2011 (5) TMI 1067 - Commission - Indian Laws

Issues Involved:
1. Jurisdiction of the Competition Commission of India (CCI).
2. Alleged anti-competitive agreements under Section 3 of the Competition Act.
3. Definition of the relevant market.
4. Dominance of the Distribution Companies (DISCOMs) in the relevant market.
5. Alleged abuse of dominance under Section 4 of the Competition Act.

Detailed Analysis:

Issue 1: Jurisdiction of the CCI
The CCI sought the views of the Delhi Electricity Regulatory Commission (DERC), which stated that while matters relating to electricity tariffs fall under the DERC, issues of abuse of dominance by DISCOMs could be examined by the CCI. The Commission clarified that its mandate is to eliminate practices having adverse effects on competition, promote competition, protect consumer interests, and ensure freedom of trade. The CCI and sectoral regulators have complementary roles. Therefore, the CCI has jurisdiction to examine the issues of abuse of dominance by DISCOMs.

Issue 2: Alleged Anti-Competitive Agreements
The informant alleged that DISCOMs had entered into anti-competitive agreements causing an appreciable adverse effect on competition. However, the DG found no evidence to support these allegations. The informant did not provide any material to substantiate the claims, and no evidence was found during the investigation to establish contravention of Section 3 of the Act. Therefore, the CCI concluded that there was no violation of Section 3.

Issue 3: Definition of the Relevant Market
The DG defined the relevant market as the distribution and supply of electricity and allied facilities like metering and billing in the respective areas of the three DISCOMs. The DISCOMs contended that the relevant market should be the supply of electricity to consumers in the licensed area of supply in Delhi. The CCI agreed with the DG's definition, noting that electricity is a specialized product with no substitutes, and the conditions for supply are distinctly homogeneous within the licensed areas. Therefore, the relevant market was defined as the distribution and supply of electricity in the licensed areas of the respective DISCOMs.

Issue 4: Dominance of the DISCOMs in the Relevant Market
The CCI found that each of the three DISCOMs had a dominant position in their respective areas of operation. The DISCOMs had the ability to operate independently of competitive forces due to their exclusive areas for distribution and supply of electricity. The CCI determined that the DISCOMs enjoyed a monopoly in their respective areas, and thus, held a dominant position in the relevant market.

Issue 5: Alleged Abuse of Dominance
The informant alleged that DISCOMs were abusing their dominant position by imposing unfair and discriminatory conditions in the purchase of goods (electricity meters) and services. The DG's investigation revealed that the DISCOMs restricted the supply of meters to those provided by them or their approved vendors, limiting consumer choice and creating entry barriers for other meter manufacturers. The DG also found that a significant percentage of meters tested showed positive errors, leading to inflated bills for consumers. However, the CCI noted that the sample size of meters tested was too small to be representative of all consumers. Despite this, the CCI concluded that the DISCOMs had imposed unfair conditions on consumers by restricting their choice of meters, which amounted to an abuse of dominance under Section 4(2)(a)(i) of the Act.

Supplementary Order:
A supplementary order by a member of the CCI highlighted the issue of consumer choice in the meter market, noting that the DISCOMs had restricted the market to their approved vendors, thereby denying market access to other manufacturers. The supplementary order found that the DISCOMs' practices amounted to an abuse of dominance by creating entry barriers and foreclosing competition in the meter market.

Final Decision:
The CCI concluded that the DISCOMs had abused their dominant position in the relevant markets of distribution and supply of electricity and meters by imposing unfair conditions on consumers and denying market access to other meter manufacturers. The CCI directed the DISCOMs to cease and desist from such practices, publish accurate information on their websites, and take steps to make consumers aware of their right to procure meters of their choice. The CCI also suggested that the sectoral regulator take necessary actions to address the issue.

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