2019 (6) TMI 1700 - Commission - Indian Laws

Anti-competition acts - Contravention of provisions of Section 3(4) read with Section 3(1) of Competition Act, 2002 - retailers of the Informants were not adhering to the terms of the Distributor Agreements - HELD THAT - The Commission notes that allegations of the Informants against the OPs pertain to contravention of Section 3 (4) of the Act which provides that any agreement amongst enterprises or persons at different stages or levels of the production chain in different markets, in respect of production, supply, distribution, storage, sale or price of, or trade in goods or provision of services, including (a) tie-in arrangement; (b) exclusive supply agreement;(c) exclusive distribution agreement;(d) refusal to deal; (e) resale price maintenance, shall be an agreement in contravention of provisions of the Act, if such agreement causes or is likely to cause an appreciable adverse effect on competition in India. The Commission observes that in the instant case, no doubt, there was an agreement between OP-1 and the Informants, in the form of secondary distribution agreement . Further, the parties to the agreement are in a vertical chain of supply and distribution of Vivo smartphones. However, in order to assess whether such agreement/ any clause(s) of agreement is anti-competitive and causes or is likely to cause AAEC in markets in India, the relative market power of the OPs is to be looked into and thereafter the factors provided under Section 19(3) of the Act need to be examined. The Commission observes that no evidence of any controlling influence of BBK Enterprise on the economic activities of OP-1 and OP-2, has been furnished by the Informants. The Commission notes that OP-1 has stated that the brands Vivo and Oppo have independent marketing teams and are competitors in the market for sale and distribution of smartphones in India and that BBK Enterprise does not have any director(s) on the board of directors either of OP-1, OP-2 or OP-3, thereby resulting in autonomy in decision making in Vivo. There is no material on record to refute these contentions of the OP. Therefore, the contention of the Informants that combined market share of Vivo, Oppo, OnePlus and Realme be taken to determine market power, is not tenable. The Commission finds no competition concern in the entire matter. Consequently, the allegation of the Informant, as regards contravention of various provisions of Section 3(4) of the Act by the OPs is not made out - Commission notes that in addition to the aforesaid allegations, the Informants have also alleged that from admission of the OP-1 in its response dated 19.11.2018, it appears that the OPs are facilitating a cartel at the retailer level under the aegis of the All India Mobile Retailers Association, in violation of Section 3(3) of the Act. However, the Commission observes that the Informants have merely raised a general allegation during the proceedings without substantiating the same with any evidence whatsoever and the same has been controverted by the OPs stating that no retailers or AIMRA has been impleaded in the matter by the Informant. The matter is ordered to be closed forthwith in terms of the provisions of Section 26(2) of the Act.

Summary

Issues Involved:
1. Restriction on online sales.
2. Market Infiltration Policy (MIP).
3. Minimum Operation Price (MOP) violation.
4. Allegation of facilitating a cartel at the retailer level.

Detailed Analysis:

1. Restriction on Online Sales:
The Informants alleged that the Opposite Parties (OPs) restricted them from selling Vivo branded mobile handsets and accessories online, limiting their freedom of trade and the supply of Vivo products in the market. The Commission observed that Vivo products are readily available online on various e-commerce platforms and the OPs also have a dedicated e-shopping portal. The primary distribution agreement between OP-1 and OP-2 pertains to offline sales, and no rights for online sales were given to OP-1. Therefore, the restriction on online sales by OP-1 does not directly withhold the supply of Vivo products in the market. The Commission found no contravention of Section 3(4)(c) of the Act regarding the restriction on online sales.

2. Market Infiltration Policy (MIP):
The Informants submitted that the OPs enforced a policy of penalizing distributors/retailers for market infiltration, violating Section 3(4)(c) of the Act. The OPs justified MIP as a measure to prevent duplication of smartphones and counterfeits. The Commission noted that no restrictions were placed on the Informants in dealing with other brands either within or outside the allocated territory. The Commission concluded that MIP did not cause or is likely to cause an Appreciable Adverse Effect on Competition (AAEC) in the market for smartphones in India, and thus, no contravention of Section 3(4)(c) of the Act was found.

3. Minimum Operation Price (MOP) Violation:
The Informants alleged that the practice of mandating a MOP resulted in Resale Price Maintenance (RPM), which is anti-competitive and in contravention of Section 3(4)(e) of the Act. The Commission noted that consumers have multiple options to purchase Vivo smartphones, including online platforms at competitive prices. The adverse effect on competition due to MOP was not established by the Informants. The Commission observed that the smartphone market is highly competitive, with many players and frequent launches of new brands, ensuring no AAEC due to MOP policy. Consequently, no contravention of Section 3(4)(e) of the Act was found.

4. Allegation of Facilitating a Cartel at the Retailer Level:
The Informants alleged that the OPs facilitated a cartel at the retailer level under the aegis of the All India Mobile Retailers Association (AIMRA), violating Section 3(3) of the Act. The Commission observed that this allegation was not substantiated with any evidence and was controverted by the OPs, stating that no retailers or AIMRA were impleaded in the matter. In the absence of tangible evidence, no case was made out for contraventions of Section 3(3) of the Act against the OPs.

Conclusion:
The Commission found no competition concerns in the entire matter and ordered the case to be closed under Section 26(2) of the Act. The Secretary was directed to communicate the order to the parties accordingly.