Introduction and Background

The Competition Commission of India recently passed an order dismissing a case against AVEVA Inc. The information in the case was filed by one Mr. Velusamy Karuppannan who alleged that the Respondent, as a technology service provider, has distorted the fair play field through unilateral and multilateral conduct in the industrial automation software industry. Some of the main allegations raised in the matter included AVEVA using its market power to push the costlier product between the users, bundling and tying its services to enhance usage and adoption of predatory pricing to strategically eliminate competitors from the market. The Commission analysed these issues and passed a final order under section 26(2) of the Competition Act dismissing the matter.

Core Issues Involved

The matter concerns the presence of competition in the industrial automation software industry. Some of the core issues involve the applicability of MES, SCADA, and historian software as a foundational layer for the operation of other specialised software in the industry, and the possibility of bundling and tying by AVEVA to ultimately lock in consumers. The informant further alleged that the UK-based company was using its market power to the flex-subscription model, which is a costlier option compared to the perceptual licensing method, while also strategically undercutting its competitors through predatory pricing tactics. The Commission dismissed the matter, stating that the strong presence of companies such as Siemens, Honeywell, and Oracle in the market indicates the existence of competition.

Law and Policy Analysis

Absence of third-party consultation

The case involved technical markets. For instance, even though the Commission has made a distinction between MES and historian software in its analysis, the respective definitions given by it suggest some overlap as far as the collection of data from the shop floor is concerned. This aspect is crucial as, even though the Commission in the order has admitted a lack of data when it comes to determining the market share of the respondent, it still chose not to consult any third-party stakeholder and rather directly close the matter.

Violation of section 3(4) ignored

Another key concern in the order is the amount of burden shifted to the Informant when it comes to proving contravention by AVEVA. As far as violation of section 4 is concerned, i.e. abuse of dominant position, the Commission restricted itself to the second-step, i.e. proving dominance in the delineated relevant market, even though the charge was made along with allegation of violation of section 3(4) of the Act, i.e. vertical restraints, thereby diluting the importance of such a step. The Commission ought to have appreciated the strength of interlinkages within the industry before reaching to a conclusion, as that is one of the sources of market power in technical markets.

Admissibility of anonymous evidence

Another peculiarity in the order remains around the admissibility of anonymous evidence. The Commission in this case has taken on record two anonymous emails. It is an indication that the CCI has used suo moto powers in this case given that there are no formal guidelines on how to tip the CCI apart from filing an information. This aspect is crucial as litigating parties regularly contend over which piece of factual information could serve as evidence. Most recently, the Supreme Court of India has given a landmark ruling in the Schott Glass case where guidelines for taking evidence on record, if it were to be given by a contending party, have been laid.

Conclusion

The Commission, in this case, has been unable to appreciate the industry dynamics. Some of the key allegations, such as the impact of bundling and tying on the market power of AVEVA, higher prices for users and the possibility of predatory pricing remain unassessed. A policy connection between the outcome of this case, the recently concluded India-UK trade agreement and the home country of the Respondent also cannot be ruled out. This may finally discourage the information filing process at the competition body unless the Informant files an appeal against the decision.