In This Issue

India: Reliance Jio's low priced 4G network - Legal Implication vis-à-vis Predatory Pricing

Reliance JIO Infocom, in order to attract digital audience in India has introduced its 4G network services and other related telecom services at exorbitantly low prices. The introduction of telecom services at low prices can be actuated with Reliance’s introduction of mobile phones at around INR 500 (less than USD 9 per phone) in early 2000 which brought about a revolution in the country.

.................................................................................................

India: National Green Tribunal imposes a Penalty of INR 100 Crores on the Delta Group

NGT imposed a penalty of INR 100 crores on Delta Group and INR 5 crores on Adani Enterprises for damage caused to the environment due to sinking of the ship, M.V. Rak off the shore of Mumbai in 2011. The sinking of the ship resulted in an oil spill and resulted in 60054 MT of coal being left on the sea bed.

.................................................................................................

 

India: Government imposes Anti-Dumping duty on the import of an inert gas commonly used as a refrigerant

The Indian Government vide Notification No. 30/2016- Customs (ADD) dated July 11, 2016 in exercise of its powers under the Customs Tariff Act, 1975 and the Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995 has imposed an anti-dumping duty on the import of 1,1,1,2- Tetrafluroethane or R-134a into India, originating in or exported from China. 1,1,1,2- Tetrafluroethane or R-134a is an inert gas which is commonly used as a refrigerant in refrigerators and automobile air conditioners.

.................................................................................................


India: Reliance Jio's low priced 4G network - Legal Implication vis-à-vis Predatory Pricing

 

On December 27, 2015, the eve of the 83rd birth anniversary of Late Dhirubhai Ambani, the founder of Reliance Industries, Jio services were beta-launched to Jio’s partners and employees. The launch was witnessed by 35,000 employees and their families, with 80,000 more watching the live streaming of the proceedings across over 1,000 centers. After a successful Beta-run, the services were launched commercially throughout the country on September 5, 2016.

 

Reliance JIO Infocom, is a subsidiary of Reliance Industries limited, and in order to attract digital audience in India has introduced its 4G network services and other related telecom services at exorbitantly low prices. The introduction of telecom services at low prices can be actuated with Reliance’s introduction of mobile phones at around INR 500 (less than USD 9 per phone) in early 2000 which brought about a revolution in the country.

 

Impact

 

It is anticipated that with the launch of Jio, the major players in the Indian industry, namely Bharti Airtel, Vodafone India and Idea Cellular are likely to be effected. BNP Paribas, the French multi-national bank and financial services company, claims, that the entrance of Jio will expedite the exit of weaker operators who make roughly 25% of the revenue for the industry[1]. Giving a tough fight, Bharat Sanchar Nigam Limited (BSNL), the Indian State owned Telecommunications Company, believes itself to be in a position to give competition for such low tariffs for broadband services.

 

Jio being a new player has already created a skirmish amongst the existing service providers, pursuant to which Cellular Operators Association of India (COAI) have asked Department of Telecommunication (DoT) to stop Jio’s entry. COAI said that all Reliance Jio’s connections should be stopped because under the guise of a test run, Jio is offering full-fledged services. In return to it, Jio replied by calling these charges “malicious, unfounded, ill-informed, and frivolous” but the final statement from the DoT is pending.

 

JIO and Predatory Pricing

 

Predatory pricing is the act by which a company having a dominant position in the market, reduces prices of a good or service in an industry so that the smaller players of that industry cannot sustain their business in the long run and are forced to exit.

Section 4(2) of The Competition Act, 2002 reads as following: “predatory price” means the sale of goods or provision of services, at a price which is below the cost, as may be determined by regulations, of production of the goods or provision of services, with a view to reduce competition or eliminate the competitors.

 

To establish the allegations of predatory pricing, first, one has to establish whether the company holds a dominant position in the industry. This position means that the company has the power to operate independently of the market status and because of its strength can steer the market in its favor. Solely on the basis that a company is a dominant player it cannot be accused of predatory pricing, but, it has to be shown that they abused this position in order to make the market favorable to them.

 

In Re: Johnson And Johnson Ltd[2]. Justice S Manchanda said that “the essence of predatory pricing is pricing below one’s cost with a view to eliminating a rival.” In MCX Stock Exchange Ltd v. National Stock Exchange of India Ltd., DotEx International Ltd. and Omnesys Technologies Pvt. Ltd[3], the CCI defined predatory pricing as the conduct, “where a dominant undertaking incurs losses or foregoes profits in the short term, with the aim of foreclosing its competitors.”

 

Take Away

 

According to Reliance, sole purpose of the JIO scheme is to make India one of the most internet integrated country by providing internet usage to the mass. However, whether the actions of Reliance Jio amounts to predatory pricing can be determined only if it is proved that Reliance Jio is a dominant player in the market and they are abusing their dominant position to force the small players out of the market.

 

We shall be watching this space and keep our readers updated in case this develops further.

 

[1]http://economictimes.indiatimes.com/news/company/corporate-trends/reliance-jios-free-offers-in-trial-phase-may-hit-data-growth-of-others-analysts/articleshow/53937067.cms

 

[2] (1988) 64 Comp Cas 394 NULL.

 

[3] 2011 Comp LR 129 (CCI)  

 

  Back To Top


India: National Green Tribunal imposes a Penalty of INR 100 Crores on the Delta Group

 

In India, various environmental laws have been enacted for the purpose of protection and conservation of environment which is a trending global concern. Therefore, environment, in India, is regulated by these statutory laws as well as common law practices and principles. One such principle is the Polluter’s Pay Principle which is extensively discussed in the present case.

 

The slogan “If you make a mess, it’s your duty to clean up” is extremely appropriate for this Principle. In the earlier times pollution was not a concern. The release of gases or waste into the air and water was considered legal. Water and air were used as “sinks” and it was thought that neither air nor water was a limited resource and therefore, their use was free to all. However, when the side effects of pollution were felt, the apprehension for injury to the environment, human health, and property began. Pollution became a widespread anxiety and scientists were in the vanguard of those who were looking for solutions. The first real allusion to Polluter’s Pay Principle was in the OECD Guiding Principles Concerning International Economic Aspects of Environmental Policies recommendation of 26th May 1972.

 

Here, the Principal Bench of the National Green Tribunal, a special tribunal established in 2010 to handle the expeditious disposal of the cases pertaining to environmental issues, at New Delhi has ordered the Delta Group (including its Panama based holding company & 2 Qatar based subsidiaries) to pay compensation for the Oil Spill caused by Ship “M.V. Rak” around 20 Nautical Miles (1 Nautical Mile=1.852 Km) from the Indian Coast Line in August, 2011. The Principal Bench of the National Green Tribunal (hereinafter referred to as “NGT”) in Samir Mehta v. Union of India (O.A. No. 24 of 2011) vide its order dated August 23, 2016 ordered the Delta Group to pay a compensation of INR 100 Crores and also ordered Adani Enterprises Limited (hereinafter referred to as “Adani”) to pay INR 5 Crores as compensation for dumping of the cargo in the sea and then failing to take any precautionary or preventive measures.

  • A. Brief Background

     

  • The Ship, M.V. Rak’s (hereinafter referred to as “The Ship”) voyage started on June 14, 2011 from Lubuk Tutung, Indonesia with its destination being Dahej, Gujarat. The Ship had been chartered by Adani to carry 60054 MT of coal for use at its thermal power plant at Dahej, Gujarat, and was also carrying 290 tonnes of fuel oil and 50 tonnes of diesel. During the course of its voyage, the Ship sank approximately 20 Nautical Miles from the coast of South Mumbai on August 4, 2011 due to heavy flooding. The sinking of the Ship resulted in an oil spill with the impact of the oil spill be clearly noticed and visible on the mangroves of Mumbai with the lower portion of mangroves at Bandra turning dark because of a layer of oil and getting destroyed. Further, the NGT observed that the 60054 MT of coal which was being chartered by the Ship was still lying on the sea bed and was a continuous source of pollution. The NGT noted that Adani had taken no steps either to lift the coal or take any preventive steps to stop the pollution from the coal. In view of the pollution, an application was filed under Sections 14 and 15 of the National Green Tribunal Act, 2010 (hereinafter referred to as “2010 Act”) before the NGT asking for the imposition of penalties.

     

  • B. Judgment of the NGT

     

  • The NGT in its judgment made the following observations and issued the following directions:

     

    1. The NGT observed that on the true and purposive construction of the International Conventions and the statutory provisions that had been implemented under Indian Law, no party from any country in the world has the right/privilege to sail an unseaworthy ship to the Contiguous and Exclusive Economic Zone of India and in any event to dump the same in such waters, causing marine pollution, damage or degradation thereof.

    1. The NGT directed the constitution of a Committee which is responsible to carry out a study on whether the removal of the ship wreck and cargo from the present location should be directed, whether it was necessary to leave the wreck of the ship and/or it is not practically possible to remove the wreck of the ship and the cargo. The Committee was directed to present the report of the study before the NGT within one month. Further, the Committee was empowered to issue directions in regards of what compensation should be paid by the Delta Group and Adani at regular intervals for preventing and controlling the pollution.

    2. The NGT held that the liabilities to pay environmental compensation as directed are on account of and subject to adjustments, after the submission of the final report by the Committee.

    3. The NGT directed the Delta Group and Adani to remove the Ship and its cargo or they should cause the Ship and its cargo to be removed within a period of six months from the date of submission of the Committee’s Report before the NGT.

    4. The NGT held the Delta Group was liable for causing marine environmental pollution by sinking of the ship in the Contiguous Zone of Indian waters and directed the Delta Group to pay environmental compensation of INR 100 Crores to the Ministry of Shipping, Government of India in terms of Sections 15 and 17 read with Sections 14 and 20 of the 2010 Act.

    5. The NGT held that the amount of INR 100 Crores would include the expenses incurred by the Coast Guard and other forces for the prevention and mitigation of pollution in different ways caused by the oil spill and saving the crew onboard the Ship, etc. and a sum of INR 6,91,84,405/- shall be adjusted and paid to the respective agencies.

    6. Adani was held liable to pay a sum of INR 5 crores as environmental compensation in terms of Sections 15 and 17 read with Sections 14 and 20 of the 2010 Act for dumping 60054 MT Coal in the seabed and causing pollution of marine environment and for their failure in taking steps to pick the coal that had been left due to the sinking of the Ship.

     

  • Take Away

     

  • The sinking of the Ship had raised pertinent questions relating to pollution caused by the sinking of Ship and oil spill in the Territorial Water, Contiguous Zone and Exclusive Economic Zone of India , whether the NGT had the jurisdiction to entertain the application and what liabilities could be fixed. This judgment of the NGT holding the Delta Group and Adani liable for the pollution caused by the sinking of the Ship is likely to have significant implications on the powers of the National Green Tribunal and the applicability of its orders in international law. It is pertinent to note that appeals against this decision of the NGT lies with the Supreme Court. However, no such appeals appears to be filed yet. We shall update our readers in case of further developments.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Back To Top


India: Government imposes Anti-Dumping duty on the import of an inert gas commonly used as a refrigerant

 

The Indian Government vide Notification No. 30/2016- Customs (ADD) dated July 11, 2016 in exercise of its powers under the Customs Tariff Act, 1975 and the Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995 has imposed an anti-dumping duty on the import of 1,1,1,2- Tetrafluroethane or R-134a into India, originating in or exported from China. 1,1,1,2- Tetrafluroethane or R-134a is an inert gas which is commonly used as a refrigerant in refrigerators and automobile air conditioners.

 

The Indian Government had first implemented an anti-dumping duty on the import of 1,1,1,2- Tetrafluroethane vide Notification No. G.S.R 539(E) dated July 15, 2011. The Indian Government had found that the import of 1,1,1,2- Tetrafluroethane was causing material injury to the domestic market as the imports were undercutting the prices of domestic manufacturers. This had resulted in a corresponding reduction in prices in the domestic market which was having a negative effect on the financial performance of domestic manufacturers.

 

The Indian Government had initiated a review in April, 2015 vide Notification No. 15/23/2014-DGAD on the continuation of the anti-dumping duty and had found that the situations were still persisting in the market which had led to the imposition of the original duty and a continued imposition of the anti-dumping duty was required to protect the interests of the domestic industry.

 

The anti-dumping duty has been imposed for a period of five years, though it can be revoked or amended earlier, based on the situation prevalent in the market.  

  1. Meaning of Dumping

     

    • Dumping occurs when goods are exported from one country to another at a price lower than at which the goods are normally sold.

    • Dumping is considered to be an unfair trade practice which can have a distortive effect on domestic and international trade. The imposition of an anti-dumping duty is a means of remedying the situation that has been created in the market due to the dumping of goods and its trade distortive effect.

    • The use of anti-dumping duty as a tool of maintaining fair competition is allowed by the World Trade Organization (WTO).

    •  

  2. Rationale for Imposition of Anti-Dumping Duty

     

  3. The rationale behind imposing an anti-dumping duty is to correct the trade distortive effect of dumping and re-establish fair trade in the market.

    • In Reliance Industries v. Designated Authority [2006 10 SCC 368], the Supreme Court observed the following: “The Anti-dumping legislation is meant for protection of the domestic industries as a whole against unfair practice of dumping, irrespective of whether they are backwardly integrated or not. The Anti-Dumping Law is, therefore, a salutary measure which prevents destruction of our industries which were built up after independence under the guidance of our patriotic, modern minded leaders at that time and it is the task of everyone today to see to it that there is further rapid industrialization in our country, to make India a modern, powerful, highly industrialized nation”.

  4. Institutional Arrangement for Anti-Dumping

    • Anti-dumping measures in India are administered by the Directorate General of Anti-dumping and Allied Duties (DGAD) functioning under the Dept. of Commerce in the Ministry of Commerce and Industry and the same is headed by the "Designated Authority".

    • The Designated Authority’s function, however, is only to conduct the anti-dumping duty investigation and make recommendation to the Government for imposition of anti-dumping or anti subsidy measures. Such duty is finally imposed/levied by a Notification of the Ministry of Finance.

     

  5. Applicable Laws

  6.  

    • The laws applicable for the implementation of an anti-dumping duty to maintain fair trade in the Indian market are the Customs Tariff Act, 1975 and the Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995 (hereinafter referred to as the “1995 Rules”).

    •  

  7. Persons who can make an application for Anti-Dumping

    • Applications can be made by or on behalf of the concerned domestic industry to the Designated Authority in the Department of Commerce for an investigation into alleged dumping of a product into India. Under Rule 5 of the 1995 Rules a valid application can be made only by those petitioners/domestic producers who expressly support the application, and account for more than 25% of total domestic production of the article in question. Further, the application is deemed to have been made by or on behalf of the domestic industry, if it is supported by those domestic producers whose collective output constitutes more than fifty percent of the total production of the like article produced by that portion of the domestic industry expressing either support for or opposition as the case may be, to the application. However, such producers may exclude those who are related to the exporters or importers of the alleged dumped article or are themselves importers thereof. In other words, a domestic producer who is related to the exporter or importer of the dumped article or is himself an importer thereof, may not be treated as part of the domestic industry even if he files or supports an anti-dumping petition.

    • Rule 5(4) of the 1995 Rules allows suo motu initiation of anti-dumping proceedings by the Designated Authority on the basis of information received from the Collector of Customs appointed under the Customs Act, 1962 or from any other source. In such circumstances, the Authority initiates the anti-dumping investigation on its own without any complaint/petition filed in this regard, provided the Authority is satisfied that sufficient evidence exists as to the existence of dumping, injury and causal link between the dumped imports and the alleged injury.

    • An application can also be made by the party that is seeking to export products into the country to request the Designated Authority for determination of dumping margin under Rule 22 of 1995 Rules. A request can be made to initiate a new Shipper’ review in case an anti-dumping duty has been imposed on the product that is sought to be exported. In such cases a declaration has to be made by the party making the application that they are not related to any of the exporters/producers subject to the anti-dumping measures in force with regard to the product concerned. Further, they also have to declare that they have not exported the product concerned during the original period of investigation.

     

  1. How to determine Dumping

  2.  

    • Rule 10 of the 1995 Rules provides two of the essential factors that are taken into account for the determination of dumping, namely, the export price and the normal value.

    • The export price of goods is the price at which the goods are exported into India from another country or territory.

    • "Normal value" is the equivalent price at which the goods are sold, in the ordinary course of business, in the domestic market of the exporting country.

    • The export price and the normal value are then compared at the same level of trade, for the assessment of dumping. The difference between the normal value and the export price is known as the margin of dumping.

    • Section 9B of the Customs Tariff Act, 1975 provides that the central government will not impose an anti-dumping duty without first determining whether there is some material injury that is caused or threatened to be caused to any established industry in India or there is likely to be material retardation in the establishment of an industry in India. To determine the material injury caused to the industry the authority may look at the following factors-

      •  Volume of the goods coming into India;

      • Price at which the goods are sold; and

      • Demand of the product during the last three years and whether there has been a change in the demand due to the dumping of goods.

    • The volume of the goods coming into India will have an effect on the demand of the goods in the market, the quantity that is consumed, and the capacity utilization of domestic manufacturers of the goods, changes in the market share held by domestic manufacturers and inventory available with dealers of the goods.

    • The Price at which the goods are sold will have an affect on the profit margin of domestic manufacturers as they may have to sell the goods at a lower price to match the price of the imported goods, may result in a reduced or flat turnover, loss of contracts, decline in sales and may result in reduction in employment and wages as domestic manufacturers may look to cut costs due to reduction in prices and capacity utilization.

    • On the basis of the margin of dumping and the material injury caused or threatened to be caused, the authority will then proceed to determine the injury margin. If it can be proved that the dumping of imported goods has caused material injury to the domestic industry, the authority can impose an anti-dumping duty. In Agfa Gevaert A.G. v. Designated Authority [2001(130) E.L.T. 741 (Tri.-Del.)], it was observed that only if the causal link between the import of goods and material injury to domestic industry is established, an anti-dumping duty can be imposed to remove the injury to the domestic industry. Therefore, it is pertinent to note that injury to domestic industry and causal link between that injury and dumped imports is a sine qua non for imposition of anti-dumping duty.

    • The anti-dumping duty will be imposed in order to be sufficient to remove the injury caused to the domestic industry by the dumping of goods.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Back To Top


Image and Content source:Internet

  |   |   |   |   |   |   |   |   |   |  
© Copyright 2016-17, S.S. Rana & Co. All rights reserved