2020 (3) TMI 1484 - AT - Law of Competition

Anti-competitive action - abuse of dominant position - relevant market - Opposite Party is dominant in the said relevant market or not AGL has abused its dominant position in the relevant market. Whether AGL is dominant in the said Relevant Market? - HELD THAT - A vital question for consideration which cannot be glossed over and is of primary importance in regard to status of Industrial Consumers as a distinct category is whether there is any gaseous substitute for natural gas for the Industrial Consumers. It emerges from the record that two types of agreements were offered by AGL to Industrial Consumers viz. (a) MGO Contract whereby the off taker agrees to purchase a minimum amount of natural gas ensuring a minimum level of supply to the buyer and stable revenue to the supplier and (b) Non-MGO Contracts where the buyer is not under any obligation to purchase a minimum level of gas and has the liberty to purchase gas based on its requirement. the only conclusion deducible on the basis of material available on record is that during the relevant period there was no gaseous substitute of natural gas available to Industrial Units in Faridabad. It is emphatically clear that PNG was not interchangeable with other fuels as contended on behalf of AGL. Furthermore it cannot be ignored that during the relevant period LPG was not available to Industrial Units as an alternate fuel as revealed from the submissions made before the DG. It is therefore futile on the part of AGL to contend that it had successfully demonstrated that PNG was interchangeable with other fuels at the relevant time. Having regard to all relevant considerations and the material available on record we find no hesitation in supporting the finding recorded by the Commission on the aspect of relevant market and AGL s dominant position in the relevant market . The fact that the pipeline infrastructure setup by AGL subsequently can be used now by any other competitor to distribute CNG does not create any dent in the aforesaid finding. As a sequel thereto we affirm the finding that the Appellant AGL occupied a position of strength making it the dominant player and enjoying dominant position in the relevant market. Alleged abuse of dominant position be it seen that the Commission in its impugned order held against AGL contravention - HELD THAT - On a plain reading of the provision engrafted in Section 27 of the Act it emerges that contravention of Section 3 or Section 4 of the Act being established the Commission is empowered to pass all or any of the orders envisaged under Clauses (a) to (g). The language of this provision leaves no scope for doubt that the Commission may befitting the circumstances of a case pass any order falling under either one or more of the Clauses in combination or even encompassing all the Clauses. The term any has to be accorded a purposive and a creative interpretation which can be explained on no hypothesis other than the one that it embraces one more than one some many and all. In the instant case the Commission passed orders under Clauses (a) (b) (d) of Section 27. Under Section 27(a) Commission directed AGL to cease and desist from indulging in the contravening conduct; under Section 27(b) the Commission imposed a penalty of 4% of the average turnover of the last three years while under Section 27(d) the Commission directed AGL to modify the Gas Supply Agreements (GSAs) in light of observations in the impugned order. So far as direction under Section 27(a) is concerned no exception can be taken to it. AGL has to be restrained perpetually from indulging in the contravening conduct. Now before coming to quantum of penalty under Section 27 it is apt to ascertain whether AGL has modified the Gas Supply Agreements (GSAs) to bring it out of the offending violative and contravening conduct. Conclusion - AGL enjoyed a dominant position its dominance prevailed in the relevant market and it abused its dominant position by imposing unfair conditions. The penalty imposed on AGL is modified by reducing it from 4% to 1% of the average turnover for the relevant years. Appeal disposed off.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

(a) Whether Adani Gas Limited (AGL) enjoyed a dominant position in the relevant market.

(b) Whether AGL's dominant position prevailed in the relevant market.

(c) Whether AGL abused its dominant position by imposing unfair conditions on buyers under the Gas Supply Agreement (GSA).

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a): Whether AGL enjoyed a dominant position in the relevant market

Relevant Legal Framework and Precedents: The Competition Act, 2002, Section 4, defines "dominant position" as a position of strength enjoyed by an enterprise in the relevant market, enabling it to operate independently of competitive forces or affect its competitors or consumers in its favor.

Court's Interpretation and Reasoning: The court analyzed the relevant market, which was identified as the supply and distribution of natural gas to industrial consumers in Faridabad. The court noted that AGL held 100% market share in this market, as it was the only entity authorized to set up and operate a City Gas Distribution (CGD) network in Faridabad.

Key Evidence and Findings: The court found that AGL's exclusive authorization by the Government of Haryana and the absence of competition from other entities established AGL's dominant position in the relevant market.

Application of Law to Facts: The court applied the definition of dominant position under the Competition Act to the facts, concluding that AGL's market share and lack of competition confirmed its dominant position.

Conclusions: The court concluded that AGL enjoyed a dominant position in the relevant market.

Issue (b): Whether AGL's dominant position prevailed in the relevant market

Relevant Legal Framework and Precedents: The court referred to the definition of "relevant market" under Section 2(r) of the Competition Act, which considers both the relevant product market and the relevant geographic market.

Court's Interpretation and Reasoning: The court agreed with the Director General's (DG) classification of industrial consumers as a distinct category and noted that natural gas was distinct from other energy sources, with no gaseous substitute available for industrial consumers in Faridabad.

Key Evidence and Findings: The court found that industrial consumers had no available gaseous substitute for natural gas, making them solely dependent on AGL for supply.

Application of Law to Facts: The court applied the definition of the relevant market to the facts, affirming that AGL's dominant position prevailed in the relevant market.

Conclusions: The court concluded that AGL's dominant position prevailed in the relevant market.

Issue (c): Whether AGL abused its dominant position

Relevant Legal Framework and Precedents: Section 4(2)(a)(i) of the Competition Act prohibits an enterprise from imposing unfair or discriminatory conditions in the purchase or sale of goods or services.

Court's Interpretation and Reasoning: The court examined various clauses of the GSA and found that several clauses imposed unfair conditions on consumers, such as unilateral determination of interest rates and obligations during emergency shutdowns.

Key Evidence and Findings: The court identified specific clauses in the GSA that were unfair to consumers, including clauses related to billing and payment, force majeure, and emergency shutdowns.

Application of Law to Facts: The court applied the provisions of the Competition Act to the identified unfair clauses, concluding that AGL abused its dominant position by imposing these conditions.

Treatment of Competing Arguments: AGL argued that the conditions were necessary due to the nature of the gas industry and its agreements with GAIL. However, the court found these arguments insufficient to justify the unfair conditions.

Conclusions: The court concluded that AGL abused its dominant position by imposing unfair conditions under the GSA.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "The Commission was of the opinion that AGL had contravened provisions of Section 4(2)(a)(i) of the Act by imposing unfair conditions upon buyers under GSA."

Core Principles Established: The judgment established that an enterprise holding a dominant position must not impose unfair or discriminatory conditions on consumers, and such conduct constitutes an abuse of dominance under the Competition Act.

Final Determinations on Each Issue: The court upheld the Commission's findings that AGL enjoyed a dominant position, its dominance prevailed in the relevant market, and it abused its dominant position by imposing unfair conditions. The court modified the penalty imposed on AGL, reducing it from 4% to 1% of the average turnover for the relevant years.

Overall, the judgment provides a comprehensive analysis of the issues related to market dominance and abuse of dominant position under the Competition Act, 2002, and reinforces the principles of fair competition and consumer protection.