2018 (4) TMI 916 - SC - Indian Laws

Functions under the Competition Act, 2002 - whether there is an abuse of such dominant position under Section 4(2)(c) where the respondent could be stated to have indulged in a practice resulting in denial of market access in any manner? Held that - It can be seen that in the facts of the case, the broadcaster, namely respondent No. 5, had a broadcast agreement which was entered into for a period of one year from 1stAugust, 2010. This was sought to be terminated within the aforesaid period by the respondent by notices dated 19thJanuary, 2011 - on the present facts, there is an abuse of the dominant position enjoyed by the respondents 1-4 only for the reason that the broadcaster was denied market access on and after 19th February, 2011 until 1st August, 2011. The words in any manner one of wide import and must be given their natural meaning. This being the case, it is difficult to appreciate the reasoning of the Appellate Tribunal that, as the broadcaster and MSOs are not in competition with one another, the provisions of Sections 3 and 4 do not get attracted. The dominant position held by the respondent MSOs is clearly established for the purpose of Section 4 in the present case, and the Commission finding in that behalf is also not set aside by the Appellate Tribunal. Once a dominant position is made out on facts, whether a broadcaster is in competition with MSOs is a factor that is irrelevant for the purpose of application of Section 4(2)(c) which, as has been found by us, becomes applicable for the simple reason that the broadcaster is denied market access due to an unlawful termination of the agreement between the said broadcaster and the respondents 1-4. Penalty - Held that - Section 4(2)(c) has been breached, yet the reason given by respondents 1 to 4 for termination being otherwise justifiable - no penalty should be levied. Appeal allowed.

Summary

Issues Involved:
1. Functions and role of the Competition Commission of India under the Competition Act, 2002.
2. Dominant position and its abuse by Multi System Operators (MSOs).
3. Denial of market access under Section 4(2)(c) of the Competition Act, 2002.
4. Imposition of penalty by the Competition Commission of India.

Issue-wise Detailed Analysis:

1. Functions and Role of the Competition Commission of India:
The appeal raised questions about the functions of the Competition Commission of India (CCI) under the Competition Act, 2002. The Preamble and Section 18 of the Act emphasize the Commission's duty to prevent practices adversely affecting competition, promote and sustain competition, protect consumer interests, and ensure freedom of trade. The CCI has a positive role, including the power to inquire into dominant positions suo motu and to prohibit anti-competitive agreements. The Act has an overriding effect over other statutes to ensure economic development.

2. Dominant Position and its Abuse by MSOs:
The CCI found that the MSOs had an 85% subscriber share in Punjab and Chandigarh, thus holding a dominant position in the Cable TV market. This position allowed them to operate independently of competitive forces. The Appellate Tribunal did not set aside this finding. The "dominant position" under Section 4 is defined as a position of strength enabling an enterprise to operate independently of competitive forces or affect its competitors or consumers in its favor. The broadcaster, being dependent on the MSOs for market access, was affected by the MSOs' dominant position.

3. Denial of Market Access under Section 4(2)(c):
The CCI found that the MSOs' termination of the agreement with the broadcaster resulted in denial of market access, thus violating Section 4(2)(c). The TDSAT had previously held the termination unlawful for not conforming to Regulation 4.2 of the Telecommunication (Broadcasting and Cable Services) Interconnection Regulations, 2004, which requires a three-week notice with reasons for termination. The Supreme Court agreed that the MSOs' dominant position led to denial of market access, regardless of whether the broadcaster and MSOs were direct competitors.

4. Imposition of Penalty by the Competition Commission of India:
The CCI imposed a penalty of ?8,40,01,141/- on the MSOs. However, the Supreme Court found that the broadcaster's TRP ratings were significantly lower than other channels, justifying the termination of the agreement. Despite the breach of Section 4(2)(c), the Supreme Court decided that no penalty should be imposed, given the justifiable reasons for termination provided by the MSOs.

Conclusion:
The Supreme Court allowed the appeal, setting aside the judgment of the Appellate Tribunal and the penalty imposed by the CCI. The Court recognized the MSOs' dominant position and the denial of market access but found the termination of the agreement justifiable based on the broadcaster's low TRP ratings.