2019 (8) TMI 1778 - Commission - Indian Laws

Right to give necessary permissions and rights for organisation of volleyball leagues - Agreement executed between VFI and Baseline, is anti-competitive or not - penalty for entering into anti-competitive agreement - HELD THAT - In the present case, the allegations concern restrictions placed on organisation of volleyball league by any enterprise other than Baseline in India or abroad and on volleyball players who are part of the Volleyball League to participate in any other league or other national/international events for the next 10 years. In DHANRAJ PILLAY AND OTHERS VERSUS HOCKEY INDIA 2013 (5) TMI 962 - COMPETITION COMMISSION OF INDIA , the Commission noted that the sports sector comprises multitude of relationships. For example, a sports federation may be a seller of various rights such as media rights, sponsorship rights, and franchise rights associated with sports event(s) under its purview and there would be a separate set of consumers for each such right. However, the ultimate viewers of sport events are the end consumers, who influence the popularity of the sport. Also, a sports federation requires services of players, officials, etc. for staging an event which makes sports federations themselves as consumers. In this multitude of relationships, defining the relevant consumer would enable defining the relevant market. The Commission notes that as per the decisional practice of Commission, there is an inherent conflict of interest when an entity is acting as a regulator as well as an organiser. The restraints imposed by the regulator would be justified if the restraint on competition is a necessary requirement to serve the development of sport or preserve its integrity. Furthermore, the proportionality of the regulations can only be decided by considering the manner in which regulations are applied - it requires to be analysed whether VFI, which is a regulator of volleyball as well as the organiser of volleyball tournaments, was justified to enter into agreement with Baseline giving it exclusive rights for a period of 10 years to conduct and organise Volleyball League in India to the exclusion of other enterprises and consequently affecting the free movement of players, who are part of the Volleyball League, by not letting them participate in other tournaments. The Commission at this stage is of the prima facie opinion that certain clauses of the agreement dated 21.02.2018 as it existed prior to amendment between VFI and Baseline had placed a prohibition on the players who are participating in Baseline's Volleyball League from participation in other similar tournaments for a period of ten years. The restrictions may be extended by more than ten years in case the said Agreement is renewed or extended. Furthermore, the players who would participate in Baseline's Volleyball League are/were not allowed to participate in any national or international event if its dates clashed with Baseline's Volleyball League. Such restrictions appear to be prejudicial to the players participating in Baseline's volleyball league as these players may have to forgo international events like, Olympics, Asian Games, etc. Such restrictions also appear to have the effect of restricting free movement of participating volleyball players and would have put them at a disadvantage - The Commission cannot be oblivious to the fact that VFI has entered into an arrangement with Baseline, thereby granting some exclusive rights to the said company to hold a Volleyball League and simultaneously placing restrictions on the players participating in the Volleyball League. This conduct of VFI, in the prima-facie opinion of the Commission, needs to be examined through an investigation by the DG, to determine whether the same resulted in violation of provisions of the Act including that of Section 4. The Director General (the DG) is directed to investigate into the matter and submit its report within a period of 150 days from receipt of this order - Application disposed off.

Summary

Issues Involved:
1. Whether Volleyball Federation of India (VFI) is an enterprise under Section 2(h) of the Competition Act, 2002.
2. Delineation of the relevant market for assessing VFI’s dominance.
3. Whether VFI holds a dominant position in the relevant market.
4. Alleged abuse of dominant position by VFI.
5. Anti-competitive nature of the agreement between VFI and Baseline Ventures (India) Private Limited (Baseline).

Issue-wise Detailed Analysis:

1. Whether Volleyball Federation of India (VFI) is an enterprise under Section 2(h) of the Competition Act, 2002:
The Commission observed that VFI, as per its Constitution and bye-laws, is established to organize national and international championships, generating revenue for VFI. VFI collects affiliation and other fees from its members, making it an enterprise under Section 2(h) of the Act.

2. Delineation of the relevant market for assessing VFI’s dominance:
The Commission noted that the relevant market comprises the 'relevant product market' and 'relevant geographic market.' The relevant product market for assessing restrictions on organizations of volleyball events is the "market for organization of professional volleyball tournaments/events." For assessing restrictions on volleyball players, the relevant product market is the "market for services of volleyball players." The geographic dimension for both product markets covers the whole of India, making the relevant markets:
- The 'market for organization of professional volleyball tournaments/events in India.'
- The 'market for services of volleyball players in India.'

3. Whether VFI holds a dominant position in the relevant market:
The Commission observed that VFI is the only national-level volleyball federation in India, the sole governing body of the game of volleyball and the players associated with it. VFI's regulatory powers and exclusive rights to organize national and international volleyball events grant it a dominant position in both relevant markets.

4. Alleged abuse of dominant position by VFI:
The Informants alleged that VFI granted exclusive rights to Baseline to organize a Volleyball League for ten years, prohibiting any other person or enterprise from organizing a similar league. VFI also restricted volleyball players from participating in other leagues or international events if the dates clashed with Baseline's league. The Commission noted that such restrictions might result in denial of market access to other competitors and limit the provision of services of volleyball players, potentially violating Section 4 of the Act.

5. Anti-competitive nature of the agreement between VFI and Baseline Ventures (India) Private Limited (Baseline):
The Commission observed that certain clauses of the agreement between VFI and Baseline placed a prohibition on players participating in Baseline's league from participating in other similar tournaments for ten years. These restrictions could be extended if the agreement is renewed. The Commission noted that such restrictions appear to limit the provision of services of volleyball players and foreclose the relevant market for organizing professional volleyball tournaments/events in India to other competitors of Baseline.

Conclusion:
The Commission directed the Director General (DG) to investigate the matter and submit a report within 150 days. The investigation should determine whether the conduct of VFI resulted in a violation of the provisions of the Act, including Section 4. The DG is also at liberty to investigate any anti-competitive conduct of other entities/persons encountered during the investigation. The Commission clarified that the observations made in the order do not constitute a final expression of opinion on the merits of the case.