CCI | Snapdeal is part of vertical distribution chain, not merely marketplace facilitating interaction between buyers and sellers

Competition Commission of India (CCI): The Bench of Ashok Kumar Gupta, Chairperson and Augustine Peter and U.C. Nahta, Members closed a case under Section 26(6) of the Competition Act, 2002 by laying down analysis of the detailed investigation report by the DG.

The present case is pertaining to the information filed by Jasper Infotech (P) Ltd. against Kaff Appliances India (P) Ltd. for the alleged contravention of Section 3(4) of Competition Act. The Informant displayed OP-Kaff’s products on its online portal ‘Snapdeal’ at a discounted price, aggrieved by which the OP displayed a caution notice on its website alleging that the OP’s products sold by Informant through its website are without authorization and are counterfeit. The stated caution notice said that OP will not honour warranties on its products sold through the said website and any purchase made from it would be at customer’s own risk.

Further, a legal notice was served in order to withdraw the caution notice alleging a violation of certain provisions of the Competition Act.

According to the Informant, the main grievance of OP was regarding the discounted price at which such products were sold by the Informant through its website and to substantiate the said claim it revealed an e-mail which attempted to impose a price restriction in the form of Minimum Operating Price (MOP) on the website to make sales at a minimum price and threatened to ban online sales if such prices were not maintained, which resultantly is a contravention of Section 3(4)(e) of the Competition Act.

The other contravention attempted by OP was to cut off supplies to distributors who were aiming to sell through an online channel which amounted to a violation of Section 3(4)(d) of Competition Act. On perusal of the facts, Commission directed DG for an enquiry.

DG in conclusion to its report said that, firstly OP is not involved in maintaining a resale price and secondly, it does not possess sufficient market power to cause AAEC as provided under Section 18(3) and accordingly no contravention could be established under the provisions of Section 3(4)(e) of the Act. Further, on the establishment of the said report by DG, further investigation was directed under Section 26(7) of the Act. In the said investigation, DG concluded that alleged conduct of OP did not lead to any AAEC under Section 19(3) of the Act.

Analysis

Commission observed that, distributors/dealers were using the services of the informant while selling the products of OP, it ipso facto becomes a part of distribution/vertical chain and thus, it would be incorrect to state that an Informant is only a market place facilitating interaction of the buyers and sellers online. Further, while not agreeing with DG’s observation it was stated by the Commission that the agreements between manufacturers/distributors and e-commerce players can be looked into under Section 3(4) read with Section 3(1) of the Act.

To establish a contravention under Section 3(4) read with Section 3(1), two conditions need to be fulfilled- firstly, agreement/arrangement/understanding ought to exist and secondly, such agreement/ arrangement/understanding has caused or has the potential to cause AAEC.

A Right of the manufacturer to choose the most efficient distribution channel ought not to be interfered with, unless the said choice leads to anti-competitive effects.

Commission found merit in justifications offered by OP and observed that evidence on record does not demonstrate the conduct/practice of OP led to any AAEC and presence of a large number of dealers who were competing with each other suggests a fair degree of intra-brand competition.

Thus, evidence on record did not reveal the existence of any price restriction of minimum RPM and intra-brand competition negated the anti-competitive impact of OP’s alleged conduct. The case was thereby closed. [Jasper Infotech (P) Ltd. v. KAFF Appliances (India) (P) Ltd., 2019 SCC OnLine CCI 2, Order dated 15-01-2019]

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