Appellant Final.docx

034-A

BEFORE THE HONOURABLE COMPETITION APPELLATE TRIBUNAL OF BOHEMIA, AT RIVERDALE APPEAL FILED UNDER SECTION 53B OF THE BOHEMIAN COMPETITION ACT, 2002 APPEAL NO. _____/2017

…APPELLANT

DYLON NUTRICIA V.

1. COMPETITION COMMISSION OF BOHEMIA 2. MOTHER CARE AND CHILD CARE 3. RETAILERS’ ASSOCIATION OF MILK 4. ADIVA REGINA CATTLE FEED LTD. 5. BRICK CATTLE FEED LTD. 6. CAUTIOUS CATTLE FEED LTD. …RESPONDENT

7. DETRO CATTLE FEED LTD.

TOGETHER WITH APPLICATION FOR COMPENSATION FILED UNDER SECTION 53N OF THE BOHEMIAN COMPETITION ACT, 2002 APPLICATION NO. ______/2017

RETAILERS’ ASSOCIATION OF MILK

…APPLICANT V.

…RESPONDENT

DYLON NUTRICIA

MEMORANDUM FILED ON BEHALF OF THE APPELLANT

TABLE OF CONTENTS

LIST OF ABBREVIATIONS ................................................................................................. I INDEX OF AUTHORITIES .................................................................................................. II STATEMENT OF JURISDICTION ................................................................................. VIII STATEMENT OF FACTS ................................................................................................... IX STATEMENT OF ISSUES ................................................................................................. XII ISSUE 1: WHETHER THE FOUR CATTLE FEED MANUFACTURERS HAVE FORMED A CARTEL AND ENTERED INTO AN ANTI-COMPETITIVE AGREEMENT? ........................................................... XII

ISSUE 2: WHETHER DYLON

HAS ABUSED ITS DOMINANT POSITION IN THE RELEVANT

MARKET BY CHARGING EXCESSIVE PRICES? ......................................................................... XII

ISSUE 3: WHETHER

THE IMPOSITION AND QUANTUM OF PENALTY BY THE

CCB ON DYLON

JUSTIFIED? ........................................................................................................................... XII

ISSUE 4: WHETHER

THE APPLICATION FOR COMPENSATION UNDER

SECTION 53N

IS

MAINTAINABLE? .................................................................................................................. XII

SUMMARY OF ARGUMENTS ........................................................................................ XIII WRITTEN SUBMISSIONS .................................................................................................... 1 CONTENTION 1: THAT ADIVA, BRICK, CAUTIOUS AND DETRO HAVE FORMED A CARTEL AND HAVE ENTERED INTO AN ANTI-COMPETITIVE AGREEMENT. . 1 1.1 That the available evidence is sufficient to prove cartelization and the existence of an anti-competitive agreement. ............................................................................................... 1 1.2 That Adiva, Brick, Cautious & Detro are not a part of a ‘single economic entity’. .... 5

CONTENTION 2: THAT THERE HAS BEEN NO ABUSE OF DOMINANCE BY DYLON. ............................................................................................................................... 10 2.1 That the relevant market is ‘processing and sale of milk in Bohemia’. ..................... 10 2.2 That Dylon is not dominant in the relevant market so defined. ................................. 14 2.3 That arguendo Dylon is found to be dominant, its conduct was not abusive. ........... 17 CONTENTION 3: THAT THE IMPOSITION AND QUANTUM OF PENALTY BY THE CCB ON DYLON IS UNJUSTIFIED. ................................................................................ 19 3.1 That penalty must be imposed with respect to the relevant turnover. ....................... 19 3.2 That other mitigating factors must be considered. ..................................................... 21 CONTENTION 4:

THAT THE APPLICATION FOR COMPENSATION UNDER

SECTION 53N IS NOT MAINTAINABLE. ....................................................................... 24 4.1 That the application for compensation is premature. ................................................. 24 4.2 That RAM has no locus standi to file the application. .............................................. 26 PRAYER ............................................................................................................................... XV

LIST OF ABBREVIATIONS

§

:

Section

¶

:

Paragraph

AC

:

Appeals Cases

AIR

:

All India Reporter

CAT

:

Competition Appeals Tribunal

CCB

:

Competition Commission of Bohemia

CCI

:

Competition Commission of India

CMLR

:

Competition Law Report

COMPAT

:

Competition Appellate Tribunal

CompLR

:

Competition Law Reporter

DG

:

Director General

ECR

:

European Court Reports

EU

:

European Union

FMCG

:

Fast Moving Consumer Goods

OFT

:

Office of Fair Trading

TFEU

:

Treaty on the Functioning of the European Union

I

INDEX OF AUTHORITIES

STATUTES & TREATIES 

Code of Civil Procedure, 1908………………………………………………………...…29



Companies Act, 2013……………………………………………………………………...5



Competition Act, 2002………………………………………………………………passim



Sherman Antitrust Act, 1890……………………………………………………………..28



Treaty on the Functioning of the European Union………………………………………...7

BOOKS & ARTICLES 

ABIR ROY & JAYANT KUMAR, COMPETITION LAW

IN INDIA

(2nd ed. Eastern Law House

2014)…………………………………………………………………………..…….…4, 12 

ALISON JONES & BRENDA SUFRIN, EC COMPETITION LAW (3rd ed. Oxford University Press 2008)…………………………………………………………………………………...…17



G.P. SINGH, PRINCIPLES OF STATUTORY INTERPRETATION (8th ed. Wadhwa and Company Nagpur 2001)……………………………………………………………………………..25



MARTIN SMITH, COMPETITION LAW: ENFORCEMENT & PROCEDURE (1st ed. Butterworths 2001)…………………………………………………………………………………..….22



RICHARD WHISH & DAVID BAILEY, COMPETITION LAW (8th ed. Oxford University Press 2015)………………………………………………………………………………….......14



S.M. DUGAR, GUIDE

TO

COMPETITION LAW: VOLUME 1 (U.P. Mathur ed., 5th ed.

LexisNexis 2010)………………………………………………………………………...29 

Richard Whish, Control of Cartels and other Anti-Competitive Agreements, in COMPETITION LAW TODAY: CONCEPTS, ISSUES,

AND THE

LAW

IN

PRACTICE 41 (Vinod

Dhall ed. 1st ed. 2007)………………………………………………………………...…...3

II

DIRECTIVES & GUIDELINES 

Guidance on the Commission's Enforcement Priorities in Applying Article 82 of the EC Treaty to Abusive Exclusionary Conduct by Dominant Undertakings, Information from European Union Institutions and Bodies (2009/C 45/02)…………………………..……14



EU Directive on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union (2014/104/EU1)……………………………………………………25, 27



Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (the EC Merger Regulation), OJ L 24……………15

ARTICLES, PAPERS, & REPORTS 

Amitabh Kumar, Excessive Pricing – An Abuse of Dominance, 1 COMP. L. REP. 88 (2011)………………………………………………………………………..…………...17



Baker and McKenzie, Global Guide to Competition Litigation: India, 4 (2012), http://www.hhp.co.id/files/Uploads/Documents/Global%20Antitrust%20&%20Competiti on/Guide%20to%20Competition%20Litigation/India.pdf ...............................................24



Dean Williamson, Organization, Control and the Single Entity Defence in Antitrust, 5 J. COMP. L. & ECO. 724 (2009)……………………………………………………………....6



Earl E. Pollock, Standing To Sue, Remoteness Of Injury, And The Passing-On Doctrine, 32 ANTITRUST L. J. 5 (1966)……………………………………………………………...28



European Commission Notice on the Definition of Relevant Market for the Purposes of Community Competition Law (97/C 372/03)……………………………………………10



Jonathan Baker, Market Definition: An Analytical Overview, 74 ANTITRUST L. J. 129 (2007).…..………………………………………………………………………………..11



Mélanie Thill-Tayara, Holding On To The “Holding Out Doctrine”: The French Approach Towards Intra-Group Conspiracy, 24 EUR. COMP. L. REV. 553 (2003)…..……8 III



Okeoghene Odudu & David Bailey, The Single Economic Entity Doctrine In EU Competition Law, 51 COM. MAR. L. REV. 1721 (2014)…………………………………....8



Organisation for Economic Cooperation & Development, Prosecuting Cartels Without Direct Evidence of Agreement, POLICY BRIEF, 1 (June 2007) http://www.ciaonet.org/attachments/11327/uploads............................................................1



Pieter Van Cleynenbreugel, Single Entity Tests in U.S. Antitrust And EU Competition Law, SSRN, http://ssrn.com/abstract=1889232 (accessed on 2nd February 2017, at 1600 hours)………………………………………………………………………………………6



Report of High Level Committee on Competition Policy and Law (SVS Raghavan Committee Report) 2000…………………………………………………………………15



The Unilateral Conduct Working Group, Assessment of Dominance, INTERNATIONAL COMPETITION NETWORK, 25 (May 2011), http://www.internationalcompetitionnetwork.org/uploads/library/doc752.pdf.................16



Tjarda Desiderius Oscar van der Vijver, Objective Justification and Prima Facie Anticompetitive Unilateral Conduct: An Exploration of EU Law and Beyond (Europa Institute, Faculty of Law, Leiden University 2014)...……………………………………18

INDIAN CASE LAW 

Bihta Co-operative Development and Cane Marketing Union Ltd v Bank of Bihar, AIR 1967 SC 389……………………………………………………………………………...25



Borosil Glass Works Ltd. Employees Union v. D.D. Bambode, AIR 2001 SC 378….…25



Builders Association of India v. Cement Manufacturers’ Association & Ors., Case No. 29 of 2010 (31st August 2016)………………………………………………………………..4



DLF Ltd. v. Competition Commission of India and Ors., (2014) 2 CompLR 1…………16



ECP Industries Ltd. v. Competition Commission of India, (2016) Comp AT 85……20, 21

IV



Excel Crop Care Ltd. v. Competition Commission of India and Ors., (2013) Comp AT 146……………………………………………………………………………………19, 22



Film and TV Producers Guild of India v. Multiplex Association of India, Mumbai and Ors., Case No. 37/2011 (3rd January 2013)……………………………………………..…3



GlaxoSmithKline Pharmaceuticals Ltd. v. Competition Commission of India and Ors., Appeal No. 85/2015 (8th November 2016)……………………………………………….21



Global Tax Free Traders v. William Grant & Sons Ltd. & Ors., 2015 (2) CompLR 503………………………………………………………………………………………..13



Hindustan Steel Ltd. v. State of Orissa, AIR 1970 SC 253…………………………..21, 22



Hyderabad Cylinders Pvt. Ltd. v. Competition Commission of India, 2016 (2) CompLR 886……………………………………….……………………………………………….21



International Cylinder (P) Ltd v. Competition of India & Ors., (2013) Comp AT 166…21



MDD Medical Systems India Pvt. Ltd v. Foundation for Common Cause & People Awareness, (2013) Comp AT 56…………………………………………………………22



National Insurance Co. v. CCI, Appeal No. 94/2015 (9th December 2016)……………....9



Re: National Insurance Co. Ltd., Case No. 02/2014 decided on 10th July 2015………......8



Re: Superfine Typewriters, UTP Enquiry No. 429/1987………………………………...26



Shamsher Kataria v. Honda Siel Cars & Ors., Case NO. 03/2011 (CCI)…………………9



Sri Rama Agency v. Mondelez India Foods Pvt. Ltd., Case No. 58 of 2015…………….11



Toyota Kirloskar Motor Pvt. Ltd. v. Shamsher Kataria & Ors., Appeal No. 60/2014 (9th December 2016)………………………………………………….……………………9, 20



Vimal Singh Rajput v. CCI, Appeal No. 27/2016 (25th May 2016)……..……………….20

EUROPEAN CASE LAW 

AEG-Telefunken AG v. High Authority of the ECSC, (1983) ECR 3151………………..7

V



Ajinomoto Eurolysine v. SNC Doux Aliments Bretagne and others, No. 09-15816 (15th June 2010)………………………………………………………………………………..27



British Airways v. Commission, (2003) ECR II-5917……………………………….16, 17



Centre Belge d’Etudes de Marche Telemarketing v. CLT, (1985) ECR 3261……...17, 18



Comateb and Ors v. Directeur General des Douanes et Droits Indirects, (1997) ECR I165………………………………………………………………………………………..27



Coopérative Le Gouessant and Sofral v Ajinomoto Eurolysine, No. 11-18495 (15th May 2012)……………………………………………………………………………………...27



Eurofix-Bauco v. Hilti, (1988) OJ L65/19…………………………………………...15, 16



Express Dairy v. IBAP, (1980) ECR 1887……………………………………………….27



General Quimicia & Ors. v. Commission, (2011) ECR I-1………………………………6



Hoffmann-La Roche & Co. AG v. Commission, (1979) ECR 46……………….15, 16, 17



Imperial Chemical Industries Ltd. v. Commission of the European Communities, (1972) ECR 619……………………………………………………………………………….…..5



Ireks-Arkady v. Council and Commission, (1979) ECR 2955…………………………..27



Just v. Danish Ministry for Fiscal Affairs, (1980) ECR 501……………………………..27



Mannesman AG v. High Authority of the ECSC, (1962) ECR 357…………………...….7



Napier Brown v. British Sugar, 1988 OJ (L 284) 41…………………………………….16



Napp Pharmaceutical Holdings Ltd. & Subsidiaries v. Director General of Fair Trading, (2002) CAT 1……………………………………………………………………………...2



Nokes v. Doncaster Amalgamated Collieries Ltd., (1940) AC 1014…………………….25



PO-Michelin, OJ (2002) L 143/1………………………………………………….……..16



Registrar of Restrictive Trade Agreements v. WH Smith & Sons Ltd., (1969) 3 All ER 1065………………………………………………………………………………………..2



Sainsbury’s Supermarket Ltd. v. Mastercard Incorporated & Ors., (2016) CAT 11……26 VI



SNC Doux Aliments Bretagne and others v Société Ajinomoto Eurolysine, No. 10/18285 (27th February 2014)……………………………………………………………………...27



Solvay v. Commission, (1996) 5 CMLR 57……………………………………………..22



Stora Koppperbergs Berlgslags AB v. Commission, (2000) ECR I-9925………………...7



Tesco Stores Ltd. v. Office of Fair Trading, (2012) CAT 31……………………………..2



Tetra Pak International SA v. Commission of the European Communities, (1996) ECR I05951…………………………………………………………………………………11, 15



United Brands v. Commission, (1978) ECR 207……………………………..….16, 17, 18



Viho Europe BV v. Commission of the European Communities, (1996) ECR I-5457…...7

AMERICAN CASE LAW 

American Needle Inc. v. National Football League, 560 US 183 (2010)………………....6



American Tobacco Co. v. United States, 328 US 781 (1946)…………………………….4



Elite Logistics Corp. v. MOL American, Inc., Case No. CV 11-02952 DDP (2nd February, 2016)……………………………………………………………………………………...28



Image Technical Services Inc. v. Eastman Kodak Co., 125 F.3d 1195 (9th Cir. 1997)….10



Monsanto Co. v. Spray-Rite Services Corp., 465 US 752 (1984)…………………………2



United States v. E.I. du Pont de Nemours & Co., 351 US 377 (1956)…………………..11

CASE LAW FROM OTHER JURISDICTIONS 

Latvia Hens’ Egg Case, (1980) SCR 158………………………………………………….3



Sao Paulo Airline Case, Merger File No. 08012.009497/2010-84………………………..3



Southern Pipeline Contractors and Anr. v. Competition Commission, (2011) ZACA C6………………...………………………………………………………………………20

VII

STATEMENT OF JURISDICTION

IN RELATION TO THE APPEAL THE APPELLANT HUMBLY INVOKES THE JURISDICTION OF THE HONOURABLE COMPETITION APPELLATE TRIBUNAL UNDER SECTION 53B OF THE BOHEMIAN COMPETITION ACT, 2002 TO APPEAL AGAINST THE ORDER PASSED BY THE COMPETITION COMMISSION OF BOHEMIA UNDER

SECTION 26 OF THE ACT.

IN RELATION TO THE APPLICATION FOR COMPENSATION THE APPELLANT (RESPONDING TO THIS APPLICATION) HUMBLY SUBMITS TO THE JURISDICTION OF THE HONOURABLE COMPETITION APPELLATE TRIBUNAL AS INVOKED BY THE 3RD

RESPONDENT, RETAILERS’ ASSOCIATION OF MILK (APPLICANT FOR THE PURPOSE OF THIS APPLICATION). RETAILERS’ ASSOCIATION OF MILK HAS APPROACHED THE HONOURABLE TRIBUNAL UNDER SECTION 53N OF THE BOHEMIAN COMPETITION ACT, 2002 TO APPLY FOR COMPENSATION.

The Honourable Competition Appellate Tribunal has decided to hear the appeal and the application together.

VIII

STATEMENT OF FACTS

I. BACKGROUND Bohemia is a republic in South Asia, with laws pari materia to India, including the Bohemian Competition Act, 2002. In Bohemia, 25 per cent of the milk and dairy industry consists of the local, unorganised sector and the remaining 75 per cent is jointly held by Anmol, Dairy Fresh Ltd. (Dairy Fresh), Farm Everyday and Dylon Nutricia (Dylon). While the other three milk manufacturers have been functioning from Bohemia, Dylon is a world nutrition chain that has recently set-up business in Bohemia. In October-November 2012, Acme Group Plc (Acme), a global giant in the animal husbandry business, looking to capitalize the potential for growth in the Bohemian economy, set up four joint ventures in the business of cattle feed – Adiva Regina Cattle Feed Ltd. (Adiva), Brick Cattle Feed Ltd. (Brick), Cautious Cattle Feed Ltd. (Cautious), and Detro Cattle Feed Ltd. (Detro). The joint ventures have a common Research & Development (R&D) Agreement to meet the standards of the Cattle Feed Regulations, 2012 that were implemented after an incident where poisoned cattle feed was fed to the cattle, resulting in the death of 50,000 cows and buffaloes. There was a global recession in 2014, the effects of which were felt particularly across the unorganised and FMCG sectors in Bohemia. II. INFORMATION AGAINST DYLON NUTRICIA In May 2016, Mother Care and Child Care (MCC) and Retailers’ Association of Milk (RAM) filed information against Dylon, alleging abuse of its dominant position for charging an increased price for its packaged milk, following the global recession. Accordingly, the CCB

IX

instructed the DG to carry out an investigation and submit a report regarding the same. It was found that there was an increase in the price of milk by all milk suppliers. The DG sought information regarding a breakdown of their exact costs, when Dylon cited its extensive R&D expenses in respect of superior technology and packaging. Dylon also brought to the DG’s notice the increased prices of cattle feed, a vital factor behind the increase in the price of milk. III. INFORMATION AGAINST ADIVA, BRICK, CAUTIOUS AND DETRO During the pendency of the investigation, Dylon filed information before the CCB against Adiva, Brick, Cautious and Detro for cartelization and their role in limiting and controlling the production and supply of cattle feed between the months of January and March 2015, leading to an increase in the price of cattle feed between April to July 2015. This was also passed on to the DG and both the investigations were clubbed. IV. REPORT OF DG’S INVESTIGATION The DG in his final report found Dylon liable for abusing its dominant position by charging excessive prices. The DG rejected Dylon’s suggested relevant market definition and instead chose to define the relevant market as ‘processing and sale of packaged milk’. The DG found Dylon to be dominant in this market. The DG did not take into account the argument that the increased price was due to excessively high cattle feed prices was rejected. However, the DG found Adiva, Brick, Cautious and Detro to have formed a cartel and colluded to have curtailed the supply of cattle feed, leading to a subsequent rise in prices. This was based on several pieces of evidence uncovered during the course of the DG’s investigation.

X

V. IMPUGNED ORDER The CCB upheld the findings of the DG with respect to Dylon Nutricia and found it in contravention of Section 4(2)(a)(ii), on the ground that Dylon had benefited from the significant increase in price even if there was an increase in the cost of cattle feed. With respect to the four cattle manufacturers, the CCB accepted their contention that there could be no collusive agreement or cartelization between them since they were a part of a single economic entity. In light of these findings, the CCB ordered Dylon to cease and desist charging excessive prices as well as the imposition of a penalty amounting to 10 per cent of their average turnover for the preceding three years. VI. DISPUTE BEFORE THE TRIBUNAL Dylon preferred an appeal under Section 53B of the Competition Act to the Competition Appellate Tribunal against both the findings of the CCB. It also challenged the imposition and quantum of the penalty ordered by the CCB. Along with this, RAM filed an application for compensation for recovery of damages and loss from Dylon under Section 53N of the Act. The COMPAT has decided to hear the appeal and the application together.

XI

STATEMENT OF ISSUES

ISSUE 1: WHETHER THE FOUR CATTLE FEED MANUFACTURERS HAVE FORMED A CARTEL AND ENTERED INTO AN ANTI-COMPETITIVE AGREEMENT?

ISSUE 2: WHETHER DYLON

HAS ABUSED ITS DOMINANT POSITION IN THE RELEVANT

MARKET BY CHARGING EXCESSIVE PRICES?

ISSUE 3: WHETHER THE IMPOSITION AND QUANTUM OF PENALTY BY THE CCB ON DYLON JUSTIFIED?

ISSUE 4: WHETHER

THE APPLICATION FOR COMPENSATION UNDER

MAINTAINABLE?

XII

SECTION 53N

IS

SUMMARY OF ARGUMENTS

CONTENTION 1: That Adiva, Brick, Cautious and Detro have formed a cartel and have entered into an anti-competitive agreement. The Respondent cattle feed manufacturers have contravened Section 3(3) of the Competition Act, 2002 by forming a cartel in view of the following arguments – firstly, the evidence available against them is sufficient to establish contravention. Several pieces of communication and economic circumstantial evidence are available, that are considered adequate to adjudge competition law cases. Secondly, these Respondents are not a part of a single economic entity, as they competing with each other in the same market, and their parent entity does not exercise decisive control over their functions and policies. CONTENTION 2: That there is no abuse of dominance by Dylon in the relevant market. The Appellant has not infringed Section 4(2)(a)(ii) of the Competition Act, 2002, in light of the following arguments – firstly, the relevant market in the present case is ‘processing and sale of milk in Bohemia’, based on the factors of end-use and consumer preferences that must be taken as a whole. Secondly, there is intense competition in the relevant market and no milk supplier enjoys dominant share of this market. The other factors of durability, size and distribution networks also point away from the Appellant holding a dominant position. Thirdly, even if, arguendo, the Appellant is found to be dominant in the relevant market, it has not abused its dominance. The increase in the price of milk was not done with a view to maximise profits but to recover the costs that had surged due the increase in the price of cattle feed.

XIII

CONTENTION 3: That the imposition and quantum of penalty by CCB on Dylon is unjustified. The imposition of penalty on the Appellant is unjustified, since there has been no abuse of dominance on the Appellant’s part. Further, even if infringement is found, the quantum of penalty is unwarranted. Firstly, the penalty has to be imposed on the relevant turnover, as has been held by COMPAT in various cases, whereas the CCB has imposed on the total turnover. Secondly, the CCB has failed to take into account several mitigating factors including the high prices of cattle feed and the absence of any mala fide intention on the Appellant’s part in charging the high prices. CONTENTION 4: That the application for compensation filed by RAM under Section 53N is not maintainable. The application for compensation filed by RAM cannot be maintained before the COMPAT in view of the following – firstly, the application is premature. Compensation can be applied for only after the dispute has been determined, while in the present case it remains to be adjudicated before the COMPAT. Secondly, RAM and the dairy retailers it represents have suffered no loss or damage due to the increase in price of milk, as this cost has been passed on to the consumers. The RAM does not represent the consumers and even if RAM has filed a class action suit, it does not adhere to the preconditions of such a suit.

XIV

WRITTEN SUBMISSIONS

CONTENTION 1: THAT ADIVA, BRICK, CAUTIOUS AND DETRO HAVE FORMED A CARTEL AND HAVE ENTERED INTO AN ANTI-COMPETITIVE AGREEMENT.

1. According to Section 3(3) of the Bohemian Competition Act, 2002, any agreement between enterprises or association of enterprises engaged in identical or similar trade of goods or provision of services that directly or indirectly determines sale or purchase prices, or limits or controls production or supply, shall be presumed to have an adverse effect on competition. Cartels, which are associations that control or attempt to control these factors 1, are also presumed to have such effect. Such are agreements are void2 and prohibited3. 2. It is humbly contended that the concerned respondents – Adiva, Brick, Cautious and Detro, have contravened Section 3 of the Act by entering into an anti-competitive agreement and engaging in a cartel. The submission in this regard is two-fold: 1.1 That the available evidence is sufficient to prove cartelization and the existence of an anti-competitive agreement. 3. Circumstantial evidence includes evidence of communications among suspected cartel operators and economic evidence concerning the market and the conduct of those participating in it that suggests concerted action. 4 Under the Competition Act, 2002, circumstantial evidence is permissible on record if it reasonably justifies the claim of

1

§ 2(c), Competition Act, 2002.

2

§ 3(2), Competition Act, 2002.

3

§ 3(1), Competition Act, 2002.

4

Organisation for Economic Cooperation & Development, Prosecuting Cartels Without Direct Evidence of Agreement, POLICY BRIEF, 1 (June 2007) http://www.ciaonet.org/attachments/11327/uploads.

1

concerted action to achieve an unlawful objective.5 The nature of the Act being economic legislation, it is necessary to make an economic analysis on the basis of practical experience and strict standards of proof beyond reasonable doubt are not necessary. The recognized standard of proof in European and Indian competition law jurisprudence to prove the existence or a cartel or an anti-competitive agreement is preponderance of probabilities6, which can be established with reliance on circumstantial evidence alone. 4. The importance of circumstantial evidence to prove the existence of a cartel and an anticompetitive agreement arises due to the inherent secrecy involved in the operation of a cartel. Lord Denning has famously commented upon this covertness- “People who combine together, to keep up prices, do not shout it from the housetops. They keep it quiet. They make their own arrangements in the cellar where no one can see. They will not put anything into writing nor even into words. A nod or a wink will do.” 7 5. In the present case, the circumstantial evidence available is of two types – communication and economic, both of which are discussed hence. COMMUNICATION EVIDENCE 6. Communication evidence suggests that the concerned persons communicated or met, but does not include the contents of their communications. 8 Even so, it is considered

5

Monsanto Co. v. Spray-Rite Service Corp., 465 US 752 (1984), at 768.

6

Tesco Stores Ltd. v. Office of Fair Trading, (2012) CAT 31, at ¶ 88; Napp Pharmaceutical Holdings Ltd. & Subsidiaries v. Director General of Fair Trading, (2002) CAT 1, at ¶ 105. 7

Registrar of Restrictive Trade Agreements v. WH Smith & Sons Ltd., (1969) 3 All ER 1065, at 1069. 8

Organisation for Economic Cooperation & Development, Prosecuting Cartels Without Direct Evidence of Agreement, PUB. NO. DAF/COMP/GF (2006) 7, 10 (September 2006), https://www.oecd.org/daf/competition/prosecutionandlawenforcement/37391162.pdf.

2

compelling evidence,9 as it shows communication between people who have no reason to do so. Making a similar observation in 1776, Adam Smith in his book The Wealth of Nations, remarked- “People of the same trade seldom meet together…such conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”10 7. In the present case, there are several pieces of communication evidence that point towards the existence of a cartel and an agreement to control the supply, and hence the price of cattle feed, among the four Respondents cattle feed manufacturers. 8. Firstly, on 20th December 2014, the concerned Respondents attended a seminar conducted by the Department of Animal Husbandry, Dairying and Fisheries. Following this, between December 2014 and March 2015, when the supply of cattle-feed by these manufacturers was reduced, several call and SMSs were exchanged amongst the CEOs of the Respondent companies. 11 Common increased prices, especially after a meeting, can be inferred as evidence of collusion.12 It is submitted that the unusual frequency of communication among these companies during the period corresponds with their parallel reduction of supply of cattle feed, indicating collusion. 9. Secondly, when Mr. Kurian (CEO of Davenport Cooperative) requested the cattle-feed manufacturers to reduce their prices in order to guard against the sudden increase in milk prices, the four Respondents not only replied on the same date, but also used identical language. 13 This, again, is evidence of concerted communication amongst them to 9

Film and TV Producers Guild of India v. Multiplex Association of India, Mumbai and Ors., Case No. 37/2011 (3rd January 2013), at ¶ 18. 10

Richard Whish, Control of Cartels and other Anti-Competitive Agreements, in COMPETITION LAW TODAY: CONCEPTS, ISSUES, AND THE LAW IN PRACTICE 41 (Vinod Dhall ed. 1st ed. 2008). 11

Moot Proposition, at ¶¶ 11, 15.

Latvia Hens’ Eggs case, (1980) SCR 158; Sao Paulo Airline Case, Merger file no. 08012.009497/2010-84. 12

13

Moot Proposition, at ¶ 16.

3

determine the supply and price of cattle-feed in the market and forms an important piece of evidence in proving the existence of a cartel. ECONOMIC EVIDENCE 10. Out of the two types of economic evidence – conduct and structural14 – in the instant case, there exists economic conduct evidence. Between December 2014 and January 2015, there was a reduction in supply of cattle-feed by all four Respondent cattle-feed manufacturers15. It is submitted that the simultaneous decrease in the supply, which consequently led to an increase in the price of cattle-feed, points towards a collusive agreement. 11. Such pieces of economic evidence have been relied upon in various cases involving infringement of competition law. In American Tobacco Co. v. United States16, the three largest tobacco manufacturers of the US simultaneously increased their prices. The Court found that the record of this price change was admissible as circumstantial evidence of the existence of a conspiracy. 12. The validity of this evidence has also been upheld in Indian competition law jurisprudence. In Builders Association of India v. Cement Manufacturers’ Association & Ors. 17 wherein, while determining the existence of a cement cartel, the CCI imposed a penalty of Rs. 6700 crore on the basis of economic circumstantial evidence. The CCI observed that concerted action may be established by placing reliance upon parallel behaviour in prices, dispatch and supply accompanied by other factors indicating coordinated behaviour. Further, circumstantial evidence is of no less importance than direct evidence in proving collusion.

14

ABIR ROY & JAYANT KUMAR, COMPETITION LAW IN INDIA 68 (2nd ed. 2014).

15

Moot Proposition, at ¶ 11.

16

328 US 781 (1946), at 790, 804.

17

Case No. 29 of 2010 (31st August 2016), at ¶ 184.

4

13. While parallel conduct may not always mean that a concerted action has taken place, it may however amount to strong evidence of such a practice if it leads to conditions of competition which do not correspond to the normal conditions of the market. 18 In the instant case, the sudden and simultaneous decrease in supply of cattle feed is unusual. If this alone does not point towards the existence of an anti-competitive agreement, there also exist certain ‘plus factors’ mentioned above, that include the communication evidence. 14. It is therefore humbly submitted before the Honourable Tribunal that the evidence available in the present case is sufficient to prove the existence of collusion and an anti-competitive agreement. 1.2 That Adiva, Brick, Cautious & Detro are not a part of a ‘single economic entity’. 15. The Appellant contends before the Honourable Tribunal that the four Respondents are separate units and function independently of each other and therefore, the defence of a ‘single economic entity’ against collusive anti-competitive agreements is not available to them. 16. The definition of an ‘enterprise’ under Section 2(h) of the Competition Act, 2002 comprehensively consists of ‘units’, ‘divisions’ and ‘subsidiaries’, and Adiva, Brick, Cautious and Detro are subsidiaries of Acme within the meaning of Section 2(87) of the Companies Act, 2013. However, when a subsidiary is not under the strict guidance of the holding company for economic activities and compete in the market against another subsidiary, there may be scope for ‘rule of reason’19 and treating them as distinct entities

18

Imperial Chemical Industries Ltd. v. Commission of the European Communities, (1972) ECR 619, at ¶ 66. 19

Order of the Competition Commission of India regarding combination notice filed by Grasim Industries Limited and Aditya Birla Chemicals (India) Ltd., Registration no. C-2015/03/256, at ¶ 39.

5

where the judges take economic and substantive factors into consideration while deciding the considered parties’ scope.20 17. Therefore, the existence of a common parent company does not directly lead to the inference that the subsidiaries, together with the parent, form a single economic entity. This is even more relevant in cases where the subsidiary is not 100 per cent owned by the parent. In such cases it is imperative to prove not only the parent company’s ability to exercise decisive influence over its subsidiary, but also actual exercise of this ability. 21 What has to be established, thus, is the absence of real autonomy of the subsidiaries. 18. In the present case, Acme has a shareholding of more than 50 per cent in each the subsidiaries, who are the Respondents in this case. However, its substantial ownership in these concerns does not imply control.22 There is nothing to suggest that Acme had any control over the operations of these concerns; rather the requirement of an R&D Agreement amongst these concerns implies that for any cooperation among the Respondents, a contract was needed. No such need would have arisen had Acme exercised any substantial control over them. 19. The ‘rule of reason’ test has been evolved by US Supreme Court in American Needle, Inc. v. National Football League23. In this case, while holding that the teams comprising the National Football League (NFL) and the NFL were not a single economic enterprise by virtue of them being independently managed businesses, it laid down the conditions of control, diversity of interests, and competitive links under this rule. Following this decision, 20

Pieter Van Cleynenbreugel, Single Entity Tests In U.S. Antitrust And EU Competition Law, SSRN, http://ssrn.com/abstract=1889232 (accessed on 2nd February 2017, at 1600 hours). 21

General Quimicia & Ors v. Commission, (2011) ECR I-1, at ¶ 85.

22

Dean Williamson, Organization, Control and the Single Entity Defense in Antitrust, 5 J. COMP. L. & ECO. 724, 737 (2009). 23

560 US 183 (2010), at 194.

6

to prove the existence of a single economic entity, it is essential to establish not only that there is one control centre, but also to establish control and lack of competition of the entities with each other. 20. In the present case, the Respondents fail to meet the additional requirements of these conditions as well. The parent entity, Acme, exercises no actual control over the Respondent cattle-feed manufacturers and there exists actual competition amongst them. 21. All four concerned Respondents are cattle-feed manufacturers and are active throughout Bohemia. 24 They are, therefore, selling a variant of the same product making them all participants and competitors in the cattle-feed market. The presence of this element further cements the conclusion that they are, in fact, separate and independent. 22. The tests that a ‘single economic entity’ needs to pass in order to be declared so are similar in the European Union. The assessment of a group of entities as such depends upon control and conduct factors.25 Article 101(1) of the TFEU prohibits anti-competitive agreements between ‘undertakings’ and association of undertakings. The definition of undertakings is common control-centric. They have been defined as economic units which consist of a unitary organization of personal, tangible and intangible elements, which pursue a specific economic aim on a long-term basis and can contribute to the commission of an infringement.26 23. In Viho Europe BV v Commission of the European Communities27, while holding that the wholly owned subsidiaries of Parker Pen, over which it exercised complete control, were a

24

Moot Proposition, at ¶ 10.

25

AEG-Telefunken AG v. Commission of the European Communities (1983) ECR 3151, at ¶¶ 50-52; Stora Kopparbergs Berlgslags AB v. Commission (2000) ECR I-9925, at ¶¶ 21-30. 26

27

Mannesman AG v. High Authority of the ECSC, (1962) ECR 357, at ¶ 371. (1996) ECR I-5457, at ¶¶ 50-51.

7

‘single economic entity’, the Court distinguished elements of control and market conduct as two variables to establish this status. 24. Control has similar implications as under the American law. Only if the subsidiary has no control over its operations internally or in the market will it form a part of a single entity. Market conduct assesses whether a subsidiary is able to determine its own policies and function as an independent player in the market. The French competition law has formulated an additional condition – to the extent that related entities act as separate competitors, their conduct is not integrated and they do not present a single economic entity.28 Even when the economic entity is composed of several natural and corporate legal persons, competition inter se is impossible. The impossibility of competition is the criterion used to determine which separate legal entities are to be treated as a single economic entity.29 25. The operations and functions – both internal and external – of the Respondents in the immediate case fail to meet any of these conditions formulated in the various global competition law principles. Not only are they competing in the same market, they act as independent players that pursue separate economic interests; there is nothing to suggest a commonality of objectives of the Respondent cattle-feed manufacturers. 26. These tests have also been applied in the Indian competition law jurisprudence. The test of control was applied in Re: National Insurance Co. Ltd.30, when the public sector insurance companies claimed the defence of being a ‘single economic entity’ in response to allegations of cartelization and bid-rigging. The CCI held that despite the government being Mélanie Thill-Tayara, Holding On To The “Holding Out Doctrine”: The French Approach Towards Intra-Group Conspiracy, 24 EUR. COMP. L. REV. 553, 556 (2003). 28

29

Okeoghene Odudu & David Bailey, The Single Economic Entity Doctrine In EU Competition Law, 51 COM. MAR. L. REV. 1721, 1726 (2014). 30

Case No. 02/2014 (CCI), at ¶¶ 25-26.

8

a 100% shareholder in each of these companies, they acted independently and on their own volition. This was further upheld by the COMPAT in its appeal. 31 This lack of control prevented the companies from being declared a single economic entity. 27. The test of conduct and existence of competition was used in Shamsher Kataria v. Honda Siel Cars & Ors.32. In this case, Hyundai claimed the defence of a ‘single economic entity’ with respect to an agreement with its overseas supplier that would otherwise have been prohibited under Section 3 of the Competition Act, 2002. The CCI observed that the concept of single economic entity would be applicable only if there existed inseparability in the economic interest of the parties to the agreement. When this decision was appealed33, this Honourable Tribunal inter alia reiterated this test and also applied the control test observing that they could only be a single economic entity if the decision making of the affiliates was largely influenced by the policy of the parent. 28. As is clear in the present case, the Respondent concerns have independent economic interests. They are different entities, selling an identical product, all over Bohemia, that is, they are functioning in the same product and geographic market. It can thus be inferred that not only are they competing with each other, their economic interests are also separate and independent. 29. Therefore, in the light of the above arguments, it is humbly submitted by the Appellant that the four cattle-feed manufacturers are not a part of a ‘single economic entity’ and in view of the available evidence, have colluded to form a cartel and entered into an anti-competitive agreement.

31

National Insurance Co. v. CCI, Appeal No. 94/2015 (9th December 2016), at ¶ 13.3.

32

Case No. 03/2011 (CCI) at ¶ 9.1.4.

33

Toyota Kirloskar Motor Pvt. Ltd. v. Shamsher Kataria & Ors., Appeal No. 60/2014 (9th December 2016), at ¶ 95.

9

CONTENTION 2: THAT THERE HAS BEEN NO ABUSE OF DOMINANCE BY DYLON.

30. The Appellant humbly contends before the Honourable Tribunal that there has been no abuse of dominance by the Appellant in contravention of Section 4 of the Competition Act, 2002. In order to address abuse of dominance, it is essential to delineate the relevant market, establish the existence of a dominant position in such market and finally prove that this position of dominance has been abused in some manner.34 The arguments in this regard are, therefore, three-fold: 2.1 That the relevant market is ‘processing and sale of milk in Bohemia’. 31. In order to determine the position in the market and prove abuse, the CCB is required to determine the relevant market.35 The relevant market must have a product and geographical aspect that are clearly defined. 36 These aspects in the instant case have been discussed hence. RELEVANT PRODUCT MARKET 32. It is humbly contended that the relevant product market in the immediate case is the ‘processing and sale of milk’, and not ‘processing and sale of packaged milk’, as determined by the DG 37 and accepted by the CCB while erroneously establishing the Appellant’s dominant position and its abuse in this market.

34

Image Technical Services Inc. v Eastman Kodak Co, 125 F.3d 1195 (9th Cir. 1997), at ¶ 19.

35

§ 2(r), Competition Act, 2002.

36

European Commission Notice on the Definition of Relevant Market for the Purposes of Community Competition Law (97/C 372/03), at ¶ 2. 37

Moot Proposition, at ¶ 17.

10

33. In order to determine the relevant product market, its substitutability with similar products has to be determined. Products that are substitutable form a part of the same market. For this purpose, the factors considered foremost are – the end use of products, price of products and preferences and perceptions of the consumers.38 34. ‘End or intended use of products’ relates to the functionality and ultimate purpose for which the product is intended to be used. It allows the courts, as a first step, to limit the field of investigation of substitutes.39 In case the product was intended to be used as other similar products, they all form a part of the same market. No different product market comes into existence if the concerned product is used by the consumers to achieve the same purpose. While determining substitutability, it is not necessary that the products are perfectly substitutable; even if they are functionally interchangeable they form a part of the same relevant market. 40 Reasonable interchangeability of the products for the same purpose constitutes a single market.41 35. The CCI has followed a similar reasoning in Sri Rama Agency v. Mondelez India Foods Pvt. Ltd.42. In this case, the CCI accepted the product market definition to be of ‘chocolate’ as opposed to ‘non-premium chocolate’ contended by the informant. The CCI observed that the cravings and taste of chocolates constitutes it into a separate market, but refused to accept that it could be further divided into premium and non-premium, as the effect produced by chocolate is the same in either category. 38

§§ 2(t) and 19(7), Competition Act, 2002; Supra note 36, at ¶ 7. Commission notice

39

Supra note 36, at ¶ 36. 97/c

40

Tetra Pak International SA v. Commission of the European Communities, (1996) ECR I05951, at ¶ 67-69. 41

United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377 (1956), at 395; Jonathan Baker, Market Definition: An Analytical Overview, 74 ANTITRUST L. J. 129, 132 (2007). 42

Case No. 58 of 2015, at ¶ 18.

11

36. The requirement thus, is for the products of a common market to be similar and not identical, so as to fulfil the same purpose. In the present case, the Appellant’s packaged milk serves the same purpose as the milk supplied by other manufacturers, whether loose or packaged. The inherent quality of milk remains unaffected notwithstanding how it is sold; the intended use of all milk is the same. 37. ‘Price of product’ is another factor that determines the extent to which the product can be substituted with others. As long as the prices are similar and do not vary drastically with those of similar products, it forms a part of a single market. In the present case, the Appellant has been selling its milk products at low, competitive prices globally, 43 a practice that has also been followed in Bohemia.44 It is thus evident that the prices charged by the Appellant are similar to those charged by its competitors; thus making the milk it sells interchangeable in the eyes of the consumers in terms of cost. 38. Another factor that establishes substitutability is the ‘consumers’ preferences and perceptions’. It is for the consumers that all products are manufactured and their perceptions with regards to product form an important aspect in determining the relevant market. If the consumer is likely to switch to another product if the deal becomes less attractive for him, for example in the event of an increase in price, it may be concluded that both these products are part of the same market. 45 Consumers’ preferences cannot be computed with empirical accuracy; they vary and are not uniform enough to demonstrate a strong preference towards any particular product. While in the present case, the Appellant has seen a rise in its sales and consumers favouring it,46 this is just a reflection of the favour 43

Moot Proposition, at ¶ 5.

44

Clarification No. 9.

45

Supra note 14, at 163. abir

46

Moot Proposition, at ¶ 13.

12

it experiences from certain consumers, as do other manufacturers. For example, Dairy Fresh is popular among persons between the ages of 15-25 years and persons between the ages of 50-70 years prefer Farm Everyday.47 This shows that consumer preferences and perceptions are not uniform. While certain persons may not switch to another product and have preferences, this cannot be assumed of the group as a whole. Thus, in the instant case, where a portion of consumers is inclined to purchase the Appellant’s milk due to its packaging, this should not be taken as a reflection of the entire consumer group. 39. This has also been reiterated by this Tribunal in the case of Global Tax Free Traders v. William Grant & Sons Ltd. & Ors.,48 where the issue, inter alia, was the determination of the relevant product market as ‘single malt scotch whiskey’ or as ‘scotch whiskey’. The Tribunal observed that even though the manufacturing procedure of both these products was different and, as argued by the Appellant, some consumers would never shift to the latter market from the former, the market had to be broadly defined as ‘scotch whiskey’. It was held that the relevant product market had to be defined keeping in mind the overall consumer behaviour, and not that of the group that had a strong preference towards single malt scotch whiskey. 40. It is therefore concluded that in the determination of the relevant market in the present case, the substitutability of the Appellant’s product is found in the milk market on the basis of the aforementioned factors. It is thus humbly submitted that the relevant product market is ‘processing and sale of milk’.

47

Moot Proposition, at ¶ 4.

48

2015 (2) CompLR 503, at ¶ 23.

13

RELEVANT GEOGRAPHIC MARKET 41. It is humbly submitted before the Tribunal that the Appellant’s products are available and sold throughout the territory of the country. The relevant geographic market in the instant case, therefore, is the whole of Bohemia. 42. The Appellant thus concludes that in the present case the relevant market is ‘the processing and sale of milk in Bohemia’. 2.2 That Dylon is not dominant in the relevant market so defined. 43. It is humbly contended that the Appellant does not hold a dominant position in the market of ‘processing and sale of milk’, the relevant market in the present case. 44. To constitute an offence under Section 4, it is essential for the firm to hold a position of dominance in the relevant market. The expression ‘dominant position’ is a binary term; either a firm is dominant or it is not.49 It is submitted that no single firm holds a position of dominance in the relevant market of processing and sale of milk in Bohemia. 45. In establishing dominance, market shares play an important role in determining the market structure and relative importance of the enterprise.50 It is brought to the Tribunal’s notice that the market for processing and sale of milk in Bohemia is extremely competitive, with no single firm holding a clear and considerable majority of the market shares. The division of market shares is as follows-

49



Unorganised sector – 25 per cent



Anmol – 25 per cent



Dylon – 22 per cent



Dairy Fresh – 16 per cent

RICHARD WHISH AND DAVID BAILEY, COMPETITION LAW, 190 (8th ed. 2015).

50

Guidance on the Commission's Enforcement Priorities in Applying Article 82 of the EC Treaty to Abusive Exclusionary Conduct by Dominant Undertakings, Information from European Union Institutions and Bodies (2009/C 45/02), at ¶ 13.

14



Farm Everyday – 12 per cent51

46. Clearly no firm holds market shares sizeable enough to give rise to a presumption of dominance.52 Further, numerous jurisdictions have recognised that a firm with less than 50 per cent market share may only be dominant if its market share is substantial in comparison with that of its competitors, that is, if the remaining market share is scattered or dispersed amongst a number of competitors and not one single competitor.53 It is submitted that none of the participants in the relevant market meet the requirements for dominance, with identically low market shares being held by all. Enterprises with less than 25 per cent market shares are not likely to enjoy a dominant position in the market.54 47. In TN Consumer Products Distributors Association v. Britannia Industries Ltd.,55 the CCI has also acknowledged that in a market of intense competition, even if the Respondent is prominent, no single firm may be dominant due to lack of substantial market power being held by one single enterprise. It is thus submitted that no enterprise holds a position of dominance in the relevant market and the CCB’s findings against the Appellant are without any substance. 48. Regardless, if the existence of intense competition and the distribution of market shares were to be disregarded, it is humbly contended that the position of dominance in the relevant market may be found to be held by Anmol and not by the Appellant. While the

51

Clarification No. 21.

52

Hoffmann-La Roche & Co. AG v. Commission, (1979) ECR 461, at ¶ 53-56; Eurofix-Bauco v. Hilti, (1988) OJ L65/19, at ¶ 91- 94; Tetra Pak International SA v. EC Commission, (1997) 4 CMLR 662, at ¶ 109-110. 53

Report of High Level Committee on Competition Policy and Law (Raghavan Committee Report) 2000, at ¶ 4.4.5. 54

Council Regulation (EC) No. 139/2004 of 20 January 2004 on the control of concentrations between undertakings (the EC Merger Regulation), OJ L 24, at ¶ 32. 55

Case No. 106/2015 (29th March 2016), at ¶ 10.

15

market share of an enterprise plays an important role in indicating its market power, other factors may also be given due importance in determining the same.56 49. The Act lists out a number of such factors that may be examined to determine whether or not an enterprise is dominant in a given relevant market. 57 These include the size and resources of the enterprise, the existence of well-established sales or distribution networks and other barriers to entry. 50. The ECJ as well has treated commercial stability58 and the existence of well-established distribution systems as barriers to entry in several decisions59. It is submitted that while Dylon was a fairly new entrant to the market in Bohemia, having been established only in 2010, Anmol was established as early as 1970. Further Anmol has a remarkably strong network of dealers and retailers in Bohemia, with seventy sales offices spread across thirty states; in contrast to this, Dylon has factories located in only four Bohemian states. 51. In British Airways v. Commission60, while finding British Airways to be dominant in a market with less than 40 per cent market share, the Court noted that British Airways’ dominance was reinforced by its popularity amongst consumers and the fact that its market share was declining did not mean it was not dominant. To be dominant, an enterprise must hold durable and sustainable market power61. Dylon is a fairly new entrant to the market 56

DLF Ltd. v. Competition Commission of India and Ors., (2014) 2 CompLR 1, at ¶ 86.

57

§ 19(4), Competition Act, 2002.

58

United Brands v. Commission, (1978) ECR 207, at ¶ 81.

59

Hoffmann-La Roche & Co. AG v. Commission, (1979) ECR 461, at ¶ 48; Eurofix-Bauco v. Hilti, (1988) OJ L65/19, at ¶ 69; Napier Brown v. British Sugar, 1988 OJ (L 284) 41, at ¶ 56; PO- Michelin OJ (2002) L 143/1, at ¶ 182-183. 60

(2003) ECR II-5917, at ¶ 223.

61

The Unilateral Conduct Working Group, Assessment of Dominance, INTERNATIONAL COMPETITION NETWORK, 25 (May 2011), http://www.internationalcompetitionnetwork.org/uploads/library/doc752.pdf.

16

and while it may have gained a certain amount of popularity among consumers in the past year, Anmol has been synonymous with milk and dairy processing for the past forty-seven years and continues to dominate the market by being the most trusted brand. 52. Dominance requires power over time and so it is important for market shares to be held ‘for some time’.62 It is therefore evident that Anmol, and not the Appellant, may be found to enjoy a position of dominance in the relevant market and the same is submitted before this Honourable Tribunal. 2.3 That arguendo Dylon is found to be dominant, its conduct was not abusive. 53. It is contended that assuming but not admitting that the Appellant is found to hold a position of dominance, the increase in price does not amount to an abuse of this dominant position, as it was the result of an objective necessity. 54. In order to establish that the Appellant has abused its dominant position in the present case, the Commission is required to show two things – firstly that the price was excessive and secondly that the excessive price was unfair. 63 Merely charging excessive prices is not sufficient; it must be proved that such excessive price is unfair.64 55. The defence of objective necessity is well recognised in Europe 65 and requires the undertaking or enterprise to show that its actions were objectively necessary. 66 The Appellant submits that the increase in price was a direct result of the high prices being

62

Hoffmann-La Roche & Co. AG v. Commission, (1979) ECR 461, at ¶ 41; ALISON JONES & BRENDA SUFRIN, EC COMPETITION LAW 397 (3rd ed. 2007). 63

United Brands v. Commission, (1978) ECR 207, at ¶ 266.

Amitabh Kumar, Excessive Pricing – An Abuse of Dominance, 1 COMP. L. REP. 88, 88-90 (2011). 64

British Airways v. Commission, (2003) ECR II-5917, at ¶ 291; Centre Belge d’Etudes de Marche Telemarketing v CLT, (1985) ECR 3261, at ¶ 27. 65

66

Supra note 50, at ¶ 29. (guidelines)

17

charged for cattle feed by Respondent cattle feed manufacturers, by engaging in a cartel and entering into an anti-competitive agreement. Since the Appellant owns its own dairy farms67, cattle feed is an essential raw material in the production process and the Appellant was unable to recover its own costs without increasing the prices of its milk. 56. The United Brands68 judgment highlighted that enterprises have every right to take steps they deem necessary to protect their commercial interests. The Telemarketing69 judgment also acknowledged that commercial constraints serve as objective justifications for what may prima facie appear to be abusive conduct. The Appellant already bears significant costs due to its extensive R&D expenses and has, inspite of this, managed to price its products competitively globally and in Bohemia before the effects of the high price of cattle feed was felt. Therefore it is submitted that the sudden and substantial increase in the price of cattle feed as a result of the cartelisation of the Respondent cattle feed manufacturers could not be reasonably absorbed by the Appellant and had to be passed on to consumers in order to protect its commercial interests. 57. In light of this, it is submitted before the Honourable Tribunal that even if found to be dominant in the relevant market, the conduct of the Appellant does not amount to abuse of this position.

67

Moot Proposition, at ¶ 5.

68

Tjarda Desiderius Oscar van der Vijver, Objective Justification and Prima Facie Anticompetitive Unilateral Conduct: An Exploration of EU Law and Beyond (Europa Institute, Faculty of Law, Leiden University 2014). 69

Centre Belge d’Etudes de Marche Telemarketing v. CLT, (1985) ECR 3261, at ¶ 26.

18

CONTENTION 3: THAT THE IMPOSITION AND QUANTUM OF PENALTY BY THE CCB ON DYLON IS UNJUSTIFIED.

59. It is humbly contended that the imposition as well as quantum of penalty imposed on the Appellant by CCB is unjustified and not sustainable. 60. The Competition Act, 2002 empowers the Commission to pass ‘cease and desist’ orders as well as impose a penalty of not more than 10 per cent of the average annual turnover of the person or enterprise, if they are found to be in contravention of Sections 3 or 4 of the Act. 70 However the Appellant prays that in light of the preceding arguments, there does not exist any liability on the part of the Appellant and it must not be subjected to the penalty. 61. Arguendo such liability is found to exist, it is further contended before this Honourable Tribunal that the quantum of penalty imposed by the Commission is not appropriate. The Appellant contends so based on two factors that the Commission failed to take into account when determining quantum – 3.1 That penalty must be imposed with respect to the relevant turnover. 62. Under the Competition Act, 2002, the Commission is empowered to impose penalties with respect to the turnover of the offending person or enterprise. The COMPAT, on a constructive reading of the entire Act and after giving due regard to similar European Union and OFT guidelines on the determination of penalty, has interpreted this provision to permit the imposition of penalties only on the ‘relevant turnover’ of multi-product enterprises.71

70

§ 27, Competition Act, 2002.

71

Excel Crop Care Ltd. v. Competition Commission of India and Ors., (2013) COMPAT 146, at ¶ 62.

19

63. This interpretation has subsequently been followed by this Honourable Tribunal without exception 72 and is applicable to all enterprises that are found to have contravened the provisions of the Act with respect to a particular product while being engaged in the production of more than one product.73 64. The Appellant is a multi-product enterprise, engaged in the production and supply of milk as well as other independent products like baby food and products related to the nutrition of mothers and infants.74 The relevant market for the determination of the Appellant’s alleged abuse has been defined as ‘processing and supply of milk’. Even if the Honourable Tribunal were to reject this argument and adopt the definition of ‘processing and supply of packaged milk’, as proposed by the Commission, it is submitted that the penalty determined by the Commission must be imposed only with respect to the income from this particular product and not from the entire turnover of the enterprise that includes several other products. 65. In adopting this interpretation, the due regard has been given to the principle of proportionality, 75 which must play an important role in the determination of penalties. Further this Tribunal has taken note of the fact that by virtue of the provisions of the Act, the scope of the Commission’s powers is limited only to products, goods or services qua which the allegation of abuse of dominant position is levelled.76 The imposition of penalty

72

Toyota Kirloskar Motor Pvt. Ltd. v. Shamsher Kataria & Ors., Appeal No. 60/2014 (9th December 2016), at ¶ 168. 73

ECP Industries Ltd. v. CCI, (2016) COMPAT 85, at ¶ 30.

74

Moot Proposition, at ¶ 5.

75

Southern Pipeline Contractors and Anr. v. Competition Commission, (2011) ZACAC 6, at 27. 76

Vimal Singh Rajput v. Competition Commission of India, Appeal No. 27/2016 (25th May 2016), at ¶ 11.

20

on the entire turnover has been found to be legally unsustainable by the Tribunal and the rule of relevant turnover has been repeatedly upheld.77 66. Recently, in deciding the appeal in the case of ECP Industries Ltd. v. Competition Commission of India78, where the appellant challenged the imposition of penalty by the CCI on its turnover from all its products, this Tribunal after considering a body of precedents, held that the CCI must consider all relevant factors before imposing penalty, and the penalty may only be imposed on the relevant turnover. 67. In light of this it is humbly submitted that even if the Honourable Tribunal determines that the Appellant is liable to be penalised, such penalty must only be imposed with respect to the Appellant’s average annual turnover for the preceding three years from the relevant products and not the Appellant’s entire turnover. 3.2 That other mitigating factors must be considered. 68. The Competition Act, 2002 confers on the Commission the discretion to impose penalties as it deems fit, upon finding persons or enterprises liable for contravening the provisions of Section 479, as is evident from the use of the words ‘may’ and ‘as it may deem fit’ in the empowering provision. This discretion, as per the COMPAT, must be exercised judicially and the Commission is bound to take into account aggravating or mitigating factors while doing so.80 The Supreme Court has concurred with this view81, while also time and again relying on the doctrine of proportionality.82 77

GlaxoSmithKline Pharmaceuticals Ltd. v. Competition Commission of India and Ors., Appeal No. 85/2015 (8th November 2016), at ¶ 58; Hyderabad Cylinders Pvt. Ltd. v. Competition Commission of India, 2016 (2) CompLR 886, at ¶¶ 15-18. 78

2016 (1) CompLR 393, at ¶¶ 30-35.

79

§ 27, Competition Act, 2002.

80

International Cylinder (P) Ltd v. CCI & Ors., (2013) COMPAT 166, at ¶ 57.

81

Hindustan Steel Ltd. vs. State of Orissa, AIR 1970 SC 253, at ¶ 7.

21

69. While the maximum penalty that can be imposed by the Commission is 10 per cent of the relevant turnover, the Commission is also duty-bound to take into consideration various mitigating factors and pay heed to the same in determining the quantum of penalty. Even if the Appellant is found to have abused a dominant position by this Tribunal, it would be the first such offence; in the imposition of penalties, a previous infringement is an exacerbating factor.83 The Appellant has a good reputation and immense goodwill in the global market due to its consistently competitive prices and thus must be shown leniency.84 70. It is further submitted that a singularly important mitigating factor that must be considered by the Honourable Tribunal is the reason behind the increase in price by the Appellants. As stated in the Appellant’s statements to the DG, the inflated price was the result of a combination of external factors like the global recession, reduced supply and the inflated price of cattle feed.85 The rise in price was, under no circumstances, for the profit of the Appellant. The absence of profits due the increase in price must also be taken as a material factor while considering the amount of penalty.86 71. Furthermore, the Supreme Court has opined that in the imposition of penalties, due regard must be given to whether or not the party obliged acted deliberately in defiance of law87. In the immediate case, the Appellant lacked any mala fide intention and only acted in response to a number of inexorable economic factors. 82

Excel Crop Care Limited v. Competition Commission of India, (2013) COMPAT 146, at ¶ 63. 83

Solvay v. Commission, (1996) 5 CMLR 57, at ¶ 70.

84

MDD Medical Systems India Pvt. Ltd v. Foundation for Common Cause & People Awareness, (2013) COMPAT 56, at ¶ 29. 85

Moot Proposition, at ¶ 13.

86

MARTIN SMITH, COMPETITION LAW: ENFORCEMENT & PROCEDURE 187 (1st ed. 2001).

87

Hindustan Steel Ltd. v. State of Orissa, AIR 1970 SC 253, at ¶ 7.

22

72. Therefore, it is submitted before the Honourable Tribunal that even if the Appellant is found to be in contravention of the provisions of the Act, the imposition of a penalty amounting to 10 per cent of the total average turnover of the past three years is excessive and is not sustainable after taking into account the prevalent mitigating factors.

23

CONTENTION 4:

THAT THE APPLICATION FOR COMPENSATION UNDER

SECTION 53N IS NOT MAINTAINABLE.

73. As is evident from the Appellant’s previous contentions, the application for compensation cannot be filed before contravention of the Act and liability is established. However it is humbly contended that arguendo such contravention is established, the application will still remain unmaintainable. 74. The Appellants humbly contend before the Honourable Tribunal that the application filed by RAM cannot be maintained under Section 53N of the Competition Act, 2002. The submission in this regard is two-fold: 4.1 That the application for compensation is premature. 75. It is contended that the application for compensation filed by RAM during the pendency of the present proceedings is not maintainable due to the fact that it is premature, as the matter remains to be decided. 76. The Competition Act, 2002 permits any person or class of persons affected by conduct in contravention of the Act to make an application to the COMPAT for compensation arising out of the findings of the Commission or Tribunal.88 However it is contended that such application must only be entertained after the final adjudication of the matter 89 and an application made during pendency of the appeal at the Tribunal is premature and cannot be granted. 77. The Explanation to Section 53N states that an application for compensation may be made only after either the Commission or the Tribunal on appeal has determined that a violation 88

§ 53N, Competition Act, 2002.

89

Baker and McKenzie, Global Guide to Competition Litigation: India, 4 (2012), http://www.hhp.co.id/files/Uploads/Documents/Global%20Antitrust%20&%20Competition/Gu ide%20to%20Competition%20Litigation/India.pdf.

24

has taken place. In accordance with the fundamental rule of interpreting statutes, provisions must prima facie be given their ordinary meaning.90 The Legislature is deemed not to waste its words or not say anything in vain and a construction attributing redundancy should be avoided.91 Further, Explanations are often appended to provisions; such Explanations must be read to clarify ambiguities92. Similarly, in the present case, the Explanation to Section 53N must be read to clear any obscurity that may arise while interpreting the stage at which an application for compensation can be made. 78. A plain reading of the language of Section 53N along with the Explanation meant to clarify ambiguities makes it evident that an application for compensation would only lie after the Tribunal has determined the appeal and not during its pendency. The use of the word ‘only’ in the Explanation emphasizes this inference and entertaining an application for compensation at this stage will amount to disregard of the exact language of the statute. 79. The EU Directives on actions for damages follows the same principle, requiring that an infringement of competition law must be irrefutably established by the final decision of a national competition authority or review court before an action for damages is brought. 93 80. In light of this it is submitted before the Tribunal that the application for compensation filed by RAM be dismissed until the appeal against Dylon’s liability for infringing the Act be finally determined.

90

Nokes v. Doncaster Amalgamated Collieries Ltd., (1940) AC 1014, at ¶ 22.

91

G.P. SINGH, PRINCIPLES OF STATUTORY INTERPRETATION 63 (8th ed. 2003); Borosil Glass Works Ltd. Employees Union v. D.D. Bambode, AIR 2001 SC 378, at 380. 92

Bihta Co-operative Development and Cane Marketing Union Ltd v Bank of Bihar, AIR 1967 SC 389, at 393. 93

Article 9, EU Directive On Certain Rules Governing Actions For Damages Under National Law For Infringements Of The Competition Law Provisions Of The Member States And Of The European Union (2014/104/EU1).

25

4.2 That RAM has no locus standi to file the application. 81. For the application for compensation under Section 53N to be maintainable, it is necessary that the applicant has locus standi to file it, which RAM does not possess. The submission in this regards is two-fold: 4.2.1 That RAM suffered no loss or damage. 82. An application for compensation succeeds when the applicant is able to show that he has suffered loss or damage.94 The aim of awarding compensation is to put the applicant into the same position as he would have been had the alleged practice or abuse not taken place.95 RAM is a body representative of the dairy retailers of Bohemia, who have suffered no loss due the increase in the price of milk. 83. Retailers are the intermediaries between the manufacturers and the final consumers. They determine the selling price to the ultimate consumers in accordance with the price at which they are able to procure the goods. As is the general practice, they increase their prices in response to a general price increase, and do not absorb the whole effect for the benefit of the consumers. An efficient firm must – in order to turn a profit – pass its costs on to its consumers or else go out of business, making pass-on a fact of economic life.96 84. There is no suggestion that the dairy retailers in the present case did not follow this established practice. This becomes clearer by taking into account the fact that in the public announcement97 made by RAM, it admitted that the consumers paid a high price. Had the retailers suffered loss due to the increase in prices, the consumers would not have; the price rise has been passed to the consumers. 94

§ 53N(1), Competition Act, 2002.

95

Re: Superfine Typewriters, UTP Enquiry No. 492/1987.

96

Sainsbury’s Supermarkets Ltd. v. Mastercard Incorporated & Ors., (2016) CAT 11, at ¶ 433.

97

Moot Proposition, at ¶ 12.

26

85. When it is an established commercial practice to pass on price increases down the supply chain, it is the consumers or undertakings to whom the burden has thus been ‘passed on’ who have suffered harm. Thus when a party has reduced its actual loss by passing it on, entirely or in part, to its own purchasers, the loss which has been passed on no longer constitutes harm for which the party that passed it on needs to be compensated.98 86. While the ‘passing on’ rule remains to be widely applied by the EU in the antitrust arena, it has been recognized and applied in cases pertaining to illegal fee and administrative charges99. However, efforts are being made to recognize this rule legislatively. 100 87. Nonetheless, some European jurisdictions, such as France, have been proactive in the recognition and application of the ‘passing on’ doctrine.101 In Coopérative Le Gouessant and Sofral v. Ajinomoto Eurolysine,102 where compensation for cartel activities was claimed by the direct purchasers who were the retailers, the French Supreme Court expressly held that a presumption exists that victims of anti-competitive practices systematically pass on the additional costs that result from increased prices to their own customers and found that the burden of proof is on the person seeking damages to rebut this presumption. 88. This defence has been widely applied by the US courts in competition law cases, where, as

98

Supra note 93, at ¶¶ 39, 41. directive

99

Just v. Danish Ministry for Fiscal Affairs, (1980) ECR 501, at ¶¶ 24-27; Express Dairy v. IBAP, (1980) ECR 1887; Ireks-Arkady v. Council and Commission, (1979) ECR 2955, at ¶¶ 14, 16; Comateb and Ors v. Directeur Général des Douanes et Droits Indirects, (1997) ECR I165, at ¶¶ 15-18. 100

Supra note 93, generally. Directive.

101

Ajinomoto Eurolysine v SNC Doux Aliments Bretagne and others, No. 09-15816 (15th June 2010); SNC Doux Aliments Bretagne and others v Société Ajinomoto Eurolysine, No. 10/18285 (27th February 2014). 102

No. 11-18495 (15th May 2012).

27

in Bohemia, the law103 requires “injury in business or property” for entertaining a claim of compensation. Even though its application has been limited, it has recently been recognized in a class action suit in the case of Elite Logistics Corp. v. MOL American, Inc.104 In this case, the Plaintiff’s application for a class action suit was denied, where it was alleged that the Defendant was charging an illegal fee. The Court did not allow the application as it noted that the Plaintiffs had passed the effect of the increased price to the ultimate consumers. It was also observed that the defence has not been barred by other case law, but only limited its operation. Its applicability was expressly recognized in class action suits. 89. Similar is the present case, where RAM seeks to claim compensation on behalf of the retailers. The retailers, having passed on the effect to the consumers, have not been impacted by the increase in prices of milk. Absence of impact of increase in prices on the applicant gives no cause of action and no right to maintain the application.105 90. Therefore, it is humbly concluded that the application filed by RAM, is not maintainable since the organization and retailers it represents have suffered no loss or damage. 4.2.2 That the application has not been filed on behalf of consumers. 91. It is humbly contended that the application for compensation filed by RAM is not on behalf of the ultimate purchasers, that is, consumers. 92. As has been contended above, the retailers RAM represents have suffered no loss or damage, as it has been passed on to the consumers. While RAM announced its intention to claim compensation on behalf of both retailers and consumers106, it cannot be presumed that 103

§ 7, Sherman Antitrust Act, 1890.

104

Case No. CV 11-02952 DDP (2nd February 2016).

105

Earl E. Pollock, Standing To Sue, Remoteness Of Injury, And The Passing-On Doctrine, 32 ANTITRUST L. J. 5, 6 (1966). 106

Moot Proposition, at ¶ 12.

28

the actual application was made on behalf of the consumers.107 Since it is the consumers who have paid the increased prices, only they have locus standi for filing the application. 93. Class actions under Section 53N(4) of the Competition Act, 2002 can only be filed by one of the numerous persons having the same interest. Not only is RAM inherently a retailers’ association that has suffered no loss, it is also not acting on behalf of the consumers given that it fails to meet the requirements of a class action under the Act. RAM has not taken permission of the court before filing the application for compensation on behalf of the consumers.108 For a class action, general notice is also required to be given for the benefit of all those persons on whose behalf the action is sought.109 It is also required that in such a case, all parties must have same interest, and that other persons are invited to join the application before it is converted to a class action.110 In the present case, RAM does not share an interest same as that of the consumers, and has failed to apprise them of its class action. 94. Not having met any of the requirements of a class action, it is clear that the application has not been made on behalf of the consumers. Therefore, it is humbly submitted that the application cannot be maintained in view of the flagrant violations of all requirements of such an action.

107

Clarification No. 28.

108

Rule 8, Order I, Code of Civil Procedure, 1908.

109

S.M. DUGAR, GUIDE TO COMPETITION LAW: VOLUME 1 1097 (5th ed. 2010).

110

Ibid., at 1123.

29

PRAYER Wherefore, in the light of the issues raised, arguments advanced and authorities cited, it is humbly requested that the Honourable Competition Appellate Tribunal may be pleased to adjudge and declare that: 1. That Adiva, Brick, Cautious and Detro have engaged in cartelization and have infringed Section 3(3) of the Competition Act, 2002. 2. That Dylon has not contravened Section 4(2)(a)(ii) of the Competition Act, 2002, relating to abuse of dominant position. 3. That penalty imposed by the CCB, and its quantum, is unjustified. 4. That the application for compensation filed by RAM is not maintainable.

And pass any such order that the Honourable Tribunal deems fit and proper in the interest of justice.

For this act of kindness the Counsel for the Appellant, as in duty bound, shall forever pray.

ALL OF WHICH IS RESPECTFULLY SUBMITTED

_________________________ Sd/COUNSEL FOR THE APPELLANT

XV