2015 (4) TMI 1354 - Commission - Indian Laws

Anti-competitive practices in the nature of exclusive agreements with sellers of goods/services - It has been urged that due to such practices, the consumer is left with no choice in regards to terms of purchase and price of the goods and services as thebuyer/consumercan either accept the terms and conditions in totality of the e-portal or opt not to buy the product - contravention of the provisions of section 4 of Competition Act, 2002 - HELD THAT - For analysing allegations pertaining to contravention of section 3 (4) read with section 3(1) of the Act, it is necessary to first establish the existence of an agreement/arrangement. Once the agreement is proved, the next enquiry is into the effects of such agreement/arrangement; the test being AAEC as per the factors laid down under section 19(3) of the Act. Though the OPs have denied exclusive arrangements, accepting that such exclusive arrangement did in fact exist, the important question is whether such arrangements/agreements are anti-competitive. Section 3(1) of the Act unequivocally condemns only such agreement/arrangement/understanding which has or is likely to have an AAEC in the market. Section 3(3) of the Act presumes AAEC in case of certain horizontal agreements/arrangements which have been specifically identified therein. However, vertical agreements/arrangements under section 3(4) and other agreements/arrangements which do not fall under section 3(3) are anti-competitive only when AAEC is proved. The bare perusal of the agreement on the touchstone of the factors laid out suggests that such agreements do not result into AAEC. It does not seem that such arrangements create any entry barrier for new entrants. It seems very unlikely that an exclusive arrangement between a manufacturer and an e-portal will create any entry barrier as most of the products which are illustrated in the information to be sold through exclusive e-partners (OPs) face competitive constraints. For example, mobile phones, tablets, books, camera etc., are neither alleged nor seem to be trodden by monopoly or dominance. Further, it does not appear that because of these exclusive agreements any of the existing players in the retail market are getting adversely affected, rather with new e-portals entering into the market, competition seems to be growing. With regard to allegations pertaining to section 4 of the Act, the relevant market needs to be determined where OPs are operating. In this context, the Commission is convinced with the OPs that every product cannot be taken as a relevant market in itself. Irrespective of whether we consider e-portal market as a separate relevant product market or as a sub-segment of the market for distribution, none of the OPs seems to be individually dominant - the Commission does not consider it necessary to go into the question of abuse of dominance by the OPs as raised by the Informant and ADCTA. The Commission is of the prima facie view that no case of contravention of the provisions of either section 3 or section 4 of the Act is made out against the OPs - the matter is closed under the provisions of section 26(2) of the Act.

Summary

Issues Involved:
1. Alleged anti-competitive practices via 'exclusive agreements' by e-commerce platforms.
2. Applicability of sections 3(1) and 3(4) of the Competition Act, 2002.
3. Dominance and market share concerns under section 4 of the Act.
4. Allegations of unfair trade practices and predatory pricing.
5. Examination of appreciable adverse effect on competition (AAEC).

Detailed Analysis:

Issue 1: Alleged Anti-Competitive Practices via 'Exclusive Agreements'
The Informant alleged that e-commerce platforms (OPs) engaged in anti-competitive practices by entering into 'exclusive agreements' with sellers, which forced consumers to accept non-negotiable terms and conditions. The exclusive agreements allegedly controlled supply, created an impression of scarcity, and manipulated prices, thus distorting fair competition.

Issue 2: Applicability of Sections 3(1) and 3(4) of the Competition Act, 2002
The Informant argued that sections 3(1) and 3(4) of the Act applied to these exclusive agreements, which had an appreciable adverse effect on competition. The Commission examined whether these agreements created barriers for new entrants, drove existing competitors out, or hindered market entry. The Commission found that the agreements did not create entry barriers or adversely affect existing players, as competition seemed to be growing with new e-portals entering the market.

Issue 3: Dominance and Market Share Concerns under Section 4 of the Act
The Informant contended that each e-portal had a 100% market share for products they exclusively sold, thus enjoying a dominant position. The Commission, however, determined that each product could not be considered a relevant market in itself. It found that none of the OPs were individually dominant in the online retail market, which had several players offering similar facilities.

Issue 4: Allegations of Unfair Trade Practices and Predatory Pricing
ADCTA alleged that e-portals engaged in unfair trade practices, such as selling products below purchase prices and imposing conditions like quantity restrictions. They also accused the OPs of predatory pricing in abuse of their dominant position. The Commission noted these allegations but found no evidence that OPs' practices had an appreciable adverse effect on competition.

Issue 5: Examination of Appreciable Adverse Effect on Competition (AAEC)
The Commission assessed whether the exclusive agreements had an AAEC by considering factors under section 19(3) of the Act, such as barriers to new entrants, foreclosure of competition, and benefits to consumers. It concluded that the agreements did not result in AAEC, as they did not create entry barriers, and consumers benefited from the ability to compare prices and the convenience of online shopping.

Conclusion:
The Commission found no prima facie case of contravention of sections 3 or 4 of the Act by the OPs. It concluded that the exclusive agreements did not have an appreciable adverse effect on competition and closed the matter under section 26(2) of the Act. The Secretary was directed to inform all concerned parties accordingly.