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This article is written by Karan Shelke, pursuing a Certificate Course in Competition Law, Practice And Enforcement from Lawsikho.

Introduction

Competition law deals with anti-competitive conducts arising from the exercise of undue market power by enterprises or from acquisitions between enterprises. Competition law consists of rules that are aimed to protect the markets and get optimal consumer welfare. The Competition Act, 2002 (the Act) provides tools to avoid decreased competition in markets. An interim measure is one such tool under Section 33 of the Act, where during an investigation, the Competition Commission of India (CCI) can pass provisional decisions, until the conclusion of proceedings. 

The Hon’ble Supreme Court of India in CCI v. SAIL (2010) 10 SCC 744 laid down a set of conditions on the CCI for passing an order under Section 33 of the Act. Firstly, the CCI’s consideration in passing an interim measure must be of a higher degree than the prima facie view required under Section 26(1) of the Act. Secondly, such an order is necessary to issue an order of restraint and lastly, there must be a perception that without such order, the parties in the market will suffer irreversible and irreparable damage or that it would have an adverse effect on competition.

After the SAIL Judgment, markets have undergone tremendous digitalization which has brought a revolution in the sphere of the daily consumer experience. Competition law has been at the epicentre of this rapid change in market dynamics to tackle the enormous market power accumulated by some tech companies. With only four interim orders issued in the past 11 years, it is evident that interim measures are one of the most under-used tools within the CCI’s power. However, in a recent order, the CCI has revitalized this dormant tool in the backdrop of renewed interest from various competition authorities in digital markets. 

In this article, I have analyzed the renewed interest of various competition authorities to impose interim measures in digital markets in light of the recent order of the CCI. 

Series of Events

  • Back in 2018, MakeMyTrip and Go-Ibibo (collectively referred to as MMT-GO) which is an online travel agency providing services like hotel reservations decided to delist Treebo and Fab Hotels pursuant to an exclusive agreement with OYO. Fab Hotels, Treebo and OYO are Indian budget hotel chains that operate on franchising. 
  • In October 2019, the CCI passed an investigation order under Section 26(1) of the Act against MMT-GO and OYO after the Federation of Hotel & Restaurant Associations of India (FHRAI) filed information. According to the FHRAI, MMT-GO indulged in denial of market access, predatory pricing, charging of exorbitant commissions, price and room parity conditions. It was alleged that MMT-GO and OYO imposed exploitative and exclusionary conditions that are price and non-price abuses. According to FHRAI, such vertical tie-ups can cause an appreciable adverse effect on the competition in the ‘market for franchising services for budget hotels in India’ and the ‘market for online intermediation services for booking of hotels in India
  • In February 2020, the CCI passed another investigation order against MMT-GO and OYO after Treebo filed information. According to the CCI, since the allegations are similar in nature during the same time period, there is no need to delineate different relevant markets. In this case, Treebo alleged absolute exclusion by virtue of an exclusive listing agreement between MMT-GO and OYO.

The Latest take on Interim Measures by the CCI

With pending investigations in both cases, on 9th March 2021, the CCI issued interim measures against MMT-GO to re-list Fab Hotels and Treebo. The CCI by adopting a narrower market as held in the October 2019 order held that booking channels like direct booking, offline booking and booking through online travel agencies are used simultaneously and not as substitutes. The CCI considered the growing importance of online platforms for discovering hotels by comparing prices conveniently as a distinct feature from other kinds of services. 

While noting satisfaction of the three-tier test established in the SAIL Judgment, the CCI held that Fab Hotels and Treebo made a definitive expression that a strong case is made out in the interest of free market and trade that requires interim intervention. Furthermore, the CCI held that the balance of convenience lies in the favour of Fab Hotels and Treebo as delisting may significantly hamper their online presence as giving online access will not cause any impairment to MMT-GO. On the third criteria, the CCI pointed out the loss of revenue and investor confidence due to the lack of an indispensable channel of distribution satisfies the second limb of the third criteria.

Implications for the measures

The CCI Chairman has recently stated that market studies may trigger enforcement action. The CCI in its market study on e-commerce has identified online bookings in the budget and mid-market segments through OTAs as a necessary and important access route to consumers. The report mentions that a major hotel chain in a particular category was listed exclusively on a major OTA at the expense of its rivals chains. The order assumes prominence because the CCI has relied on its previous market report which has identified competition concerns on OTA platforms. The order can have an impact on markets that are distinguished by network effects and ‘winner-takes-it-all’ outcomes. The CCI has also adopted a narrower relevant market which can have a domino effect on future cases against digital players. 

Furthermore, MMT-GO argued that since Fab Hotels and Treebo were able to survive and grow despite being delisted is sufficient to prove that there is no denial of market access. However, the CCI held that the actual extinction of an enterprise from the market should not be a standard to measure the effect of denial of market access. The CCI by adopting such interpretations has expressed its enforcement primacy in digital markets to prevent markets from tipping effects.

Trends in the European Union

The standards for passing interim measures have been codified under Article 8 para 1 of Regulation 1/2003. Under the Regulations, two requirements have to be satisfied to impose interim measures. Firstly, where there must be a due risk of serious and irreparable damage to the competition. This requirement appears to be a sine qua non in both jurisdictions. Secondly, there must be prima facie evidence of an infringement. 

The last time the European Commission (EC) imposed interim measures was in the IMS Health case in 2001. After IMS health, interim measures did not see light in 18 years until 2019 when the EC issued interim measures against Broadcom for its allegedly abusive conduct in the markets related to the supply of chipsets for TV set-top boxes and modems. Commissioner Vestager’s statement on EC’s decision to impose interim measures on Broadcom highlights the importance of interim measures in competition law, especially in the fast-moving markets. The EC’s institutional memory and its current pathway in dealing with antitrust cases in the fast-moving markets will serve as a good value while assessing interim measures in digital markets.

To adapt according to the changing landscape of digital markets, certain European national jurisdictions have amended their competition laws to give competition authorities more teeth. Back in 2014, the UK lowered the legal threshold to facilitate greater usage of interim measures under its competition law enforcement. After the amendments, the Competition and Markets Authority (CMA) was no longer bound to show that “serious irreparable damage” but can impose measures where they are necessary to prevent “significant damage” to competitors or customers.

This was further cemented after the Furman Report recommended the CMA to make greater use of interim measures to prevent damage to the competition while a case is ongoing in fast-moving markets. The recommendations highlight the eagerness to use interim measures for stepping up scrutiny in multi-faced digital markets. The recent amendments to the German Competition Act lowers the requirements for issuing interim measures as a step to improve the German Cartel Office’s ability to take faster and more efficient action in vulnerable markets. Further, On 8th October 2020, the Paris Court of Appeal rejected Google’s challenge against the French Competition Authority’s interim measures compelling Google to negotiate in good faith. The case against Google is relevant as the French Competition Authority is known for its active usage of interim measures during the last decade.

The European competition authorities have increasingly questioned whether they are equipped with the right tools with the advent of digital markets. The European competition authorities have recognised the necessity of fast resolution especially in digital markets that are prone to network effects by acting swiftly and preventing potentially irreversible damage to competition. The rules and procedures governing the usage of interim measures have been amended and reformed in recent times highlighting a paradigm shift in enforcing competition law. 

The necessity of interim measures in digital markets

To impose interim measures in the technology market when necessary is a clear message from the European Commissioner. To combat some of the undesired consequences of prolonged investigations and appeals which require complex and detailed assessments, the process of imposing interim measures can be improved where it is ineffective. A report in the EU found that antitrust cases took an average of four years before a decision was made which may be too late to tackle a competition law problem. Interim measures have been identified as an important tool kit to keep up with fast-changing digital markets. With the advent of smartphones and the digital India movement, markets have gone through tremendous changes. In a dynamic and ever-evolving market, there may be a risk that competition law violations will have irreversible damage. In such situations, a more interventionist approach is a possible solution because the overall narrative is that digital markets are prone to certain critical factors such as extreme returns to scale and network effects and by the time appeal routes are exhausted, there is a risk that the harm will become irreversible.

Conclusion

The order assumes prominence since this is the first time the CCI has used interim measures in a digital market. The CCI in its order has highlighted the importance of timely interval in the digital markets. While it is not just the tool of interim measure that will do the necessary but also is the time taken for implementing such measures. The CCI in the past has taken its own sweet time to pass an investigation order. Competition authorities of Brazil, France and Turkey have recently imposed interim measures against tech players operating in multi faced markets.

The interim measures imposed by the CCI and reforms introduced by major European countries is a revival for aggressive enforcement of competition laws, particularly in the digital market. With the advent of the fast-moving market and the renewed interest of European authorities to impose interim measures, the necessity to have adequate recourse to interim measures can be considered by the CCI in fast-moving and multi-faced markets. Between the filing of information and conclusion, enterprises acting as gatekeepers have an incentive to leverage their control over the platform in favour of their products. Addressing competition issues in the digital economy is a core part of CCI’s effort which has been highlighted in its e-commerce report. However, the aforementioned effort requires more teeth and renewed tools.


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