Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): In a significant decision, the coram of Ashok Kumar Gupta (Chairperson), Sangeeta Verma and Bhagwant Singh Bishnoi (Members), in view of the negative impact of exclusive and restrictive agreements between online ticketing platforms and single screen cinemas/ multiplexes on the relevant market; held that there is a prima facie case owing to the conduct of ‘BookMyShow that requires investigation by the Director General (DG) to determine whether their conduct of has resulted in contravention of the provisions of S. 4 (abuse of dominant position) of Competition Act, 2002. 

 

Background of the case: Showtyme an online movie ticketing portal was launched in November 2021 in order to provide an alternative option to the cine-goers in Hyderabad (later across India) to book their movie tickets online, by paying a convenience fee of ₹11/- per ticket; which is stated to be 40-50% less than the existing players. On the other hand, BookMyShow, a popular online movie ticketing portal, holds at least 90% market share in movie ticket booking industry in India.  

 

The informant in the instant matter, is a social activist and the founder of Showtyme, who alleged that BookMyShow has formed an explicit cartel with multiplexes and theatres and pursuant to which, it has signed exclusive agreements with them in order to thwart any opportunity to other platforms to sell tickets of cinema, even at 50 % lesser convenience fee than that of BookMyShow, thereby controlling the movie ticketing industry and imposing barriers for new entrants like Showtyme 

 

Contentions 

  • It was submitted the informant that BookMyShow has abused its dominant position under S. 4 of the Competition Act, by imposing unfair and discriminatory conditions on the theatres/ multiplexes i.e., making them sign contracts for sale of 100% tickets on its platform.  
  • It was further submitted that BookMyShow is entitled to charge the consumers convenience fee for online booking of tickets; however, entering into agreements with theatres/multiplexes to not sell the movie tickets online to anyone else; giving lakhs and crores of rupees on loans at zero interest to the Opposing Parties; and selling more than 50% tickets of movies online; such acts leaves no scope for the new entrants to enter into the market and thereby creating a hostile effect upon fair competition. 
  • The informant also put forth before the Commission that he submitted various complaints to licensing authorities and other authorities in the State of Telangana and has also given a representation to the Ministry of Consumer Affairs, Government of India.     

 

Per contra, BookMyShow argued that-  

  • It is an intermediary engaged in the activity of facilitating online booking of tickets for movies, plays, concerts, sports events across India through its mobile application and website and follows a standard form of contract and commercial terms. The duration of the agreements with each cinema/ theatre/ multiplex is negotiated as per their requirement. It is entitled to charge convenience fee from customers for facilitation of booking of tickets through its mobile app and website.  
  • BookMyShow also contended that the informant approached the Commission with “unclean hands” as he filed the information even before the launch of Showtyme’s website. As per BookMyShow, the website should have been in operation for at least a certain amount of time to experience the competition in the market from various players. Thus, the question of causing harm to Showtyme does not arise.  
  • Regarding the allegations of exclusivity, it was stated that BookMyShow is a relatively new entrant in the relevant market; therefore, in order to penetrate this market BookMyShow had to tie-up with certain cinema theatres on an exclusive basis. This exclusivity also benefits the cinema theatres that have tied up with BookMyShow as otherwise they do not have the resources to make the tickets available online through their own website or other modes. It was further contended that allegations of creating entry barrier are misleading as the market is still evolving and volatile in nature. It was stated that various participants like PayTM have entered the market and established a significant presence. 
  • It was stated that BookMyShow does not provide any monetary assistance in return for exclusivity. In certain cases, it only provides some security deposit to adjust the ticket price and revenue share to the cinema theatres.  

 

Observations: Perusing the facts and the allegations levied upon BookMyShow, the Commission duly noted that the grievance of the informant centered around the agreement and arrangement between BookMyShow and certain theatres/ multiplexes in the city of Hyderabad, thereby allegedly preventing him from offering the services of his website Showtyme for online booking of tickets.   

  • While determining “relevant market” for the instant matter, the Commission noted that relevant product market comprises of all those products or services which are regarded as interchangeable or substitutable by consumers, by reason of their characteristic, price and intended use. Therefore, the most important parameter is as to how the consumers or users of products or services perceive substitutability or interchangeability amongst provision of services. The Commission noted that the services of online platforms like BookMyShow are available pan-India and the platform faces similar competitive constraints and homogeneous conditions of competition throughout India. Thus, the relevant market in the present case was that of ‘market for online intermediation services for booking of movie tickets in India’.
  • The Commission pointed out that BookMyShow had not provided data on its market share for the online intermediation services for booking of movie tickets in India rather they provided the number of tickets sold, indicating total yearly footfalls and not value of tickets in INR crores, which is apparently untenable and inconsistent for computation of market share of BookMyShow even in the wider market proposed by it. The Commission stated that it is not inclined to rely upon such figures.  
  • Regarding BookMyShow’s dominant position, the Commission observed that market share is one of the many factors that are considered in the assessment of dominance. In the instant case, market share of the platform needs to be seen in conjunction with its reach, scale and the network effects that work in its favour, leading to huge consumer footfalls thereby making presence on the platform critical for visibility and competitive ability of cinema theatres. The ability of BookMyShow to enter into exclusive agreements corroborates its position of strength and the various provisions in its agreements with cinema theatres/multiplexes, indicate its superior bargaining power in deciding contractual terms. These factors, taken together, prima facie appear to substantiate the dominant position enjoyed by BookMyShow in the relevant market of online intermediation services for booking of movie tickets in India. 
  • The Commission also pointed out that BookMyShow’s exclusive agreements have the potential to reduce competition in the relevant market, as they may make rival intermediary platforms or new entrants incur significant additional cost to induce the cinemas to give up their exclusive contracts with the leading platform with market power. The exclusive and restrictive agreements with single screen cinemas and multiplexes, in conjunction, prima facie appear to have the potential of denying market access to competing platforms and potential entrants. The cinema theatres as well as the cinegoers alike are restricted in their choice of alternate ticketing platforms, during the working of the contracts that BookMyShow has with large number of theatres/ multiplex chains”.  
  • Upon perusal of the exclusive agreements with single screen cinemas, the Commission also pointed out that BookMyShow has reserved the right of data collection, ownership and storage; without the cinemas having any right, title, interest to such data; even though in the agreements there is provision for sharing of data. 

 

Decision: With the aforementioned observations, the Commission was of the view that exclusivity relating to data ownership can increase the bargaining power of the platform over time. Data further strengthens and entrenches the network effects limiting inter platform competition. In a dynamic sense, this would imply that BookMyShow would earn monopoly rents, going forward. The aspect of exclusive ownership of and access to data by a dominant intermediary, merits investigation”. 

The Commission was of the view that there exists a prima facie case regarding BookMyShow’s conduct which should be investigated by the Director General under the provisions of S. 26(1) of the Competition Act. The Commission also directed the DG to complete the investigation and submit the investigation report within a period of 60 days from the receipt of this order.    

[Vijay Gopal v. Big Tree Entertainment Pvt. Ltd., Case No. 46 of 2021, decided on 16-06-2022]  


*Sucheta Sarkar, Editorial Assistant has reported this brief.

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) addressed a matter wherein it was alleged that certain Car Companies were abusing their dominant position and denying the cashless claim to consumers if the insurance policy had not been obtained through them, their dealers or their insurance broking companies.

Manav Seva Dham (Informant) alleged contravention of provisions of Sections 3 and 4 of the Competition Act, 2002 by Maruti Suzuki India Limited (OP 1/Maruti), Tata Motors Ltd. (OP 2/Tata), Hyundai Motor India Limited (OP 3/Hyundai), Hero Moto Corp Limited (OP 4/Hero), Mahindra and Mahindra Limited (OP 5/Mahindra) and Toyota Kirloskar Motor Private Limited (OP 6/Toyota).

It was stated that the OP were enjoying a dominant position in the market for automobiles and motor insurance in India, which enables them to operate independently of competitive forces.

Further, it was added that there had been apparent monopoly and cartelization by the OPs in selling insurance policies through their fully owned insurance broking or subsidiary companies and servicing and repairing motor vehicles in respect of the insurance policies sold by them, which is detrimental to the insurance policyholders.

Due to the above stated, the informant has received several complaints from the insurance companies as well as insurance policyholders about the monopolistic practices of the OPs.

OPs even ensure that the genuine spare parts are only available with their authorised dealers, and their authorised dealers continue to charge arbitrary high prices from the consumers, who are forced to avail the services for repairing and maintaining their motor vehicles since the genuine spare parts, diagnostic tools, and technical information required to service their cars are not made available to independent repair workshops, failing which, the warranty of the vehicle would lapse.

Hence, the OPs have created a monopoly over the motor insurance and repair services for their motor vehicles.

Analysis of the Commission

Primarily, the Informant was aggrieved by the alleged conduct of the OPs of disallowing of the cashless claim to consumers if the insurance policy has not been obtained through them, their dealers, or their insurance broking companies.

Whether the Opposite Parties are in a position of dominance and have abused their dominant position, as alleged?

Commission noted that nothing concrete has been submitted in the regard to the allegations made.

Further, the Coram expressed that,

Consumers have a choice to purchase their vehicle from various manufacturers and the same also is true in respect of availing insurance facility for vehicles.

Informant had alleged regarding some arrangement of OPs with their insurance broking companies for the provisions of insurance services to customers who buys vehicles from them.

Commission observed that, even if dealers offer to sell insurance policies to customers, the customers may yet have the option to buy such policy from alternative channels should they want.

“…facility of cashless claim may be an additional benefit extended by certain brokers and may not be confined to the broking arms of the aforementioned Opposite Parties alone.”

Hence, no prima facie case existed. [Manav Seva Dham v. Maruti Suzuki India Ltd., 2022 SCC OnLine CCI 17, decided on 22-3-2022]

Case BriefsSupreme Court

Supreme Court: While adjudicating the dispute with regard to jurisdiction of CCI to inquire into allegations of bid rigging, collusive bidding, and cartelisation in the tender process for appointment of selling agents and distributors for lotteries organised in the State of Mizoram the Division Bench of Sanjay Kishan Kaul* and M.M. Sundresh, JJ., concluded that,

Lotteries may be a regulated commodity and may even be res extra commercium; that would not take away the aspect of something which is anti-competition in the context of the business related to lotteries.”

Factual Backdrop

A complaint was made by the respondent 4-complainant under Sections 3 & 4 read with Section 19(1)(a) of the Competition Act, 2002 with regard to invitation of expression of interest (EOI) issued by State of Mizoram through respondent 2, the Director, Institutional Finance and State Lottery inviting bids for the appointment of lottery distributors and selling agents for state lotteries.

The complainant contended before the Competition Commission of India (CCI) that there was bid rigging and a collusive bidding process which violated Section 3(1) read with Section 3(3) of the Competition Act, and also caused grave financial loss to the State of Mizoram. The allegation was also made against the State that it had abused its dominant position as administrator of State lotteries, by requiring distributors to furnish exorbitant sums of money towards security, advance payment, and prize pool even before the lotteries were held which was in contravention to Section 4 of the Competition Act.

Action Taken by the CCI

The CCI found that prima facie, there were evidence of cartelisation and bid rigging in contravention of Section 3(1) read with Section 3(3) of the Competition Act. However, the CCI opined that no case was made out against respondent the State as it could not be considered as an ‘enterprise’ or a ‘group’ under the Competition Act. The CCI opined that the State’s role was to regulate and monitor the business of lotteries in the State of Mizoram in exercise of its powers and functions under the Mizoram Lotteries (Regulation) Rules, 2011 framed under the Lotteries (Regulation) Act, 1998. The CCI, thus, rejected the complaint under Section 4 of the Competition Act.

However, with regard to private respondents, CCI required the Director General (DG) to conduct an investigation into the matter. Pursuant to which the DG report revealed that the respondent 5 and 6 along with M/s. Teesta Distributors and M/s. E-Cool Gaming Solutions (P) Ltd. had colluded, formed a cartel, and indulged in bid rigging in violation of Sections 3(1) and 3(3) of the Competition Act. Consequently, the CCI by its order dated 12-02-2013 send copies of the DG report to the parties seeking objections/replies thereto.

Intervention by the High Court

The Bench observed that surprisingly the State had approached the Gauhati High Court challenging both the report of the DG and the CCI’s order for making adverse observations despite the fact that the complainant had failed to establish a prima facie case under Section 4 of the Competition Act. The Bench remarked,

“We say ‘surprisingly’, because if at all, the grievance could have been of respondent 2 qua the observations made, but could not have been of State… In fact, Section 4 proceedings against respondent 1 were already closed.”

The High Court, however, chose to pass an interim order to stay further proceedings before the CCI. Subsequently, by the impugned order the High Court relied on Union of India v. Martin Lotter Agencies Ltd., (2009) 12 SCC 209,  to hold that lotteries, being akin to gambling activities, came under the purview of the doctrine of res extra commercium. The High Court opined that since the Competition Act was applicable to legitimate trade and goods, and was promulgated to ensure competition in markets that are res commercium, the CCI did not have jurisdiction to entertain the complaint of respondent  4.

Whether distribution of lotteries amounts to “Service”?

With regard to the respondents’ claim that they were merely a distributor which did not provide any services to any potential user of lottery and such distribution did not constitute a service under Section 2(u) of the Competition Act, the Bench held that the expansive definition of ‘Service’ under Section 2(u) of the Competition Act means “service of any description”, which is to be made available to potential users. Holding that the purchaser of a lottery ticket is a potential user and a service is being made available by the selling agents in the context of the Competition Act, the Bench concluded that the inclusive mentioning does not inhibit the larger expansive definition.

CCI’s Jurisdiction to entertain issues relating to lotteries

On the contention that Section 3(1) of the Competition Act would have no application as there was no “goods” or “provisions of services” which could give rise to the CCI’s jurisdiction, specifically because lottery tickets were not goods and there was no provision of any services, the Bench observed that lotteries may be a regulated commodity and may even be res extra commercium; that would not take away the aspect of something which is anti-competition in the context of the business related to lotteries. Hence, the Bench concluded,

The lottery business can continue to be regulated by the Lotteries (Regulation) Act, however, if in the tendering process there is an element of anti-competition which would require investigation by the CCI, that cannot be prevented under the pretext of the lottery business being res extra commercium, more so when the State Government decides to deal in lotteries.

Findings and Conclusion

Finding the conduct of the State “very non-appreciable” and intervention by the High Court “extremely premature”, the Bench stated that the State ought to have cooperated with the CCI and the High Court ought to have waited for the CCI to come to a conclusion but on the other hand what had happened was that the CCI proceedings had been brought to a standstill while the High Court opined on the basis of some aspects which may or may not arise. The Bench remarked,

“A simple aspect of anti-competitive practices and cartelisation had got dragged on for almost ten years in what appears to be a mis-application by the High Court of the interplay of the two Acts, i.e., the Competition Act and the Regulation Act.”

Hence, holding that the proceedings before the CCI ought to have been permitted to conclude with the right available to the affected parties to avail of the appellate remedy under Section 53B of the Competition Act, the Bench set aside the impugned judgment and directed to close the proceedings in the case filed by the State while the proceedings against the other parties were directed to continue.

[CCI v. State of Mizoram, 2022 SCC OnLine SC 63, decided on 19-01-2022]


*Judgment by: Justice Sanjay Kishan Kaul


Appearance by:

For the CCI: Rajshekhar Rao, Senior Advocate


Kamini Sharma, Editorial Assistant has put this report together

District CourtHigh CourtsLegal RoundUpTribunals/Commissions/Regulatory Bodies

Here are some of the interesting Legal Stories from Week 4 of January 2022


Bishop Franco Mulakkal; A victim of faction feud in the Church and group fights of nuns? Read why Sessions Court acquitted the Bishop in nun rape case

 While hearing a case which had lead nation to one of the most controversial outbreak and had lifted the veil to showcase the alleged atrocities and harassment behind the four walls of the Church, Gopakumar G., Addl. Sessions Judge held that what seem to be a disturbing case of sexual violence by a Bishop, intoxicated with power, authority and position was nothing but a faction feud in the Church and the victim was a mere scapegoat in the hands of priests.

Read full report here…


Consumer cannot be forced to pay “service charge” in a restaurant: Consumer Forum finds conduct of restaurant contrary to principles of Consumer Protection Act

While holding against the service charge, charged by a restaurant, Consumer Forum directed for return of the amount charged as “service charge” along with compensation.

Read full report here…


Did Ola abuse its dominant position? Read to know

 NCLAT held that Ola’s below-cost pricing was not predatory pricing with a view to dislodging any competitor from the market but towards establishing itself as an effective and reliable brand in the market and also opening up a latent market to its advantage.

Read full report here…


Son ousted benighted widowed mother, deprived her right to “live a normal life” apart from maintaining and supporting her livelihood

G.S. Kulkarni, J., while addressing another unfortunate case concerning a mother who was ousted from the tenement she owned by her own son expressed that,

“This appears to be another clear case where the petitioner(son) has no other intention but to enjoy the tenement exclusively, ousting the roof over his mother’s head, taking advantage of her incapacity at such an old age.”

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Husband’s company can have ‘Virat Kohli’ as a brand ambassador, but cannot provide maintenance to wife: Man tried appearing as a pauper? Saket Courts adjudicates

 While addressing a case wherein the maintenance was sought by wife, Saket Courts held that,

“It cannot be believed that a person who was capable of supporting a family by getting married, would all of a sudden become devoid of all sources of income.”

Read full report here…


‘On Judgement Day, God shall admonish petitioner for committing un-Christian act’: Read weather Madras HC holds Catholic Priest prima facie accountable under S. 295A IPC for using ‘Bharat Mata’ and ‘Bhuma Devi’ in offensive manner

 “Bhuma Devi is considered as a Goddess by all believing Hindus. I use the expression “believing” because, even materialists, rationalists and non-believers also can be counted as Hindus. I may add tongue-in-cheek that even the great iconoclast and rationalist Periyar did not cease to be a Hindu. Bharat Mata evokes a deeply emotional veneration in a very large number of Hindus. She is often portrayed carrying the national flag and riding a lion. She is to many Hindus a Goddess in her own right.”

Read full report here…


Can merely disowning bank accounts exempt assessee from paying tax? Read why ITAT approved addition of Rs 12.81 Crores under S.68 of Income Tax Act

Stating that, “Urgent needs invite urgent action”, ITAT while addressing a very significant matter wherein assessee did not disclose the two bank accounts operated by him to the Income Tax Department, expressed that,

“Merely disowning the bank accounts by the assessee does not lead to the conclusion that the accounts are not maintained by him when there is a direct evidence contrary to the contention of the assessee.”

Read full report here…


Provision of Personal Hearing would defeat the purpose of Faceless Assessment Scheme? Del HC decides

The Division Bench of Manmohan and Navin Chawla, JJ., while focusing on the principles of natural justice and right to personal hearing observed that,

Faceless Assessment Scheme does not mean no personal hearing.

An assessee has a vested right to personal hearing and the same has to be given, if an assessee asks for it. 

Read full report here…


SPOTIFY v. POTIFY | Can the mark POTIFY conjure up mark SPOTIFY? Here’s detailed analysis of US Patent and Trademark Office decision in trademark clash

United States Patent and Trademark Office decided whether SPOTIFY is entitled against dilution by blurring under 15 U.S.C Section 1125(c).

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53-year-old man molested a 9-year-old minor boy by pressing his private parts: Court sentences man under POCSO Act

Jayakrishnan, Special Judge addressed a case wherein a minor boy aged 9 years old was subjected cruelly by a 53-year-old man who squeezed the boy’s private part causing him pain.

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Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Appellate Tribunal (NCLAT):  The Coram of Justice Jarat Kumar Jain (Judicial Member) and Dr Alok Srivastava (Technical Member) held that Ola’s below-cost pricing was not predatory pricing with a view to dislodging any competitor from the market but towards establishing itself as an effective and reliable brand in the market and also opening up a latent market to its advantage.

Two appeals filed by appellant Meru Travel Solutions (P) Ltd. and Fast Track Call Cab (P) Ltd. assailed the common order passed by the Competition Commission of India under Section 26(6) of the Competition Act, 2002.

Commission decided that on the basis of information submitted by Fast Track and Meru and analysis of DG’s investigation report, the dominant position of Ola in the relevant market and abuse of its dominant position was not established and Ola had not been found to have anti-competitive agreements with drivers.

By the present decision, both the appeals will be disposed off.

Analysis and Discussion

Technology | Ola v. Other Radio Taxis

Tribunal noted that before the advent of technology-leveraged, network-based aggregator models, taxi services such as Meru, Fast Track, Easy Cab, Taxi For Sure etc. also leveraged technology to pride ease of booking and taxi ride, yet Ola’s model differed from them in many ways, particularly its use of the smartphone-based application which could be used with remarkable ease by the riders and provide taxi services anywhere in the area within minutes of ‘hailing’ through the mobile phone.

Hence, it could not be said that Ola employed technology in a much more effective and enabling fashion to provide services which previous radio taxi operators were not able to.

Market Share

Ola market share is seen to increase from 5-6% in 2012-13 to 59-60% in 2014-15 and to 61% in 2015-16. Thus, there was a significant rising trend noted upto January 2015, whereafter Ola market share had been plateauing or witnessing a gradual decline.

Though the active fleet size increased but in Tribunal’s opinion merely the size of the fleet does not decide the dominant position of a particular radio taxi service provider.

“We note that the technological edge that the platform crested by Ola which provide ease of taxi bookings, rider security, payments, drivers welfare made many riders comfortable with the network of Ola. The customer incentives worked in conjunction with these facilities and conveniences to attract riders to Ola and a certain brand image was created and reinforced over a period of time.”

Further, another highlighting factor noted was that Ola was itself facing competition in the relevant market from established players such as Meru and Fast Track and later from Uber while it was trying to establish its brand.

Below Cost Pricing | Predatory pricing by Ola?

In Tribunal’s opinion, the strategy adopted by Ola was in view of the market conditions, helped by a heavy infusion of foreign funding. Hence, there was no below-cost pricing by Ola for any sustained period of time which could be labelled as predatory pricing and abuse of its dominant position in the market.

Coram also agreed with the finding of DG that the below-cost pricing adopted from May-June 2014 onwards could be treated as the variable cost which, as argued by Senior Counsel of Respondent Ola, was the expenditure that Ola undertook to establish its brand in the market and increase its market share.

It was also noted that Uber also adopted an almost similar network approach for the provision of radio taxi, hence Tribunal was inclined to agree with Ola’s arguments that Uber was a significant competitor in the relevant market and Ola was responding to pricing actions of Uber while trying to establish itself in the Bengaluru market of radio taxi services.

Tribunal found that the situation in the present matter was akin to that in the matter CCI v. Fast Way Transmission (P) Ltd., (2018) 4 SCC 316, wherein the Supreme Court held that when an enterprise enjoys a dominant position in the relevant market, it is enabled to operate independently of competitive forces or affect its competitors or consumers or that relevant market in its favour.

“We do not think that Ola could operate independently of other competitors in the relevant market, and hence it did not enjoy a dominant position in the market.”

Conclusion

Stating that Ola started from a low market share of about 20%, Tribunal held that it cannot agree that Ola was at that initial time in a dominant position and was trying to push out competitors from the market by employing below-cost, predatory pricing.  An increase in its market share over a period of time, was due to a combination of factors, of which below-cost pricing was one.

Another significant factor, with regard to Ola’s agreements with its drivers, Tribunal noted that the agreements cover many aspects, which concern welfare measures for drivers and helping them source credit for buying vehicles. The incentives provided to drivers are dynamic and not constant in time. The drivers have the option to shift to other networks depending on their requirements and convenience.

Hence the driver’s agreement that Ola has with drivers with entirely optional and does not in any way bind the drivers to Ola’s network in any way.

Therefore, Tribunal did not find the driver’s agreements anti-competitive in violation of Section 3 of the Act.

Ola is working on generating demand through customer discounts and then bringing in more drivers to cater to the increased demand. Ola tries to create a win- win for the riders and drivers, and of course to its enterprise.

Lastly, Tribunal held that the Orders of CCI do not require any interference and therefore the appeals were dismissed. [Meru Travels Solution (P) Ltd. v. Competition Commission of India, 2022 SCC OnLine NCLAT 37, decided on 7-1-2022]


Advocates before the Tribunal:

For Appellant:

Ms. Sonal Jain, Mr. Udayan Jain, Mr. Abir Roy, Mr. Ishkaran Singh, Ms. Kajal Sharma and Ms. Riya Dhingra, Mr. Vivek Pandey, Mr. Raj Surana, Mr. Ishaan Chakrabarti, Advocates.

For Respondents:

Ms. Shama Nargis, Deputy Director, CCI.

Mr. Ajay Kumar Tandon for R-1, CCI. Ms. Purnima Singh, Ms. Neha Bhardwaj, Ms. Shivani Malik, Ms. Astha Baderiya, Advocate for R-1.

Mr. Rajshekhar Rao, Sr. Advocate with Ms. Nisha Kaur Uberoi, Mr. Gautam Chawla, Mr. Raghav Kacker, Ms. Sonal Sarda and Mr. Samriddha Gooptu, Ms. Sakshi Agarwal, Mr. Ishan Arora, Mr. Madhav Kapoor, Advocates for R-2.

Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): Coram of Ashok Kumar Gupta (Chairperson) and Sangeeta Verma, Bhagwant Singh Bishnoi (Members) directs the investigation in view of an alleged violation of provisions of the Competition Act.

The informant had filed the present information under Section 19(1)(a) of the Competition Act, 2002 against Apple Inc. (OP-1) and Apple India Private Limited (AIPL) alleging contravention of various provisions of Section 4 of the Act.

Informant alleged that Apple uses a barrage of anti-competitive restraints and abuse of dominant practices in markets for distribution of applications (‘apps’) to users of smart mobile phones and tablets, and processing of consumers’ payments for digital content used within iOS mobile apps (‘in-app content’).

Further, it was added that Apple imposes unreasonable and unlawful restraints on app developers from reaching users of its mobile devices unless they go through the ‘App Store’ which is stated to be controlled by Apple. Adding to this, Apple required app developers who wish to sell digital in-app content to their consumers to use a single payment processing option offered by Apple, carrying a 30% commission.

The 30% commission may also amount to a form of ‘margin squeeze’ in breach of the provisions of Section 4 of the Act.

In contrast to the above position, app developers could make their products available to users of an Apple personal computer in an open market, through a variety of stores or even through direct downloads from a developer’s website, with a variety of payment options and competitive processing fees that average 2-5%.

In the informant’s view, the above-stated amounted to abuse of its dominant position on the part of Apple.

Apple’s marketing restrictions makes it difficult for multi-platform apps to inform their users of the ability to make out- of-app purchases, and since Apple has a monopoly over the distribution of iOS apps, app developers have no choice but to assent to this anti-competitive tie-in- arrangement and such conduct on part of OPs is in violation of the provisions of Section 4(2)(d) and Section 4(2)(e) of the Act.

Mandating the use of IAP limits the ability of the app developers to offer payment processing solutions of their choice to the users for app purchases as well as IAPs and amounts to imposition of unfair terms and condition in the purchase or sale of goods or services and moreover, it amounts to denial of market access for the competing payment gateway in violation of the provisions of Section 4(2)(c) of the Act.

Elaborating further, Apple expressly conditions the use of its App Store on the use of its In-App Purchase to the exclusion of alternative solutions in a per se unlawful tying arrangement.

Analysis, Law and Decision

While analysing the matter, Coram firstly noted that Apple’s ecosystem is tightly knit and vertically and exclusively integrated throughout the value chain wherein it offers apps, app store as well as smart devices.

Some consumers may have preference for closed ecosystem like Apple and others may have a preference for open ecosystems like that of Google.

 Apple’s proprietary in-app purchase system (IAP)

Apple prohibits app developers to include a button/link in their apps which take/steer the user to third party payment processing solution other than Apple’s IAP. While the App Store policies of Apple allows users to consume content such as music, e-books, etc. purchased elsewhere (e.g., on the website of the app developer) also in the app, its rules restrict the ability of app developers to inform users about other purchasing options through a notification in the app itself, which might be cheaper. This would result in higher price for the users of such apps.

Commission found that the lack of competitive constraint in the distribution of mobile apps affects the terms of which Apple provides access to its App Store including the commission rates and terms that thwart certain app developers from using other in-app payment systems.

Coram prima facie opined that mandatory use of Apple’s IAP for paid apps & in-app purchases restrict the choice available to the app developers to select a payment processing system of their choice especially considering when it charges a commission of up to 30% for app purchases and in-app purchases.

Market power being enjoyed by Apple due to its grip over iOS ecosystem resulted in ‘allegedly’ high commission fee of up to 30%.

Commission also observed that the intermediation by Apple between the app developer and the app user for payment-processing purposes, would also result in leveraging on the part of Apple as it is using its dominant position in the app store market to enter/protect its downstream market of various verticals in violation of Section 4(2)(e) of the Act.

The app developers have to agree to the usage of Apple’s IAP payment processing service, if they want to distribute their apps to the iOS users through Apple’s App Store. Apple conditions the provision of app distribution services on the app developer accepting supplementary obligations which by their nature or according to commercial usage, have no connection with the subject of the contract for the provision of distribution services, which results in violation of Section 4(2)(d) of the Act.

The above conduct, prima facie results in leveraging by Apple of its dominant position in App Store market to enter/protect its market for in-app purchase payment processing market, in violation of Section 4(2)(e) of the Act.

Another significant point noted by Commission was that App Store is the only channel for app developers to distribute their apps to iOS consumers which are pre-installed on every iPhone and iPad. Further, third party app stores are not allowed to be listed on Apple’s App Store.

Therefore, the above conduct prima facie results in denial of market access for the potential app distributors/app store developers in violation of Section 4(2)(c) of the Act. The said also results in limiting/restricting the technical or scientific development of the services related to the app store for iOS, due to reduced pressure of Apple to continuously innovate and improve its own app store, in violation of Section 4(2)(b) of the Act.

Conclusion

Coram prima facie opined that Apple violated the provisions of Section 4(2)(a), 4(2)(b), 4(2)(d) and 4(2)(e) of the Act, and hence warranted detailed investigation.

The Commission directed the Director-General to cause an investigation to be made into the matter under the provisions of Section 26(1) of the Act also directed the DG to complete the investigation and submit the said report. [Together We Fight Society v. Apple Inc., 2021 SCC OnLine CCI 62, decided on 31-12-2021]


Additional Read:

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Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): CCI received information from 4 chess players who were subjected to disciplinary action by All India Chess Federation (AICF) for participation in a chess event not authorised by it. The case concerned several stipulations of AICF on chess players, organisation of chess tournaments, discretionary nomination of players, etc.

After a detailed investigation by the Director General, CCI conducted further inquiry in the matter and found AICF to enjoy dominant position in the markets for organization of professional chess tournaments/events in India and services of chess players in India. In its order under Section 27 of the Act, CCI observed that AICF’s restriction on chess players to participate in unauthorised events and attendant punitive consequences restricted the movement of chess players and placed them and potential organisers of chess tournaments in a disproportional disadvantage. Hence, such stipulation was held as an unreasonable restriction on chess players and denial of market access to organisers of chess events/tournaments, in contravention of the provisions of Section 4(1) read with Section 4(2)(b)(1) and Section 4(2)(c) of the Act. The restrictions on chess players was further held to be in the nature of exclusive distribution and refusal to deal, in contravention of Section 3(4)(c) and Section 3(4)(d) of the Act.

Accordingly, CCI directed that:

(a) AICF shall cease and desist from the conducts that is found anti-competitive;

(b) AICF shall lay down the process and parameters governing authorisation/sanctioning of chess tournaments. In doing so, AICF will ensure that they are necessary to serve the interest of the sport changes and shall be applied in a fair, transparent and equitable manner. Besides, AICF shall take all possible measure(s) to ensure that competition is not impeded while preserving the objective of development of chess in the country;

(c) AICF shall establish prejudice caused by a chess player before taking any disciplinary action against him. Needless to say, the disciplinary actions taken shall be proportional, fair and transparent. The disciplinary actions against the Informant and other similar players shall be reviewed by AICF on these lines;

(d) AICF shall file a report to the Commission on the compliance of the aforesaid directions from (a) to (c) within a period of 60 days from the receipt of this order.

A penalty of Rs 6.92 lakhs was imposed on AICF for indulging in anti-competitive conduct. [Hemant Sharma v. All India Chess Federation (AICF),  2018 SCC OnLine CCI 53, order dated 12-7-2018]

Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): The case primarily concerned access to upstream LPG terminalling infrastructure at Vishakhapatnam Port, which comprises several components viz. unloading arms at the jetty, blender, heat exchanger and cavern (storage facility). This infrastructure, being operated by SALPG, is used for handling imports of propane and butane and their blending into LPG.

East India Petroleum Pvt. Ltd. (EIPL) filed an information with CCI under Section 19(1)(a) of the Competition Act, 2002 alleging that while allowing it to use the blender, SALPG has been insisting on the mandatory use of cavern. This resulted in paying significant charges to SALPG. The OMCs were thus not finding the LPG terminalling services offered by EIPL economically viable and were constrained to avail the terminalling services offered by SALPG only. To address this, EIPL first proposed to use the blender of SALPG and thereafter, take the output directly to the cross-country pipeline, bypassing the cavern. Since this was not agreeable to SALPG which allowed bypass of the cavern to the extent of 25 percent only,  EIPL proposed to install its own blender and sought a tap-out and tap-in from the propane and butane lines to discharge blended LPG, bypassing the cavern. This was also not acceptable to SALPG. Another proposal seeking tap-out from the propane and butane lines at the jetty to EIPL own blender and construction of its own infrastructure between the blender and storage facility was also refused by SALPG. All this was alleged to be an abuse of dominant position by SALPG.

After a detailed investigation by the Director-General, CCI conducted a further inquiry into the matter and found SALPG enjoys a dominant position in the market for upstream terminalling services at Visakhapatnam Port. SALPG sought to justify its conduct on the grounds of safety as well as efficiency and business justification. However, after a detailed examination of claims made and hearing the parties, the Commission held the impugned conduct of SALPG to be in contravention of the provisions of Section 4 of the Act. Accordingly, CCI directed that:

  • (a) SALPG shall not insist mandatory use of its cavern and shall allow bypass of cavern for both pre-mixed and blended LPG, without any restrictions; and/or
  • (b) SALPG shall allow access to its competitors, potential as well as existing, to the terminalling infrastructure at Visakhapatnam Port, subject to compliance with all safety integrity and other requirements under applicable laws and regulations framed thereunder. Such an access should avoid additional cost burden on SALPG, and the entity seeking access shall bear the cost, if any, towards necessary changes to the existing infrastructure. Under this option also, SALPG shall not insist on the mandatory use of cavern and it shall allow bypass of the cavern, without any restriction. SALPG shall extend full cooperation for the study/audit undertaken by VPT in relation to the remedies ordered herein. Needless to say, SALPG shall not do anything raising rival’s cost.

A penalty of INR 19.07 crore has also been imposed on SALPG for indulging into the anticompetitive conduct. [East India Petroleum Pvt. Ltd. (EIPL) v. South Asia LPG Company Pvt. Ltd. (SALPG), Case No. 76/2011, order dated 11-07-2018]

Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India: In the order passed by a bench comprising of Mr. Devender Kumar Sikri (Chairperson), Mr. S.L. Bunker (Member), Mr. Sudhir Mital (Member), Mr. Augustine Peter (Member), Mr. U.C. Nahta (Member), Mr. G.P. Mittal (Member), addressed two cases i.e. Case No. 07 of 2012 and Case No. 30 of 2012, both filed under Section 19(1) (a) of the Competition Act, 2002 (the Act), eventually clubbed together having similar issues and a common respondents being Google LLC, Google India Private Limited and Google Ireland Limited (GIL).
The brief facts being that it was averred by the informants, Matrimony.com and Consumer Unity & Trust Society, that Google has been running its core business of ‘Search and Advertising’, in a discriminatory manner, causing harm to advertisers and indirectly to the consumers and creates an uneven playing field by favoring its services and partners, through manually manipulating its search results to the advantage of its vertical partners and it was also further posited that in order to promote Google’s own vertical search sites, it started mixing many of its vertical search results with the organic search results, thus asserting and abusing its dominant and monopolistic position in the market, in contravention with the provisions of Section 4 of the Act.
Based on the investigation report and various contentions put forward, the Competition Commission observed and affirmed that Google has a dominant position in the relevant Indian market, despite the presence and standing of strong competitors like Yahoo! and Microsoft Bing. It was further, observed that Specialized Search Services like Google News, Google Maps, Google Flights etc., has harmed its competitors and also making the search results ‘biased’, ‘limited’ and not based on the mechanism of ‘Universal Results and Common units’ affects the competition.
The Commission found the internet giant to be abusing its dominance in Online web search and Online search advertising markets by imposing unfair conditions upon Trademark owners whose trademarks are being allowed to be bid as keywords (as third party) in online search advertising, blazoning its conduct to be anti-competitive in terms of Section 4(2)(a)(i), 4(2)(b)(ii), 4(2)(c) and 4(2)(e) of the Act.
The CCI comprising of Mr. Sikri, Mr. Bunker, Mr. Peter and Mr. Nahta, held that, in respect of the Flight Commercial Unit, Google is to display a disclaimer in the commercial flight unit box indicating that the ‘search flight’ link placed at the bottom leads to the Google’s Flight page, and not the results aggregated by any other third party service provider so that the users are not misled. However, CCI also observed that it did not find any contravention with respect to Google’s specialised search design, AdWords and online distribution agreements.
The Commission while referring to the case Excel Crop Care Limited v. Competition Commission of India, (2017) 8 SCC 47, imposed a penalty of Rs 135.86 crore at the rate of 5% of their average total revenue generated from India operations for the financial years 2013-2015, for infringing anti-trust conduct.
While giving a dissenting opinion, Mr. Sudhir Mital and Mr. G.P. Mittal, disagreed with the Majoritys’ view in respect of the alleged contravention of Section 4(2)(a)(i) of the Act by Google in respect of Flights Unit, and stated that the remedy provided to upload a disclaimer for the same, will not eliminate the harm caused or likely to be caused to the third party websites and that more necessary steps should have been taken to empirically examine as to how the high visibility of flight units affected third party travel verticals. Also, further dissenting to the Majoritys’ conclusion regarding Direct (negotiated) Search Intermediation Agreements and historic use of Fixed Position for Universal Results, demurred that the system were not sufficiently advanced to conduct a relevance comparison for all positions on the result page which made Google to fix their positions on Search Engine Result Page (SERP). [Matrimony.com Limited v. Google LLC,2018 SCC OnLine CCI 1, dated 31.01.2018 and Dissent Note dated 08-02-2018]

Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): CCI has dismissed allegations of abuse of dominant position against Nissan Motor India Pvt. Ltd. in terms of after-sales service while observing that the issue raised in the information pertained to alleged deficiency in services and no case of contravention of the provisions of Section 4 of the Competition Act was made out against Nissan Motor India Pvt. Ltd. The information before the Commission was filed against Sterling Vehicle Sales Pvt. Ltd. (an authorised dealer of Nissan Motor) and Nissan Motor India Pvt. Ltd. alleging contravention of the provisions of Section 4 of the Act. Earlier, the services and maintenance of the Nissan car of the informant were done from the service centre (Sterling Vehicle Sales Pvt. Ltd.), but many defects like unusual sound, faulty engine etc. emerged after the servicing. The Informant alleged that either the car has manufacturing defect or was damaged by service centre’s carelessness and negligent handling. Before CIC, informant prayed the Commission to issue a cease and desist order against the Opposite Parties restraining them from indulging in the alleged unfair and erroneous trade practices and direct them to exchange the defective car with a brand new car of the same model. The Informant also prayed that the Opposite Parties be directed to pay compensation to the tune of Rs. 2 lakhs towards the mental harassment and inconvenience caused. After hearing the parties, CIC observed that for making out a case for contravention of the provisions of Section 4 of the Act, the dominant enterprise has to be shown to have abused such position in the relevant market but the informant has not indicated any relevant market where any of the Opposite Parties is shown to be dominant. While observing that, “the grievances made by the Informant essentially pertain to alleged deficiency in services and none of the abusive instances as alleged in the information comes within the purview of Section 4(2) of the Act,” CIC closed the matter. [Jolly Diclause v. Sterling Vehicle Sales Pvt. Ltd., [2016] CCI 25, decided on June 7, 2016]

Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): An information alleging abuse of dominant position by Prateek Realtors India Pvt. Ltd. (Prateek Realtors) with regard to sale of an apartment in Noida, Uttar Pradesh, was dismissed by CIC on the ground that Prateek Realtors was not a dominant player in the market for provision of services for the development and sale of residential unit in Noida and Greater Noida. Earlier, Prateek Realtors developed a residential housing complex, namely, ‘Prateek Laurel’ on the plot in Noida and offered residential apartments.

The Informant booked a finished residential apartment in the said project, after payment of the booking amount and signed a residential apartment ‘allotment letter’. It was alleged in the information that the terms and conditions of the allotment letter were unilaterally prepared by Prateek Realtors India Pvt. Ltd. without consulting the Informant and also these terms and conditions were not shown to the Informant at the time of booking. It was further alleged that Prateek Realtors has inserted such terms and conditions in the allotment letter which made exit impossible for the Informant. It was also stated that since Prateek Realtors had already received a considerable amount, it imposed highly abusive conditions through the allotment letter on the Informant and also compelled him to sign one-sided agreements relating to maintenance, car parking and electricity supply.

After perusal of material on record and hearing both the parties, CCI noted, “The Commission observes that as per the information available in the public domain there are many other major developers like Amrapali, Supertech, Unitech, 3C Company, Lotus Greens, Saha Infratech, ATS Greens, Jaypee Infratech, Eldeco etc. which are competing with OP 1 in the relevant market with projects of varying magnitudes and having comparable sizes and resources. The presence of so many players in the relevant market acts as a competitive constraint for OP 1 in enjoying a position of strength which would enable it to operate independently of market forces in the relevant market….Therefore, in view of the Commission, OP 1 cannot be considered as a dominant player in the relevant market.” While observing that, “no case of contravention of the provisions of Section 4 of the Act (which pertains to abuse of dominant position) is made out against OP 1 (Prateek Realtors),” the Commission closed the matter. [A.S.Sharma v. Prateek Realtors India Pvt. Ltd., [2016] CCI 21, decided on 01.06.2016]