India's Cartel Blind Spot: Pranav Gupta v. FPBAI and the Quest for a Hub and Spoke Doctrine

[Aditya Pathak is a 4th Year Student at National Law Institute University, Bhopal]

Introduction

The recent Competition Commission of India’s (CCI) decision in Pranav Gupta v. Federation of Publishers’ and Booksellers’ Association in India (FPBAI) gives a compelling examination of anticompetitive practices within India's book publishing industry especially through the lens of the ‘hub and spoke’ doctrine. Pranav Gupta had initiated the case and alleged that FPBAI, an umbrella body and association of publishers and booksellers in India, served as a central platform to cartelize, dictate prices, and limit the supply of books and journals across the country.

The CCI's investigation revealed how FPBAI's practices of fixing of inflated currency exchange rates for imported books and the stipulation of terms of supply and discounts had effectively orchestrated horizontal agreements among its member booksellers. Although FPBAI contended that these rates and terms were merely ‘suggestive’ and not mandatory, the DG and the Commission found they were in practice and deeply embedded in industry conduct. There were initially 25 opposite parties and the decision to focus exclusively on FPBAI as the opposite party stemmed from the Commission's initial assessment that allegations had been ‘majorly levelled against FPBAI only’ and its member publishers/officials and regional associations had only implemented the mandate and directions of FPBAI. This deliberate narrowing of scope for the other parties undermines the hub and spoke doctrine, in the sense that only the hub has been penalized and the spokes have gone scot-free and have not even been investigated. This article will first lay down the factual background of the case, then analyze the case and examine the hub and spoke dynamics in it, and it would then conclude by examining the national as well as international jurisprudence regarding the doctrine.

The Factual Background

The case began with an Information filed by Shri Pranav Gupta under the Section 19(1)(a) of The Competition Act, 2002 (TCA). The informant initially named 25 Opposite Parties (OPs) which included the FPBAI, seven publication houses, ten individuals who had been past members/office bearers of FPBAI, and seven regional associations affiliated with FPBAI. The main accusation was that FPBAI was used as a platform to cartelise, dictate, or facilitate pricing as well as restrict and manage the availability of books and journals in India. However, the CCI in its initial order removed the other 24 OPs from the array of parties and directed the Director General (DG) to examine the conduct of FPBAI only.

Pranav Gupta argued that the DG should have broadened the investigation to include the competing companies/enterprises and regional associations. He contended that their conduct squarely met the definition of a 'cartel' under the Act as the anticompetitive behaviour went beyond FPBAI's directions and their overlapping businesses, interlocking directorships, and participation in FPBAI/Good Offices Committee (GOC) were reasons for looking into those parties further.  Previous CCI decisions were cited where the DG had expanded investigations beyond the initially named parties, such as Shamsher Kataria v. Honda Siel Cars India Ltd. and Others and Jyoti Swaroop Arora v. Tulip Infrastructure Ltd. and Others.

Despite these arguments, the CCI maintained its decision to restrict the investigation and stated that all trade associations are established with entities that are involved in comparable activities and are, by definition, rival businesses, and that FPBAI's mere provision of a platform for shared complaints cannot be faulted in the absence of concrete proof or a more comprehensive plan. The CCI clarified that the scope of the present matter was restricted to FPBAI's alleged anticompetitive conduct and concerned issues like fixation of exchange rates, discount control, dictating terms of supply, and issuing advisories. The investigation and final order found FPBAI itself guilty of contraventions under Section 3(3)(a) and 3(3)(b) read with Section 3(1) of the Act. Additionally, three specific FPBAI office bearers were held personally liable under Section 48 for their active role in formulating and enforcing these anticompetitive practices. The ‘spokes’ as distinct entities, however were not independently investigated or found liable as the CCI concluded that the DG had committed no error in its limited scope.

The Hub and Spoke Dynamics in Pranav Gupta: FPBAI as the Orchestrator

In this case, even though the doctrine wasn’t expressly mentioned, the CCI effectively unravelled a hub and spoke cartel orchestrated by FPBAI in which the FPBAI acted as the ‘hub’ that facilitated collusion among independent booksellers and publishers, which were the ‘spokes’. Through its GOC, the FPBAI regularly issued currency exchange rates incorporating a 3–5% markup over RBI benchmarks. While the evidence was officially framed as suggestive, the evidence, including emails and statements from GOC officials demonstrated that members treated these rates as mandatory and enforced them in internal transactions. This vertical coordination led to industry wide uniformity in pricing behaviour with most booksellers being forced to adhere to GOC set terms despite dealing with institutions at prevailing bank determined rates. CCI found this compelling enough to treat the practice as price fixation and held FPBAI in contravention of Section 3(3)(a) read with 3(1) of the Act.

The FPBAI used its position to prescribe terms of supply such as credit periods, interest on defaults, resale price monitoring, and approved vendor lists directed at libraries and institutions. Though labelled ‘recommendatory’, these circulars had become de facto standards which were bound across the network and which stifled negotiation capacity and erected barriers for non members. By repeatedly circulating these terms and linking them to procurement advice, FPBAI enabled indirect horizontal coordination among the spokes with each member aligning behaviour through the hub’s framework. These actions mirror the legal standards developed in antitrust jurisdictions globally where multiple vertical communications, uniform adoption of directives, and behavioural alignment through a central facilitator can satisfy the requirement of a ‘rim’ in hub and spoke arrangements even without direct communication among the spokes themselves.

Jurisprudence surrounding the Hub and Spoke Doctrine

India: In India, the legal framework for anticompetitive agreements has long grappled with the hybrid nature of hub and spoke cartels which involve both horizontal and vertical elements. Historically, the CCI would often assess such arrangements under the broader Section 3(1) of TCA. Early cases like Fx Enterprise Solutions Limited and Jasper Infotech focused on resale price maintenance violations yet the CCI refrained from formally identifying them as hub and spoke cartels. The Samir Agrawal case was perhaps the most important development where allegations of collusion among cab drivers facilitated by an aggregator were dismissed because the CCI and subsequently the NCLAT and the Supreme Court of India found no evidence of direct collusion or agreement between the spokes, who were the drivers operating under the cab company Uber. However in the Builder’s Association of India v. The Cement Manufacturers’ Association and Others, the CCI did identify, though not expressly, a hub and spoke cartel and found that the Cement Manufacturers’ Association, the hub helped major cement companies, the spokes coordinate actions which led to aligned pricing. The Competition Law Review Committee, after identifying the ambiguity surrounding the doctrine recommendedexplicitly including hub and spoke cartels in Section 3(3). This led to the Competition (Amendment) Act, 2023, which added an explanation proviso to Section 3(3) and expressly recognized the hybrid anticompetitive agreements and stated that entities not engaged in identical trade or hubs are presumed to be part of the agreement if they ‘participate or intend to participate in the furtherance of such agreement’. However the final amendment did not incorporate a Parliamentary Standing Committee recommendation for a stricter intention requirement for hub liability.

International Scenario: Internationally, robust jurisprudence exists for hub and spoke arrangements. In the United States, Section 1 of the Sherman Act, even though it doesn’t expressly mention the doctrine, it prohibits such conspiracies as it requires a rim of horizontal agreement connecting the spokes for a per se violation. The landmark United States v. Apple, Inc., or the Amazon E-book case serves as a prime example. Apple, the hub was found to have orchestrated a horizontal price fixing conspiracy among five major publishing companies, the spokes, to raise ebook prices. The court explicitly affirmed Apple's per se liability and stated that the "relevant 'agreement in restraint of trade'" was ‘the horizontal agreement that Apple organized among the Publisher Defendants to raise ebook prices’. Similarly in the UK, the Toys "R" Us v. FTC case (Hasbro case) involved Hasbro, the hub which had facilitated anticompetitive deals between a number of toy manufacturers, the spokes, where the court inferred a horizontal agreement due to the hub's guarantees and communications. European Union law, under Article 101 of the Treaty on the Functioning of the European Union (TFEU) holds a hub liable if it was aware of the anticompetitive objectives pursued by its competitors and intended to contribute or could reasonably foresee the anticompetitive acts, and contributed to their realization.

Conclusion

Comparing these jurisprudential approaches to the Pranav Gupta case reveals a critical deviation in the CCI's application of the doctrine. In the case, despite Gupta’s specific allegations that competing member publishers and booksellers, the potential spokes, were using FPBAI's platform, the alleged hub for anticompetitive cartelization, the CCI explicitly limited the Director General's investigation solely to FPBAI's conduct and did not direct an analysis into the alleged collusion or agreement among its member publishers and booksellers. The CCI reasoned that without a prima facie direction to investigate such an ‘alleged cartel,’ the DG's scope could not be expanded. Thus the crucial ‘rim’ of horizontal collusion among the spokes which is a sine qua non for establishing a hub and spoke cartel in international jurisdictions and emphasized in CCI’s own Samir Agrawal precedent was fundamentally overlooked. While the CCI found FPBAI's actions of fixing currency exchange rates, dictating terms of supply, circulating approved vendor lists to be anticompetitive violations of Section 3(3) due to FPBAI's significant market presence, its judgment does not demonstrate that these findings stemmed from a proven underlying horizontal agreement among its members that FPBAI orchestrated or facilitated, which is the defining characteristic of a hub and spoke cartel. Thus, while anticompetitive conduct was penalized, the specific doctrine of hub and spoke was not fully applied in a manner consistent with prevailing international and evolving Indian standards which require establishing the spoke to spoke collusion element.