30 March, 2017
On 7 March 2017, the Supreme Court of India (SC) upheld an appeal by the Competition Commission of India (CCI) against an order of the Competition Appellate Tribunal (COMPAT) in a case of alleged cartelisation by members of a film and television artists’ trade union in the state of West Bengal. This order of the SC (Order) is arguably the first of the apex court on substantive issues arising under the provisions relating to anti-competitive agreements under the Competition Act, 2002 (Competition Act).
The matter arose out of information filed by a distributor and telecaster of regional serials in Eastern India, including the state of West Bengal (Informant). The Informant alleged that he had been assigned the rights to dub and telecast the television serial ‘Mahabharat’ in Bengali and had entered into agreements to telecast it on two television channels. However, under opposition and pressure from two associations, namely the Eastern India Motion Picture Association (EIMPA) and the Committee of Artists and Technicians of West Bengal Film and Television Investors (Co-ordination Committee), one of the two channels decided to not proceed with the telecast.
The Co-ordination Committee is a joint platform comprising the Federation of Cine Technicians and Workers of Eastern India, and West Bengal Motion Pictures Artists Forum. Upon one channel deciding to not telecast the dubbed serial, the Informant decided to approach the CCI and filed an information alleging that the restrictive acts of EIMPA and the Co-ordination Committee were in violation of the provisions of the Competition Act.
The Director General (DG), upon investigation, found that the Co-ordination Committee and EIMPA restricted the telecast of the dubbed television serial in the market for ‘film and television industry in West Bengal’. The DG also found that the persons or association of persons who were the constituents of the Co-ordination Committee were active in this market and thus any joint action to restrict such telecast amounted to an anti-competitive agreement within the meaning of Section 3(3)(b) of the Competition Act.
In response to the DG’s report, the Co-ordination Committee argued that they were a trade union of artists and technicians of West Bengal and, as such, were not an ‘enterprise’. Accordingly, their acts were merely industrial actions protected under Article 19(1)(a) of the Constitution of India. The CCI agreed with the findings of the DG that, by their conduct, the Co-ordination Committee and EIMPA had restricted the telecast of the dubbed television serial. Further, while the CCI agreed that they were trade unions and thus not enterprises, it held that this only absolved them from adjudication under Section 4 of the Competition Act, which deals with unilateral conduct.
The CCI held that trade unions are not exempt under Section 3 and went on to hold that by restricting the telecast of the serial, the Co-ordination Committee and EIMPA has violated the provisions of Section 3(3)(b) of the Competition Act. This prohibits agreements between competing enterprises, which limits or controls production, supply, market, technical development, investment or provision of services.
On appeal, the COMPAT, agreeing with a dissenting minority order of the CCI, narrowed the relevant market to the market for ‘telecasting of dubbed serials on the television in West Bengal’. The COMPAT also agreed with the minority order in holding that the scope of Section 3(3)(b) covered only agreements between competitors which, inter alia, restricted the production and/or distribution of goods or services. In the present case, the members of the trade unions, being artists, technicians, etc, were not competitors in the market for ‘telecasting of dubbed serials on the television in West Bengal’ (which would ideally be direct to home/cable operators).
Further, since one of the two channels continued to telecast the serial in spite of the industrial action by the trade unions, there was no evidence to suggest that the industrial action in question actually limited or controlled the production, supply, markets, technical development and investment or provision of services. Accordingly, the COMPAT allowed the appeal and held that the Co-ordination Committee was not guilty of a contravention under Section 3(3)(b) of the Competition Act. No order was passed with respect to EIMPA since they chose not to challenge the CCI order.
The above order of the COMPAT was challenged before the SC. At the very outset, the SC widened the scope of the relevant market to include the entire film and television industry of West Bengal. The reasoning was that the cause for which the trade unions had called for industrial action did not restrict itself to the market for dubbed television serials in West Bengal but was with respect to the entire film and television industry of West Bengal. On the issue of trade unions, the SC opined that any entity engaging in an economic activity constitutes an enterprise within the meaning of Section 3 of the Competition Act.
In the present instance, the SC held that the Co-ordination Committee did not act as pure trade unionists. The constituent members of the Co-ordination Committee (or EIMPA for that matter) were engaged in the production, distribution and exhibition of films. Accordingly, the SC held that the acts of the Co-ordination Committee deprived consumers from exercising their choice and hindered competition in the market by barring dubbed television serials from exhibition on television channels in West Bengal, thus violating the provisions of Section 3(3)(b) of the Competition Act.
Key Takeaways
Typically, since any agreement between competitors under Section 3(3) of the Competition Act carries with it a presumption of appreciable adverse effect on competition (AAEC), there is no requirement to define a relevant market in such cases. Further, in previous cases such as Builders Association of India vs. Cement Manufacturers’ Association & Others, the CCI has held that there is no requirement under the provisions of Section 3 of the Competition Act (read with Section 19(3) thereof) to determine and construct a relevant market. Even in cases where a relevant market needs to be defined, for instance in cases pertaining to abuse of dominance under Section 4 of the Competition Act, a relevant market is to be defined keeping in mind the factors under Sections 19(6) and 19(7) of the Competition Act. The SC appears to have not only stressed the definition of a relevant market for an assessment under Section 3(3), but also widened the defining factors to include ‘effected markets’, a concept not explicitly present in the Competition Act.
Further, it has been long thought that unlike the United States and the European Union, where certain acts are per se antitrust violations, the presumption of AAEC under Section 3(3) was a rebuttable one. It was argued that the intention of the legislature in using the word ‘presumed’ rather than ‘deemed’ was that the presumption could, theoretically, be rebutted. A recent order of the COMPAT in National Insurance Company vs. Competition Commission of India laid down that contrary to this popular belief, the presumption under Section 3(3) was irrefutable and conclusive, hence making a violation of Section 3(3) a per se offence. This line of thought has been upheld by the SC in this Order. However, the SC then goes on to assess the effected market for the relevant conduct, which is not required for a per se offence.
Lastly, the Order has shed some light as to when industrial action by a trade union will amount to a violation of the provisions of the Competition Act. It appears that the actions of a legitimate trade union comprising individual workers may still enjoy the protection of Article 19 of the Constitution of India. However, where the trade union in question operates more like a trade association – in that their members are enterprises, or represent enterprises – any industrial actions such as boycotts may be adjudicated under the relevant provisions of the Competition Act.
For further information, please contact:
Anshuman Sakle, Partner, Cyril Amarchand Mangaldas
anshuman.sakle@cyrilshroff.com
