The Competition Commission of India (CCI) dismissed an information filed under Section 19(1)(a) of the Competition Act, 2002, finding no prima facie case of anti-competitive conduct in the mandatory migration to FIPS-140-3 cryptographic tokens, and ordered the matter closed under Section 26(2).
Background & Facts
The Dispute
The informant, Advocate Ramkishan Saraswat, lodged an information alleging that the Ministry of Electronics and Information Technology (MeitY), the Controller of Certifying Authorities (CCA) and M/s Precision Biometric India Pvt. Ltd. colluded to create a monopoly in the market for FIPS-compliant USB cryptographic tokens used for Digital Signature Certificates (DSC) in India.
Key Facts
- January 2026: The CCA issued an advisory mandating migration from the globally accepted FIPS-140-2 standard to FIPS-140-3 for all USB cryptographic tokens.
- 21 September 2026: Cut-off date prescribed for commercial and private entities to implement the migration.
- OP-3 (Precision Biometric) was the only vendor capable of supplying FIPS-140-3 compliant tokens, allegedly receiving a 100% market share.
- The advisory required Certifying Authorities to cease issuance of DSCs on FIPS-140-2 modules after the cut-off date, effectively foreclosing competition.
- The informant claimed the advisory created an entry barrier of 18-24 months for testing and validation, forcing competitors out of the market.
- The informant alleged a vertical agreement between OP-2 and OP-3, constituting a concerted practice under Section 3(4) of the Act.
Procedural History
- 12 June 2026: Information filed by the informant under Section 19(1)(a) of the Competition Act, 2002.
- 19 August 2026: CCI considered the matter in an ordinary meeting and deliberated on the allegations.
- 31 August 2026: CCI issued the order under Section 26(2) closing the information and dismissing the interim application under Section 33.
Parties' Positions
- Informant: Asserted that the advisory was tailored to benefit OP-3, creating a monopoly and violating Sections 3(4) and 4 of the Competition Act. Sought a full investigation, cease-and-desist order, and a transitional timeline of 18-24 months for multi-vendor compliance.
- Opposite Party No. 1 (MeitY): Stated that it merely formulates policy and does not engage in anti-competitive conduct.
- Opposite Party No. 2 (CCA): Claimed the advisory was a statutory exercise of its regulatory powers under Section 17 of the Information Technology Act, 2000, aimed at enhancing security.
- Opposite Party No. 3 (Precision Biometric): No specific defence recorded; the informant alleged its exclusive market position resulted from the advisory.
Relief Sought
The informant prayed for: (i) an investigation under Section 26(1) into abuse of dominance and market foreclosure; (ii) cease-and-desist orders against OP-3; (iii) a non-discriminatory transitional timeline of at least 18-24 months; and (iv) any other order to preserve free competition. An interlocutory application (IA No. 179 of 2026) sought interim relief to stay the cut-off date of 21 September 2026 under Section 33.
The Legal Issue
Whether the advisory issued by the Controller of Certifying Authorities mandating migration to FIPS-140-3, and the alleged exclusive supply by Precision Biometric, constitute a contravention of Section 3(4) and Section 4 of the Competition Act, 2002, thereby attracting investigation under Section 26(1), or whether the regulatory action is protected from competition law scrutiny.
Arguments Presented
For the Informant
- Alleged that the advisory created an artificial entry barrier, forcing competitors to exit and granting OP-3 a 100% market share, satisfying the Appreciable Adverse Effect on Competition test under Section 19(3).
- Contended that the coordination between OP-2 and OP-3 amounted to a vertical agreement, violating Section 3(4).
- Relied on the precedent that any conduct resulting in market foreclosure can be examined under the Act.
For the Respondents
- OP-2 argued that the advisory was a bona fide exercise of its statutory functions under Section 17 of the Information Technology Act, 2000, and therefore immune from competition law review.
- The Commission noted the absence of any documentary evidence of an agreement between OP-2 and OP-3, rendering the allegation under Section 3(4) unsubstantiated.
- Cited Institute of Chartered Accountants of India v. CCI to emphasize that regulatory decisions are not subject to competition scrutiny unless they exceed statutory authority.
The Court's Analysis
The Commission first examined whether the advisory fell within the ambit of the Competition Act. It observed that the CCA’s functions, enumerated in Section 18 of the Information Technology Act, include laying down standards for Certifying Authorities. The advisory was therefore a core regulatory activity. The Commission held that such regulatory actions are not amenable to competition law scrutiny unless they are exercised beyond the statutory mandate.
"The impugned conduct of OP-2 of upgrading technical standards, is emanating by virtue of its exercising regulatory powers in discharge of functions as a statutory body, that inter alia include setting of standards, processes, conditions etc. The alleged conduct of OP-2 is thus not found to be amenable to scrutiny under the Act."
The Commission then assessed the prima facie case under Section 3(4). It found that the informant had not produced any agreement, meeting minutes, or correspondence linking OP-2 and OP-3. Consequently, the allegation of a concerted practice was unsupported. Regarding Section 4, the Commission noted that dominance alone does not constitute an offence; there must be an abuse of that dominance. While OP-3 held a 100% share for the FIPS-140-3 tokens, the share resulted from the regulatory mandate, not from an abusive conduct. The Commission further held that the alleged “appreciable adverse effect” was speculative, as the advisory allowed existing DSCs on FIPS-140-2 modules to continue until expiry, mitigating immediate consumer harm.
Having found no evidence of an agreement or abusive conduct, the Commission concluded that no prima facie case existed under Sections 3(4) or 4. Accordingly, it exercised its power under Section 26(2) to close the information. The interim application under Section 33 was also dismissed as there was no basis for interim relief.
The Verdict
The CCI ordered the information to be closed under Section 26(2) of the Competition Act, 2002 on 31 August 2026. The petition for investigation under Section 26(1) and the interim relief sought under Section 33 were rejected. No monetary award, injunction, or corrective order was granted. The Secretary was directed to communicate the order to the informant.
What This Means For Similar Cases
Regulatory Actions Remain Outside Competition Scrutiny Without Concrete Evidence
- Courts will treat statutory standards-setting as a protected regulatory function unless the plaintiff produces clear proof of a collusive agreement or abuse beyond the regulator’s statutory mandate.
- Practitioners must secure documentary evidence - such as contracts, minutes, or communications - demonstrating an anti-competitive nexus before invoking Sections 3(4) or 4.
Dominance Alone Does Not Equal Abuse
- Holding a dominant market share, even 100%, is insufficient for a Section 4 violation if the dominance stems from a lawful regulatory requirement.
- Counsel should focus on demonstrating how the dominant position is being leveraged to restrict competition, rather than merely pointing to market share statistics.
Interim Relief Under Section 33 Requires Prima Facie Merit
-
Applications for stay orders or other interim relief will be dismissed if the Commission finds the underlying complaint lacks a prima facie case.
-
Lawyers should ensure that interim applications are supported by concrete facts showing imminent and irreparable harm.
-
Verify that any alleged anti-competitive conduct is not merely a policy decision within the regulator’s statutory powers.
-
Gather hard evidence of agreements or coordinated conduct before filing a competition complaint.
-
Anticipate that the Commission will apply a high threshold for establishing abuse of dominance in regulated markets.
