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2013 (5) TMI 169 - Commission - Companies LawComplaint made 19(1)(a) of the Competition Act, 2002 against Board for Control of Cricket in India (hereinafter BCCI ) - (i) Irregularities in the grant of franchise rights for team ownership. (ii) Irregularities in the grant of media rights for coverage of the league. (iii) Irregularities in the award of sponsorship rights and other local contracts related to organization of IPL. In addition to the issues as pointed out above, the Commission examined the dual role of BCCI for anti-competitive practices. Held that - In line with the provisions of the Act, international jurisprudence, it is concluded that BCCI is an enterprise for the purpose of the Act, and therefore, within the jurisdiction of the Commission. The Commission finds BCCI guilty of contravention of Section 4(2)(c) of the Act. In view of the above and in exercise of powers under Section 27 of the Act, the Commission directs BCCI (i) to cease and desist from any practice in future denying market access to potential competitors, including inclusion of similar clauses in any agreement in future. (ii) to cease and desist from using its regulatory powers in any way in the process of considering and deciding on any matters relating to its commercial activities. To ensure this, BCCI will set up an effective internal control system to its own satisfaction, in good faith and after due diligence. (iii) To delete the violative clause 9.1(c)(i) in the Media Rights Agreement. The Commission considers that the abuse by BCCI was of a grave nature and the quantum of penalty that needs to be levied should be commensurate with the gravity of the violation. The Commission has to keep in mind the nature of barriers created and whether such barriers can be surmounted by the competitors and the type of hindrances by the dominant enterprise against entry of competitors into the market. The Commission has also to keep in mind the economic power of enterprise, which is normally leveraged to create such barriers and the impact of these barriers on the consumers and on the other persons affected by such barriers. The Commission decides accordingly. The directions of the Commission must be complied within 90 days of receipt of this Order. The amount of penalty determined of Rs. 52.24 crore must also be deposited within a period of 90 days from the date of receipt of this Order.
Issues Involved:
1. Applicability of the Competition Act to BCCI and whether BCCI is an 'enterprise' under Section 2(h) of the Act. 2. Determination of the relevant market. 3. Assessment of BCCI's dominant position in the relevant market. 4. Alleged abuse of BCCI's dominant position in contravention of Section 4 of the Act. Issue-wise Analysis: 1. Applicability of Competition Act on BCCI: BCCI's Submissions: - BCCI argued it is a 'not-for-profit' society promoting cricket and its activities fall outside the purview of the Act, especially Sections 3 and 4. - Cited the Supreme Court's decision in Secretary, Ministry of Information and Broadcasting, Govt. of India v. Cricket Association of Bengal, emphasizing that BCCI's activities are not commercially driven and any surplus is reinvested in cricket. DG's Findings: - Despite being a society, BCCI's activities related to IPL, such as granting franchise and media rights, are commercial. - Relied on findings from the Income Tax Department and the EC's decision on FIFA, concluding that BCCI's activities fall within the commercial sphere, making it an enterprise under Section 2(h) of the Act. Commission's Conclusion: - BCCI, despite its not-for-profit status, engages in commercial activities, thus qualifying as an enterprise under the Act. 2. Relevant Market Determination: BCCI's Submissions: - Argued that markets for various IPL rights (franchise, media, etc.) are separate and not interchangeable. DG's Findings: - Concluded that the relevant market is the "underlying economic activities ancillary to organizing the IPL Twenty 20 cricket tournament" under BCCI's aegis. Commission's Conclusion: - Defined the relevant market as the organization of Private Professional Cricket Leagues/Events in India, distinguishing it from other forms of entertainment and sports based on its unique characteristics and consumer demand. 3. Assessment of Dominance: BCCI's Submissions: - Acknowledged its monopoly but argued that it should be treated differently due to the unique nature of the sports market and its non-profit status. DG's Findings: - BCCI controls all cricket activities in India, including player selection and event organization. - BCCI's actions against the rival ICL demonstrated its dominance and influence over the market. Commission's Conclusion: - BCCI holds a dominant position in the relevant market due to its regulatory powers, control over infrastructure, and influence over players and events. 4. Alleged Abuse of Dominant Position: Grant of Franchise Rights: - DG found irregularities and lack of transparency in the franchise rights process, including bid rigging and unfair contract terms favoring BCCI. - BCCI's defense included claims of acting outside the scope of authority by individuals and commercial expedience. Grant of Media Rights: - DG observed that the media rights agreements were manipulated to favor certain entities, with long-term contracts creating market foreclosure. - BCCI attributed these issues to unilateral actions by individuals and the nascent stage of IPL. Grant of Other Rights: - DG found that associate sponsorship and other local contracts were awarded without tender processes, favoring certain vendors. - BCCI argued that these contracts were based on operational requirements and short durations, allowing market access to others. Commission's Conclusion: - BCCI abused its dominant position by including restrictive clauses in agreements, denying market access to potential competitors and leveraging its regulatory powers for commercial benefits. Order under Section 27 of the Act: - Directed BCCI to cease and desist from practices denying market access and using regulatory powers in commercial matters. - Imposed a penalty of 6% of BCCI's average annual revenue for the past three years, amounting to Rs. 52.24 crore. - Ordered deletion of the violative clause 9.1(c)(i) in the Media Rights Agreement. The Commission's directions must be complied with within 90 days of receipt of the order, including the deposit of the penalty amount.
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