65. Competition Concerns In Hydrogen Industries

Detailed Explanation With Case Laws

1. Introduction

Hydrogen is becoming an important part of the clean-energy transition. It can be used in industries, transport, electricity generation, refining and energy storage. In India, the development of green hydrogen is being promoted through government policies and investment. However, the growth of hydrogen markets can also create competition-law concerns.

Competition law seeks to prevent businesses from using market power to exclude competitors, fix prices, divide markets or create unfair barriers to entry. In India, these issues are mainly governed by the Competition Act, 2002, along with sector-specific energy laws and government policies.

2. Meaning of Competition Concerns in Hydrogen Industries

Competition concerns arise when companies with significant market power engage in conduct that restricts competition. In hydrogen industries, such concerns may arise at several stages:

Production of hydrogen;

Electrolyser manufacturing;

Renewable electricity supply;

Hydrogen storage;

Transportation through pipelines;

Hydrogen refuelling infrastructure;

Export and import markets;

Sale of hydrogen to industrial consumers.

Because hydrogen markets are still developing, early control over infrastructure, technology or supply chains may give certain companies substantial advantages.

3. Abuse of Dominant Position

Section 4 of the Competition Act prohibits abuse of a dominant position.

A hydrogen company could potentially become dominant if it controls an essential infrastructure network, technology, production facility or important supply source. Dominance itself is not prohibited; abuse of dominance is prohibited.

Possible abuses include:

Excessive or discriminatory pricing;

Refusing access to essential infrastructure;

Predatory pricing;

Discriminatory conditions;

Limiting production or technical development;

Denying market access to competitors.

For example, if a dominant hydrogen-pipeline operator refuses reasonable access to competing hydrogen producers, this could raise competition-law concerns.

4. Cartels and Price Fixing

Section 3 of the Competition Act prohibits anti-competitive agreements.

Hydrogen producers or suppliers could potentially coordinate:

Hydrogen prices;

Production quantities;

Customers;

Geographic markets;

Tender participation;

Infrastructure charges.

Such agreements could constitute cartel behaviour.

The Supreme Court's decision in Excel Crop Care Ltd. v. Competition Commission of India (2017) is important for understanding cartel and bid-rigging principles under Indian competition law. Although the case did not concern hydrogen, its principles can apply to anti-competitive coordination in emerging energy markets.

5. Vertical Agreements

Hydrogen industries may involve long supply chains. A producer may contract with an electrolyser manufacturer, pipeline operator, storage provider and industrial consumer.

Section 3 also addresses certain vertical arrangements, including:

Tie-in arrangements;

Exclusive supply;

Exclusive distribution;

Refusal to deal;

Resale-price maintenance.

Such agreements are not automatically illegal. Their competitive effect must be examined under the statutory framework.

6. Mergers and Acquisitions

Hydrogen companies may increasingly merge or acquire businesses involved in electrolysers, renewable power, pipelines and storage.

The Competition Commission of India (CCI) can examine combinations that satisfy the applicable statutory thresholds and determine whether they are likely to cause an appreciable adverse effect on competition.

A major acquisition could raise concerns where it combines businesses controlling important hydrogen technology and infrastructure.

7. Essential Facilities and Infrastructure Access

Hydrogen infrastructure may require large investments. Pipelines, storage facilities, ports and specialised terminals may therefore become difficult for new companies to duplicate.

If an infrastructure facility becomes indispensable for effective market participation, refusal or discriminatory access can become a competition concern, depending on the facts and applicable legal framework.

The Supreme Court's decision in CCI v. Bharti Airtel Ltd. (2019) is useful for understanding the relationship between competition law and sector-specific regulation. The Court recognised the importance of specialised sectoral regulation where technical issues fall primarily within the jurisdiction of the sector regulator.

8. Competition and State Support

Government subsidies, production incentives and public procurement can accelerate hydrogen development. However, competition concerns may arise if support mechanisms systematically exclude competitors or favour particular businesses without adequate justification.

Transparent eligibility criteria and competitive allocation mechanisms can reduce such risks.

9. Important Case Laws

CCI v. Bharti Airtel Ltd. (2019)

The Supreme Court considered the relationship between the CCI and a specialised telecommunications regulator. The case demonstrates that competition law may operate alongside sectoral regulation, with technical regulatory questions sometimes requiring determination by the specialised regulator first.

Excel Crop Care Ltd. v. CCI (2017)

The Supreme Court examined cartel and bid-rigging principles. It is relevant to hydrogen procurement and infrastructure tenders where competing firms might coordinate their bids.

Competition Commission of India v. Steel Authority of India Ltd. (2010)

The Supreme Court examined the CCI's jurisdiction and investigation process. The decision is relevant to understanding how competition investigations operate in regulated industries.

10. Challenges

Hydrogen competition regulation faces several challenges:

Emerging markets: Market structures are still developing.

High infrastructure costs: Entry may be expensive.

Technology concentration: A small number of firms may control important technologies.

Network effects: Pipeline and storage networks may create strong market advantages.

Government incentives: Subsidies must be designed without unnecessarily distorting competition.

International markets: Hydrogen supply chains may cross several jurisdictions.

11. Conclusion

Competition law will become increasingly important as hydrogen markets expand. Indian competition authorities may need to examine cartels, abuse of dominance, mergers, exclusive agreements, infrastructure access and technology concentration.

The objective is not to prevent large-scale investment but to ensure that hydrogen markets remain sufficiently open for innovation, investment and consumer choice. Effective coordination between the CCI, energy regulators and government authorities can help develop a competitive and sustainable hydrogen economy.