9 January, 2018
CCI dismisses a complaint relating to delay in delivery of possession of an apartment and unfair clauses in an agreement16
On November 14, 2017, CCI dismissed the information filed by R. Ramkumar alleging violation of Section 4 of the Act against Akshaya Private Ltd. (‘Akshaya’). R. Ramkumar alleged that he had booked a residential apartment in a project developed by Akshaya, the delivery of which has been unduly delayed and the agreement entered into between them contains unfair clauses in favour of Akshaya.
While defining the relevant product market to be ‘provision of services for development and sale of residential apartments/flats ’, CCI noted that a plot of land and commercial space cannot be considered as substitutes for residential apartments because of differences in price, characteristics, and intended use. CCI limited the relevant geographic market to Old Mahabalipuram Road also known as the information technology (‘IT ’) corridor in the State of Tamil Nadu, since the conditions of competition for supply and demand for development and sale of residential flats were considered as homogenous and distinguishable from other neighbouring areas in terms of factors like price, land availability, distance and commuting facilities, proximity and connectivity, presence of multinational companies, state of infrastructure, and regional and personal preferences. In light of several other real estate developers operating in the relevant market, CCI found that Akshaya was not in a dominant position. Accordingly, CCI held that absent dominance, no question of abuse of dominant position under Section 4 could arise.
CCI dismisses allegations against NIIT17
On November 28, 2017, CCI dismissed allegations of anticompetitive conduct and abuse of dominance against skill and talent development firm, NIIT Limited (‘NIIT ’), with respect to franchise agreements.
Separate complaints were filed by NIIT ’s three Hyderabad-based franchisees (‘Franchisees ’), which were engaged in the business of provision of computer education and training services. Since all the three complaints were against NIIT involving ‘substantially similar’ allegations, CCI passed a common order. The Franchisees alleged inter alia : (i) that contrary to the terms agreed in the franchisee agreement, NIIT was directly approaching schools located within the territories of the Franchisees and undercutting them by offering the same courses at highly discounted prices; (ii) that NIIT follows a differential pricing pattern for its consumers in metro and non-metro areas; and (iii) a differential revenue sharing model for franchisees located in metro and non-metro areas.
In this instant case, CCI defined the relevant market to be ‘market for the provision of computer education and training services in India’ since computer and IT skill training requires special knowledge on the subject as compared to skill training services in other professional and non-professional areas in terms of its characteristics, prices, and end use, as well as such training courses could be availed across India.
With respect to the issue of abuse of dominance, CCI held that apart from NIIT , there are many other companies operating in the relevant market offering similar courses, and thus NIIT was not a dominant player and therefore could not violate Section 4 of the Act. While dismissing allegations of anti-competitive conduct under Section 3 of the Act, CCI noted that the prevailing competition has compelled NIIT to venture into online mode of delivery through its online learning portals. It further noted that the differential pricing for metro and non-metro areas was not arbitrary and could be explained on the basis of various factors like lower awareness and lack of affordability by students in non-metro areas, differences in marketing responsibility, and job placements.
CCI dismisses complaint alleging cartelisation and anticompetitive practices against certain Registration Plates Manufacturers18
On November 14, 2017, CCI dismissed the information filed under Section 19(1)(a) of the Act by the Association of Registration Plates Manufacturers of India (‘Association ’) against Shimnit UTSCH India Private Limited (‘Shimnit ’), Real Mazon India Private Limited (‘Real ’), and TEST Security License Plates Private Limited (‘TEST ’) (Shimnit, Real, and TEST collectively referred to as the ‘Registration Plates Manufacturers ’).
The Association had alleged that the Registration Plates Manufacturers had formed a cartel to engage in collusive bidding in various States to get High Security Registration Plates (‘HSRP ’) contracts by conniving with the officials of the Transport Departments. The Association further alleged that the rates quoted by the Registration Plates Manufacturers in the bids used to be very high and later when open Notice Inviting Tenders (‘NITs ’) were floated by the States and tender conditions were eased, the Registration Plates Manufacturers abuse their dominant position through predatory pricing.
CCI observed that the Association failed to establish any specific case of bid rigging in any State tender post-2009 and that no conduct nor any evidence supporting collusion among the Registration Plates Manufacturers post-2009 was detailed in the information.
CCI dismisses allegations of abuse of dominance against Maharashtra State Power Generation Company19
On November 30, 2017, CCI dismissed the allegations of abuse of dominance against Maharashtra State Power Generation Company (‘ MAHAGENCO’) with respect to the qualification criteria provided by MAHAGENCO for the bidders in its tender.
Shri Vijay Menon filed the information before CCI against MAHAGENCO alleging that MAHAGENCO has abused its dominant position by putting a qualifying requirement in its tender floated in the month of September, 2017 for coal liaisoning services, whereby it disqualified bidders against whom an inquiry was pending before CCI or who have already been penalized by CCI. While holding the issue as purely administrative in nature, CCI recognized the discretion a consumer should have to exercise choice and to frame terms and conditions of tender documents so as to best secure an optimal outcome. CCI was, however, cautious to further point out that consumer discretion should be allowed so long as it does not restrict market entry and allows vendors to freely compete in the procurement process. It also remarked that competition concerns could arise in rare cases where a monopoly buyer exercises the option in an anticompetitive
manner. CCI found no case of contravention established against MAHAGENCO, and thereby it closed the matter under Section 26(2) of the Act.
CCI again slams penalty of .52.24 crores on BCCI for abusive conduct20
In case of Surinder Singh Barmi v. Board of Control for Cricket in India (‘ BCCI’) decided on November 29, 2017, CCI reaffirmed its decision taken in the earlier order dated February 8, 2013, whereby CCI had issued a penalty of . 52.24 crores (approx. US$ 8.2 million) on BCCI for abusing its dominance. The CCI order dated February 8, 2013 was set aside by the erstwhile Competition Appellate Tribunal (‘ COMPAT’) vide order dated February 23, 2015 in an appeal filed by BCCI on grounds of violation of principles of natural justice, thereby remitting the matter to CCI for fresh disposal.
While dismissing BCCI’s argument that it is not an enterprise under Section 2(h) of the Act, CCI observed that BCCI by organizing matches and tournaments, granting media rights to broadcasters, entering into franchisee arrangements with business houses, raising sponsorship, etc. engages in economic activity and motive to earn profit is irrelevant for defining an entity as an enterprise.
CCI then defined the relevant market to be the market for organisation of professional domestic cricket leagues/events in India and held it to be not substitutable with other formats of cricket, other sports, and general entertainment programmes telecasted on television. While limiting the relevant market to be so, CCI noted a number of factors, inter alia: (i) that there is no evidence of price competition and cross elasticity of demand between domestic cricket leagues like Indian Premier League (‘ IPL’) and the alternatives suggested by BCCI; (ii) that other formats of cricket like international and domestic cricket differed on account of selection of the team; (iii) that the different formats of cricket have different objectives and commercial exploitation; and (iv) BCCI’s own understanding about the different formats. CCI also stated that applying the ‘small but significant non-transitory increase in price’ test conceptually, given the characteristics and consumer preferences for cricket/IPL in India, not significant consumers would substitute IPL with any other form of entertainment e.g., films, television shows, or any other sporting event, thereby making a five to ten percent increase in price unprofitable. Within the relevant market, CCI found BCCI to be dominant because of its status as a de facto regulator of cricket in India having the exclusive right to sanction or approve cricket events in India by virtue of its endorsement by the International Cricket Council.
The CCI then examined whether the alleged abusive representation and warranty given by BCCI under Clause 9.1(c)(i) in the IPL Media Rights Agreement entered with the broadcasters of IPL that ‘it shall not organize, sanction, recognize, or support during the Rights period another professional domestic Indian T20 competition that is competitive to the league [IPL]’ for a period of 10 years is in contravention of Section 4(2)(c) of the Act. CCI observed that viewed in light of Rules 28(b) and 28(d) of BCCI Rules and Regulations, the representation and warranty created insurmountable entry barriers and left no scope for conducting any kind of professional domestic cricket other than by BCCI or its members. CCI further stated that BCCI has not provided any reasonable or regulatory justification, as also failed to substantiate its claims of nascency, limited time for recoupment, and the need for the self-imposed restriction running for a sustained
period of 10 years. CCI thus held that BCCI had foreclosed the market for organization of professional domestic cricket leagues/events in India under Section 4(2)(c) of the Act. Accordingly, CCI directed BCCI to cease and desist from the abusive conduct, precluded it from placing blanket restrictions on organisation of professional domestic cricket league/ events by non-members, and imposed a penalty of . 52.24 crores (approx. US$ 8.2 million), which was about 4.48% of BCCI ’s average revenue from organisation of professional domestic cricket leagues in India during the last three preceding financial years.
CCI dismisses the reference filed by the Rail Coach Factory, Kapurthala alleging collusive bidding against certain Roof Mounted AC Package Unit Manufacturers21
On November 28, 2017, CCI dismissed the reference filed under Section 19(1)(b) of the Act by Shri D. K. Shrivastava, chief material manager, Rail Coach Factory, Kapurthala against M/s Daulat Ram Engg & Services P. Ltd., Madhya Pradesh (‘Daulat Ram Engg ’), M/s Daulat Ram Industries (‘Daulat Ram Industries ’), M/s Amit Engineers (‘Amit ’), M/s Fedders Lloyd Corporation (‘Fedders ’), M/s Intec Corporation (‘Intec ’), M/s Lloyd Electric and Engg. Ltd. (‘Lloyd ’), M/s Sidwal Refrigeration Industries Ltd. (‘Sidwal ’), M/s Stesalit Ltd. (‘Stesalit ’) and M/s Ess Ess Kay Engg. Co. P. Ltd. (‘Ess ’) (Daulat Ram Engg, Daulat Ram Industries, Amit, Fedders, Intec, Lloyd, Sidwal, Stesalit, and Ess collectively referred to as the ‘RMPU Manufacturers ’) alleging inter alia contravention of the provisions of Section 3 of the Act.
Shri D. K. Shrivastava alleged that the RMPU Manufacturers have formed cartel and rigged the tenders floated by the Rail Coach Factory, Kapurthala, other Zonal Railways and the Indian Railways (on pan-India basis ) for Roof Mounted AC Package Units (‘RMPUs ’), which was evident from the collective increase and decrease in the rates quoted by the RMPU Manufacturers during the period of 2011 to 2014, the increase in rates observed in tenders opened in or after June 2013, and instances of identical or similar pricing between several subsets of the RMPU Manufacturers, which contravened the provisions of Sections 3(3)(a) and 3(3)(d) read with Section 3(1) of the Act.
CCI , having found a prima facie case, directed the Director General (‘DG ’) to investigate the matter. The DG , upon the completion of its investigation, concluded that Amit, Fedders, Intec, Lloyd, and Sidwal had contravened Sections 3(3)(a) and 3(3)(d) of the Act. The matter was then considered by CCI . CCI noted that there was collective increase and decrease in the rates quoted by the RMPU Manufacturers, but mere price parallelism, without some conclusive evidence of agreement or arrangement among the RMPU Manufacturers, is not sufficient to conclude that the price parallelism was an outcome of collusion. In sum, CCI acknowledged that parallel behaviour of competitors can be a result of intelligent market adaptation in an oligopolistic market and to arrive at a finding of contravention merely on the basis of suspicion resulting from identical or similar pricing with evidence of possibility of exchange of information is fraught with its own pitfalls. In light of no direct evidence nor even persuasive circumstantial evidence to establish that the RMPU Manufacturers tacitly colluded, CCI held that no case of contravention of Sections 3(3)(a) and 3(3)(d) read with Section 3(1) of the Act was established.
11 The term ‘control’ has been defined to include controlling the affairs or management by: (i) one or more enterprises,
either jointly or singly, over another enterprise or group, (ii) one or more groups, either jointly or singly,
over another group or enterprise. ‘Control’ was clarified in Independent Media Trust (C-2012/03/47) to mean, “the
ability to exercise decisive influence over the management or affairs” of another enterprise.
12 Alpha TC Holdings Pte Limited, C-2014/07/192.
13 Para 65, EC Jurisdictional Notice.
14 Ibid.
15 Ibid.
16 Case No. 38 of 2017.
17 Case Nos. 47, 48 and 49 of 2017.
18 Case No. 58 of 2017.
19 Case No. 61 of 2017.
20 Case No. 61 of 2010.
For further information, please contact:
Zia Mody, Partner, AZB & Partners
zia.mody@azbpartners.com
