Buster Turns Up Heat
The Wall Street Journal, May 10, 2012
India's antitrust regulator is flexing its muscles with new
investigations and a request for greater powers, presenting more
challenges for companies that want to do business in the world's
The Competition Commission of India has begun an investigation of
Apple Inc. AAPL +0.24%for marketing the iPhone 4 in India through
select mobile-phone operators, an approach that could allegedly
harm other companies in the industry, a government official said
late Wednesday. It was also revealed this week that the agency is
investigating Google Inc. for alleged abusive behavior in online
advertising in India. And the commission is targeting a wide range
of industries, including cement and tire manufacturing, for
alleged price fixing.
salesman arranged boxes of the iPhone 4 after its introduction by
Aircel in Hyderabad, India, last May.
Competition Commission also is seeking sweeping new powers to
conduct surprise search-and-seizure operations, known as "dawn
raids" in Indian bureaucratic circles, the official said. It also
wants to scrutinize a wider range of mergers and joint ventures,
especially in the pharmaceutical industry, where foreign companies
have been active in takeovers.
The Competition Commission started accepting cases in 2009,
replacing an essentially toothless antitrust body that had been in
place since 1970. The new agency is charged with cracking down on
anticompetitive agreements and abusive market behavior by dominant
companies. It can order companies to dissolve such agreements and
can levy hefty fines, in some cases up to 10% of a company's
The regulator quickly has become a force to reckon with in
corporate India—adding a risk for domestic and international
companies while they also assess potential new tax liabilities for
investments in India and cross-border mergers involving Indian
"They're trying to make up for the last 20 years, when there
wasn't any real antitrust law in India," said Karthik Kumar, a
corporate lawyer at Jones Day who specializes in Asia deals. "They
are a significant force. Any company in India or overseas that is
looking at making an investment in India or at its existing
operations there views this very seriously."
The Competition Commission has issued 10 orders totaling more than
$250 million in penalties since it was established and is working
through a slate of cases that could push that figure up
substantially. The agency has targeted a number of companies for
forming cartels, from explosives manufacturers, to film
distributors, to pesticide makers, issuing fines large enough to
wipe out a large chunk of several companies' earnings.
salesperson at a mobile-phone shop in New Delhi helped a customer
with an iPhone 4 last year.
Apple case centers on the smartphone maker's agreements to market
the iPhone 4 in India through agreements with two mobile-phone
operators, Bharti Airtel Ltd. and Aircel Ltd. The agency will
determine whether that arrangement has had an adverse impact on
the overall industry, the government official said.
An Apple spokesman declined to comment.
The Google case, which initially will focus on its dominant
position in India's nascent online-advertising market, could take
months to investigate and could extend into "every aspect of the
company's business," the official said.
Google said it is confident that its products are compliant with
Indian competition law. "Though competition is always a click
away, we understand that with success comes scrutiny," the company
Beyond antitrust, the commission also has begun providing
consumers with an administrative route to punish companies the
consumers believe defrauded them, rather than having to file
lawsuits that could take years to decide.
The agency's biggest penalty was a $118 million fine last year for
prominent Indian real-estate developer DLF Ltd. for "highly
arbitrary, unfair, and unreasonable" conduct toward buyers of
apartments at a housing complex in the outskirts of New Delhi. DLF
built smaller units than it promised when it made sales and
delayed construction, resulting in significant losses for buyers,
the agency said.
DLF has appealed the fine to India's Competition Appellate
Tribunal. A DLF spokesman declined to comment.
In one of the most closely watched cases, the Competition
Commission recently completed an investigation of cement companies
for allegedly colluding to set prices and is weighing what
penalties to impose, the government official said. He declined to
say what companies were investigated.
Macquarie Securities in a March research report said it was
probable that penalties would be imposed on the top 10 or 12
cement companies. Based on the revenue of such companies, that
could result in total fines of hundreds of millions of dollars.
Meanwhile, the Competition Commission is seeking expanded powers,
which Parliament is expected to consider in coming weeks. One
change would allow the agency to raid company offices to gather
evidence without a warrant from a magistrate, as currently
required. Another change would expand the agency's ability to
target companies that are dominant and abusive collectively.
Pradeep Mehta, secretary-general of consumer-advocacy group CUTS
International, who advised the government on beefing up the
competition law, said the changes will bolster the agency. But he
said it still suffers from a shortage of skilled manpower capable
of carrying out complex economic analyses to probe antitrust
Commission member Harish Gupta said the young agency is still
working to assemble the staff it needs.
"The sheer size of the country, diversity of people and cultures,
diversity of sectors and business practices" combined to make
enforcement difficult, he said in a September speech. "The decades
of government controls have resulted in a very weak competition
Separately, the commission is expected to get authority soon over
small mergers—a move intended to bring more scrutiny to foreign
investments in the pharmaceutical sector. Though the country
allows foreign companies to own 100% of Indian pharmaceutical
ventures, some government officials became concerned after a spate
of foreign takeovers of Indian companies in recent years, such as
Daiichi Sankyo Co.'s 4568.TO -2.73%purchase of a majority interest
in Ranbaxy Laboratories Ltd. and Abbott Laboratories' ABT
+1.62%acquisition of a unit from Piramal Healthcare Ltd. 500302.BY
Some officials worried that such takeovers would lead to increases
in drug prices. Under guidelines expected to take effect soon, the
Competition Commission would be able to put conditions on
pharmaceutical deals, such as requiring that foreign companies
which make Indian acquisitions maintain production of low-cost
generic drugs, the government official said.
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