Amazon and Flipkart found violating Competition law in India-DG investigation report out
The Competition Commission of India (CCI), by its order dated January 04, 2016, has closed a case alleging anti-competitive agreements between the four PSU general insurance companies and their association.
The Informant is the Association of Third Party Administrators (TPAs) engaged in ensuring that the administration of services in the health insurance market is efficient, consumer centric and serves the needs of India’s growing healthcare infrastructure.
It was alleged that the General Insurance Public Sector Association (GIPSA), an informal association of the four PSU insurance companies, has been established and used to further the anti-competitive conduct of the four PSUs. The Informant alleged that despite being an ad-hoc body, the GIPSA issued expression of interest for setting up of a captive Health Insurance Third Party Administer (HITPA) joint-venture, thus demonstrating that GIPSA is indeed a platform for furthering the anti-competitive agreements among the PSU insurance companies.
The Informant supplied a circular issued by the Department of Financial Services (DFS) directing the Chief Managing Directors of the four PSU insurance companies not to obtain any standalone Group Health Insurance business from each other without obtaining express consent from the concerned CMD, to ensure that there is no competition amongst them. The Informant also supplied communication(s) showing compliance of the above said circular(s).
The DG investigation found that the decision of PSUs to have a captive TPA was meant to ensure increased efficiency in delivery of standards. HITPA shall have no exclusive rights of their business and hence would not foreclose the market or lead to Appreciable Adverse Effect on Competition (AAEC). Further, HITPA was not yet operational on the date of submission of DG Report. The DG also considered that the records of meetings supplied for alleging cartelization were incomplete and unsigned, and hence couldn’t be considered genuine. As regards instructions issued by DFS, the DG found that the PSUs continued to compete with each other. The actual conduct of PSUs during the investigation showed no violation of provisions of Section 3(3) of the Act.
As regards the JV HITPA, the CCI considered that the mere formation of JV HITPA cannot be considered anti-competitive per se especially since the same was not functional at this nascent stage. The CCI was of the opinion that the formation of HITPA by way of a JV by the PSU insurance companies was a commercial decision aimed at combating the inefficiencies and deteriorated services provided by the existing TPAs. Even on analyzing the impact of the said JV i.e. HITPA in terms of the provisions contained in Section 19(3) of the Competition Act, 2002 (Act), it does not appear that HITPA would affect the market for TPAs in any appreciable adverse manner.
As regarding the alleged business-sharing agreement between the PSUs, the CCI noted that the evidence supplied by the Informant was not just incomplete but unsigned also. It did not even mention the name of the organization/ person/ authority who had purportedly issued the instructions/ guidelines.
Regarding the culpability of the association, the details furnished by the association and the minutes of meeting of its Governing Board did not indicate any discussion which attracted the provisions of Section 3 of the Act. The investigation did not find any anti-competitive arrangement among the four PSUs. The CCI was in agreement with these findings.
Regarding the alleged liability of DFS for issuing the purported circular, the CCI noted that the DFS is only functioning as an extension of the Government and acting on behalf of the President to monitor the overall performance and functioning of PSU insurance companies to achieve their objectives. Hence it does not qualify as an “enterprise” within the realms of Section 2(s) of the Act. However, the CCI did opine that DFS should refrain from issuing any such directions/guidelines to PSUs in the interest of protection of competition.
(Source: Order dated January 04, 2016. For full text see CCI website-www.cci gov.in)
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