COMPETITION LAW UPDATE DECEMBER 2012-JANUARY, 2013

I. CCI ISSUES SUPPLEMENTARY ORDER AGAINST DLF AND PROVIDES A MODIFIED AGREEMENT TO BE EXECUTED
WITH BUYERS OF APARTMENTS

1.1 In its order in the matter of Belaire Owners' Association (Informant) v. DLF Ltd. and Ors. (DLF) dated August 12, 2011
(Main Order), the Competition Commission of India (CCI) had held the Opposite Party to be a dominant enterprise in
the geographic area of Gurgaon (Haryana). Further, the CCI had held that the Opposite Party had abused its
dominant position and violated the provisions of the Competition Act, 2002 (Competition Act) by entering into a
highly abusive apartment buyer’s agreement (Agreement) with various buyers. In view of the foregoing, the CCI had
directed the Opposite Party to suitably modify unfair conditions imposed on its buyers.

1.2 While hearing the Opposite Party's appeal against the Main Order, the Competition Appellate Tribunal (COMPAT)
remitted the matter to CCI, for it to pass an order specifying the extent and manner in which the terms and
conditions of the Agreement required modification. Further to the COMPAT's order, CCI has issued a supplementary
order dated January 3, 2013 (Supplementary Order), wherein it has directed modification of various clauses of the
Agreement.

1.3 The Informant contended that the entire Agreement ought to be considered for modification as the CCI's
observations in the Main Order only highlighted certain clauses that were abusive. The Opposite Party argued that
only specific clauses mentioned in the Main Order could be considered for modification and also argued that the
Agreement did not need any modification, as the project was already completed and possession given to the buyers.
The CCI observed that several clauses of the Agreement were interwoven and modification in any one clause would
necessitate the modification in other clauses, and that the Agreement was required to be modified so that no
abusive clauses were included in it.

1.4 In the Supplementary Order, the CCI reviewed each clause of the Agreement and ordered changes if it found it to be
abusive (of the Opposite Party's dominant position). In effect, the CCI has provided a modified and amended
Agreement that the Opposite Party is required to execute with each buyer.

1.5 Some of the clauses of the Agreement modified by the CCI and its relevant observations are set out below:

(a) The provisions of the Agreement which provided the Opposite Party right over open area, even after the sale
of the apartment were held to be inconsistent with applicable law. The CCI observed that the Opposite Party
could have no right over the common area after the sale of the apartments. Accordingly, the CCI ordered the
revision/ deletion of several clauses of the Agreement to reflect this position.

(b) The Agreement provided that the Opposite Party could sell parking spaces independently and that the cost of
the flat was not inclusive of the parking space. The CCI observed that open parking and parking under stilt are
part of common areas and could not be sold independently and that the Opposite Party only had the right to
sell flats under applicable law.

(c) The Agreement enabled the Opposite Party to charge an additional amount for allotting an apartment of
choice to a buyer. However, if such allotment could not be made, the Agreement did not provide for payment
of any interest on such amount. The CCI directed the Agreement to be modified to provide for refund of the
additional amount along with interest, if the apartment of the buyer's choice could not be provided.

(d) The Agreement provided the Opposite Party unfettered rights to make structural changes in the apartment
complex, without requiring any consent from the buyers. The CCI amended the foregoing provision to provide
that substantial changes in the lay-out plan resulting in more than 2% increase or decrease in super area
would require the buyers’ consent.

(e) The Agreement provided that the buyer will only have proportionate ownership rights in the land underneath
the building and the Opposite Party retained the right to increase the number of floors and reserved terrace

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COMPETITION LAW UPDATE DECEMBER 2012-JANUARY, 2013
rights for itself. The CCI directed that the relevant clauses be modified to vest such rights in the buyers as a
part of the common area.

(f) Provisions in the Agreement giving full and absolute rights in the community buildings/ sites/ recreational and
sporting activities to the Opposite Party were ordered to be deleted.

(g) Clauses in the Agreement which restricted the resident welfare associations from entering into fresh
contracts with service providers for upkeep and maintenance of the building complex were ordered to be
deleted.

(h) Clauses relating to delivery of possession of the apartment by the Opposite Party had no exit option for the
buyer and were held to be loaded in favour of the Opposite Party. The Opposite Party had the liberty to
extend the period of delivery of possession on self serving grounds, without any penalty for such delay. The
CCI ordered such clauses to be deleted and ordered the inclusion of a clause that would allow the buyer to
terminate the Agreement if the Opposite Party committed an event of default (such as, missing two
construction milestones or undertaking major changes in the specifications of the project without the buyers'
consent).

(i) The CCI further modified the Agreement to state that in case the Opposite Party has any unpaid loans after
the apartments are sold, the lenders could only have lien over unsold apartments for recovery of dues from
the Opposite Party.

II. CCI DISMISSES ALLEGATIONS OF ABUSE OF DOMINANT POSITION AND CARTELIZATION AGAINST MAJOR
MULTIPLEX OWNERS AND MULTIPLEX ASSOCIATION OF INDIA

2.1 On January 3, 2013, CCI rejected the Film and Television Producers Guild of India's (Informant) allegations of abuse
of dominant position and cartelization against the Multiplex Association of India (MAI) and various multiplex owners
across India.

2.2 The Informant had alleged that MAI and other multiplex owners had acted in a concerted manner to determine
prices of their services and to prevent exhibition of films on their screens, unless their revenue share demands were
met by the film producers/ distributors. The Informant's grievance was that the MAI had realised that multiplex
earnings contribute to almost 60% of revenue for a film and that they were attempting to exploit their position in an
anti-competitive manner. Further, the Informant alleged that multiplex owners have various alternative films
available for exhibition and can refuse exhibition of the films of a producer/ distributor who did not agree to their
unreasonable demands.

2.3 The CCI appointed the Director General (DG) to investigate into the Informant's allegations. On an analysis of various
factors, including revenue sharing agreements, market share of multiplex theatres and behaviour of the multiplex
owners, the DG concluded that MAI and its members were collectively deciding the terms of the business of film
exhibition in multiplex theatres and that they were acting in a concerted manner to control the market of film
exhibition.

2.4 In its report, the DG observed that:

(a) multiplex theatres are the largest source of revenue generation for a film, which results in over dependence
of producers and distributors on multiplex theatres;

(b) the master agreement executed between multiplex owners and the producers/ distributors in 2009 (Master
Agreement) contained terms of revenue sharing arrangement, which expired on June 30, 2011 and the
Master Agreement was not renewed. Thereafter, the multiplex owners started formulating new terms and
conditions for displaying movies at their respective theatres;

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COMPETITION LAW UPDATE DECEMBER 2012-JANUARY 2013
(c) as there are a limited number of multiplex theatres in India and as they are a large source of revenue for
films, they are in a dominant position and that they were abusing their dominant position in the relevant
market by acting in a concerted manner;

(d) multiplex owners adopt delaying tactics in finalising the release date for a particular movie by not signing the
revenue sharing agreement till the time the producer/ distributor agrees to their terms and conditions; and

(e) MAI acted as the platform for all multiplex owners, who were acting in a concerted manner under the
directions of the president of MAI.

2.5 In the reply to the allegations of the Informant and the DG's findings, the MAI and the multiplex owners contended
that:

(a) MAI was not involved in day to day operations or business management of multiplex theatres, but it only
provided a platform for its members to discuss issues relevant to their operations;

(b) films are subject matter of copyright laws and the owner of such copyright can exploit it in any way it wants.
Hence, the multiplex owners are dependent on the producers and distributors of the films and not vice versa;

(c) the DG did not examine the conduct of the members of MAI independently, which is against settled principles
of law; and

(d) the DG failed to show how the alleged anti-competitive agreement amongst various multiplex owners and
MAI resulted in directly/ indirectly determining/ fixing price or limiting or controlling the supply of services.

2.6 On the basis of the DG's report and the contentions of the parties, the CCI concluded that:

(a) the DG had failed to provide enough evidence to conclude that the multiplex owners were acting in concert
or that they had formed a cartel to decide the terms and conditions for releasing a movie at their multiplex
theatres;

(b) in order to prove conspiracy among competitors, evidence of communication between opposite parties is
very important; however, exchange of information alone is not sufficient to prove concerted action and the
parties ought to have used the exchange of information to facilitate the illegal conduct. The evidence before
the CCI only proved that there was communication amongst the multiplex owners, but it did not prove any
illegal conduct by the multiplex owners using such information. The CCI observed that there was evidence to
show that the multiplex owners were acting independently;

(c) meetings of trade associations may be used as a platform for conducting concerted activities by the
competitors. However, the mere fact that MAI organized meetings where its members exchanged certain
information, by itself cannot be said to be anti-competitive under the Competition Act;

(d) in order to establish abuse of dominant position under the Competition Act, it has to be proved that it is done
by an enterprise. The CCI observed that MAI was not involved in any activity relating to exhibition of films and
could not be termed as an enterprise; and

(e) mere exchange of information on a platform offered by a trade association cannot be taken as proof for
establishing charges of cartelisation against members of such trade association. There should be enough
circumstantial or direct evidence to show that members of the trade association are indulging in cartelisation,
and the DG in its report should be able to demonstrate a common design or scheme to achieve an unlawful
objective.

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COMPETITION LAW UPDATE DECEMBER 2012-JANUARY 2013
III. CCI DIRECTS MODIFICATION OF NON-COMPETE CLAUSE IN A BUSINESS TRANSFER ARRANGEMENT

3.1 On December 21, 2012, CCI approved a horizontal combination between Orchid Chemicals and Pharmaceuticals
Limited (OCPL) and Hospira Healthcare India Private Limited (HHPL) under the provisions of Competition
Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011
(Combination Regulations). The notice for approval of the combination issued by the parties under the Combination
Regulations related to a business transfer agreement (BTA) executed between OCPL, K. Rahgvendra Rao (promoter
and principal shareholder of OCPL) and HHPL, for the sale of OCPL's betalactum active pharmaceutical ingredients
(APIs) business.

3.2 The BTA contained non-compete clauses which restricted OCPL and Mr. K. Raghvendra Rao from undertaking certain
activities pertaining to the transferred business for 8 (eight) and 5 (five) years, respectively. The non-compete
obligations also restricted research, development and testing of APIs. The parties to the combination contended that
such non-compete clauses are standard in transactions such as the one being examined by the CCI and that they
were an essential safeguard for HHPL, as OCPL and Mr. K. Raghvendra Rao possessed the experience, technical
know-how and the ability to establish an independent business which could undermine HHPL's investment
significantly.

3.3 The CCI was of the view that, if non-compete clauses are necessary to be incorporated in any agreement, such
clauses should be reasonable, particularly in respect of: (a) the duration of restraint; and (b) business activities,
geographical area and persons on whom such restraint is applicable, so as to ensure that such obligation do not
cause any appreciable adverse effect in the relevant market. Based on the above observations of the CCI, the parties
agreed to modify the BTA to limit the non-compete period to 4 (four) years in relation to domestic market in India
and to allow OCPL to conduct research and development on such new molecules, which would result in
development of APIs currently not present in the world.

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