CCI shall not act against a company where the alleged anti-competitive practice does not cause appreciable adverse effect in competition on Indian markets

An Information was filed with the Competition Commission of India (CCI) under Section 19(1)(a) of the Competition Act, 2002 (“Act”) against RCI India Private Limited (“RCI”) alleging contravention of the provisions of Section 3 and Section 4 of the Act.

An information was given to the Competition Commission of India (CCI) alleging that RCI – an Indian subsidiary of RCI Inc. had made illegal transactions with its clients including Mahindra Holidays & Resorts India Ltd (“Mahindra (India)”). Covington S.A.R.L., (Covington) incorporated in Luxembourg – a direct subsidiary of Mahindra (India) entered into an agreement dated 4th August 2014.

As per the said agreement, RCI Europe acted as beneficial protector and guardian of the business interests of RCI. Further, by means of the said agreement, it was agreed that RCI Europe would provide interest free loan of 10 million Euros to Mahindra (India) for the purposes of buying Holiday Club Resorts OY (“Holiday Club”). It was alleged that the effect of the said loan transaction created barriers to competition for its rival in the timeshare exchange market, i.e. Interval International.

The Informant had prayed CCI to conduct a detailed investigation be initiated into the anti-competitive practices committed by RCI and Mahindra (India) and stringent penalty be imposed upon both the companies for their illegal and criminal acts which are aimed at contravening the provisions of the law by creating a corporate smokescreen.

The CCI noted that the provisions of the Act are only attracted when the impact of the alleged/ impugned conduct has some nexus to the competition in markets in India and is likely to cause an appreciable adverse effect on competition in such market. Though the presence of such entities in India is not a sine qua non, however, the impact of their conduct must have an appreciable adverse effect on competition in India to trigger the machinery under the Act.

The CCI further observed that the provision encompassed under section 32 of the Act is based on the “effects doctrine”, which empowers competition regulators to extend jurisdiction beyond the “principle of territoriality”. The pith of this doctrine is that the domestic competition law captures anti-competitive acts by enterprise(s) even if the violating enterprise is not located within the territory of the country or the alleged conduct has taken place outside the territorial jurisdictions, provided that the anti-competitive act has an effect in the country.

In the present matter Holiday Club is a Finnish company and serves only in Finland, Sweden and Spain. Thus, the Commission noted that the acquisition, alleged to be anti-competitive, has taken place outside India and is in the context of a product meant for consumption outside India i.e. sale of resorts/part of resorts on time share basis. Though Mahindra (India) seems to be the ultimate acquirer of the Holiday Club, the present case does not seem to have any impact on the competition in the Indian markets. Given that Holiday Club has resorts only in Finland, Sweden and Spain, the impugned acquisition of Holiday Club does not appear to bring any material change in the position of Mahindra (India) as a competitor in the Indian markets. Thus, the present case does not appear to raise any competition concern in India, to warrant scrutiny under the Act.

The Commission thus ruled that no prima facie case existed in this case. Consequently, no case arises for consideration of any interim relief, as claimed by the Informant under Section 33 of the Act.

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