A blog by Centre for Competition law & Policy, NLU Jodhpur



Alay Ninad Raje and Ishika Jain


Competition law acts as a guardian against anti-competitive practices by firms in the market, to foster competition and protect markets against such anti-competitive conduct. For this purpose, the antitrust regime prohibits any agreement which causes, or is likely to cause, appreciable adverse effect on competition [“AAEC”] in the markets. To further this philosophy, the law takes a strict approach when dealing with Cartels. Recently, the Competition Commission of India [“CCI”] on 20.01.2022 penalized Japanese shipping firms for cartelization and ordered them to stop their anti-competitive practices. It was observed that these companies shared commercially sensitive information with each other. 

Also, the European Commission (“EC”) in J&J/Actelion case observed that companies purchase stock of each other for various commercial reasons, however, intentionally or non-intentionally this minority shareholding attracts the attention of competition law. The reason being that this has anti-competitive effects in some situations, such as cartelization, formation of oligopolistic markets, tacit collusion, and monopolisation. Lately, FedEx India’s buying of minority shareholding in Delhivery was perused through by CCI before giving an approval, for the purpose of determining whether or not such buying results in reduction of competitive forces in the market, as both are competitors of each other. Thus, just like cartels, minority shareholding amongst competitors is a big antitrust concern.

In light of these developments, the author undertakes a homogenized analysis of both these concerns and poses a question that; whether information exchange between an enterprise and its minority shareholders, who happens to be its competitors, would amount to cartelization. For instance, there are enterprises ‘E’, ‘F1’, and ‘F2. These enterprises are competitors of each other in the same market. Moreover, F1 and F2 are minority shareholders in E. Now, if E has shared certain information relating to pricing with F1 and F2, then would this exchange of information amount to Cartelization between these enterprises.

Understanding Exchange of Information amounting to Cartelization:

A cartel is an arrangement or agreement between the competitors, to restrict, limit, control or attempt to control the production, distribution, sale, price or trade of goods or services. Cartels are clandestine, verbal and often informal agreements, aimed at increasing prices generally through price-fixing, allocation of production, and engaging in collusive conduct. Cartels achieve their objective of increasing profits by reducing the uncertainty and competition in the market through the sharing of commercially sensitive information that would otherwise be unavailable to them. The exchange of information between competitors has been a cause of concern for competition regulators. The transfer of commercially sensitive information such as pricing strategies, which may lead to a substantial adverse effect on the market is considered anti-competitive conduct. This facilitates collusive practices as the competitors reach unanimous coordination. Over this, we shall understand both, the Indian approach and the approach by the European Union [“EU”].

The Indian Approach

Section 3(3) of the Competition Act, 2002[“the Act”] deals with such exchange of information between competitors. The CCI in the case of In re: Alleged Cartelization in Flashlights Market in India, observed that when competitors exchange commercially sensitive information pertaining to their production and sales, increase in prices, etc., the same is anti-competitive in nature, provided that AAEC factors laid down under section 19(1) of the Act, are satisfied. Meaning that, if evidence indicating AAEC is not available, then a mere exchange of information cannot be held anti-competitive.

The EU Approach

Article 101 of the Treaty on the Functioning of the European Union [“TFEU”] stipulates the law over the information exchanges between the competitors. The EU Antitrust regulator undertakes the examination of these cases, in accordance with the guidelines on the applicability of Article 101 of the TFEU to horizontal cooperation agreements. Accordingly, multiple factors, similar to AAEC, have to be considered before holding the exchanges of information as anti-competitive. Meaning that, it will have to be ascertained that the information shared results in foreclosing the market, or raising of the entry barriers to the market or other reasons that indicate anti-competitive impacts of the market. In the case of T-Mobile Netherlands, it was held that if competitors exchange information, they risk disrupting the existing competition in the market.

Minority Shareholding and Cross-Ownership vis-à-vis Antitrust Regime:

Cross-ownership relates to direct ownership of stocks in a competitor by another competitor. A cross-ownership can occur even through a minority shareholding. This minority shareholding can be of two broad types; A non-controlling minority shareholding, and a controlling minority shareholding. In the former, a company buys a smaller proportion of the shares in the other company, and this shareholding does not allow the company to exercise decisive control on the other company’s operation, while in the latter it acquires a controlling influence of certain rights over strategic decisions of the company. Such minority shareholdings raise a concerning eye under competition law. This conclusion is based on three main reasons which are as follows:

  1. Economic incentives for not competing increases: Now, the enterprise will not only be interested in its own profit but also have interest in the profits of the competitor, because the enterprise will receive a share in the profits of the competitor. In these cases, both the competitor and the enterprise will have the incentive to increase the prices of the products or reduce the quality. This is because the consumer is going to purchase the product either from the enterprise or from its competitor, and in any case, the profits will be eventually shared.
  2. Ability for influencing decisions and strategic behaviour of the company arises: The enterprise can influence the decision in a manner that limits the possibilities of its competitor to establish themselves in a geographical area or with the product type where the enterprise itself holds a major position. In the Toshiba/Westinghouse case, it was observed that through an enterprise’s minority shareholding, its competitor’s ability to raise capital or stop the competitor from making any investment decisions can be limited. For instance, it can stop the competitor from entering into a joint venture or stop the manufacturing of a product or establish a new factory.
  3. Information over business matters of the competitor becomes accessible: An enterprise’s minority stake in a competitor may provide it access to information about the competitor that would otherwise be unavailable to it. This can happen if, for instance, the enterprise acquires the opportunity to choose a member of the competitor’s board of directors because of its minority stake. The enterprise may have access to sensitive information about the competitor’s strength, position, and strategy. This information can be used for colluding tacitly.


The enterprise and its minority shareholder may according to the company law, be considered as a single economic entity under certain circumstances, however, if the transfer of business-sensitive information between them leads to hindering competition in the market, that will be anti-competitive. An agreement or a concerted practice between competitors would violate section 3 of the Act and Article 101 of the TFEU. For efficient functioning of a Cartel, it is necessary that;(a) the competitors have a certain degree of transparency, which allows them to be cognizant about the business strategies of each other; (b) the incentive to disassociate from the Cartel is less, and (c) the other firms involved can punish the enterprise which tries to diverge from the collusion. This can be achieved when enterprises have a minority stake in their competitors or vice-versa, coupled with a smooth flow of information between them that induces tacit coordination.

This is because, business-sensitive data which is not publicly available regarding pricing patterns, a trend of product sales, consumer outreach strategies etc., become easy to acquire, given the fact it is exchanged with its shareholders. Thus, as the enterprise is a minority shareholder, it gains the ability to gauge if the competitor is planning to deviate from the Cartel’s conduct. Additionally, a structural link between two competitors might increase the credibility of the “penalty” for violating the coordination. The reason is that if the competitor deviates from the decisions of the Cartel, either its minority shareholder or it will incur losses, and losses of one will be losses of another as they have a shared liability. In the case of independent competitors, a deviation is generally punished through a price war with the firm that has deviated from the Cartel. However, while dealing with a minority shareholder, punishment can be inflicted by influencing the decisions of the competitors by utilizing the minority shareholder’s rights and hampering credible business decisions.

The EC while dealing with a similar situation in Dow/DuPont and Bayer/Monsanto, held that the exchange of information between minority shareholders and the main enterprise, who are competitors of each other, can remove the existing competition from the market, create entry barriers, and harm consumer welfare. Hence, it shall be condemned under the Article 101 of the TFEU. Similarly, the CCI in the case Combination Registration No. C-2020/04/741, held that minority shareholding amongst competitors give them the ability to engage in various kinds of anti-competitive coordination and activities. However, even though such a case has not yet been dealt by these antitrust authorities w.r.t Cartelization, it has to be pertinently noted that under both section 3 of the Act and Article 101 of the TFEU, the ingredients of a Cartel are satisfied by the above illustrated activity. Hence, this arrangement can provide the necessary fuel to power a Cartel, and reduce the competitor’s desire to deviate from the collusion.


Firms by acquiring a minority stake in their competitors, and the information exchanges between them satisfy the ingredients of an efficient Cartel. This causes hindrance in existing market dynamics. Given the fact that markets are getting complex day by day, and businesses are adopting intricate strategies to compete and survive in these markets, competition law has to evolve in accordance with the same. Keeping that in mind it has become imperative to frame a set of guidelines for enterprises and their minority shareholders to follow in respect of information exchange, such that it specifies as to what information would qualify as one that can be shared amongst competitor shareholders, and what information would be considered as one amounting to antitrust sensitive.

The authors are third-year students at the Institute of Law, Nirma University.   

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