2013 (2) TMI 941 - CCI - Companies Law

Summary

Issues:
1. Alleged excessive and discriminatory deposit structure imposed by the opposite party for membership upon subsidiaries of Regional Stock Exchanges (RSEs).
2. Discriminatory conditions imposed on subsidiaries of RSEs in comparison to other corporate members.
3. Abuse of dominant position by the opposite party in the securities market.
4. Praying for an investigation under section 26(1) to scrutinize the conduct of the opposite party under section 4 of the Act.

Analysis:

Issue 1: Alleged Excessive and Discriminatory Deposit Structure
The informant, a subsidiary of a Regional Stock Exchange (RSE), alleged that the opposite party, a national level stock exchange, imposed an excessive and discriminatory deposit structure for membership. The informant highlighted that the deposit amount required for membership was significantly higher for RSE subsidiaries compared to other corporate members. Additionally, stringent conditions were imposed on RSE subsidiaries, such as restrictions on trading in their own name/account and limitations on sub-broker trading. The informant contended that these conditions were discriminatory and requested an investigation by the Commission.

Issue 2: Discriminatory Conditions
The informant argued that the conditions imposed by the opposite party on RSE subsidiaries were discriminatory and constituted an abuse of dominant position in the securities market. The informant pointed out differences in treatment between RSE members and other corporate members, including restrictions on trading activities and sub-broker permissions. The informant claimed that these differential treatments were unjust and requested the Commission to scrutinize the conduct of the opposite party under section 4 of the Act.

Issue 3: Abuse of Dominant Position
The Commission assessed the informant's submissions and determined that the opposite party held a dominant position in the securities market. However, the Commission clarified that dominance itself is not prohibited under the Competition Act, 2002; rather, it is the abuse of dominance that is prohibited. The Commission acknowledged the differences in treatment between RSE members and other corporate members, emphasizing the regulatory framework set by SEBI to revive regional stock exchanges. The Commission highlighted the risk assessment criteria and risk management systems in place to ensure market integrity and investor protection.

Issue 4: Investigation and Conclusion
After thorough analysis, the Commission concluded that the conditions imposed by the opposite party on RSE members, including the informant, were necessary for investor protection. The Commission found that the transactions between the opposite party and RSE members were distinct from those with ordinary corporate members due to the unique structure and regulatory requirements of RSE subsidiaries. Consequently, the Commission determined that there was no prima facie case under section 4 of the Act. The case was closed under section 26(2) of the Act, and the decision was communicated to all concerned parties.