CCI on Interim Measures in Digital Markets

[Mohini Parghi is a IV Year B.A. LLB (Hons.) student at NALSAR University of Law, Hyderabad]

The Competition Commission of India passed an interim order on 9 March 2021 in the ongoing case involving a complaint against MakeMyTrip, Go-Ibibo and Oyo alleging anticompetitive practices under sections 3 and 4 of the Competition Act, 2002. The case is expected to be instrumental in shaping the Commission’s approach to dealing with online platforms that operate in multi-sided markets, an issue that competition regulators across jurisdictions have been grappling.

What makes the Commission’s interim order passed significant, however, is the fact that it is probably the first of its kind. Following an application by two entities, the Commission ordered MakeMyTrip & Go-Ibibo (MMT-Go) to re-list the former on their online portals. In doing so, the Commission granted (what appears to be) a mandatory injunction for the first time, and articulated principles governing the same. This post briefly discusses implications of the ruling.

Background

Rubtub Solutions Pvt. Ltd. (Treebo) had filed an information before the Commission against MakeMyTrip India Pvt. Ltd. and Oravel Stays Pvt. Ltd. (Oyo), alleging contravention of sections 3 and 4 of the Act. Later, Casa2 Stays Pvt. Ltd. (FabHotels) was also added as a party and the case was combined with another information that involved similar facts. FabHotels, Treebo and Oyo are all involved in the business of partnering with and providing franchising services to budget hotels in India, while MMT-Go provides travel and tourism services online, i.e., it is an Online Travel Agency (OTA).

The allegations against MMT-Go revolved around an exclusivity agreement with Oyo, according to which MMT-Go agreed to remove Oyo’s competitors from its platform, thereby denying them access to MakeMyTrip’s online customers. The Commission had earlier found a case for investigating MMT-Go for abuse of dominance under section 4 and anti-competitive agreement under section 3(4) of the Act, taking a prima facie view that MMT-Go was dominant in the ‘market for online intermediation services for booking of hotels in India’, while Oyo was a ‘significant player’ in the ‘market for franchising services for budget hotels in India’. A year into the investigation, FabHotels and Treebo approached the Commission under section 33 (power to issue interim orders), seeking re-listing on MMT-Go’s platform.  

Threshold for Interim Orders: Harm to Competition?

The Commission’s power to grant interim reliefs in competition matters is rooted in section 33 of the Act, which provides that the Commission may temporarily restrain a party from carrying on an anti-competitive act, without giving notice to such party ‘where it deems it necessary’, until the conclusion of the inquiry. The Supreme Court, in Competition Commission of India v. Steel Authority of India Ltd.(SAIL), clarified that this power must be exercised ‘sparingly and under compelling and exceptional circumstances’. It laid down the conditions that must be fulfilled for an interim order to be granted:

  1. An act in contravention of the stated provisions has been committed and continues to be committed, or is about to be committed;

  2. It is necessary to issue order of restraint; and

  3. The party to the lis would suffer irreparable damage, or there is definite apprehension that it would have an adverse effect on competition in the market.
The Commission found the first two conditions to be satisfied, stating that the case against MMT-Go was stronger than a mere prima facie case and that the balance of convenience lay in favor of FabHotels and Treebo. Following this, the Commission noted that there are two limbs to the last condition, separated by “or”. Therefore, in order to grant an interim order, the Commission must either be satisfied that the party would suffer irretrievable damage or that there would be an adverse effect on competition in the market. This broadens the Commission’s power to intervene at the interim stage, since parties seeking interim reliefs need not meet the strict requirement of irreparable harm if the Commission apprehends ‘adverse effect on competition’ in the market.  

A logical reading of the SAIL test would be that the parties seeking the interim relief must show that they would suffer irreparable damage if the relief is not granted. If this is not proven, then the Commission must find that there is a definite possibility of adverse effect on competition.This cannot be taken to mean that a mere adverse effect on the partieswould suffice. In the order, while the Commission brings up the power held by dominant digital platforms and their role as gatekeepers in digital markets, it does not apply this to the facts of the matter. Rather, it merely states that denial of market access by dominant platforms ‘can be lethal to the functioning of businesses who rely on such intermediaries to reach the end-consumers’, and thus irreparable injury need not be proved. The SAIL test explicitly calls for an effects-based analysis, which would entail the Commission going into anti- and pro-competitive effects of MMT-Go’s agreement with Oyo and the continued denial of access to FabHotels & Treebo on the ‘market for online intermediation services for booking of hotels in India’. But the order does not clarify the anti-competitive effects and, despite emphasizing on the Commission’s role as a market regulator, focuses mainly on the loss caused to FabHotels and Treebo.

Power to Grant Mandatory Injunctions

A mandatory injunction is one in which a court directs a party to perform a certain act, as opposed to a prohibitory injunction, which preserves the status quo. During the proceedings, MMT-Go had argued that the relief sought by FabHotels and Treebo was a mandatory injunction rather than a prohibitory injunction, and therefore the legal standard required for the same was higher. It was submitted that while granting such an interim injunction, the court must be satisfied that there exists a strong case for trial; such a threshold was to be of a higher standard than a mere prima facie case.

Here, the Commission gave multiple reasons for rejecting MMT-Go’s arguments, which need to be unpacked. It started out by stating that the Commission was not akin to a court, and the same rules of procedure did not apply to it – interim injunctions were to be governed by the SAIL judgement alone. Importantly, the Commission went on to emphasize that the proceedings before the Commission are in rem and reliefs are granted keeping in mind the process of competition, rather than being for the benefit of the particular parties to the case. It is true that the Commission is not bound by procedural laws governing civil courts; in fact, the Competition (Amendment) Act, 2007 removed a provision under Section 33 stipulating that temporary injunctions under the Act were to be governed by Order XXXIX of the Code of Civil Procedure.

But, following this, the Commission went on to state that the relief sought by FabHotels and Treebo was not a mandatory injunction at all. The Commission explained that seen from the perspective of FabHotels and Treebo, the relief may appear to be a mandatory injunction; however, while performing its role as a market regulator, the Commission is concerned with the ‘process of competition’ and not individual competitors. It stated that an ‘act of exclusion’ (such as the one committed by MMT-Go) could continually distort the market, and therefore restraining a party from continuing such conduct cannot be termed a mandatory relief. It is unclear why the Commission went to such lengths to avoid the relief being termed a mandatory injunction, especially since the reasoning appears tenuous. After all, by this logic, any mandatory injunction could be seen as a prohibitory injunction. That the Commission is a market regulator does not change the fact that the order would require a positive act from MMT-Go, making it akin to a mandatory injunction.

Regardless, this could have been avoided anyway, since the Commission had already affirmed that it had found the case to be of a higher degree than a prima facie level, thereby meeting the threshold for a mandatory injunction.

Conclusion

Interim measures by the Competition Commission have seen little to no legal development since the enactment of the Competition Act. They have an interesting place in competition enforcement, as they call upon a market regulator to protect the interests of an individual firm, while also ensuring free and fair competition. Thus, it is imperative that the Commission clearly articulate the principles it relies upon while granting such orders. Other issues with the MMT-Go order have also been pointed out, such as the Commission’s unsatisfactory analysis of the impact of COVID-19. While the Commission rightly points out the need to act fast in digital markets due to their dynamic nature, this cannot come at the cost of clarity and cogent reasoning.

Mohini Parghi

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