Mighty MNCs find mega hurdle on the road to India — CCI

For foreign companies looking to invest in India, the most vexing issues normally are taxation, as seen in the Vodafone and Cairn cases, or foreign direct investment (FDI) rules that limit their stakes or impose offset clauses (such as Dassault’s Rafale deal).

The recent weeks, though, have seen the Competition Commission of India (CCI) hitting the headlines for throwing roadblocks on the path of two American corporate juggernauts — Amazon and Apple. The CCI’s recent ruling on the Amazon-Future deal may leave the US retailer back in square one. Amazon may have to completely redraw its plans to tap India’s giant retail market.

Also read: India’s antitrust watchdog suspends Amazon’s 2019 deal with Future Group

Apple, on the other hand, is fighting a case that accuses it of abusing its power in the apps market. If it loses the case, its expansion plans in India, where it currently holds a small share but sees large potential in the future, may have to be reconfigured.

What’s different now

In the past, too, the CCI has levied large fines on corporates, and changed the way markets work. As a fair-trade regulator, it has pushed hard to make Corporate India comply with competition laws. For instance, in 2016, it slapped a penalty of over ₹6,700 crore on 11 cement companies and the Cement Manufacturers Association (CMA), charging them with cartelisation.

In 2014, it imposed a fine of ₹2,554 crore on 14 carmakers in the country for not selling spares in the open market. The Commission has punished India’s airlines for non-competitive practices, and imposed fines on big corporate houses such as DLF and state-owned Coal India.

However, these actions were mostly against domestic entities. Its actions against foreign companies have been few and far between. Many of its rulings have been overturned in courts — both Indian and international arbitration ones. It is only in recent years that the CCI has pulled up MNCs in a significant way, say corporate observers.

Google has gotten into trouble a few times in the past few years over its search engine as well as Android, India’s most widely used mobile operating system. In 2018, the CCI fined it for ‘search bias’. In 2019, it ordered a probe against Google for allegedly blocking market rivals by abusing the dominant position of Android. With the Apple and Amazon cases, CCI is in the news all over again.

‘We are small,’ says Apple

Apple is fighting an unlikely opponent — the little-known non-profit Together We Fight Society (TWFS), which has moved the CCI saying the US tech giant hurts competition by forcing app developers to use its proprietary system.

Also read: Apple urges Competition Commission of India to dismiss anti-trust case

Apple has asked CCI to throw out the case, claiming it is too small a player in the Indian smartphone market dominated by Google. While its share is an ‘insignificant 0-5%’, Google enjoys a 90-100% share, it pointed out. It further called the TWFS complaint a ‘proxy filing’ — that the non-profit was “likely acting in concert with parties with whom Apple has ongoing commercial and contractual disputes globally and/or that have complained to other regulators.”

The CCI has started reviewing the allegations against Apple, whose proprietary system can charge commissions of up to 30% on in-app purchases. While Apple says its presence in India is too small to be considered ‘dominant position’, the market is expected to grow exponentially in the coming years, and the company is said to be strategizing to expand its presence.

The Future shocker for Amazon

The CCI has slapped a penalty of ₹202 crore on Amazon for ‘concealing material information’ about its $200 million investment in two Future Group firms: Future Coupons Resources Pvt Ltd (FCRPL) and Future Coupons Pvt Ltd (FCPL). It has also suspended its clearance for the deals.

Citing its investment in FCRPL and FCPL and its contractual stipulations, Amazon has been trying to legally thwart a $3.4 billion deal between Future Retail Ltd (FRL) and Reliance Retail to create a mammoth retail organisation. CCI, in its latest ruling, said Amazon had invested in the coupon firms only to get a foothold in FRL, and that it had hidden internal memos supporting this.

It was common knowledge that Amazon was investing in the coupon firms (that were recently incorporated) only with an eye on FRL. However, the CCI using that technicality to revoke its previous clearance for the Amazon investments in FCPL and FCRPL came as a surprise.

Amazon will most likely appeal the decision. FRL and Reliance are certain to leverage the latest CCI decision to put their own deal back on track. The final decision may go either way. But, MNCs looking to invest mega sums in India in the future will take cognizance of how the CCI can completely overturn their plans.