3 August, 2017
CCI dismissed the allegations of unfair and illegal ousting of digital cinema service providers by Pen India Ltd., Bound Script Motion Pictures Pvt. Ltd., UFO Moviez India Ltd. and Real Image Media Technologies Pvt. Ltd.5
K Sera Sera (‘ KSS’) filed an information against Pen India Ltd. (‘Pen India’), Bound Script Motion Pictures Pvt. Ltd. (‘Bound Script’), UFO Moviez India Ltd. (‘ UFO’) and Real Image Media Technologies Pvt. Ltd. (‘Real Image’) (collectively referred to as the ‘Opposite Parties’) before CCI, alleging contravention of Sections 3 and 4 of the Competition Act in relation to the release of the movie ‘Kahaani 2’.
KSS alleged that Pen India and Bound Script, being the producers and presenters of the movie, entered into anti-competitive agreements with UFO and Real Image to limit/control the release of Kahaani 2, thereby leading to unfair and illegal ousting of other digital cinema service providers in the market, including KSS. It was further alleged that each of the Opposite Parties had abused their dominant position in violation of Section 4 of the Competition Act.
The CCI noted that Pen India had been providing content to KSS earlier. However, in light of a recent allegation against KSS by Viacom 18 for piracy in relation to the movie ‘Force 2’, CCI found that it would have been counterintuitive for the producers of Kahaani 2 to provide the content of the said movie to KSS. The CCI held that ‘an objective business rationale to protect the commercial interest of Pen India and Bound Script cannot be overlooked in a proceeding under the Competition Act unless the same is shown to have exclusionary effects or is tainted with an anticompetitive objective’. The CCI viewed the refusal to exhibit movies through KSS’s digital service as a precautionary step to protect the copyright.
The CCI noted that no specific conduct was alleged to be abusive by KSS. The CCI dismissed the allegations against the Opposite Parties and held that “the very objective of competition law is to protect the interest of consumers and the process of competition. It is not concerned with the harm to the competitors unless that also leads to harm to the consumers.”
CCI dismissed allegations against the Director General, Bureau of Indian Standards or imposing unfair conditions6
Shri Prem Prakash (‘ SPP’) filed an information against the Director General, Bureau of Indian Standards (‘ BIS’) before CCI alleging contravention of Section 4 of the Competition Act in relation to imposition of unfair conditions on SPP, especially, with respect to the Bureau of India Standards, Laboratory Recognition Scheme (‘ LRS’).
Being the proprietor of Venus testing and Research Scheme, SPP alleged that one of the conditions of LRS required every laboratory seeking recognition under it to have an accreditation to IS/ISO/IEC 17025 or ISO/IEC 17025 in the respective field of testing, such as Mechanical, Electrical, Chemical and Microbiological, as applicable. The accreditation body is required to be a full member of the Asia Pacific Laboratory Accreditation Co-operation (‘ APLAC’) and/or the International Laboratory Accreditation Co-operation (‘ ILAC’). SPP was aggrieved that his laboratory could not provide services to BIS for conformity assessment as it was not accredited by a body that was a full member of ILAC/APLAC.
The CCI noted that the activity under consideration, undertaken by BIS was ‘prescribing of criteria for recognition of laboratories under LRS’. The CCI noted that such activity was carried out by BIS for ensuring quality in laboratory testing services by outside laboratories and was based on the mandate vested under the BIS Act. The CCI dismissed the allegations against the Director General, BIS as it was inevitable that those entities that did not satisfy the prescribed criteria would be excluded to ensure a particular level of quality in services to the end consumers.
CCI dismissed the allegations against Reliance Industries Ltd. and Reliance Jio Infocomm Ltd. by Bharti Airtel Ltd.7
On June 9, 2017, CCI dismissed a complaint filed by Bharti Airtel Ltd. (‘Airtel’) against Reliance Industries Ltd. (‘ RIL’) and Reliance Jio Infocomm Ltd. (‘ RJio’) (collectively referred to as the ‘Opposite Parties’) alleging contravention of Sections 3 and 4 of the Competition Act. The gravamen of the various allegations made by Airtel was the provision of free services by RJio and the use of its financial strength to enter into the telecom market with the sole intention of eliminating its competitors since the inception of its business from September, 2016.
CCI broadly categorized the provision of telecom services using 2G, 3G and 4G technologies as ‘provision of wireless telecommunication services to end users’ relying on the fact that the Department of Telecommunications (‘DoT’) grants uniform and same license to all telecommunication service providers i.e. Unified Access License, and does not differentiate based on the technologies deployed by them. Since India is divided into 22 telecommunication circles, CCI delineated the relevant market to be the market for provision of wireless telecommunication services to end users in each of the 22 circles in India’.
CCI concluded that RJio was not a dominant player in the relevant market based on the following:
- the relevant market was led by Airtel, having a 23.5% market share followed by Vodafone (18.1%), Idea (16.9%), BSNL (8.6%), Aircel (8%), RCOM (7.6%), RJio (6.4%), Telenor (4.83%), Tata (4.7%), Sistema (0.52%), MTNL (0.32%) and Quadrant (0.27%);
- RJio’s customers constituted less than 7% of the total subscriber base at pan-India level;
- Airtel had alleged dominance of RJio on account of its large spectrum holding which is compatible for offering 4G LTE services. To that end, CCI noted that the extent of regulatory requirements of DoT cap the overall and band-wise spectrum holding by telecom operators, hence taking care of undesirable concentration of spectrum in the hands of few operators;
- financial strength is relevant, but it cannot be the sole factor to determine dominant position of an enterprise.
Interestingly, despite RJio gaining a subscriber base of approximately 72 million within 4 months, CCI recognized RJio’s schemes to be a short-term business strategy of an entrant with the objective of penetrating a market where there are already big players operating. The CCI held that the provision of free services cannot by itself raise competition concerns unless the same is offered by a dominant enterprise and shown to be tainted with an anti-competitive objective of eliminating competition, which was not found in the instant case. In addition to the above, and in the absence of any explanation provided by Airtel as to how provision of free services was the outcome of an anti-competitive agreement between RIL and RJio, CCI did not find a prima facie case of contravention of Section 3(1) or Section 4(2)(e) of the Competition Act by RJio.
CCI directed DG to probe Prasar Bharti in relation to imposition of unfair conditions while providing infrastructure facilities for FM radio broadcasting services8
On July 4, 2017, CCI passed an order under Section 26(1) of the Competition Act, directing an investigation against Prasar Bharti (‘ PB’) and Ministry of Information and Broadcasting (‘I&B’).
The complaint was filed by Next Radio Limited (‘Next Radio’) alleging abuse of dominant position by PB in the market of providing infrastructure facilities and licenses to Radio and FM operators in India by, inter alia, (i) charging unfair license fees and escalation of such fees, (ii) compelling payment of license fee even when due to an emergent or technical necessity, Next Radio was disallowed to use the infrastructure of PB while PB was not required to pay any damages/ penalty for such non-provision of the licensed infrastructures facility (iii) revising the
draft agreement (based on the migration policy of I&B from Phase II to Phase III) by abusing its dominant position to thrust upon Next Radio an increased financial burden in various ways for sharing and using the licensed infrastructure.
PB and I&B countered the allegation by stating that: (i) the license fee was not being determined by PB; (ii) the license fees approval is done by the Government of India after examination and consultation with the Chief Adviser (Cost), Department of Expenditure and Ministry of Finance;
(iii) the increased cost was only marginal and nominal as compared to Phase III policy; and (iv) the migration from Phase II to Phase III benefited Next Radio and other FM operators.
CCI first analyzed whether PB and I&B would be considered as an ‘enterprise’ under the ambit of Section 3 of the Competition Act. It was held that since PB provided infrastructure to FM radio broadcasters by charging a license fee, which is a commercial activity, it was an enterprise.
On the other hand, I&B was not considered to be an enterprise, since it was engaged in the formulation of guidelines, regulations and policies for matters related to information and broadcasting in India. The CCI held that there was no violation of Section 3 because PB and I&B were not engaged in identical or similar business, nor was the allegation under Section 3(4) sustainable, as I&B was not an enterprise. Therefore, CCI concluded that there was no prima facie case of contravention of any provisions of Section 3 of the Competition Act.
CCI then analyzed the allegations of abuse of dominant position by PB and I&B . It was held hat since I&B was not an enterprise, its alleged conduct could not be examined in terms of Section 4. To investigate allegations against PB , CCI determined the relevant market as “market for provision of infrastructure facilities for FM radio broadcasting in each of the six cities (Delhi, Chennai, Pune, Ahmedabad, Kolkata and Bengaluru), where (Next Radio) has been offered to operate FM broadcasting services ”. The CCI concluded that PB did enjoy a dominant position in the relevant market and described several clauses of the draft agreement as “one-sided and heavily titled in favor of PB ”. While acknowledging that such terms are standard terms of contracts provided to other FM operators, CCI held that a dominant player ought to be more careful with such terms, to see that such conditions remain fair, reasonable and justified. In view of the above, CCI issued a prima facie order under Section 26(1) of the Competition Act, directing the DG to conduct investigation.
Notably, Next Radio and PB were simultaneously litigating at the Hon’ble High Court of Delhi, the result of which led to a settlement between the two, prior to CCI ’s order, under Section 26(1) of the Competition Act. The CCI opined that the settlement of the parties under the order would not deter the proceedings before CCI , as the Competition Act does not provide for any settlement between parties for any alleged anti-competitive activity.
5 Case No. 97 of 2016.
6 Case No. 4 of 2017.
7 Case No. 3 of 2017.
8 Case No. 29 of 2016.
For further information, please contact:
Zia Mody, Partner, AZB & Partners
zia.mody@azbpartners.com
