Wednesday, 5 June 2013

Hockey India Order - Sports and Competition Law

It was reported in the press a few days back that Hockey India would be found guilty of anticompetitive practices by the CCI. An information was filed in 2011 by former Indian Hockey Team Captain, Sri Dhanraj Pillai, in the backdrop of the World Series Hockey League and the sanctions imposed by National Hockey Federation - Hockey India - on the players affiliated with it. However, it seems that in majority order passed on May 31, 2013 the CCI has not found any violation of Section 3 or 4 by Hockey India. I have not read the complete order but intend to do so shortly to analyse the order.

On a preliminary reading of the findings of the order, the CCI has in exercise of its powers under Section 18 of the Competition Act, 2002 observed that a conflict of interest may arise for Hockey India in the capacity of a National Sports Federation (regulator of a sport) and as an organiser of events (as an commercial enterprise). Further CCI observed that Hockey India should put in place an 'effective internal control mechanism' to ensure that its regulatory powers are not used in any way in the process of considering and deciding on any matters relating to the commercial activities of Hockey India. This is an interesting development as in the earlier BCCI Case, the CCI had found the cricket board to have indulged in anticompetitive conduct. The area of sports and competition law have always been different from the other sectors as there is more at play than merely 'commerce'. The manner in which sports is governed is an important function and the extent to which Competition Authorities can intervene has been an issue in other jurisdictions as well. In this background, this author will try to analyse the Hockey India order and also try to compare the treatment of sports and competition law in this order and the BCCI order.

Furthermore, the author will also throw some light on the powers exercised by the Hon'ble CCI under Section 18 of the Competition Act, 2002. The CCI has in the past too exercised its powers under the said section in the form of an advisory / recommendatory jurisdiction to outline its recommendation. More will follow on this order shortly.  

Tuesday, 4 June 2013

Jindal Steel & Power & Arshiya Judgments - Appellate Jurisdiction of the COMPAT

In an earlier post, we had brought to the attention of the readers the issue pertaining to the jurisdiction of Hon'ble COMPAT pending in certain appeals before the Hon'ble COMPAT. The said issue has now been settled by Hon'ble COMPAT in two separate judgments available here and here. As discussed in the earlier posts, the observations crucial to the determination of the issue was the judgment of the Hon'ble Supreme Court in the SAIL Judgment.

In the first appeal, it was argued by the appellants who were appealing against an order passed by the CCI under Section 26 (8) of the Competition Act that the observations in the SAIL Judgment were an obiter and, therefore, not binding. However, the Hon'ble COMPAT was not impressed with such a line of argument and instead felt that the observations recorded by the Hon'ble SC were binding and applicable even in the case at hand. The Hon'ble COMPAT after quoting the law as laid down by the Hon'ble Supreme Court in the SAIL Judgment went on to hold that in the light of the negative language used in the text of the SAIL Judgment, it was clear that only those decisions, directions or orders referred to in Section 53A (1) (a) of the Competition Act were appealable and no other orders etc were appealable. Hence, an order under Section 26 (8) not being an order referred to in Section 53A (1) (a) was held to be not appealable. Furthermore, the Hon'ble COMPAT held that the Hon'ble Supreme Court had clearly interpreted the contours of Sections 53A and 53B of the Competition Act, 2002 and had clearly declared the law. Therefore, it cannot be considered to be an obiter [or in other words only pertaining to orders passed under Section 26 (1) which was the factual matrix in the SAIL Judgment] and was binding on the Hon'ble Tribunal.

The Hon'ble Tribunal also pointed out that since the question of law had already been decided by the Hon'ble SC there was no occasion for the Hon'ble COMPAT to take any different view. The Hon'ble COMPAT also observed that since the Apex Court had already decided the question of law, it was not permissible for the Hon'ble Tribunal to supply any other meaning through the application of the doctrine of casus omissus.

In the second appeal, in addition to the aforementioned arguments, it was advanced that the Section 53A (1) (a) only contained orders or directions and not decisions and that the impugned order was a decision. Since the term decision was different from an order or a decision the impugned decision was appealable. However, the Hon'ble COMPAT held that this would effectively render the term 'decisions' different from the terms directions and orders under Section 53A and lead to a contrary interpretation as advanced by the Hon'ble Supreme Court. Hence, it was not found to be acceptable. Furthermore, the Hon'ble COMPAT also held that the arguments on the applicability of the provisions of the Civil Procedure Code would not be applicable in the light of the specific statutory scheme set up through Section 53A of the Act. Also, the Hon'ble COMPAT held that sub clause (g) of Section 27 cannot be read independently with out the main provision where under a contravention of Section 3 or 4 has to be found by the CCI. Hence, on these grounds the appeals were dismissed.

Therefore, the law as it stands now has been firmly laid down to hold that Section 26 (8) orders are not appealable to COMPAT under Section 53A. It appears that the parties will have to approach the doors of the Hon'ble Supreme Court in the event they wish to advance a different interpretation to Section 53A (which interestingly was the view voiced by the Hon'ble COMPAT during the hearings too since the law was clearly laid down in the SAIL Judgment). In the meanwhile, parties can also look forward to an amendment in the law to fill this vacuum in the Appellate Jurisdiction of the Hon'ble COMPAT. At the same time, it would also be interesting to see if the parties who face a Section 26 (8) order in the meanwhile would approach a Writ Court or directly approach the Hon'ble SC under its discretionary special leave jurisdiction under Article 136 of the Constitution of India. It remains to be seen for this may not be the last of the Section 26 (8) orders.  

Friday, 22 February 2013

Appellate Jurisdiction of the Hon'ble Competition Appellate Tribunal

The Hon’ble Supreme Court in the SAIL judgment (2010) 10 SCC 744) had decided, inter alia, on the scope of the appellate jurisdiction of the Competition Appellate Tribunal (‘COMPAT’). JP had in one of the earliest posts on this blog written about this judgment. Some interesting questions on the jurisdiction of the COMPAT arise now from the said judgment and this would be addressed in the present post. To better understand the issues, it would be apposite to delve into the history of the SAIL judgment.

The specific factual context in the Sail judgment was whether an order directing the DG to initiate investigation under Section 26 (1) was appealable or not. When the case was appealed to the Hon’ble COMPAT from the order of the CCI it was argued that under Section 53B (1) of the Competition Act, 2002 (hereinafter referred to as ‘Act’) an appeal would like only in relation to a direction, decision or order referred to under Section 53A (1) (a) and it was only direction, decisions or orders referred in Section 53A (1) (a) that were appealable.  For ease of reference, Sections 53A (1) (a) and 53B (1) are extracted herein below:

“53A.(1) The Central Government shall, by notification, establish an Appellate Tribunal to be known as Competition Appellate Tribunal –

(a)                to hear and dispose of appeals against any direction issued or decision made or order passed by the Commission under sub-Sections (2) and (6) of section 26, section 27, section 28, section 31, section 32, section 33, section 38, section 39, section 43, section 43A, section 44, section 45 or section 46 of the Act;

53B.(1)The Central Government or the State Government or a local authority or enterprise or any person, aggrieved by any direction, decision or order referred to in clause (a) of section 53A may prefer an appeal to the Appellate Tribunal.

(Emphasis supplied)

Thereby, it was argued that only directions issued, decisions made or orders passed under one of the said provisions was appealable or in other words directions issued or decisions made or orders passed were used in a conjunctive sense and not a disjunctive way. Therefore, since an order under Section 26 (1) was not specifically referred under Section 53A (1) (a), such an order was not appealable.

It was held by the Hon’ble COMPAT that in the enumerated provisions there was no express provision for direction or decision[1] and, therefore, the legislative intention in Section 53A (1) (a) was to use ‘or’ in the disjunctive sense (Para 13 & 15). It was further held that the natural and ordinary meaning of the words have to be given effect as the principle rule of interpretation and uninfluenced by policy dictates (Para 17 & 18). The Hon’ble COMPAT also found support in the term ‘any’ in Section 53A (1) (a) to qualify the noun ‘direction’, ‘decision’ and ‘order (Para 18).

On appeal the Hon’ble Supreme Court held that when the legislature had specifically identified specific orders, decisions and directions to be appealable, the implication would be that all other orders, directions and decisions that have been excluded are not appealable. The Hon’ble Supreme Court held that the word ‘or’ need not be read interchangeably or substitute the word ‘or’, for the object of the Act was to provide a very limited right of appeal. In this regard, the Hon’ble Supreme Court relied upon the judgment of the Super Cassettes Industries Ltd v State of UP (2009) 10 SCC 531 wherein it was held that right of appeal is not a natural or inherent right and orders apart from the orders mentioned in the appeals provision are not appealable.

The Hon’ble Supreme Court further held that as appeal was a statutory right, such a right may be lost by a party in the face of relevant provisions of law and in the absence of a provision enabling an appeal against an order, a right to appeal against such an order may not lie.

Therefore, Hon’ble Supreme Court held that only the orders, decisions or directions under the provisions mentioned under Section 53A are appealable (viz. orders, directions or decisions under sub-Sections (2) and (6) of section 26, section 27, section 28, section 31, section 32, section 33, section 38, section 39, section 43, section 43A, section 44, section 45 or section 46). In fact the Court even observed that in the present scheme of the legislature even a direction of the CCI to the DG to investigate further under Section 26 (7) is not appealable. Also, the Hon’ble Supreme Court held that Section 53B was an indicator of the reasoning that not all orders, directions or decisions are appealable for the said provision provided that any person aggrieved by direction, decision or orders ‘referred’ to in Section 53A may prefer an appeal. The Supreme Court held that had it not been the intention to limit the appeal, Section 53B would have been worded otherwise.

Therefore, on the basis of this reasoning the Hon’ble Supreme Court held that appeals will lie only from decisions, orders or directions specifically mentioned under Section 53A (1) (a) of the Act.

The Case of Section 26 (8)

As a result of the SAIL judgment, not all orders or decisions or directions are appealable but only those that have been mentioned under Section 53A. It will be relevant to note that Section 26 (8) is not a provision referred to in Section 53A. Section 26 (8) reads as follows:

(8) If the report of the Director General referred to in sub-section (3) recommends that there is contravention of any of the provisions of this Act, and the Commission is of the opinion that further inquiry is called for, it shall inquire into such contravention in accordance with the provisions of this Act.

It may be pertinent also to note Section 26 (2) and (6) at this stage, from which appeals may lie to the COMPAT. In a case under Section 26 (2), the CCI finds that there is no prima facie case and closes the matter and under Section 26 (6) after the CCI finds a prima face case and the DG presents a report to the CCI recommending no contravention of Sections 3 or 4, the CCI thereon agrees with the recommendation of the CCI and closes the matter. However, under Section 26 (8), where the DG recommends that there is a contravention of Section 3 or 4, the CCI shall inquire into the matter thereon.
In this circumstance, the CCI may either come to a conclusion that there is a contravention of Sections 3 or 4; or come to conclusion that there is no contravention of the provisions of the Act. In the event the CCI agrees with the recommendation of the DG, it may thereon pass necessary orders or directions under Section 27 or 28 and which would be appealable before the Hon’ble COMPAT. However, in the event the CCI comes to a conclusion that there is no contravention, then Sections 27 and 28 will not be applicable as they would apply only when there is a contravention of Sections 3 or 4; Section 31 will not be applicable as it applies to combinations; Section 32 may not be applicable if the order of the CCI is not on the extraterritorial jurisdiction of the CCI; Section 33 will not be applicable for the reason that the present circumstance is not in relation to an interim order and similarly the other provisions under Section 53A will also not be attracted. Therefore, such an order of the CCI will not be an appealable order.

Therefore, as a result of the judgment passed by the Hon’ble Supreme Court, in a case where the DG holds that there is a contravention and the CCI thereon holds that there is no contravention and closes the case therewith, no appeal will lie against such an order of the CCI.

In fact it will also be relevant to note that in the Competition (Amendment) Bill, 2012 that is pending consideration before the Parliament in clause 17 it is now proposed that Section 53A would be amended to include Sections 26 (7) and (8) also as appealable orders. This thereby indicates that the kind of orders referred to above under Section 26 (8) by the CCI are not appealable orders.

Present Scenario

In fact the Hon’ble COMPAT is seized of this very point presently in one of the appeals (appeal No. 136/2012) that is pending adjudication before it. The Hon’ble COMPAT has only issued notice on the maintainability of the appeals. It has also come to my attention that the very same issue has also been raised in few other matters and are pending before the Hon’ble COMPAT. It appears that as a result of the SAIL judgment, such appeals may not be maintainable and the aggrieved parties in such cases may only approach the writ court and not COMPAT. The position, however, may change when the Competition (Amendment) Bill, 2012 is passed by Parliament, but until then it appears that the parties caught in this peculiar circumstance may not have a right of appeal to the Hon'ble COMPAT.

[1] However, contrary to the finding of the COMPAT, please see Sections 27 (a), (d), (e), (g) which makes a reference to directing enterprises and issuing appropriate directions; Section 31 (2) & (11); See also Section 42A read with Section 27, 28, 31, 32, 33;

Wednesday, 16 January 2013

St.Gallen International Competition Law Forum ICF

Dear Readers,

I am pleased to announce the forthcoming conference on competition law organised by University of St Gallen.

The 20th St.Gallen International Competition Law Forum ICF has a long standing tradition and, as in every year, numerous well-known speakers will present at the conference. As a result, the ICF will serve, once more, as one of the most important meetings points in Europe for competition/ antitrust law experts from academia and practice worldwide. 


St.Gallen International Competition Law Forum ICF - April 4th and 5th 2013 

The 20th St.Gallen International Competition Law Forum ICF will be held on April 4th and 5th 2013. Once more, it will feature a thrilling selection of hot topics in current competition law issues and some of the most distinguished speakers in the field, including Joaquín Almunia (Vice-President of the EU Commission and Commissioner for Competition), Andreas Mundt (President of the German Competition Authority) and William Kovacic (Former Commissioner of the U.S. Federal Trade Commission ). Taking place in one of Switzerland’s most beautiful cities, the St.Gallen ICF gives you the opportunity to meet, discuss and mingle with fellow competition lawyers and leading competition law experts from all over the world. Further information including a detailed programme are available on the conference website: 

Topics:                         Current issues and developments in competition law
Date:                         April 4th and 5th 2013
Location:                         St.Gallen, Switzerland
Registration:                 Registration is now open on our website ( 

If you have any questions regarding the conferrence, please contact Mr Alexander Göbel at 

Sunday, 24 June 2012

Collective Dominance, Commercial Viability and Policy Decision under Competition Act 2002

The Competition Commission of India in a recent ruling (Royal Energy Ltd v IOCL and others, MRTP Case No. 1/28, decided on May 9, 2012) has held that the decision by the Oil Marketing Companies (OMC) viz. Indian Oil Corporation Ltd, Bharat Petroleum Limited and Hindustran Petroleum Limited, to purchase bio-disel at prices determined by themselves at prices less than the manufacturing cost was not in contravention of Section 3 (anti-competitive agreements) or Section 4 (Abuse of dominant position). Despite being a short order, this case has conceptually observed on certain aspects that will be explained below in this post. 

First a little background on this case. With a view to using alternative sources of energy, the Ministry of Petroluem and Natural Gas came out with the Bio-Diesel Purchase Policy. Under this policy, the Bio-Diesel suppliers could supply bio-disel to the OMCs. The OMCs could blend the bio-diesel with the High Speed Diesel which was to be ultimately used as fuels for the vehicles. Under this policy, the OMCs were to purchase the bio-diesel that met the BIS specifications at a uniform price determined by the OMCs. As the price of High Speed Diesel was fixed & regulated, the OMCs determined the purchase price of bio-diesel by backward integration. This price was considered less than adequate and below the manufacturing cost by the suppliers of bio-diesel. This was alleged to be an anti-competitive agreement by the OMCs. The CCI ultimately held that the OMCs could not be mandated to purchase the Bio-diesel at a price higher than the price of the end product and make it commercially unviable for the OMCs to operate.
This brings to the fore the issue of whether a commercial viability test can be introduced as a defence in an investigation pertaining to Section 3 violation. For e.g. if three non-dominant enterprises wish to compete against a dominant enterprise by agreeing to act in one of the ways determined under Section 3 (3) (a) (say for instance by indirectly facilitating collusive bidding by joining forces to get the contract to the disadvantage of the dominant enterprise) resulting in better competition and for commercial viability of the enterprises then will such a conduct still be viewed to be having an appreciable adverse effect on competition for the purposes of Section 3 (1). Such an action need not necessarily result in any of the benefits identified under Section 19 (3) or may not have the effect of driving the dominant enteprise, and may be merely directed at meeting the competition posed by the dominant enterprise. Unlike the proviso to Section 4 (2) (a), Section 3 does not statutorily have the explicit 'meeting competition defence'. The action may merely result in promoting competition in the market in which the enterprises are operating - an action promoting the object of the Competition Act, 2002 and one of the duties of the CCI under Section 18. At least as held in the Royal Energy Case, there seems to be a possibility for using the commercial viability test because the subject investigation pertained to fixation of prices by direct competitors under Section 3 (3) (a).
Another issue is can commercial viability / protecction of commercial interests be used as a defence in a Section 4 contravention (apart from Section 4 (2) (a) cases). In the past in Europe it has been held that even dominant undertakings can take counter action to protect their commercial interests, however, such counter action should be proportionate to the threat taking into account the economic strength of the parties. (Case 27/76, United Brands v Commission, judgment delivered by European Court of Justice Para 189-190)

The next important observation of the CCI was that “even if an anti-competitive conduct flows from any policy of the Government, the Commission will still have jurisdiction to examine the conduct and in case of any violation suitable orders can be passed”. The Activity of policy determination by the Government may be viewed as sovereign in nature (being inalienable function of the government) and therefore, in light of Section 2 (h) of the Competition Act, 2002 and such activities may be considered outside the purview of the CCI. Even if the policy decisions are not viewed as sovereign, it will be interesting to see if the CCI would like to intervene into policy decisions of the Government. As normally a policy of deference would be adopted in matters relating to law and policy making as it is expected that it is best left to the Parliamentarians and the Government. However, in the light of the dicta in the Royal Energy case, it appears that even actions undertaken directly pursuant to a mandate under the policy of the Government would result in indirectly reviewing the policy decision.

This may lead to the CCI scrutinizing the actions of several PSUs that function under the operative directions of a particular Ministry and pursuant to policy decisions. In addition, actions taken pursuant to policy decisions of other sectoral regulators may also fall within the purview of the CCI. This only heightens the existing tension and debate whether the CCI should intervene in cases where other sectoral regulators operate. With the proposal to oust the jurisdiction of CCI in matters pertaining to acquisition and mergers of banks gaining strength[1], other sectors are also not too far behind in seeking for an exemption from the rigours competition law.[2] It will also be pertinent to note that power to exempt any enterprise from the purview of the Act under Section 54 of the Competition Act 2002 is available with the Central Government only if it is necessary in public interest or in the security of the state or to comply with any of India’s obligations under an international treaty or for enterprises performing activities that are relatable to the sovereign functions of the state. Any exemption granted pursuant to the Competition Act would have to pass any of the aforementioned tests to be clearly outside the purview of the Competition Act.

Furthermore, at a jurisprudential level, the CCI has also held in the case under discussion that the concept of collective dominance is not envisaged under Section 4 of the Competition. Collective Dominance as accepted in Europe is a case where a group of unrelated entities that are united by economic links collectively hold a dominant position in a market.[3] Although the decision does not provide any reasons for the same, the reason may be because presently Section 4 provides that no ‘enterprise or group’ should abuse its dominant position. Initially the un-amended section 4 only provided that no enterprise shall abuse its dominant position and post the 2007 amendment the term ‘group’ was specifically introduced. The definition of group is restricted to entities under the same management or control. Therefore, it may seem that collection of enterprises that do not form part of group was not considered by legislature to come within the purview of Section 4. Also, whether a concept that has its genesis outside the frontiers of India should cross the judicial borders to enter into India is a question that will have to be decided. On the other hand ordinarily it is a statutory rule that a singular word would also include a plural.[4] Therefore, by that logic enterprise would also include enterprises and a group of enterprises can abuse their dominant position. However, these issues have not been effectively raised or decided by the CCI in the said case and therefore it will still remain to be seen whether the collective dominance concept is envisaged under Section 4.

Furthermore, this decision (and the principles enshrined therein) is still to be tested by the higher judicial echelons. It will be interesting to see, if and when, this decision (or the issues) reaches the Competition Appellate Tribunal or the Supreme Court, which way would the tide of competition sway.

[1] Please see in this regard a news report in The Economic Times report on June 11, 2012 available at:
[2] Please see in this regard a news report in the Hindu Business line reported on May 29, 2012, available at:
[3] Case T-68, 77 and 78/89, Societa Italiana Vetra SpA v Commission [1992] 5 CMLR 302, Para 358
[4] Section 13 of the General Clauses Act, 1897

The Destiny of Essential Facilities in India

The Competition Commission of India (CCI) in the last three years has pro-actively adjudicated a large number of matters and has made the industry sit up and take notice of the huge penalties it has imposed.[1] The role of CCI in the days to come may have an impact not only on the competitors who are the subject of an antitrust scrutiny but may well pave the way for changes in the manner of operations of enterprises, the structures of different ‘markets’ and inevitably influence the market forces in our economy. Time will determine the role it will play. It will be interesting to see how the CCI will address several key policy and regulatory issues that it will face in the days to come. There are numerous issues that it will have to face but a leader in the pack amongst these issues would be its treatment of the vexed and often litigious issue of ‘essential facilities’.[2] This issue goes right down to the theoretical underpinnings of the free market system as it will decisively pave the way for not only antitrust jurisprudence in our country but also shape the market system.

International Application of the Doctrine

The genesis of this doctrine is normally traced back to the Terminal Railroad Association case[3], a US Supreme Court decision rendered a century ago in 1912.[4] The Terminal Railroad Association case concerned a fact situation wherein a terminal railroad association obtained control of every means of railroad access to St. Louis and the Court had to consider whether such a system by which every terminal railroad facility was controlled by the association and thereby controlled the movement of traffic into and out of St Louis would be a combination in restraint of trade.[5] In addressing this question, the Court found that the geographical and topographical situation was such that it was impossible for any railroad to pass through or even enter St. Louis without using the facilities controlled by the terminal company.[6] Furthermore, it was observed by the Court that the facilities could only be used by the members of the Association and non-members could only be admitted upon a unanimous consent of all the existing members.[7] It would also be relevant to note that the Supreme Court had identified that the terminal companies were of the greatest public utility[8] and in the extraordinary physical and topographical conditions that existed unless the terminal company was to operate as an impartial agent of all, interstate trade and commerce would be significantly impeded.[9] Finally, the Court found that the practices of terminal company were operating to the disadvantage of commerce that had to cross the river at St. Louis.[10] In this background the Court observed that it would be best to provide non-discriminatory access to the terminal facilities to non-members as well.[11] An analysis of the judgment would reveal that the Supreme Court never specifically identified the ‘essential facilities doctrine’ but however, felt that in the extraordinary physical and topographical conditions as it was practically impossible to access St Louis and as the facilities were of greatest public utility to ensure freedom of commerce it was necessary that the non-members should be allowed to the combined ownership of the facilities on just and reasonable terms. It should also be borne in mind that this was the situation at the beginning of the last century and the economic and social conditions were vastly different at that particular point of time.

The next important case on the aspect of essential facilities is the Associated Press case[12]. The case revolved around the admission policy in the Associated Press (AP), an organisation consisting of the membership of 1200 newspapers. The By Laws of the Associated Press mandated that news shall not be sold to non-AP members. Therefore, to have access to the news it was necessary to become members and restrictions (in the form of additional conditions) were imposed on the competitors of the members of the Association from gaining admission to AP.[13] The majority opinion rendered by Justice Black opined that the action was contrary to the provisions of competition and the effect of the action was to limit the opportunity of newspapers to enter new cities and the effect was to destruct competition and block new entrants into the market.[14] The Supreme Court held that by the combinations the members had surrendered completely to the association and the restraint was designed in the interest of preventing competition.[15] However, Justice Frankfurter who joined in the majority (who provided indications of the essential facilities doctrine) observed that the AP unlike other commercial entities that worked for profit had a relation to public interest in dissemination of information and further turned down the objection that this would turn AP into a public utility (as opposed to a private club) because such a categorization should not come in the way of access to news and information.[16]

Finally, in the year 2004, the US Supreme Court in the case of Verizon Communications Inc v. Law Offices of Curtis v Trinko LLP[17] held that the Supreme Court has never recognised the essential facilities doctrine.[18] The challenge under the Trinko Judgment was the denial to share network mandated under the Telecommunications Act, 1996 to competitors. Under the Telecommunications Act of 1996 local exchange carriers were mandated to provide access to their networks to competitors or new entrants and it was argued that the Verizon was providing access to its network on a discriminatory manner to the detriment of the competitors and was therefore acting contrary to the provisions of the Sherman Act. In this context the Court ruled that for an attempt to monopolise it is necessary to show in addition to the possession of monopoly power in the relevant market[19], “the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.[20] The Court further observed that directing / compelling firms to share their infrastructure would not be in line with the underlying purpose of competition law as it may lessen the incentive for enterprises to invest in economically beneficial facilities. Furthermore, it will also require the Court to act as the central planners for the industry[21] and could facilitate collusion among the parties[22] and thereby impeding the objective of the Sherman Act. The Court also noted that because of these uncertain virtues, very cautiously and only under very limited exceptional circumstances will sharing be mandated. The Court noted that the case did not fall within these exceptions.[23] In this context the Court noted that even under the essential facilities doctrine (which the Supreme Court did not feel the need to recognise) the challenge will not succeed. The Court held that the in-dispensable requirement for invoking the doctrine is the unavailability of access to the “essential facilities” and where access exists, the doctrine serves no purpose. Specifically in this case the Court held that since the Telecommunications Act of 1996 provides for sharing, there was access to facility. Therefore, in effect the Supreme Court did not even feel the need to recognise the doctrine and provided a very narrow compass for its application even in the event if it were to apply. The position of essential facilities in the European Community jurisprudence is different and is discussed below.

The concept of mandating access to facilities in Europe originated from leveraging and the special status assigned to dominant undertakings under Article 82. The first case where the reference to essential facility was used was the case of Sealink/B&I Holyhead: Interim Measures.[24] In this case Sealink owned as well as ran ferries in the Holyhead Port. B&I was also running ferries from this port and challenged the change in the time table proposed by Sealink as it would adversely disrupt the operations of B&I. In this regard, the Commission adopted interim measure and observed that Article 82[25] would be infringed if a dominant undertaking which both owns and uses an essential facility ( defined as a facility without access to which competitors cannot provide services to their customers) and refuses competitors access to that facility or grants access to competitors only on terms less favourable than it gives its own services.[26] The Commission observed that the dominant undertaking should not leverage its dominant position in one market to protect its position in another market (as in the present case operating harbours and running ferries) and where the competitor is already subject to certain level of disruption by the dominant undertaking there is a duty on the dominant undertaking not to take any action which will result in further disruption.[27] The Commission observed finally that a competitive disadvantage could not be imposed by the dominant undertaking by altering its own schedule.

Next is the landmark judgment of Magill[28] wherein the TV broadcasters obtained an injunction against Magill TV Guide Ltd from publishing comprehensive TV weekly guides. The actions of the TV broadcasters in refusing to grant licenses for weekly TV listings was successfully challenged by Magill as an abuse of a dominant position. The European Court of Justice held that the TV broadcasters were the only sources of the basic information (copyrighted TV guide) which was indispensable for the emergence of the new product (viz. weekly TV Guide) for which there was consumer demand. Furthermore, the Court found that there was no substitute for the said product and there was no justification for the refusal by the TV broadcasters and by doing so they were reserving the entire secondary market of weekly TV guides to themselves. Therefore, in directing the action of the broadcasters to be abusive the Court observed specifically that the information was indispensible and the only source and which also had significant consumer demand and thereby provided a parameter for the ‘essentiality’ of the essential facilities. Furthermore, it will be significant to note that the Court relied upon the earlier cases on refusal to deal relating to downstream markets[29] to hold that the competition in the downstream market for weekly TV Guides was reserved to themselves. Therefore, in this way they also identified the circumstance under which the doctrine had to be applied.

The next important judgment was the Oscar Bronner case[30] decided once again by the ECJ. The challenge in this case pertains to the denial by Mediaprint to allow Oscar Bronner to be part of its home delivery system for distribution of newspapers. It was argued that access to the nationwide system for distribution was essential for sale of its newspaper.[31] The Court observed that the refusal to supply raw materials or services, which were indispensible to carry on the rival’s business, to an undertaking competing with the dominant undertaking was previously held abusive by the ECJ in the context where the conduct was likely to eliminate all competition on that part of the undertaking. Further referring to the Magill Case, the Court observed that even if that test were to be applied to the case at hand other modes for distributing newspaper even though less advantageous existed and was used by other newspaper publishers[32] and there were no technical, legal or economic obstacle for the newspaper publishers to develop their own nationwide home delivery scheme for distributing newspapers.[33] Finally the Court held that to demonstrate that developing a potential alternative distribution system was not realistic or not economically viable and therefore the system was indispensible, it was necessary to demonstrate that it is not economically viable to create a second home-delivery scheme for the distribution of daily newspapers with a circulation comparable to that of the daily newspapers distributed by the existing scheme[34] as opposed to saying that it was not economically viable as a result of the small circulation of the newspapers to be circulated.[35] In this background, it was held that the refusal by the dominant undertaking to access to its distribution / home delivery system was not an abuse of a dominant position.

Finally, we shall discuss the Court of First Instance (CFI) Judgment in the Microsoft case[36], wherein the case related to the non-disclosure by Microsoft of interoperable information. While addressing the indispensability requirement or the degree of interoperability that was required the Court held that the standard that has to be used is with reference to what is necessary to remain viably on the market.[37] The CFI justified this on the interpretation that Article 82 deals with conduct that hinder the maintenance of effective competition on the market and that furthermore the jurisprudence of ECJ imposed a special responsibility on the dominant undertakings not to impair genuine undistorted competition in the market.[38] The CFI then found that the finding of the Commission that the ‘interoperability with the client PC operating system is of significant competitive importance in the market for work group server operating systems’ was correct and Microsoft could not prove otherwise.[39] Microsoft also argued that the test applied by the Commission was incorrect[40] in the light of the earlier cases pertaining to abuse of dominance where the refusal should have been likely to eliminate all competition or in other words there is a high probability that the conduct will have such a result.[41] The CFI held that this was only a matter of terminology[42] and that the objective of Article 82 would not be served if the Commission were to wait till there is no competition in the market. Furthermore, the CFI held that the standard that needs to be demonstrated is the refusal is likely to eliminate ‘all effective competition’ on the market.[43] Finally the Court observed that the practice of not granting interoperable information would amount to an abuse of a dominant position. It will be relevant to observe that the Microsoft judgment has to be viewed in the light of the specific market situation it dealt with (viz. software and high technology market which was characterised by network effects) and what would be the effect of the actions of Microsoft in future on such a market where it is necessary to have interoperable information.

Applicability of the Doctrine in India

The political, economic and social milieu of India has been very distinct from the western countries and this remains a very important parameter when a doctrine that has its genesis in the western world has to be applied in our context. Since independence in 1947 till the early 1990s India remained under the License Raj and the industries were regulated and tied down by various government policies. The industries could develop only in accordance with the dictates of the Government and their development and regulation was significantly kept under control by New Delhi. Furthermore, the Government also gave special impetus to Public Sector Enterprises to grow and serve the dual role of free enterprise and welfare state. During this time the Government through the Public Sector Enterprises has developed infrastructure and various facilities. Post the liberalisation era, the industries were de-regulated and private participation and investment has vastly increased. However, a natural distortion existed in the level playing field as the Public Sector Enterprises had access to their own resources and which were not immediately available to the new private entrants. It will also be worthwhile to mention that since the early days of privatisation various private players have also made significant investments into various facilities. At this juncture, various entities operating or looking to enter into a market may want to have access to the various facilities and infrastructures developed by PSUs and various private enterprises who had invested in infrastructure. The question would be whether the essential facilities doctrine should be applicable in India? This is an interesting question that CCI will face.

The issues will range from the applicability of the doctrine itself in the first case. Section 4 of the Competition Act provides that limiting markets, practices resulting in denial of market access and leverage to protect another market are specific instances of abuse of dominant position. Whether essential facilities will be covered under any of these categories will be at the forefront of the applicability of the doctrine in India. The US Supreme Court has already felt the need not to recognise the doctrine. The US SC in Verizon has also identified that there are uncertain virtues in forced sharing.[44] Therefore, the principle question would be whether the doctrine should actually be applied in India. Furthermore, the Courts in India have time and again cautioned from applying principles that have been developed outside India to be applied in the Indian context. Should a doctrine actually originating outside India be applied in India and that too which has not been recognised in US (seen as a leader in antitrust jurisprudence). Furthermore, regard should be had to the fact that the courts in Europe have applied the essential facilities doctrine in the background of the Special Responsibility of the Dominant Undertaking (a concept that is alien to Indian jurisprudence) and in the light of teleological interpretation adopted to protect the common market in Europe and the overall purpose of integration of Europe.

If at all the doctrine should be applied under what circumstances should the doctrine be applied will be the next question – should the infrastructure be a public utility or be of great public importance for the development of commerce and trade in India. Furthermore, the more important question would be on the determination of 'essentiality'. Should the facility be indispensable (impracticable to replicate as observed in Terminal Railroad or facility without which services cannot be provided as observed in Sealink or indispensable to provide a product as mentioned in the Magill case) or should it be viable for competition (as observed by CFI in the Microsoft judgment). This would be a key factor and it is necessary before arriving at such a decision to balance the interest of the innovators and the investors of infrastructure else free riders may take undue advantage. Last but not the least would be to check after determining ‘essentiality’ when can the doctrine be applied – is it in a situation when the conduct is likely to eliminate all competition (Magill or Oscar Bronner) or it is likely to eliminate all effective competition in the market (as in Microsoft Judgment). In addition, crucial to the determination of this issue would be the determination of the relevant market and whether the features of essentiality and applicability of other conditions are applicable in that particular relevant market. A key ingredient for determining the abuse of dominant position under Section 4 is the relevant market. Economic tools and data will have to be clearly adduced to suggest in determining the relevant market and further it has to be used in determining the viability or essentiality of a facility.

It will also not be out of place to mention that the Indian legislators / policy makers too have, whenever felt necessary mandated access to information / resources like in the case of the interconnection agreements for telecom and open access in the case of the electricity distribution. Therefore, the CCI in this circumstance when it seeks to apply the essential facilities doctrine would not only be donning the role of adjudging the illegal practices on the market but may also have to wear the cap of a policy maker. It will be interesting to see how the CCI applies this doctrine and instead of applying the doctrine in the form developed in the western jurisdictions, the Indian economic, social and market conditions should be taken into consideration while adjudging upon the access to ‘essential facilities’ for this is where the destiny of the essential infrastructure in India lies.

[1] Notably among these being the DLF case and the recent cement cartelisation case
[2] In an ongoing CCI investigation the issue of access to essential facilities has already been raised
[3] 224 US 383
[4] Although the case by itself does not refer to the essential facilities doctrine
[5] Supra note 3 at Pg 394
[6] Id at Pg 397
[7] Id at 399-400
[8] Id at Pg 402
[9] Id at Pg 405; In this regard, the Supreme Court relied upon the evidence of an expert witness who had stated that the unification of the terminal systems should be the agent of every company and that it would be the greatest public utility and of immeasurable advantage to commerce, state and interstate Id at Pg 405-406
[10] Ibid
[11] Id at Pg 411
[12] 326 US 1
[13] Id at Pg 10-11
[14] Id at Pg 13-14
[15] Id at 19
[16] Id at Pg 29
[17] 540 US 398
[18] Id at Pg 410 and 411 – The Court observed they have never recognised such a doctrine (as in the essential facilities doctrine) but also observed that they do not feel the need to recognise it or to repudiate it in the circumstances of the case at hand.
[19] Comparable to the dominant position under Section 4 of the Competition Act, 2002
[20] Id at Pg 407
[21] Court observed that in such a role the Court will have to identify the proper price, quantity, and other terms of dealing-a role for which they are ill suited
[22] Id at Pg 407 – 408. Furthermore, the Court also observed that the virtues of forced sharing are uncertain and it is difficult to identify and remedy the anticompetitive
[23] Id at Pg 409-410
[24] [1992] 5 CMLR 255
[25] Provision similar to Section 4 relating to abuse of dominant position
[26] Para 41,
[27] Id at Para 41 and 42
[28] Cases C-241/-1/91, P, RTE & ITP v Commission [1995] 4 CMLR 718
[29] Joined Cases 6/73 and 7/73 Commercial Solvents v Commission [1974] ECR 223, Para 25
[30] Case C-7/97, Oscar Bronner GmbH & Co KG v Mediaprint [1999] 4 CMLR 112
[31] Id at Para 37
[32] Id at Para 43
[33] Id at Para 44
[34] Id at Para 46
[35] Id at Para 45
[36] Case T-201/04, Microsoft v Commission [2007] ECR II-2601
[37] Id at Para 229
[38] Ibid
[39] Id at Para 381
[40] The Commission used the test whether the refusal gave risk of elimination of competition
[41] Id at Para 560
[42] Id at Para 561
[43] Id at Para 563
[44] Noted Antitrust Commentator Philip Areeda has commented in his famous article that no case provides a consistent rationale for essential facilities or explores the social costs and benefit of requiring a creator to share with a rival, See his article Essential Facilities: An Epithet in need of limiting Principles, 58 Antitrust LJ 841