurisdictions is evolving and seeing innovative interpretations of the existing legal framework to address challenges that accompany the growth of digital markets. While some jurisdictions like Germany and Japan have proposed to amend / amended their existing legal framework and/or introduced specific regulations to deal with competition law issues in digital markets, others like the EU believe that their existing regime is sufficient to regulate digital markets.

The CCI has had some exposure to digital markets and technology related markets in the past years. Specifically in relation to vertical agreements, the CCI’s view has been that online platforms are a part of the vertical chain and can be assessed under Section 3(4) of the Competition Act,^[41] but had generally taken a hands off approach to these markets given the intense competition and presence of multiple players, as well as the growing nature of the markets.

However, in keeping with global trends, the CCI has recently started taking an increasing interest in cases involving companies active in the e-commerce space. Cases involving e-commerce companies and restraints imposed by them are an exception to the usual practice of the CCI closing cases of vertical agreements at the prima facie stage.

In January 2020, the CCI released its report of a detailed study covering the potential issues that may arise as a result of the conduct of companies active in the e-commerce sector. This study covered three broad areas, i.e., online platforms in the goods category, online travel agencies, and e-commerce in the food industry, and contained stakeholder comments from various sides of the market in each of these areas.

Soon after this study was released, the CCI passed investigation orders into the conduct of large e-commerce companies like Flipkart, Amazon,^[42] MakeMyTrip, and OYO.^[43] In these cases, the CCI found that the players had significant market power and dealt with issues unique to digital markets such as preferential listing and platform parity agreements.^[44]

The CCI’s approach towards digital markets depends largely on the structure of the relevant market, and given the consolidation of market shares by players in digital markets, it is likely that the CCI’s involvement in this area will only increase in the future. This is not to say that the CCI is not cognizant of the complexities of determining market power in digital markets. In a recent case involving digital markets, specifically the “market for services provided by online platforms for selling fashion merchandise in India”, while directing the closure of the investigation, the CCI stated that in such rapidly changing markets, there could not be a static approach to market assessment.^[45]

Way Forward – Potential Challenges and Suggestions for a More Effective Regime

The CCI has demonstrated a mature understanding of vertical agreements in general, and has appreciated that limited interference is required in such cases. However, there are a few areas in which the CCI could consider revisiting / engaging with differently in its general approach and practices, which would likely result in an even more effective and efficient regime.

A gap in the application of more evolved practices could be attributed to the comparatively nascent stage at which competition law finds itself in India. Despite this, the CCI has applied practices as are being followed in some other jurisdictions and discussed in more detail below. This indicates that the CCI is making a conscious effort to improve current practices and adopt a few others, which will help accelerate its journey to reach at par with more experienced regulators.

Market Share Thresholds

The number of complaints filed before the CCI. pertaining to vertical agreements (including exclusive agreements) has increased in the past few years. As seen above, many of these involved enterprises which did not enjoy any market power and, as a result, any restraints imposed by them were unlikely to case an AAEC. This means that the CCI has ended up investing significant amount of time in cases that are eventually closed at the prima-facie stage itself. This leads to a wastage of time and resources of the CCI, and efforts could be made to address this.

One effective way could be for the CCI to introduce market share based thresholds, below which vertical agreements would be presumed not to cause an AAEC. Based on publicly available information, to date the CCI has never initiated an investigation into the conduct of a company, even where vertical restraints were evident, where the market share of the enterprise engaging in allegedly problematic conduct was below 20%. As such, a market share threshold of 20% could be introduced for vertical agreements. Restrictive conduct of enterprises having market shares below this threshold could be considered outside the scope of Section 3(4) of the Competition Act.

This would be similar to the ‘Block Exemption’ applicable in the EU^[46]. Additionally, many other jurisdictions such as Brazil^[47], Russia^[48] and Japan^[49] have market share based thresholds below which vertical agreements are not considered problematic, and hence not pursued.

Settlements and Commitments

Subsequent to the 2019 recommendations of the Competition Law Review Committee (CLRC), the Ministry of Corporate Affairs has proposed an Amendment Bill introducing certain changes to the Competition Act. Of these, one much needed proposal covering vertical agreements is in relation to the introduction of a settlements and commitments process. Under the proposed amendment, companies which have imposed vertical restraints would be able to: (a) offer commitments in relation to the alleged contraventions prior to receiving the investigation report; and/or (b) submit a proposal to settle the dispute, after receiving the investigation report.

While this is a welcome move towards practices adopted in mature jurisdictions like the EU, there are significant potential complications for the CCI if the proposed amendment is implemented in its current form without any accompanying guidance. There is lack of clarity as to whether the commitments/settlement will be made “without prejudice” (i.e., whether parties will be able to proceed without admitting guilt). There is also no proposal for adequate market testing of the commitments, which could raise significant issues as commitment/settlement decisions are not appealable. Further, it is not clear whether these provisions would be applicable to existing cases, and if so, how they would be applied (although this should be addressed in the final Bill).

Digital Markets

In keeping with the general view of the CLRC and the chairperson of the CCI that the legal framework of competition law in India is equipped to deal with digital markets, no specific amendments to the Competition Act has been envisaged for cases relation to digital markets. However, the CCI has started recognising practices which are being followed in other jurisdictions. For instance, in the recent investigation order against Flipkart and Amazon, the CCI has considered network effects and access to data as a source of market power. These aspects are also considered by German authorities.

The digital economy is growing rapidly in India. Accordingly, while the CCI may be justified in adopting global practices on a case by case basis instead of amending the law, the same should not come at the cost of legal certainty. Specifically from a point of view of vertical agreements, it would be helpful to have clarity and consistency on issues such as what factors are to be considered for assessing market power of e-commerce players (including network effects, access to data, and potential scope of innovations), and any specific type of vertical restraints (such as selective distribution agreements and MFN clauses) that would be considered differently while scrutinizing the conduct of e-commerce companies.

Conclusion

Exclusive agreements have so far been relatively low on the CCI’s enforcement radar screen. Even though the concept of agreement under the Competition Act is extremely wide, most exclusive agreements are not considered problematic by the CCI, as it follows an effects based approach to assess such agreements. As a result, due to the absence of market power of the enterprises involved, and the potential pro-competitive effects of such agreements, the CCI often determines that no intervention is required.

While the CCI’s approach has not left much to be desired, some changes could be brought about to increase certainty and reduce the time and resources spent on cases that are unlikely to raise concerns. Since the CCI does not statutorily have the power to create enforcement priorities, and it must examine all cases brought before it, guidance similar to jurisdictions such as EU, Brazil, Russia and Japan, introducing a market share based threshold for assessment of vertical restraints, would ensure a better utilization of the limited resources of the CCI and would also be in line with its pro-business approach. Moreover, the proposed introduction of a settlements and commitments process, accompanied by detailed guidance, would also help in the speedy disposal of cases, and an enhanced ability to bring change to market practices, where required.

Even in terms of its increased interest in digital markets, the CCI’s orders so far (on the both the enforcement and merger control front) must be lauded for showing a deep understanding of the complexities of such markets and a willingness to balance the desire to intervene with the need to stay out of dynamic, fast moving industries, where market forces are capable of correcting any potential concerns. The CCI has largely adopted practices followed by mature jurisdictions. It would be interesting to see how the CCI adapts to changing market dynamics, and new challenges, in the times to come.

Footnote

[1]     SM Dugar, Guide To Competition Act, 2002, 7^th Edition (2017).

[2]     Manoj Hirasingh Pardeshi v Gilead Sciences Inc. USA, CCI, Case No. 41 of 2012 (5 March 2013); M/s ESYS Information Technologies Pvt. Ltd v Intel Corporation and Ors, CCI, Case No 42 of 2011 (16 January 2014); FX Enterprise Solutions India Pvt Ltd v Hyundai Motor India Limited with St. Antony’s Cars Pvt Ltd v Hyundai Motor India Limited, CCI, Case Nos 36 and 82 of 2014 (14 June 2017).

[3]     Sh. Dhanraj Pillai and Ors v M/s Hockey India, CCI, Case No. 73 of 2011 (31 May 2013); Financial Software v Systems Private Limited and ACI Worldwide Solutions Private Limited and Ors., CCI, Case No. 52 of 2013 (13 January 2015).

[4]     Exclusive Motors Pvt Ltd v Automobili Lamborghini SPA, CCI, Case No. 52 of 2012 (6 November 2012).

[5]     EC, European Commission Guidelines on Vertical Restraints; Samir Agarwal v ANI Technologies and Ors., CCI, Case No. 37 of 2018 (6 November 2018).

[6]     Hyundai Motor India Limited v CCI and Ors, NCLAT, Competition Appeal (AT) No. 06 of 2017 (19 September 2018).

[7]     Exclusive Motors Pvt Ltd v Automobili Lamborghini SPA, CCI, Case No. 52 of 2012 (6 November 2012); Mohit Maglani v Flipkart India Pvt Ltd, CCI, Case No. 80 of 2014 (23 April 2015); K.C. Marketing v OPPO Mobiles MU Pvt. Ltd., CCI, Case No. 34 of 2018 (8 November 2018).

[8]     Section 2(b) of the Competition Act, 2002.

[9]     M/s Jasper lnfotech Pvt. Ltd. v M/s Kaff Appliances (India) Pvt. Ltd., CCI, Case No. 61 of 2014 (29 December 2014).

[10]    Swarna Properties v Vestas Wind Technology India Pvt. Ltd., CCI, Case No. 24 of 2018 (7 August 2018).

[11]    Automobiles Dealers Association v Global Automobiles Limited and Anr, CCI, Case No. 33 of 2011 (3 July 2012); M/s ESYS Information Technologies Limited v Intel Corporation and Ors, CCI, Case No. 48 of 2011 (16 January 2014); Shri Ghanshyam Das Vij v M/s Bajaj Corporation Limited and Ors, CCI, Case No. 68 of 2013  (12 October 2015); Ajay Devgn Films v Yash Raj Films Private Limited and Ors, CCI, Case No. 66 of 2012  (5 November 2012); M/s Amit Auto Agencies v M/s King Kaveri Trading Co., CCI, Case No. 57 of 2013 (8 October 2013); Cine Preshakula Viniyoga Darula Sangh v Hindustan Coca Cola Beverages Pvt. Ltd, CCI, Case No. RTPE 16 of 2009  (23 May 2011); Jasper Infotech Pvt. Ltd, v KAFF Appliances (India) Pvt. Limited, CCI, Case No. 61 of 2014  (15 January 2019); Shri Shamsher Kataria v Honda Seil Cars India Ltd and Ors, CCI, Case No. 3 of 2011  (25 August 2014).

[12]    Star India Private Limited v CCI and Ors., Bombay High Court, Writ Petition No. 9175 of 2018 (16 October 2019).

[13]    Ajay Devgn Films v Yash Raj Films Private Limited and Ors, CCI, Case No. 66 of 2012 (5 November 2012).

[14]    Automobiles Dealers Association v Global Automobiles Limited and Anr, CCI, Case No. 33 of 2011 (3 July 2012); Case No. 48 of 2011; Shri Ghanshyam Das Vij v M/s Bajaj Corporation Limited and Ors, CCI, Case No. 68 of 2013 (12 October 2015); Karni Communications v Vivo Mobile India Private Limited and Ors, CCI, Case No. 35 of 2018 (19 June 2019).

[15]    Ajay Devgn Films v Yash Raj Films Private Limited and Ors, CCI, Case No. 66 of 2012 (5 November 2012). In this case it was held that multiplexes comprised 65% of the revenue and were not part of the agreement in question; the market for exhibition of new films on single screens was held to not be of enough significance to cause an AAEC. Explosives Manufacturers Welfare Association v Coal India Limited and Ors, CCI, Case No. 04 of 2010 (26 July 2011). In this case it was noted that the agreements in question related to only 20% of the market and the remaining 80% of the market was left open and all suppliers could participate in the tender process. Cine Preshakula Viniyoga Darula Sangh v Hindustan Coca Cola Beverages Pvt. Ltd, CCI, Case No. RTPE 16 of 2009 (23 May 2011). in this case it was noted that supply to multiplexes formed less than 0.3% of the total supply in India and, considering the overall volume of business, the exclusive supply agreement in question could not cause an AAEC.

[16]    Shri Ghanshyam Das Vij v M/s Bajaj Corporation Limited and Ors, CCI, Case No. 68 of 2013 (12 October 2015); Tamil Nadu Consumer Products Distribution Association v Fangs Technology Private Limited and Anr, CCI, Case No. 15 of 2018 (4 October 2018); Automobiles Dealers Association v Global Automobiles Limited and Anr, CCI, Case No. 33 of 2011 (3 July 2012); Shri Ramamurthy Rajagopal v Doctor’s Associates Inc., Subway International, and Anr; CCI, Case No. 90 of 2014 (13 May 2015); Accessories World Car Audio Private Limited v Sony India Private Limited and Anr, CCI, Case No. 03 of 2020 (11 May 2020).

[17]    Automobiles Dealers Association v Global Automobiles Limited and Anr, CCI, Case No. 33 of 2011 (3 July 2012).

[18]    Unlike the EU, there is no concept of block exemptions or hard-core restrictions in India, nor any definitive guidance in relation to the market shares thresholds above which an AAEC is likely to be caused.

[19]    Jasper Infotech Pvt. Ltd, v KAFF Appliances (India) Pvt. Limited, CCI, Case No. 61 of 2014 (15 January 2019).

[20]    Tamil Nadu Consumer Products Distribution Association v Fangs Technology Private Limited and Anr, CCI, Case No. 15 of 2018 (4 October 2018); Noida Software Technology Park Ltd. v Star India Pvt. Ltd. and Ors., CCI, Case No. 30 of 2017 (27 July 2018).

[21]   Section 2(t) of the Competition Act.

[22]   FX Enterprise Solutions India Pvt Ltd v Hyundai Motor India Limited and St. Antony’s Cars Pvt Ltd v Hyundai Motor India Limited, CCI, Case Nos 36 and 82 of 2014 (14 June 2017). In this case the Director General (DG) had delineated separate relevant markets for separate allegations, based on where the harm was caused. The CCI rejected these market definitions and defined the relevant market again while assessing the case.

[23]    Ajay Devgn Films v Yash Raj Films Private Limited and Ors, CCI, Case No. 66 of 2012 (5 November 2012).

[24]    Financial Software and Systems Private Limited v ACI Worldwide Solutions Private Limited and Ors., CCI, Case No. 52 of 2013 (13 January 2015); FX Enterprise Solutions India Pvt Ltd v  Hyundai  Motor India Limited and St. Antony’s Cars Pvt Ltd v Hyundai Motor India Limited, CCI, Case Nos 36 and 82 of 2014 (14 June 2017).

[25]    Ajay Devgn Films v Yash Raj Films Private Limited and Ors, CCI, Case No. 66 of 2012  (5 November 2012); M/s Amit Auto Agencies v M/s King Kaveri Trading Co., CCI, Case No. 57 of 2013 (8 October 2013);  Explosives Manufacturers Welfare Association v Coal India Limited and Ors, CCI, Case No. 04 of 2010 (26 July 2011); Mr. Vijay Goyal v Inox Leisure Limited and Anr, CCI, Case No. 29 of 2018 (28 February 2019); Mohit Maglani v Flipkart India Pvt Ltd, CCI, Case No. 80 of 2014 (23 April 2015); K.C. Marketing v OPPO Mobiles MU Pvt. Ltd., CCI, Case No. 34 of 2018 (8 November 2018); Karni Communications v Vivo Mobile India Private Limited and Ors, CCI, Case No. 35 of 2018 (19 June 2019).

[26]    Jasper Infotech Pvt. Ltd. v KAFF Appliances (India) Pvt. Limited, CCI, Case No. 61 of 2014 (29 December 2014); Vishal PanePande v Honda Motorcycle and Scooter Pvt Ltd, CCI, Case No. 17 of 2017 (14 March 2018).

[27]   Case No. 33 of 2011 Automobiles Dealers Association v Global Automobiles Limited and Anr.; M/s Amit Auto Agencies v M/s King Kaveri Trading Co., CCI, Case No. 57 of 2013 (8 October 2013); Shri Ghanshyam Das Vij v M/s Bajaj Corporation Limited and Ors, CCI, Case No. 68 of 2013 (12 October 2015).; Tamil Nadu Consumer Products Distribution Association v Fangs Technology Private Limited and Anr, CCI, Case No. 15 of 2018 (4 October 2018); Mr. Vijay Goyal v Inox Leisure Limited and Anr, CCI, Case No. 29 of 2018 (28 February 2019).

[28]             Cine Preshakula Viniyoga Darula Sangh v Hindustan Coca Cola Beverages Pvt. Ltd, CCI, Case No. RTPE 16 of 2009 (23 May 2011); Mr. Vijay Goyal v Inox Leisure Limited and Anr, CCI, Case No. 29 of 2018 (28 February 2019).

[29]  Mr. Vijay Goyal v Inox Leisure Limited and Anr, CCI, Case No. 29 of 2018 (28 February 2019); Karni Communications v Vivo Mobile India Private Limited and Ors, CCI, Case No. 35 of 2018 (19 June 2019).

[30]    Shri Ghanshyam Das Vij v M/s Bajaj Corporation Limited and Ors, CCI, Case No. 68 of 2013 (12 October 2015).

[31]    Manoj Hirasingh Pardeshi and Gilead Sciences Inc. USA, CCI, Case No. 41 of 2012 (5 March 2013) – in this case it was held that the tri-partite agreement in question will help the market grow due to sharing of know-how of third line drugs with other companies.

[32]    Explosives Manufacturers Welfare Association v Coal India Limited and Ors, CCI, Case No. 04 of 2010 (26 July 2011) – in this case the CCI accepted the argument that the exclusive agreement for 20% of the supply was required to ensure continued supply of explosives to avoid harm to the industries dependent on coal.

[33]    Tamil Nadu Consumer Products Distribution Association v Fangs Technology Private Limited and Anr, CCI, Case No. 15 of 2018 (4 October 2018) – in this case the CCI accepted the argument that the distributors were barred from working with Oppo and Honour to avoid leakage of intellectual property and technical know-how to these companies, who were global competitors of Vivo – there was no bar upon working with other competing manufacturers.

[34]    Tamil Nadu Consumer Products Distribution Association v Fangs Technology Private Limited and Anr, CCI, Case No. 15 of 2018 (4 October 2018) – the CCI accepted the submission that prior permission was required before appointment of new retailers to ensure that these retailers have adequate infrastructure. Separately, the CCI accepted the submission that corporate sales are subject to prior intimidation and consent of the manufacturers to ensure that the product is genuine – the intent was not to stop corporate sales by the dealers.

[35]    FX Enterprise Solutions India Pvt Ltd v Hyundai Motor India Limited and St. Antony’s Cars Pvt Ltd v Hyundai Motor India Limited, CCI, Case Nos 36 and 82 of 2014 (14 June 2017). In this case, the CCI noted that there was no de-jure exclusivity, and the clause requiring prior permission from HMI, before accepting the dealership of competing brands was aimed towards preventing free-riding and diversion of funds.

[36]    Ashish Ahuja v Snapdeal.com and Anr, CCI, Case No. 17 of 2014  (19 May 2014). In this case, the CCI noted that, in a quality-driven market, brand image and goodwill were important concerns and it appeared a prudent business policy that sale of products emanating from unknown/ unverified/ unauthorised sources were not encouraged/allowed.

[37]    K.C. Marketing v OPPO Mobiles MU Pvt. Ltd., CCI, Case No. 34 of 2018 (8 November 2018). In this case, the CCI accepted the submission that the restriction imposed upon a Sub-Super Distributor to not sell OPPO products outside its sales region was to protect the interests of all Sub-Super distributors/ dealers who had made an investment in OPPO distributorship and the same was not in the nature of any anti-competitive restriction.

[38]   K.C. Marketing v OPPO Mobiles MU Pvt. Ltd., CCI, Case No. 34 of 2018 (8 November 2018).

[39]   Mohit Maglani v Flipkart India Pvt Ltd, CCI, Case No. 80 of 2014 (23 April 2015).

[40]   The majority of the cases referred to in this article deal with exclusive agreements. However similar principles have been followed by the CCI in relation to other vertical agreements such a resale price maintenance and tying.

[41]  M/s Jasper lnfotech Pvt. Ltd. v M/s Kaff Appliances (India) Pvt. Ltd., CCI, Case No. 61 of 2014 (15 January 2019). Interestingly, while the CCI considered online platforms as part of the vertical chain in a case involving exclusive agreements, it took a different view while assessing a merger between Flipkart and Walmart (C-2018/05/571).

[42]    Delhi Vyapar Mahasangh v Flipkart Internet Private Limited and Ors., CCI, Case No. 40 of 2019 (13 January 2020).

[43]  Rubtub Solutions Pvt. Ltd v MakeMyTrip India Pvt. Ltd. And Anr, CCI, Case No. 01 of 2020 (24 February 2020).

[44]    Ms. Prachi Agarwal and Anr. v Swiggy, CCI, Case No. 39 of 2019 (19 June 2020). In the food e-commerce sector, the CCI when dealing with allegations of abuse of dominance (specifically unfair pricing) against Swiggy, a food delivery app, observed that Swiggy had no role to play in setting of prices. Since the allegations were unsubstantiated, the CCI did not deem it necessary to go into the definition of the relevant market and the market shares of other players and stated that no prima facie case was made out in relation to allegations of abuse of dominance against Swiggy and closed the investigation.

[45]    Lifestyle Equities C.V. and Anr. v Amazon Seller Services Private Limited and Anr., CCI, Case No. 09 of 2020 (11 September 2020).

[46]    Commission Regulation (EU) No. 330/2010. This states that It can be presumed that, where the market share held by each of the undertakings party to the agreement on the relevant market does not exceed 30%, vertical agreements which do not contain certain types of severe restrictions of competition generally lead to an improvement in production or distribution and allow consumers a fair share of the resulting benefits.

[47]    In Brazil, vertical restrictive practices should only be deemed a violation if the undertaking holds a dominant market position, which is presumed when the company or its economic group has at least 20 per cent of a relevant market.

[48]    20% market share threshold.

[49]    In Japan, for the ‘impediment of fair competition’, depending on the type of the vertical restraint, it would be considered whether a firm is ‘influential in a market’, which is first assessed by ascertaining the market share of the firm; that is, whether it has more than 20 per cent.

Read Less-