COMPETITION ACT, 2002

Relevant Topic

Relevant Section

Key Issues

Summary Judgment

MANU Citation

Prohibition of abuse of dominant position.

Section 4: The unfair or discriminatory condition and price in purchase or sale of goods or service shall not include such discriminatory condition or price which may be adopted to meet the competition.

Is this process legal under the Competition Act, 2002?

Facts: The informant is a body corporate and a wholly owned subsidiary of UP Stock Exchange Limited (UPSE), a Regional Stock Exchange (RSE). The opposite party is a national level stock exchange. As per informant since the operationalisation of the opposite party in 1994, the turnover of the RSEs (including UPSE) started eroding which adversely affected their operations. In 1999, the Securities and Exchange Board of India (SEBI) envisaged a route to rescue the RSEs. The suggested route required the RSEs to form a subsidiary company. This subsidiary was permitted to acquire membership of stock exchanges such as NSE (the opposite party), BSE (Bombay Stock Exchange) etc. and the members of the RSEs could obtain sub-brokership of the subsidiary company and could trade there. UPSE accordingly formed a subsidiary (the informant) in the year 2000 and obtained membership of BSE. In response to the constant demand from its members, the informant obtained membership of NSE in 2009 by paying a high deposit (Rs. 2.71 crores) to enable the members of UPSE to trade at the opposite party stock exchange as sub brokers.

Held: The definition of relevant market proposed by the informant viz 'securities market in India' seems to be correct.  Unlike the Monopolies and Restrictive Trade Practices Act, 1969, dominance in itself is not prohibited by the Competition Act, 2002. It is only abuse of dominance which the Act intends to proscribe. Undoubtedly, the opposite party treated the RSE members (including informant) differently from other corporate members. However, differential treatment in itself cannot always be discriminatory. The notion of equality enshrined under the Indian Constitution recognizes reasonable classification and conceives different treatment may be accorded to different classes. In view of the foregoing, it appears that the conditions imposed by opposite party on RSE members (including informant) were necessary for investors' protection. Transactions between opposite party and ordinary corporate members on one hand, and between opposite party and RSE Members on the other were therefore not comparable. The opposite party's conduct therefore does not seem to be in contravention of the provisions of the Act.

UPSE Securities Limited vs. National Stock Exchange of India Limited (19.02.2013 - CCI): MANU/CO/0016/2013

Abuse of dominant position; Anti-competetive agreement; Relevant market.

Section 4(2): The unfair or discriminatory condition and price in purchase or sale of goods or service shall not include such discriminatory condition or price which may be adopted to meet the competition.

Section 3: No enterprise or association of enterprises or person or association of persons shall enter into any agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services, which causes or is likely to cause an appreciable adverse effect on competition within India.

Section 2(r): "relevant market" means the market as determined by the Commission with reference to the relevant product  or the relevant geographic market or with reference to both the markets.

Section 2(s): "relevant geographic market" means a market comprising the area in which the conditions of competition are distinctly homogenous and can be distinguished from the conditions prevailing in the neighbouring areas.

Section 2(t): "relevant product market" means a market comprising all those products or services which are regarded as interchangeable.

a. Whether there is any abuse of dominant position in relevant market by Opposite Parties?

b. Whether Opposite Parties have violated provisions of Section 3 of Act as has been alleged?

c. Whether relevant market has been rightly determined in instant case?

Facts: The present information has been filed alleging anti-competitive practices on part of the OPs whereby the genuine spare parts of automobiles manufactured by OP-1, OP-2 and OP-3, respectively, are not made freely available in the open market. It has also been alleged that even the technological information, diagnostic tools and software programs required to maintain, service and repair the technologically advanced automobiles manufactured by each of the aforesaid OPs were not freely available to the independent repair workshops. The OPs and their respective dealers, as a matter of policy, refuse to supply genuine spare parts and technological equipment for providing maintenance and repair services in the open market and in the hands of the independent repairers. By restricting the sale and supply of the genuine spare parts, diagnostic tools/equipment, technical information required to maintain, service and repair the automobiles manufactured by the respective OPs, have effectively created a monopoly over the supply of such genuine spare parts and repair/maintenance services and, consequently, have indirectly determined the prices of the spare parts and the repair and maintenance services. Additionally, such restrictive practice carried out by the OPs in conjunction with their respective authorized dealers, amounts to denial of market access to independent repair workshops.

Held: (a) Independent service providers were customers of OEMs in aftermarket and further competed with OEMs in repairs and maintenance service aftermarket. Such practices amount to denial of market access by OEMs under Section 4(2)(c) of Act. Further, such denial of market access was specifically aimed at adopting a course of conduct with a view to exclude a competitor from market by means other than legitimate competition and such exclusionary abusive conduct allowed OEMs to further strengthen their dominant position and abuse it.

(b) Consequently since exception under Section 3(5)(i) of Act was not applicable to agreements between OEMs and OESs, contravention found by Commission under Sections 3(4)(c) & (d) read with Section 3(1) of Act stood established. Further more as Commission noted that both in mature and developing competition law regimes of world, refusal to access branded or alternate spare parts and technical manuals/repair tools, necessary to repair sophisticated consumer durable products, such as automobiles, was frowned upon, since such practices restricted consumer choice besides foreclosing market for repairs/maintenance contracts by independent repairers. Practices of OEMs were found to restrict consumer choice and foreclose after markets and were held to be anti-competitive in nature.

(c) An owner of any brand of automobile, manufactured by an OEM, can get his car serviced or repaired from repair shops across territory of India. Whether such repair shops are authorized dealer outlets or those run by independent repairers conditions of competition for sale of spare parts and after-sale repair and maintenance services are homogeneous across territory of India and therefore relevant geographic market for present case consists of entire territory of India. Therefore, this Commission was of view that relevant geographic market, as defined under Section 2(s) of Act, consisted of entire territory of India. Therefore Commission was of opinion that there existed two separate relevant markets; one for manufacture and sale of cars and other for sale of spare parts and repair services in respect of automobile market in entire territory of India.

Shamsher Kataria Informant vs. Honda Siel Cars India Ltd. (25.08.2014 - CCI): MANU/CO/0066/2014

Determination of dominance in the relavant market.

Section 4: The unfair or discriminatory condition and price in purchase or sale of goods or service shall not include such discriminatory condition or price which may be adopted to meet the competition.

Whether CIL and its subsidiaries are dominant in said relevant market?

Facts: MCL instead of signing/executing coal supply agreements/fuel supply agreements as required under the new Coal Distribution Policy, 2007 (NCDP) executed/signed MoUs which did not cover all aspects of supply and issues. Aspects like quality control, grade failure, short supply, joint sampling etc., had not been detailed/enumerated in clear terms and conditions. Further, the Informant received a model Coal Supply Agreement (CSA) proposed to be executed between it and MCL. The clauses of CSA demonstrated that the conditions of supply as proposed were onerous and, as such, negated the purpose of securing firm supply of coal on the basis of a contractual arrangement in terms of NCDP. The proposed CSA contained clauses which were burdensome and capable of causing implementation issues imposing additional cost on MAHAGENCO leading to higher cost of electricity which would be eventually passed on to consumers. While the draft CSA was under negotiation, MCL sent a draft MoU to MAHAGENCO which had to be executed simultaneously at the time of execution of CSA. The draft MoU attempted to further dilute the obligations of MCL to supply coal under the proposed CSA.

Held: In view of statutory and policy scheme, coal companies have acquired a dominant position in relation to production and supply of coal. Dominant position of CIL is acquired as a result of policy of Government of India by creating a public sector undertaking in name of CIL and vesting ownership of private mines in it. Merely being a Public Sector Undertaking and mention of social objectives in memorandum cannot negate the market power exercised by CIL in view of commercial freedom enjoyed by it. Commission is of considered opinion that, CIL through its subsidiaries operates independently of market forces and enjoys dominance in relevant market.

Maharashtra State Power Generation Company Ltd. and Ors. vs. Mahanadi Coalfields Ltd. and Ors. (24.03.2017 - CCI): MANU/CO/0028/2017

Price Fixing/ Bid-rigging.

Section 3(3)d: Any agreement entered into between enterprises engaged in identical or similar trade of goods or provision of services, which directly or indirectly results in bid rigging or collusive bidding, shall be presumed to have an appreciable adverse effect on competition.

Did the opposite parties enter into any agreement or indulge in any cartel like conduct that was in contravention of Section 3 of the Act?

Facts: UPDF is an association of film producers and distributors which includes both corporate houses and individuals independent film producers and distributors. The AMPTPP and FTPGI are the members of UPDF. Further, UPDF, AMPTPP and FTPGI produce and distribute almost 100% of the Hindi Films produced/ supplied/ distributed in India and thereby exercise almost complete control over the Indian Film Industry. UPDF had instructed all producers and distributors including those who are not the members of UPDF, not to release any new film to the members of the informant for the purposes of exhibition at the multiplexes operated by the members of the informant. because of the conflict between the producers/distributors and the members of the informant on revenue sharing ratio.

Held: the contravention of the provisions of Section 3(3) of the Act has been established in as much as the producers and distributors behaved in a cartel-like manner. They came together on a common platform, by raising the bogey of survival and indulged in concerted action after talking to each other openly under media glare and took joint decision not to supply films to the multiplex owners with a view to garner higher revenue for themselves. However, after the notification of the relevant provisions of the Act, there cannot be any doubt that it is the bound duty of the persons/enterprises to ensure that knowingly or unknowingly they do not infringe the provisions of the Act and to take necessary and concrete steps in order to maintain a competition compliance programme. The opposite parties are directed to refrain from indulging in such anti-competitive practices in future and are further directed to file an undertaking to this effect within one month from the date of receipt of the order. A penalty of rupees one lakh is also imposed on each of the 27 opposite parties. This penalty shall be paid by the opposite parties within one month from the date of receipt of the copy of this order.

FICCI Multiplex Association of India vs. United Producers/Distributors Forum and Ors. (25.05.2011 - CCI): MANU/CO/0018/2011

Regulation on combination.

Section 6(1): No person or enterprise shall enter into a combination which causes or is likely to cause an appreciable adverse effect on competition within the relevant market in India and such a combination shall be void.

Whether Tribunal was right in setting aside order passed by Competition Commission whereby penalty of Rupees One Crore was imposed on Respondents on ground of non-compliance of provisions contained in Section 6(2) of Act?

Facts: The TCIL is engaged in travel and travel related services. The TCISIL is also engaged in travel and travel related services and is a subsidiary of the TCIL and is also a registered corporate agent of Bajaj Allianz General Insurance Company Limited, which is engaged in the business of selling insurance to outbound travelers, as well as health insurance, motor insurance, personal accident insurance etc. SHRIL is engaged in the business of providing premium hotel services, vacation ownership services, normal hotel services like renting of rooms, restaurants, holiday activities etc. It also arranges meetings, incentives, conference and events for its corporate clients. The Board of Directors of the aforesaid three companies approved a Scheme for demerger/amalgamation. The said Scheme contemplated the following:

(a) Demerger: Resorts and timeshare business of SHRIL were to be transferred by way of demerger from SHRIL to TCISIL in lieu of which equity shares of TCIL would be issued to shareholders of SHRIL as per the ratio in the 'Scheme'; and

(b) Amalgamation: SHRIL with its residual business would be amalgamated into TCIL in lieu of equity shares to be issued to the shareholders of SHRIL as per the ratio in the Scheme. For the purpose of implementing the above transactions, the Respondents entered into a Merger Cooperation Agreement ) on the same day. On the very same day, by another resolution of the Board of Directors of the Respondents, the following transactions were approved and executed -

(i) Share Subscription Agreement (SSA): TCISIL was to subscribe 2,06,50,000 shares of SHRIL pursuant to a preferential allotment (amounting to 22.86% of SHRIL of equity share capital of SHRIL on fully diluted basis);

(ii) Share Purchase Agreement (SPA): TCISIL was to acquire 19.94% of equity share capital of SHRIL on the fully diluted basis from certain existing shareholders and promoters of SHRIL.

(iii) Open Offerby TCIL and TCISIL to purchase 26% of the equity share capital from public shareholders of SHRIL, in terms of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.

Held: Once a particular transaction or a series of transactions falls within purview of combination, it was obligatory to report same to Commission under Section 6 of Act. Section 6(1) prohibited combinations which cause or likely to cause an adverse effect on competition and such a combination shall be void. Section 6(2) of Act required that, advance notice had to be given of proposal to enter into a combination and that had to be given within 30 days of approval of proposal relating to merger or amalgamation, execution of any agreement or other document or acquisition referred to in Section 5(a) of Act. Section 6(2) made it clear that, no combination shall come into effect until 210 days had elapsed from the date on which notice had been given to Commission under Section 6(2) and Commission had passed orders under Section 30(1), whichever was earlier.

We find that in the facts and circumstances of the case, the order passed by the Commission was just and proper and in accordance with law, which the Tribunal set aside on wrong premises. Thus, the order of the Tribunal cannot be said to be legally sustainable. The nominal penalty has been imposed by the Commission of Rupees One crore only considering the facts and circumstances of the case and that there was a violation of the provision. Thus, we find no ground to interfere with the nominal penalty that has been imposed in the instant case.

Competition Commission of India vs. Thomas Cook (India) Ltd. and Ors. (17.04.2018 - SC): MANU/SC/0405/2018

Appreciable Adverse Effect on Competition

Section 3(3)(b) read with Section 3(1): No enterprise shall enter into any agreement which causes or is likely to cause an appreciable adverse effect on competition within India. Any agreement entered into between enterprises engaged in identical or similar trade of goods or provision of services, which limits or controls production, supply, markets, technical development, investment or provision of services, shall be presumed to have appreciable adverse effect on competition.

Section 19(3): The Commission shall determine the appreciable adverse effect on competition based on the factors that if there is creation of barriers to new entrants in the market, driving existing competitors out of the market, foreclosure of competition by hindering entry into the market, accrual of benefits to consumers, improvements in production or distribution of goods or provision of services, promotion of technical, scientific and economic development by means of production or distribution of goods or provision of services.

Whether the action of KFCC and other associations caused Appreciable Adverse Effect on Competition in the market?

Facts: The said film bodies/associations have indulged in various anticompetitive activities in violation of the provisions of sections 3 and 4 of the Act viz; asking the producers-distributors to compulsorily register their films before release, with them in territories under their control, forcing them to abide by their unfair and discriminatory rules, directing the members not to deal with the non-members, prescribing undue long holdback period for satellite, DTH and other rights in respect of exhibition of films and imposing bans, penalties and giving a call of boycott against those who violate the rules and regulations of the associations.

Held: It was felt that the acts and conduct of the associations established that they have caused restrictions on free and fair competition in the market. There was a foreclosure of competition in the areas under the control of KFCC, since non-Kannada films could not be released in all the cinemas but only in restricted theatres. Further, hold back of films from exhibition of films on other media for a period prescribed as on date, ensures that films could not be exploited on other media competing with the theatres leading to the loss to the producers-distributors. restrictions on non-Kannada films in areas under the control of KFCC also did not benefit the consumers since the consumers are deprived of watching movies of their choice. The aforesaid analysis of factors as mentioned in Section 19(3) established that the acts and conduct of the associations instead of bringing in pro-competitive effects caused AAEC in the market. In light of the foregoing, it was held that Karnataka Film Chamber of Commerce (KFCC), Northern India Motion Picture Association (NIMPA), Motion Picture Association (MPA), Central Circuit Cine Association (CCCA), Film Distributors Association, Kerala (FDA) and Telangana Telugu Film Distributors Association (TTFDA) had contravened the provisions of Section 3(3)(b) read with Section 3(1) of the Act and had also caused appreciable adverse effect on competition in India in terms of Section 19(3) of the Act. However, it was felt that in absence of existence of such a joint agreement among all these associations, the findings of DG did not hold good. The associations named were individually held in contravention of the provisions of Section 3(3)(b) read with Section 3(1) of the Act.

Eros International Media Limited vs. Central Circuit Cine Association, Indore, Film Distributors Association, Kerala, Northern India Motion Pictures Association and Motion Pictures Association (16.02.2012 - CCI): MANU/CO/0019/2012