abuse of dominant position

Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): The Coram comprising of Ashok Kumar Gupta (Chairperson) and Sangeeta Verma and Bhagwant Singh Bishnoi, Members, while dealing with a case filed by Treebo Hotels against Make My Trip & OYO held that,

“A prima facie case of contravention against MMT for abuse of dominant position under Section 4(2)(a)(i) and 4(2)(c) is made out and a case against MMT & OYO for entering into a vertical arrangement having an AAEC in the market is also made out.”

Informant alleged contravention of provisions of Sections 3 and 4 of the Competition Act, 2002 against MakeMyTrip India Pvt. Ltd. (MMT) and Oravel Stays Private Limited (OYO).

Background

“Treebo” alleged “MMT” of abusing its dominant position in the relevant market for online intermediation services for booking of hotels in India.

It has been stated that, Treebo was previously listing its budget hotels on MMT’s platform in addition to the intermediation services provided by MMT, further with its acquisition of GO-Ibibo, MMT proposed to make a significant investment in Treebo, in exchange for Treebo listing its hotels exclusively on MMT’s platform.

Further proposal from MMT for investment in Treebo was turned into a threat, that if Treebo doesn’t accept MMT’s proposal, it would be removed from MMT’s platform. Treebo claimed to have finally declined MMT’s proposals for investment and exclusive listings. Thus all Treebo properties were allegedly removed from MMT’s platform.

Nearly after 6 months, MMT again decided to list Treebo back on MMT platform subject to Treebo entering into the ‘Exclusivity Agreement’ and ‘Chain Agreement’ with MMT and the said agreements were alleged to have been unfair/anti-competitive.

Through a notice of termination, the above-stated agreements were unilaterally terminated by MMT. As per Treebo’s allegation, the agreements were terminated by MMT as a result of OYO’s agreement with MMT wherein MMT agreed to remove OYO’s competitors like Treebo from its platform.

OYO’s arrangement with MMT, dominant downstream intermediary, OYO considered being vertically integrated enterprise. Due to existence of network effects in such a market, there exist huge barriers to entry for any new player in the market.

Treebo also claimed that MMT-GO and OYO renewed their commercial agreement with a specific provision to exclude Treebo and Fab Hotels from listing on MMT.

Treebo alleged that MMT has contravened the provisions of Section 4(2) (c) read with Section 4(1) of the Act by unilaterally terminating agreement with Treebo and denying Treebo market access to large share of online customers who prefer to make their hotel bookings on MMT. MMT imposed arbitrary exclusivity condition on Treebo through the ‘Exclusivity Agreement’ entered into between MMT and Treebo, in contravention of provisions of Section 4(2)(a)(i) of Competition Act, 2002.

Treebo has also brought the aforesaid allegations under Section 3(4) read with Section 3(1) of the Act as Treebo and MMT share a vertical relation. ‘Exclusivity Clause’ introduced by MMT caused Appreciable Adverse Effect on Competition in terms of Section 19(3) of the Act while creating entry barrier for new OTAs, driving out existing OTAs out of the market and there were no accrual benefits to the consumers.

OYO abused its dominant position in the relevant market for ‘franchising services for budget hotels in India’ by entering into an anti-competitive vertical arrangement with MMT. By Imposing restrictive conditions on MMT, OYO and MMT’s deal tantamount to ‘refusal to deal’ and violates Section 3(4) read with Section 3(1) of the Act.

Analysis & Decision

Commission held that restrictive arrangement between OYO and MMT, both of whom have considerable presence in their respective market segments, may lead to refusal to deal which may have adverse effects on competition.

Parity Restrictions are anti-competitive and are to be directed to be investigated under Section 3(4) as well as Section 4 of the Act.

With regard to imposition of exclusivity condition by MMT on Treebo, it appears to be unfair and hence exploitative under Section 4(2)(a)(i) of the Act, for the Treebo partner hotels as it denies them an opportunity to list on other platforms and to gains access to those platforms. The restriction also seems to be prima facie in contravention of Section 4(2)(c) of the Act.

In view of the above, DG is directed to investigate the present matter. [Rubtub Solutions Pvt. Ltd v. MakeMyTrip India Pvt. Ltd. (MMT), Case No. 01 of 2020, decided on 24-02-2020]

Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI), New Delhi: Coram comprising of Ashok Kumar Gupta (Chairman) and U.C. Nahta and Sangeeta Verma (Members), dismissed an application as the allegations in regard to abuse of dominant position or any other were not found to have been established.

The present case was filed by the Informant under Section 19(1)(a) of Competition Act, 2002, alleging contravention of provisions of Section 4 of the Competition Act, 2002 by Gujarat State Board of School Textbook (Opposite Party).

Opposite party used to publish school textbooks in various languages for the students of standard 1st to 12th. Syllabus for these textbooks was prescribed by the Gujarat Council of Educational Research and Training (GCERT) that was accepted by the Gujarat Government. It has also been submitted that OP has been entrusted with the responsibility of publishing various study materials in the State of Gujarat.

Allegations placed against OP

Opposite Party, without any stipulation in the terms of the contract, started discriminating between the printers by allotting more work to printers using web offset printing. Various printers decided to upgrade their machinery which resulted in the dependence for work on the OP as the customised up-gradation was done for OP’s work.

Opposite Party introduced a new system vide its Tender, as per which provided rates for the different types of category for printing & binding jobs.  After the opening of the commercial bids, it was discovered that 21 bidders had quoted identical bids of minus 31% of the base rate.

The Informant alleged that the said price was collusively decided by the said 21 bidders, forming a cartel. Thus, the said information formed to be the subject-matter of the investigation.

Informant alleged that OP is a dominant enterprise for the printing of textbooks in the State of Gujarat and is thus solely responsible for publishing of study material. Further, it added that the responsibility of getting the printing work done, confers a monopsonistic power on OP in respect of procurement of printing and binding services from the printers and the OP has abused its dominant position by imposing unfair and discriminatory price and conditions in purchase of such services.

Informant along with the allegation of abuse of dominant position also filed a separate application under Section 33 of the Act praying – an interim relief in nature of an interim order to OP to immediately stop the discriminatory price of excluding the Informant.

Analysis & Conclusion

Commission considered the above-stated matter and directed the OP to explain the procedure followed for empanelment of qualified bidders as per its tender and the reasons to exclude the 32 bidders.

Submissions of the OP are briefly stated under and which were noted by the Commission:

  • OP’s main objective is to make basic education affordable. Since the printing cost will directly affect the cost of textbooks which are made available to the students, the Tender cannot be termed as anti-competitive considering that the requirement of printing textbooks is for making basic education affordable.
  • Informant is venting his personal grievance in guise of the present information to coerce the OP to empanel him for the work of textbook printing.
  • Price for the printing of web-offset is actually a more cost-effective way of printing as there is major reduction in labour cost due to advanced technology
  • OP never specified any contractual condition with regard to upgrading of machinery which was, in fact, voluntary conduct on the part of printers to procure majority work against their competitors. Moreover, there is an alternative market for provisions of services of printing as the number of government schools have reduced to 76 % in the State of Gujarat.
  • total production capacities as declared by respective L1 bidders (26 bidders – deriving common L1 bidders for sheet-fed and web offset) were not found to be sufficient by the Opposite Party to complete the estimated requirement in the given timeline
  • Empanelled printers were required to submit a certain bank guarantee as per the stipulated terms. However, most printers were not able to furnish the required bank guarantee.

Commission dealt with the application very carefully and noted the submissions by the parties, further it found no merit in the application filed and no abuse of dominant position under Section 4 was established. [Ashokbhai M. Mehta v. Gujarat State Board of School Textbook, 2019 SCC OnLine CCI 30, decided on 07-08-2019]

Hot Off The PressNews

The Competition Commission of India (CCI) has found Jaiprakash Associates Limited (JAL) to be in contravention of the provisions of Section 4 of the Competition Act, 2002 (Act) for abuse of dominant position in the market of independent residential units such as villas, estate homes in their integrated township, by imposing unfair/ discriminatory conditions on the allottees in Wish Town, Jaypee Greens project, in Noida and Greater Noida.

The final order was passed on an information filed by a buyer who alleged that conditions imposed by JAL were arbitrary and heavily tilted in favour of it.

Based on the investigation, the Commission found that the standard terms and conditions imposed by JAL were one-sided and couched in a manner so as to unilaterally favour itself and be unfavourable to the consumers. Moreover, terms were vague and did not confer any substantive rights on the buyers. The conduct of JAL, such as collecting money/charges from the buyers without delivering the residential/dwelling unit on time, adding additional construction and amending /altering the layout plans, imposition of various charges, right to raise finance from any bank/financial institution/body corporate without consulting buyers was held to be abusive.

Therefore, the Commission concluded such conduct of JAL to be in violation of Section 4(2)(a)(i) of the Act. Resultantly, the Commission imposed a penalty of Rs. 13.82 crore (Rupees Thirteen Crore Eighty-Two Lakh) on JAL. The penalty was calculated @ 5% of the average revenue of JAL from the sale of independent residential units in the relevant market. Besides, a cease and desist order has also been issued to JAL.

[Source: PIB]

[Press Release dt. 13-08-2019]