In a setback of sorts for the CCI, the National Company Law Appellate Tribunal (NCLAT), in the Google Android ruling has held that “effects analysis” is required to be done for proving any abuse of dominance under competition law. The test to be employed in the effect analysis is whether the abusive conduct is anti-competitive or not.

This latest legal stance of NCLAT would mean that the CCI may have to show effects in all Big Tech cases. All Big Tech cases currently being investigated by CCI will now go for a toss, say experts. 

“For proving abuse of dominance under Section 4, effect analysis is required to be done and the test to be employed in the effect analysis is whether the abusive conduct is anti-competitive or not,” said the order issued by NCLAT Bench comprising Ashok Bhushan, Chairperson and Alok Srivastava, Member (Technical). 

This NCLAT ruling is significant as the CCI had, in the Android case, refrained from undertaking any effects analysis, but had concluded that Google had abused its dominant position in the Android ecosystem.

At present, the law does not require competition watchdog to establish ‘actual effects’ of the anti-competitive conduct of dominant undertakings. Introduction of effects-based doctrine was a key demand of big tech industry, and the representatives of the sector deposed before the Parliamentary panel seeking its incorporation into the law. 

It maybe recalled that the Parliamentary Standing Committee on Finance, headed by Jayant Sinha, had recommended that  effects-based approach be incorporated in the Competition Act for examining the cases of abuse of dominance. The government however rejected this suggestion. 

What NCLAT says

The NCLAT Bench highlighted that the object of the Competition Act is to prevent practices that have an adverse effect on competition. “For finding of abuse under Section 4 relating to the dominant position, it has to be held that the conduct is anti-competitive. We, thus, accept the submission of the learned Counsel for the Appellant (Google’s counsel Arun Kathpalia) that statutory scheme of the Competition Act delineated by Section 4 and Section 18, indicate that conduct of a dominant enterprise or group, which is held to be abusive has to be anti-competitive conduct, and there has to be effect analysis on the above point,” said the order.

Samir Gandhi, Partner & Co-Founder, Axiom5, a law firm, said the CCI has been selective in conducting an effects analysis in some cases since the language of the Competition Act does not require it to do so.

The decision of the NCLAT that such an effects analysis is required, therefore, comes as no surprise and is consistent with the recommendations of the Parliamentary Standing Committee and the CCI’s own past decisional practice, Gandhi added.

Avaantika Kakkar, Partner & Head-Competition, Cyril Amarchand Mangaldas, said: “We think that the NCLAT’s clear mandate is much needed. A formalistic approach to the idea of abuse of dominance does more harm than good”.

Kripi Kathuria, Associate Partner, Phoenix Legal, said the NCLAT, while departing from CCI’s position so far, has concluded that an analysis into the existence of discriminatory pricing and/or conditions needs to be undertaken to properly give effect to Section 4 of the Competition Act.

Nisha Kaur Uberoi, National Head Competition, Trilegal said that the Competition Law Review Committee (CLRC), which CCI was part of, had noted that the CCI has been applying the effects test in abuse of dominance cases and that an explicit clarification was not required to qualify that Section 4 was subject to the Appreciable Adverse Effect on Competition in India (AAEC) standard.

The NCLAT in the Google decision has expressly clarified that the AAEC standard is applicable to abuse of dominance provisions and not merely to anti-competitive agreements and merger control, she added. “The Google order along with earlier orders of the CCI will serve as a precedent to industry to ensure that an effects-based approach is adopted in abuse of dominance proceedings, and this is a very welcome move”, Uberoi added.