In Re: Alleged Cartelisation in Flashlights Market in India

PART A (approximately 1000 words)

1. For any ONE of the following factual issues discussed in the order, briefly discuss
the factual conclusions reached by the Director General (DG) and the Competition
Commission of India (CCI). Explain why the factual finding is significant to a
determination of cartelisation. Also explain any relevant economic principles that may
be needed to arrive at the legal conclusions. [Note: answer any ONE of A, B or C]

C. Exchange of commercially sensitive information.

A Lesser Penalty Application (LPA) that was presented in line with Section 46 of the Act was
submitted by Eveready Industries India Ltd. (OP 1) on November 6, 2018, and the
Competition Commission of India (CCI) dismissed the charges of cartelization that were
submitted by Eveready Industries India Ltd. (OP 1).An example of a citation or reference to a
source is shown by the text that was submitted by the user. OP 1 supplied information in their
Letter of Proposal (LPA) on the exchange of information for the selling and manufacturing of
flashlights between OP 1, Panasonic Energy India Co. Ltd. (OP 2), and Indo National Ltd
(OP 3). This information was given in relation to the sale and manufacturing of flashlights. It
was the group known as "OP 5," which is an acronym that stands for the Association of
Indian Dry Cell Manufacturers, that was responsible for making the dissemination of
knowledge feasible. As a result of this, OP 2 presented an LPA, which demonstrated proof
that the OPs had shared information with one another on the business of selling flashlights.
Because of this, the CCI gave the DG the direction to initiate an inquiry into the OPs. This
was a result of the situation.

The Commission of Investigations (CCI) arrived to the judgment that the mere act of the OPs
sharing specific information with one another did not offer sufficient evidence to support the
argument that the OPs were behaving in a coordinated manner in violation of the Act. In
order to determine whether or not the different OPs had really followed out the agreement to
raise rates, the CCI conducted a comprehensive investigation into the interchange of
information that was considered to be of a commercially sensitive nature. Among them were
written letters from a different organization (OP 3), in which the third organization requested
information from the first company (OP 1) on wholesale price, margins, and promotional
plans. An additional point of interest is that OP 1, OP 2, and OP 3 spoke with one another
using the medium of email in order to discuss the arrival of a new competitor, Godrej, into
the market. Although the evidence suggested that commercially sensitive information was
exchanged, the Competition Commission of India (CCI) came to the conclusion that it was
not sufficient to demonstrate that the individuals involved had established a consensus on the
particular criteria for determining or increasing prices. This was the conclusion reached
despite the fact that the evidence strongly suggested that such information was exchanged. In
addition, while the email exchanges that took place between OP 1, OP 2, and OP 3 provided
evidence that the OPs were keeping an eye on the flashlights market, it did not provide
evidence that any of the restrictions that were established in the Act had been broken. 1

The Director General relied on two crucial pieces of evidence in order to reach a settlement in
the Tyre Cartel Case. These pieces of evidence were the basis for the settlement. Other
considerations, which are referred to as "plus factors," include the existence of a platform,
specifically ATMA, where commercially sensitive information, including pricing strategies, is
exchanged. These include: (a) the presence of similar prices among the involved parties,
which is referred to as price parallelism; and (b) other considerations, which exist. This
strategy is supported by the prior conclusions of the CCI, which show that conscious
parallelism alone is not sufficient to form an agreement since it is not adequate. This
technique receives support from these judgments. However, when evaluated according to the
evidential standard of preponderance of probability, the combination of price parallelism and
other "plus factors" that imply the presence of collusive activity are considered sufficient to
show the existence of an agreement in accordance with Section 3(1) of the Capital Act of
2002. This is because the preponderance of probability is the standard that is used to evaluate
evidence. In the instance of the cement cartel, the Competition Commission of India (CCI)
used the framework for information sharing that was devised by the Cement Manufacturer's
Association (CMA). This framework served as the foundation for the approach that was
utilized. Following that, the National Company Law Appellate Tribunal (NCLAT), which is
in favor of the procedure, gave its approval to this plan. In addition, the CCI presented
evidence that parallelism was present in pricing, dispatch, and output.2

The Competition and Markets Authority (CMA) said that the exchange of information was
acceptable in the context of the Tyre Cartel since the government had sought specific data

1
Guest, Leniency Applicant Challenging the DG Report: Need for Clarity?, INDIACORPLAW (Mar. 31, 2022),
https://indiacorplaw.in/2022/03/leniency-applicant-challenging-the-dg-report-need-for-clarity.html (last visited
Jan 8, 2024).
2
Information Exchange - A Standalone Violation under Indian Competition Law, AZB,
https://www.azbpartners.com/bank/information-exchange-a-standalone-violation-under-indian-competition-law/
(last visited Jan 8, 2024).
pertaining to the matter. The Competition Commission of India (CCI), on the other hand, said
that the dissemination of this information among CMA members would have made it feasible
for pricing collusion to take place. This assertion is supported by the analogous behavior seen
by the industry.

As a result of the presence of trade groups that have the ability to operate as venues for the
exchange of information, as well as physical proof of such information sharing, the findings
that the CCI has made about cartels have been primarily predicated on the existence of such
associations. Both the Paper Cartel Case and the Beer Cartel Case have demonstrated the
sharing of information as proof of an anti-competitive agreement. Both of these cases are
related to cartel production. But there is no indication that any steps were taken based on such
commercially sensitive information. There is no proof of any actions being taken.

One notable exception to this rule is the Flashlight Cartel, which is the sole notable exception
to this criterion. Even though the parties admitted to sharing commercially sensitive
information, such as pricing data, as part of their application under the CCI's Lesser Penalty
Regulations, the Competition Commission of India (CCI) was unable to find any evidence of
an anti-competitive agreement in this particular instance. This was the case despite the fact
that the parties acknowledged sharing such information. In the absence of evidence that
established an agreement to act upon the information that was supplied and manipulate
prices, as well as to restrict or control production, supply, markets, technological
development, or investments, this transpired as a consequence of the absence of proof.

It was the responsibility of the Commission to examine the "exchange of commercially

sensitive information" in order to determine whether or not the individual OPs had followed
out the agreement to raise rates. This consists of written notes that were taken by Mr. R. P.
Khaitan of OP-3. In these notes, he requests information from OP-1 on pricing, wholesale
price, margins, and promotional activities. This resource contains these remarks as part of its
contents. As an additional point of interest, there was a conversation that took place in an
email exchange between OP-1, OP-2, and OP-3 about the arrival of a new firm called Godrej
into the market. In light of the fact that the written records of Mr. R. P. Khaitan and the
testimony of relevant individuals from OP-1 and OP-3 show that OP-1 and OP-3
communicated information that was deemed to be commercially confidential about the price
of OP-1's goods, the Commission took note of this fact. These notes and remarks, on the
other hand, do not provide any evidence to support the claim that the individuals in question
have reached a consensus about the specific criteria that need to be taken into consideration
when deciding or raising prices. Additionally, the contact that took place between OP-1 and
OP-3 about pricing did not necessarily show beyond a reasonable doubt that they plotted to
fix prices. This is because the conversation was taken into consideration. In addition, the
email exchange that took place between OP-1, OP-2, and OP-3 brings to light the fact that
these individuals were keeping an eye on the introduction of new flashlights to the market.
On the other hand, none of these activities shown any signs of violating the limitations that
were outlined in the Act to begin with.

PART B Answer any ONE of the following questions (approximately 800 words)

2. Do you agree with the CCI’s decision in this case? What according to you is the
most critical factor that influenced the CCI’s decision? Discuss in light of the
jurisprudence on the meaning of an ‘agreement’ within the Competition Act.

Both the email exchange and the comments made by the individuals who were involved
suggested, as stated by the Commission, that OP-1, OP-2, and OP-3 had developed a
common agreement to raise prices for dry cell batteries as well as flashlights. This is
something that was brought to their notice by the Commission to their attention. A further
point to consider is that it seemed that OP-1, OP-2, and OP-3 had reached a consensus about
the implementation of a price rise for flashlights. The most recent email that Mr. Suvamoy
Saha sent to Mr. Kumaraswami on March 26, 2012, while also sending copies to Mr. R. P.
Khaitan and Mr. S. K. Khurana, said that the agreement in question had not yet been put into
effect. This was despite the fact that Mr. Saha had previously stated that it had been put into
force.

In order to determine whether or whether the OPs individually followed through with the
agreement to raise rates, the Commission conducted an investigation into the "exchange of
commercially sensitive information." This consists of written notes that were taken by Mr. R.
P. Khaitan of OP-3. In these notes, he requests information from OP-1 on pricing, wholesale
price, margins, and promotional activities. This resource contains these remarks as part of its
contents. As an additional point of interest, there was a conversation that took place in an
email exchange between OP-1, OP-2, and OP-3 about the arrival of a new firm called Godrej
into the market. In light of the fact that the written records of Mr. R. P. Khaitan and the
declarations made by relevant individuals from OP-1 and OP-3 demonstrate that OP-1 and
OP-3 have communicated information that is commercially important about the price of OP-
1's goods, the Commission has taken note of this fact. On the other hand, these notes and
remarks do not provide any evidence that the individuals in question have met and reached a
consensus over the specific variables that will be used to determine or increase pricing. A
further point to consider is that the conversation that took place between OP-1 and OP-3 over
pricing might not definitively suggest that they collaborated when it came to selecting prices.
As an additional point of interest, the email conversation that took place between OP-1, OP-
2, and OP-3 suggests that these persons were keeping a close check on the introduction of
flashlights to the market. All of these operations, on the other hand, did not provide any
evidence that they were in violation of the boundaries that were imposed by the Act.

Because of this, the Commission came to the conclusion that even though there was evidence
that the relevant parties had exchanged strategic information regarding production and sales
data, a draft press release for announcing a price increase, and price data that suggested
possible collusion, there was not sufficient evidence to demonstrate that OP-1, OP-2, and OP-
3 had actually affected the prices of the flashlights. This was the conclusion that the
Commission reached. Additionally, there was not a single piece of evidence in the case that
could possibly support the statement that the OPs really carried out the agreement that was
indicated in the email exchanges that took place in March of 2012. This was the case. OP-1,
the complainant who brought to light the alleged anti-competitive activity of the businesses,
stated during the hearing that they were unable to show proof of a rise in the price of
flashlights as a consequence of the conduct of the firms. This was the case when they were
attempting to present evidence of the purported increase in pricing. On the other hand, the
Court of Criminal Investigation did not concur with the allegation that the ongoing case of
single continuous infringement is related to the earlier case of the dry cell batteries cartel,
which the CCI had launched (suo motu case no. 02 of 2016). This was the case since the CCI
had initiated the case. This is due to the fact that in the previous case, when OP 2 was granted
a complete remission of penalties, it hid the fact that it had coordinated with other players in
the flashlight market. This is the reason why things are the way they are.

The Competition Commission of India (CCI) has come to the conclusion that there is
insufficient evidence to demonstrate that OP-1, OP-2, OP-3, and OP-5 participated in cartel
action by conspiring to set flashlight prices, either directly or indirectly, in violation of
Section 3(3)(a) of the Act. This conclusion was reached in light of the fact that the CCI has
reached this conclusion.
Take heed of this: It is important to note that the judgment that was mentioned previously is
the first of three rulings of this sort that have been handed down by the CCI in very recent
times. Despite the fact that the results of the investigations carried out by the DG led to
different findings, both directorates have expressed their disagreement with the charges of
anti-competitive action. It is of the utmost importance to keep in mind that the Act does not
provide any mechanisms for reviewing decisions on the establishment of discretionary
authorities. This happens when the CCI makes the decision to reject the charges regardless of
the results of the investigations, after an investigation that was carried out in line with section
26(8) of the Act and after hearing from the parties concerned. When it comes to the "orders"
that are made by the CCI (without indicating which section of the Act is being referred to), I
believe that there is a "grey area" that relates to the situation.3

Out of the three ( blogs on the two others being brought out soon) this order stands out as
jurisprudentially important because ,firstly, it is the first time that CCI has closed the case
initiated by it on the basis of leniency applications filed by two out of three market players in
a tight oligopoly, secondly, because ,again it is perhaps, the first time that CCI has taken note
of the unique market conditions ( inconsistent market shares of majority of players and
declining demand of the product resulting into progressive declining profits) while deciding
upon the conduct of the parties , thirdly, because the CCI has , for the first time ,
distinguished between the existence of a “cartel” and its actual effect on the market i.e.
whether or not such cartel did actually determine prices in terms of section 3(3)(a) of the Act,
and fourthly, for the first time the Commission has sought to lay down some guidelines on the
extent of culpability in the exchange of strategic business information amongst competitors ,
thereby , differing and diluting to a large extent , in my view , the EU Guidelines on exchange
of information between competitors, and lastly, CCI has relied upon precedents from its own
orders, distinguishing mens rea from actus reus.4

It makes no difference whether the agreement is formal, written down, or meant to be

enforced by legal processes; the term "agreement" encompasses any kind of mutual
understanding or coordinated action whether it be verbal or written. The Finance Act of 2017
established a new meaning on May 26th, 2017, which rendered this definition obsolete and
replaced it with a new one.

3
CCI Dismisses Cartel Allegations against Flashlight Manufacturers, AZB,
https://www.azbpartners.com/bank/cci-dismisses-cartel-allegations-against-flashlight-manufacturers/ (last
visited Jan 8, 2024).
4
NishithDesai, https://www.nishithdesai.com/generateHTML/5426/4 (last visited Jan 8, 2024).
Before it was changed, clause (ba) was worded as follows: "(ba) Appellate Tribunal" refers to
the National Company Law Appellate Tribunal, which is specified in the first subsection of
section 53A. This was the previous version of the clause. In accordance with the Competition
(Amendment) Act of 20075, this was included, and it went into force on the 10th of December
in 2007.

5
Competition (Amendment) Act of 2007.