Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): The Coram of Ashok Kumar Gupta (Chairperson) and Sangeeta Verma and Bhagwant Singh Bishnoi, (Members) expressed that:

State of Uttarakhand formulated the Liquor Wholesale Order in a manner through which State officials were vested with exclusive powers which included discretion to dictate as to what brands of alcoholic beverages were to be procured and distributed to retailers and sold to end-consumers.

The instant case was by International Spirits and Wines Association of India (Informant) against Uttarakhand Agricultural Produce Marketing Board (OP – 1), Garhwal Mandal Vikas Nigam Ltd. (OP – 2) and Kumaun Mandal Vikas Nigam Ltd. (OP – 3) alleging contravention of the provisions of Section 4 of the Act.

Informant company is a representative body of International Spirits and Wines Companies which includes the following:

(a) Bacardi India Private Limited;

(b) Beam Global Spirits & Wine (India) Pvt. Ltd.;

(c) Brown Forman Worldwide LLC;

(d) Diageo India Private Limited;

(e) Edrington Marketing;

(f) Moet Hennessy India Private Limited;

(g) Pernod Ricard India Private Limited (‘Pernod’);

(h) United Spirits Limited (‘USL’); and

(i) William Grant and Sons Limited.

State of Uttarakhand issued an Excise Policy which provided that a new wholesale arrangement shall be brought into force within one month of the notification of such policy. OP-1 was appointed as the exclusive wholesale licensee for foreign liquor/beer/wine including Indian Made Foreign Liquor in the State of Uttarakhand. OP-2 and OP-3 were appointed as the exclusive sub-wholesalers of alcoholic beverages.

Monopoly

Allegation in respect to the above was, that the appointment of the above-stated caused monopoly vested in the OPs making them dominant in the relevant market.

Later, Uttarakhand Government issued a new excise policy in terms of which OP-2 and OP-3 ceased to operate as licensees. Hence, since 2016 Uttarakhand Government discharged OP-1 from all responsibilities of dealing with the procurement of alcoholic beverages in State of Uttarakhand.

How were the OPs taking advantage of their monopoly and abused their dominance? 

  • The OPs were placing orders with alcoholic beverage manufacturers for supply of IMFL in an arbitrary and discriminatory manner with no relation to the consumer demand, for certain brands of beverages in the market.
  • The OPs were not procuring alcoholic beverages of certain brands, despite demonstrably high consumer demand for such alcoholic beverages and thereby discriminating against manufacturers of these beverages. This resulted in the replacement of IMFL brands of certain members of the Informant with the brands of other alcoholic beverage manufacturers, for which there was significantly less demand when the Informant’s members were supplying in the ordinary course.
  • The OPs were not maintaining minimum stock levels and were not supplying IMFL brands in accordance with the retailers’ demand, despite express stipulation in Clauses 10 and 11 of the Liquor Wholesale Order.

Commission prima facie vide it’s order dated 19-07-2016 directed the DG to cause an investigation into the matter and submit the investigation report.

DG noted that OP-1 disregarded the mechanism of procurement of different brands of alcoholic beverages as per the Liquor Wholesale Order and order of Additional Commissioner of Excise. It was found that OP-1’s arbitrary approach in placing orders for alcoholic beverages resulted in gross decline in procurement of alcoholic beverages from USL and Pernod.

Hence, DG concluded that OP-1 contravened the provisions of Sections 4(2)(c) read with Section 4(2)(b)(i) of the Act.

Whereas OP-2 and 3’s acts were not found to be contravention of the provisions of the above-stated Sections, as both OP-2 and OP-3 were wholly dependent on OP-1.

OP-2 and OP-3 had no inter-se agreement, whatsoever, with the manufacturers/suppliers of alcoholic beverages and were not getting any direct supplies from them.

Whether there were complaints from retailers and consumers in respect of the non-availability of brands of IMFL?

DG found that OP-2 provided several copies of complaints made by retailers which were forwarded to OP-1, despite which OP-1 continued with arbitrary manner of procurement.

Further, DG noted that OP-1 did not follow the directions of the Additional Excise Commissioner (Licensing) in respect of procurement of alcoholic beverages.

DG’s Conclusion 

DG concluded that non-maintenance of minimum level of different brands at all times and carrying out the procurement of alcoholic beverages in a manner which was arbitrary and one-sided by OP-1 adversely affected competition and OP-1 abused its dominant position in the relevant market, which resulted in denial of market access to the products of USL and Pernod in the State of Uttarakhand.

It was also found that Clauses 7.1, 7.2, 7.3, 14, 4, 1.1, and 2.6 were one-sided, unfair, abusive and anti-competitive in terms of Section 4(2)(a)(i) of the Act.

Analysis, Law and Decision

After the final hearing held on 15-12-2020, Bench analysed the matter.

It was stated that the activities pertaining to procurement and distribution/supply were in the nature of ‘economic and commercial activities for which profit distribution had also been defined under the provisions of the Liquor Wholesale Order itself.

Commission reiterated that

if an entity is engaged in any activity, no matter with or without profit motive, it would be considered an enterprise as it interfaces with the market and hence, with other alternatives for the product or service in question. It is not ‘generation of profits’ rather the defining feature of an entity to be termed as an ‘enterprise’ under the Act is that the entity is engaged in some economic or commercial activity under Section 2(h) for the purposes of Section 4 of the Act.

Commission notes that the precedent is clear and well settled that in case of trade in liquor, the State has following three options:

(a) To completely prohibit the trade in liquor, or

(b) To create a monopoly for itself over manufacture, sale, possession or distribution of alcohol,

or

(c) To allow private individuals to trade in liquor.

Further, it was elaborated that, the grant of license for the trade of liquor is a statutory function, but in the present case, it is the Licensees, even though being wholly-owned Government entities, which are engaged in the economic activity of ‘procurement and distribution/supply of IMFL’ in the State of Uttarakhand.

Hence, it was held that OP-1, 2 and 3 were are ‘enterprises’ within the meaning of Section 2(h) of the Act.

Main Grievance

Unfair procurement of IMFL brands by OPs and the unfair nature of conditions imposed by OP-1 in the agreements it has entered into with IMFL manufacturers.

Commission observed that the competition assessment in respect of an alleged contravention of the provisions of Section 4 of the Act is different in scope and nature from a competition assessment of a proposed combination by way of merger notification under Section 6(2) of the Act.

Commission found that the OPs will remain dominant in any of the plausible relevant markets as each of the OPs had been granted exclusivity in its respective business and area of operation; and no other person could procure, supply or distribute alcoholic beverages in the State of Uttarakhand on account of the restrictions envisaged pursuant to the Liquor Wholesale Order.

Liquor Wholesale Order

 Provisions in the said Order were framed in a manner that entry to any competitor in the relevant market was denied and all the OPs were able to act exclusively and independently in their respective relevant markets during the relevant period.

Whether the dominant position is bestowed upon OP-1 owing to the Excise Policy and the provisions of the Liquor Wholesale Order and subsequently upon OP-2 and OP-3 in their relevant spheres of operation?

 In terms of the Liquor Wholesale Order, during the relevant period, OP-1 was the exclusive procurement agency and OP-2 and OP-2 were sole distributors of IMFL for their respective regions and no alternate access route to the market was available.

Commission expressed that, the provisions of the said order granted powers and discretion to OP-1  to decide the manner of carrying out business operations in the entire State.

OPs enjoyed 100% market share ensuring no competition to the OPs from any other entities. Such exclusion of competition virtually allowed OPs to enjoy monopoly.

Violation of Liquor Wholesale Order and Minimum Stock Requirement

As per the Liquor Wholesale Order, OP-1 was required to maintain minimum stocks of all brands of foreign liquor/beer/wine as fixed by the Additional Excise Commissioner (Licensing).

Commission further observed that it was imperative upon OP- 2 and OP-3 to regularly raise brand-wise indents/requisitions on OP-1 based on the demands of the retailer licensees of their concerned districts, in accordance with the requirements of the said order and no deviation was provided in the said order.

Bench expressed a very significant and crucial point that:

State of Uttarakhand, like other states in the country, has created monopolies by canalising liquor procurement. 

While reaching the conclusion, Commission agreed with the DG that OP-1 did not act in a manner that ensure availability of required brands to retailers and instead did not take concrete steps on the complaints, which also tends to show that OP-1 carried out procurement in a manner which adversely affected competition in the market and discriminated between different manufacturers and suppliers of IMFL.

Commission opined that OP-1 did not place any orders for many brands of Pernod and USL for many months during the 11 months period, that Liquor Wholesale Order was in effect, and the OPs were the only route to access the market for alcohol manufacturers on account of the sole rights of procurement and distribution vested under the Liquor Wholesale Order. Further, this conduct on the part of OP-1, despite existence of retailers’ demand for IMFL, indicates limiting or restricting wholesale procurement and distribution of IMFL in the State of Uttarakhand and denial of market access to producers of certain brands of IMFL in the State of Uttarakhand, in violation of Section 4(1) read with Section 4(2)(b)(i) and Section 4(2)(c) of the Act.

Commission placed reliance on its earlier decision in the matter of Surinder Singh Barmi case wherein it was held that it was immaterial whether the inclusion of clause had any anti-competitive effect, rather the unfairness of the clause needs to be seen which could only be imposed by a dominant entity.

Hence, in the present matter, OP-1 being the dominant entity was in a position to impose one-sided contractual obligations.

Commission directed OP-1 to desist from indulging in such anti-competitive conducts which have been found to be in contravention of the provisions of the Act.

In the present case the anti-competitive conduct on the part of OP-1 had not ceased of its own accord but on account of change in the policy of Government whereby earlier Liquor Wholesale Order ceased to have any effect and OPs were released from performance of the activity of procurement and distribution of liquor.

There was an abject failure in undertaking distribution based on demand, which in fact was the essence of the Liquor Wholesale Order rather than mere fulfilling of MGD obligations as has been countenanced by the said OP.

Hence, a penalty of Rs one crore on OP-1 under Section 27(b) of the Act was imposed. [International Spirits and Wines Association of India (ISWAI) v. Uttarakhand Agricultural Produce Marketing Board, 2021 SCC OnLine CCI 15, decided on 30-03-2021]

Op EdsOP. ED.

Introduction

Post liberalisation in 1991, Indian economic policies had to undergo drastic changes to adapt to the global practices and national agenda. In 2002, the Competition Act[1] was enacted to replace the Monopolies and Restrictive Trade Practices Act, 1969[2], as it was considered insufficient to control anti-competition practises and nurture competition. The Competition Act, focused mainly on abuse of dominance, anti-competition agreements, competition advocacy and regulation of combinations. The Act had been implanted with efficiency, however, with the change in the market trends a need was felt to further analyse the Act in light of the current situations. The Government therefore constituted the Competition Law Review Committee in 2018[3], to study the current market trends and examine whether the Competition Act is in sync with the market practises. The Committee’s mandate was: to suggest any changes in the current regime taking into account the market trends, best international practises, other governmental policies and regulatory mechanisms which overlap the Competition Act, and any other related competition issues. The Competition (Amendment) Bill, 2020 [4] was then drafted based on the recommendations of the Committee.

The Bill aims to bring major changes to the current system. The key takeaways can be classified in the following categories.

Structural Changes 

Taking into account the Supreme Court’s decision in Brahm Dutt v. Union of India[5] and the Delhi High Court’s decision in Mahindra Electric Mobility Ltd.  v. CCI[6], the Committee acknowledged that the functions performed by the Competition Commission of India (CCI) is multifarious and therefore to establish a regulatory body in lines with other regulatory bodies in the country, the Bill introduced the establishment of a governing body[7], consisting of part time members and ex officio members. The objective behind the introduction of governing body is twofold, firstly to reduce the burden on the CCI, as the governing body will be responsible to carry out all the quasi-legislative function and policy decision, and secondly with the introduction of part time members and ex officio members, will bring in external perspective and will strengthen the democratic legitimacy and accountability of the CCI.

The Bill aims to merge the office of Director General (DG) constituted under Section 16 of the Competition Act, as an investigation branch of the CCI. Earlier the DG was not answerable to the CCI, but to the Central Government, however this classification was merely de jure. The Committee while recommending such change took into accounted practices adopted by European Union, China, United States and Brazil, and the Supreme Court’s decision in CCI v. Steel Authority of India Ltd.[8]

Changes in the functioning of the CCI

The Bill introduces provisions recognising the settlement or consent orders, in case of antitrust proceedings. The Bill proposes the introduction of certain provision which permit an investigated party to offer a settlement[9] or voluntary undertake certain commitments[10] in relation to an anti-competitive vertical agreement or abuse of dominance proceeding. The Bill under these provisions envision the mechanism to be adopted to permit such settlement or commitment mechanism. The objective of adoption of such orders was to enable the CCI resolve antitrust cases faster, which would in turn help the businesses to avoid long investigation procedure and uncertainty. This procedural change is a sign of relief to the corporate field.

Changes in provisions relating to combinations

The definition of control under the Act had not defined the minimum standards required to establish such control, therefore the CCI had used the yardstick of the ability to exercise ‘decisive influence’ and ‘material influence’. The Bill proposes to statutorily recognise the standards of ‘material influence’[11]. The introduction of such standards serves twin purpose, firstly, it would bring certainty and consistency in the decisions and secondly, it will ensure that a larger number of transactions are scrutinised while an investment friendly economy is maintained.

The Bill introduces many changes with regards to the regulations of combinations. Some of these are, the principal act prescribed certain specific grounds which would constitute combination and the parties involved in such a transaction would be under an obligation to notify CCI before the execution of any such agreement. The Bill introduces the power of the central government in consultation with CCI to identify any other ground which would constitute combination[12], further the Bill also states that the power would also include the power to delist any ground which would otherwise constitute combination[13]. It is a welcome change as it increase the jurisdictional threshold of CCI, such an amendment would help include a number of digital transactions which were currently out of the scope of scrutiny of CCI, as it did not had any residuary power under the act. 

The Bill purposes to statutorily recognise the Green Channel Process. The rationale behind introduction of such process is to enable fast-paced regulatory approvals for vast majority of mergers and acquisition that may have no major concerns regarding appreciable adverse effects on competition. The aim is to move towards disclosure based regime with strict consequences for not providing accurate or complete information. The power of green channel will also extend to approve resolutions arrived at in an insolvency resolution process under the Insolvency and Bankruptcy Code. Further to ensure time bound assessment of combination a mandatory 30days timeline is also included in the act[14]. The Bill also reduces the time within which the CCI has to issue its preliminary opinion on whether a combination would cause adverse effect on competition, from thirty working days to twenty calendar days[15]. Such timelines would help ease the burden on the parties involved in the transactions.

Inclusion of Technology and New Age Markets

The Bill purposes to expand the scope of the act to include within its scope the digital markets, in order to achieve the said goal the Bill makes a numbers of changes in the existing system. Some of the changes are, express inclusion of hub and spoke arrangement[16], and buyer’s cartel.  The Committee recognised the tactics used by the companies to escape scrutiny under the act and also took into account the orders issued by the CCI in  Hyundai Motors case[17] and Uber case[18], and recommended that the element of ‘knowledge’ or ‘intention’ should not be considered under such agreements.

The Bill seeks to widen the scope of section 3, the principal act restricted the scope of section to horizontal or vertical agreement leading to adverse effect on competition. The Bill intents to include other agreements too, taking into account the decision in Ramakant Kini v. Dr. L.H. Hiranandani Hospital[19] and to expand the scope of the provision to include agreement entered in the digital market. The Bills expressly includes the ‘control over data’ or ‘specialised assets’ under the list of conditions which constitute dominance of a company in the market[20]. The rationale behind such inclusion was to expand the scope of the section to online businesses collecting customer data through user feedback loops, which would have the company have a more targeted approach. 

Changes in the Enforcement Functions

The principal Act did not grant any punitive powers to the DG or the CCI, therefore the institution was toothless in case of noncompliance of the orders. The Bill intends to introduce wide range of powers to the DG as well as the CCI. The Bill introduces provision[21] under which any person who (a) fails to produce any documents, information or record, (b) did not appear before the DG or fail to answer any question by the DG, (c) or sign the note of cross-examination, shall be punishable with imprisonment of term extending up to six months or fine up to one crore rupees. The Bill introduces the maximum cap of penalty as the 10% of income of the individual in the preceding three years, in case of formation of cartels[22].

The Bill intends to adopt practises prevailing in countries like UK, US, Singapore and Brazil, where the cartel under investigation has disclosed some relevant information of some other existing cartel will be liable to lesser punishment[23]. The power to compound offences is introduced in the Bill[24].

Shortcomings in the proposed amendment

  1. The Committee recommended that the governing body should only have the power to perform quasi-legislative functions and policy decision and not the adjudicatory functions, however the Bill does not clearly demarcates such powers. Further the Bill is silent on the procedure of election of the part time member and ex officio members, which raises serious concerns of independence of such members.
  2. The Committee while recommending the adoption of the integrated agency model did not take into account the impact it would have on the system of check and balance established by separating the investigative and adjudicatory branches of an organisation. Such merger is against the principle enunciated by the Supreme Court in Excel Crop Care Ltd. v. CCI[25], wherein the Court accorded greater independence to the office of the DG. The Court held that although the base for any investigation is the allegation made in a complaint, however if any new facts are revealed the office of DG is empowered to include such facts in its report. Furthermore the Bill does not take into account protective measures suggested by the Committee in order to maintain the due process, such as the DG in order to maintain functional autonomy, should directly report to the Chairperson of CCI, the parties should have adequate right to representation and examine evidence, and there should be strong appellate forum. 
  3. The Bill is silent on a number of aspects of the settlement or commitment order, such as whether such order would have a precedential value i.e. whether such an order would have to be taken into account while deciding similar pending cases and whether the right to compensation would survive such order.
  4. The Bill merely introduces the concept of compounding of offences by the NCLAT, but it does not provide for the procedure to be adopted by the NCLAT. Furthermore, the Committee recommended that a Bench of NCLAT should be dedicated to hear appeals under the Act, however the recommendation was not incorporated under the Act. Such an action would have an adverse impact on the effective implementation of the Act. Since COMPAT established under the Act is scrapped, the rate of disposal of appeals have decreased considerably. And if the recommendation is not incorporated in the Act, it will hamper the national initiatives like Make in India. 
  5. The power to review which was initially granted to the CCI, was repealed by the 2007 amendment. However later in Google Inc. v. CCI[26] the Court held that such power of review is inherent in nature. While there have been other contrary judgements, the Committee should have recommended the introduction of the power to review, however no such recommendation was made.

Conclusion

The introduction of the amendment Bill is a welcome step, as the country is at a very critical juncture where it is imperative for the Government to properly assess each recommendation before implementing the same. The Government in order to reap maximum benefit of the huge market, it must maintain a balance between robust administration and market friendly regime. The Bill is currently open for suggestion by the interested stakeholders, but a brief analysis of the proposed amendment reveals that the Government is motivated to implement a regime where the interest of all the stakeholders are taken into account. 


*4th year student, MNLU Nagpur. The author can be contacted at jhs.shivamtripathi@gmail.com

[1] Competition Act, 2002

[2] Monopolies and Restrictive Trade Practices Act, 1969

[3] Government of India, MCA, ‘Government constitutes Competition Law Review Committee to review the Competition Act’ (30 September 2018) <https://pib.gov.in/newsite/PrintRelease.aspx?relid=183835> accessed on 11 March 2020.

[4] Draft Competition (Amendment) Act, 2002 <http://feedapp.mca.gov.in/pdf/Draft-Competition-Amendment-Bill-2020.pdf> accessed on 09 March 2020.

[5](2005) 2 SCC 431

[6] (2019) SCC Online Del 8032

[7] Under Section 8

[8] (2010) 10 SCC 744, para 8. 

[9] Under Section 48-A

[10] Under Section 48-B.

[11] Under Explanation of clause (a), Section 5. 

[12] Under proviso to Section 5.

[13] Under second proviso to Section 5.

[14] Under Section 6(2).

[15] Under Section 29(1-A).

[16] Under Section 3(3).

[17] Fx Enterprise Solutions India Pvt. Ltd. v. Hyundai Motor India Ltd., 2017 SCC OnLine CCI 26 

[18] Samir Agrawal v. ANI Technologies Pvt. Ltd., 2018 SCC OnLine CCI 86 

[19] Ramakant Kini v. Dr. L.H. Hiranandani Hospital, 2014 SCC OnLine CCI 17  

[20] Under Section 19(4)

[21] Under Section 41(8).

[22] Under Sections 27 and 48.

[23] Under Section 46(3).

[24] Under Section 59-A

[25] (2017) 8 SCC 47

[26] 2015 SCC Online Del 8992

Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): The Coram of Ashok Kumar Gupta (Chairperson) and Sangeeta Verma (Member) and Bhagwant Singh Bishnoi (Member), analysed the dominance of Vatika Limited and held that it has no dominance in the relevant market.

Present information filed by “Informant” under Section 19(1)(a) of Competition Act, 2002 alleging contraventions of the provisions of Sections 3 and 4 of the Act.

Informant approached a property dealer in December, 2012, for the purchase of a residential flat in Gurugram. The property dealer arranged a meeting of the Informant with Vatika officials in the Vatika office. The informant has averred that the sales executive of Vatika informed that ‘Vatika Town Square’, would be situated at the entrance of a large number of residential and commercial complexes in new Gurugram.

Further, it has been stated that, the informant was told by Vatika that Block-D was under construction and would be completed by the end of June 2015. It was stated that by that time the entire Dwarka Express Highway Road would also be complete.

Informant was also told that possession of the property would be given after 2.5 years and in case of delay in construction or any other default by Vatika, the interest of 8% would be payable by Vatika. Along with this, the Informant was told that the stated terms and conditions would be incorporated in the Builder Buyer Agreement (BBA) to be executed by Vatika with the Informant.

Allegations of Informant

Informant alleged that in the BBA there was neither any mention of the construction /completion/ possession date nor of the payment of simple interest to the buyer, for the delay, if any, in completion of construction by Vatika.

On a later date, Informant in a meeting with Vatika was told that leasing / renting / of commercial units in ‘Vatika Town Square’ was already going on in a big way and property may be able to fetch some premium. It has been alleged that on a visit to ‘Vatika Town Square’ there was no activity of leasing/ renting at D Block and the construction was not complete. All floors had only bare columns and bare floors without any partitions for the individual units, except for some activity.

Informant on several occasions requested Vatika to inform him about the refund he would get on terminating the BBA along with deductions that would be involved, but no reply came along.

Informant alleged that Vatika was required to complete construction and offer possession by June 2015. Vatika neither informed about any delay due to force majeure event nor sought an extension of time. He further submitted that, construction activities in Block-D, ‘Vatika Town Square’ are still in progress, although Vatika issued intimation for possession and further kept demanding huge extra amount from buyers for delay in taking possession.

“…BBA was not only one-sided imposing unfair, discriminatory terms and conditions on the buyer, but also covered builder from all foreseeable or un-foreseeable events at the cost of buyers.”

“…there is selling of property through unfair means by nexus between Vatika and property dealers.”

“…Vatika is probably diverting funds collected from Block-D for other projects.”

Decision of the Commission

On perusal of the information stated above, provisions of Section 3 of the Act have no application to the present case as the Informant is a consumer and agreement with a consumer does not fall within the ambit of Section 3 of the Act.

In respect to Section 4 of the Act,

“What is of concern to the Commission in the present case is that the Informant booked a commercial space in Vatika Town Square project at Gurugram.”

Taking into account the factors such as physical characteristics or end-use of goods, price of goods or services, consumer preferences and nature of service offered, the relevant product market for the purposes of the present case is the “provision of services for development and sale of commercial space”.

Thus, the Commission keeping in view the factors held that Vatika has no dominance in the relevant market, no case to examine alleged abuse of dominance by Vatika in the matter, under the provisions of Section 4 of the Act, remains for determination by the Commission.

No prima facie case and the information filed is closed forthwith under Section 26(2) of the Act. [Suresh Chander Gupta v. Vatika Ltd., 2019 SCC OnLine CCI 34, decided on 03-10-2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): The Coram comprising of Ashok Kumar Gupta (Chairperson) and U.C. Nahta and Sangeeta Verma (Members) dismissed an application filed by a Telugu Film and T.V. Serial Producer and distributor on being not allocated sufficient cinema theaters/screens.

In the present case, Ashok Kumar Vallabhaneni (Informant) filed an application under Section 19 (1) (a) of Competition Act, 2002 against the OPs who are engaged in the business of production and distribution of movies in the States of Andhra Pradesh and Telangana, alleging inter alia contravention of the provisions of Sections 3 and 4 of the Act.

Informant entered into a Theatrical Distribution Agreement with Sun Picture according to which the Informant had purchased the “distribution and exhibition rights” for the dubbed version of the Tamil movie ‘Petta’ in the Telugu language, in the States of Andhra Pradesh and Telangana. Sun Picture decided to release the movie worldwide during the Pongal/Sankranti festival in the month of January, 2019.

Further, it has been stated that, Informant contacted OPs who have control over more than 80% of local movie theatres in the States of Telangana and Andhra Pradesh and requested them to provide a minimum of 400 screens in said states. OPs declined to provide a sufficient number of screens for the said movie due to which Informant immediately approached the ‘Telugu Chamber of Commerce’ and raised the issue of non-allocation of sufficient cinema theatres/screens.

It was alleged that due to cartelization amongst the OPs, the OPs allotted limited screens for screening the Informant’s dubbed movie, thereby,

depriving the right of the Informant from exhibiting the said movie in a sufficient number of screens and causing immense monetary loss.

Adding to the above allegation, the conduct of OPs not only adversely affected the competition at the distributor level but also had an appreciable adverse effect on the consumers/viewers. All of the stated allegations are said to be in violation of the provision of Section 3(3)(b) of the Act.

Another allegation added to the list was that the sole object of OPs was to monopolise the film industry with a view to preventing the entry of new producers and due to which Informant’s suffered a loss of about Rs 7 Crores. Therefore it has been stated that OPs were “Limiting or restricting the Telugu film industry” and thus violating the provisions of Section 4 of the Act.

Conclusion

Commission noted that,

“What the Act under Section 4 contemplates is the abuse of dominant position by an enterprise or a group rather than abuse of a dominant position of collective dominance by more than one entity.”

Thus, the commission stated that abuse on account of collective dominance is a concept not recognised by the Indian Competition regime so far. In the present case, Informant averred the presence of multiple players in the market. When the market is dynamic and is characterized by the presence of multiple players, no single player can be said to be in a position to affect the competitors or consumers or the market in its favour.

Regarding the allegation of cartelization, there was no material furnished or indicating collusion amongst OPs, thus no interference is warranted in that regard.

In view of the above facts and circumstances of the case, no case of contravention of the provisions of Sections 3 and 4 of the Act is made out against the OPs. [Ashok Kumar Vallabhaneni v. Geetha SP Entertainment LLP, 2019 SCC OnLine CCI 27, decided on 01-08-2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): The Three-Member Bench comprising of Ashok Kumar Gupta, Chairperson and Augustine Peter and U.C. Nahta as members dismissed a case for anti-competitive practices for lack of merits.

This petition has been filed under Section 19 (1)(a) of the Competition Act, 2002 by informant against the opposite party alleging contravention of the provisions of Sections 3 and 4 of the Act for controlling horse racing activity and imposing unfair and discriminatory conditions for getting results in their favour. It has been further alleged that the opposite party were either race horse owners and stud farm owners or breeders having a direct interest in the horse races and also betting activities were independently performed, profit of which went to the party which further explains their vested interest in the same.

The opposite party argued that the game/ sport of horse racing is primarily governed by the Bombay Race Course Licensing Act, 1912, Section 3 of which provides that “no horse race can be held save and except on a race course for which license for racing is granted in accordance with the provisions of this Act.” Also, any objections regarding any race event takes place under a close public vigil and there was no scope for foul play or mischief. With regard to the betting allegations, the case K.R. Lakshmanan v. State of T.N., (1996) 2 SCC 226 was quoted which clarified that betting for horse racing was legalized in India which was being performed after obtaining a license under the above act. Coming to the abuse of dominance under Section 4 it stated that it was involved in only 23% of the events.

The Commission observed that not only were the allegations vague and without substance but the informant also has not been able to demonstrate as to how the allegations attract the provisions of Section 3 of the Act and accordingly there was no case of contravention. [Habib Rajmohamad Patel v. Royal Western (India) Turf Club Ltd., 2019 SCC OnLine CCI 3, order dated 15-01-2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): This information was filed before Ashok Kumar Gupta, Chairperson; Augustine Peter and U.C. Nahta, Members under Section 19(1)(a) of the Competition Act received by informant who is an advocate alleging National Stock Exchange of India Ltd. for abuse of dominance under Section 4 of the Act.

The informant had come with a prayer that the case of ‘NSE Co-location Case’ which is being investigated by SEBI, CBI and ITD should also be investigated by Competition Commission for abuse of dominance. Informant had submitted that by giving unfair preferential access to some trading members of its co-location services the NSE had abused its dominance. And that NSE is dominant in its field having greater market power than Bombay Stock Exchange.

The Commission observed that NSE had limited and restricted the provisions of its services to other trading members availing the co-location service which resulted in ‘denial of market access’ to others to whom such unfair access was not given. Thus, the informant has alleged contravention of Section 4(2) (b) (ii) and Section 4(2) (c) of the Act. Commission was of the view that it could independently take the present matter but, the allegations were yet to be established through appropriate proceedings. Therefore, the Commission ordered the matter to be closed in terms of the provisions of Section 26(2) of the Act.[Jitesh Maheshwari v. National Stock Exchange of India Ltd., Case No. 47 of 2018, Order dated 07-01-2019]

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Competition Commission of India (CCI): The 3-Member Bench comprising of Sudhir Mital (Chairperson), Augustine Peter and U.C. Nahta (Members), while pronouncing an order under Section 26(2) of the Competition Act, 2002, dismissed the case in light of no contravention being found as alleged of the provisions of Sections 3 and 4 of the Competition Act, 2002.

The facts of the case are that the Informant had filed the present information under Section 19(1) (a) against OP-1, i.e. Vatika Ltd. and OP-2, i.e. Confederation of Real Estate Developers’ Associations of India (CREDAI) for contravention of Sections 3 and 4 of Competition Act, 2002. The informant had purchased a plot in a township being developed by OP-1 in Gurugram, Haryana. Informant had opted for a “construction linked payment plan” in which he had to pay the total amount within a span of 3 years. Once the initial payment was duly paid a plot was allotted to the informant and further, the agent asked the Informant to sign the buyer’s agreement which was jointly signed by the Informant and his son.

As per the payment plan, the Informant had deposited the second installment and was asked to make the third installment within 15 days when initially at the time of making application for the plot it was decided that the third installment would be payable in 8 to 9 months from the date of booking. For the payment of the third installment, demand letter from OP-1 started to flow and on being asked about the same by informant it was reasoned that because of the construction work had been completed upto the 5th installment plan.

The Informant further stated that, on mailing several queries due to being aggrieved by the above stated circumstances and seeking clarifications on the same, but no reply being received in this regard, the Informant had to send out a legal notice to OP-1 reiterating the details of the one-sided communication to which the response was that the Informant had defaulted in payment of installment and as a consequence the amount already paid by the informant had been forfeited, therefore the Informant was not liable to any refund.

Allegations by the Informant:

  • OP-1 abused its dominant position; by refusing to visit the site, unfair terms of the Buyer’s Agreement, unreasonable demand of instalment payments and not responding to queries which ultimately places the OP-1 in the position of abuse of dominance in the relevant market of residential plots by violating Section 4(2)(a)(i) of the Competition Act, 2002
  • Cartelisation: OP-2 and its members including OP-1 have indulged in common practices by incorporating standard clauses in their agreements.

The Commission on perusal of the information and submissions of the parties has stated that it disagrees with the Informant’s submission that the relevant geographic market should be delineated as “Northern Peripheral Road Corridor.” There are various residential projects in Gurugram other than the projects in Northern Peripheral Road Corridor which could have been considered by consumers desirous of purchasing a residential plot. It is noted that the Informant has assessed the dominance of OP-1 as per the relevant geographic market defined by him. “The Commission notes that OP-1 faces sufficient competitive constraints from various other competitors and would not be able to operate independently of the competitive forces prevailing.”

Therefore, in view of the above-stated allegations and Commission’s view in that respect, no case of contravention of the provisions of Section 3 and 4 arise against the OP. [Ranjit Singh Gujral v. Vatika Ltd., 2018 SCC OnLine CCI 84, dated 16-10-2018]

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Competition Commission of India (CCI): The four-member bench comprising of Devender Kumar Sikri, Chairperson and Sudhir Mital, U.C. Nahta, and G.P. Mittal, Members, ordered closure of the matter filed against BMW India Private Limited (OP-1) under Section 19(1)(a) of the Competition Act, 2002 alleging ‘abuse of dominance’.

The brief facts of the matter state that ‘Informant’ was a dealer for selling BMW cars in the State of Gujarat and was continuing to be one for almost 9 years. The primary allegation which in accordance to the ‘Informant’ constitutes to ‘abuse of dominant position’ is that OP-1 abused their dominant position by selling their cars through dealers outside Gujarat to the customers based in the State of Gujarat. Another averment was that BMW India seems to have been carrying out a fraudulent/illegal arrangement as no ‘entry tax’ is being paid on entering of the cars in the State of Gujarat from outside the State.

Therefore, the Commission on noting the stated allegations and facts, analysed the issue placed by the ‘Informant’ and concluded by stating that, BMW India had in advance, before the renewal of the agreement of dealership between the parties, sent a notice of ‘non-renewal’ which made the ‘Informant’ well aware of the expiry of the agreement and the fact that BMW India has negligible share in the passenger car segment in India clearly leads to BMW India not being a dominant player. Hence the Commission opined that nowhere OP-1 contravened Section 4 i.e ‘abuse of dominant position’  and pronounced an order of closure under the provisions of Section 26(2) of the Competition Act, 2002. [Prasoli Motor Works (P) Ltd. v. BMW India (P) Ltd.,2018 SCC OnLine CCI 39, dated 30-05-2018]

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Competition Commission of India (CCI): Competition watchdog ordered to close a case filed against Facebook, Google and some online portals (“opposite parties”) for alleged abuse of dominant position and anti-competitive conducts. The informant in this case was aggrieved by complaints filed on online electronic public fora by persons with whom the informant has ongoing disputes. Informant alleged that these persons had also published defamatory material against the Informant on online platforms such as Google and Facebook. The Informant has also claimed that because of the wide outreach of these websites publication of false/ defamatory statements/ adverse remarks have tarnished its reputation and it has suffered reputational and monetary damage. Informant contended that Facebook and Google enjoy dominant position on the internet as the information contained in these websites can be viewed worldwide and hence they have violated the provisions of section 4 of the Competition Act, 2002.

The CCI observed that the Informant failed to make out a case against Facebook and Google for abuse of dominance under the provisions of section 4 of the Act. CCI closed the case with the view that the general averments made by the Informant against the opposite parties including publication of defamatory materials on certain websites allegedly maligning the Informant’s reputation, do not raise any competition concern. [In Re: Taj Pharmaceuticals Ltd and Facebook , [2015] CCI 158, decided on 07.10.2015]