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Law of Competition - Case Laws
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2017 (7) TMI 1343
Anti-Competitive agreements - below-cost pricing strategy - abuse of dominant position in the relevant market by offering heavy discounts to the passengers and incentives to the cab drivers associated with them - predatory pricing under Section 4(2)(a)(ii) of the Act or not - HELD THAT:- The Commission is of the view that competitive constraints in the relevant market are to be assessed in a holistic manner, not solely on the basis of market shares of the alleged dominant entity. Market shares must be interpreted in the light of all the relevant market conditions.
In the present case, both OP and Uber are found to be aggressively competing with each other to attract participants, i.e. drivers and riders, on both sides of their platforms, which is necessary for reducing search and matching frictions. Despite OP having the largest network, the network effect was not strong enough to deter entry and rapid expansion of Uber - there are no significant costs preventing consumers from switching between different radio taxi apps. The radio taxi apps are offered for free and can be easily downloaded on smartphones and can coexist on the same handset. Thus, availing the services of one aggregator’s network does not preclude the use of another. Once these apps are installed on a device, riders can switch from one app to another in no-time. In fact, both drivers and riders can have applications developed by multiple service providers and can ‘multi-home’.
In most markets, every enterprise will have some degree of market power, by virtue of which they can affect consumers or competitors in its favour to some extent. The narrow interpretation of the concept of dominance offered by the Informant would mean that an entrant armed with a new idea, a superior product or technological solution that challenges the status quo in a market and shifts a large consumer base in its favour would have to be erroneously held dominant. To preclude possibilities of such anomalies in approach in assessing dominance, the Act lays down a holistic framework for assessing dominance and lists out the relevant factors including relative strength of competitors, entry conditions and countervailing power. Thus, the Commission is not convinced that conduct of OP, in the absence of other important factors that determine dominance, can be accepted to be indicative of dominance.
Based on collective consideration of the facts that the competitive process in the relevant market is unfolding, market is growing rapidly, effective entry has taken place thereby leading to gradual decline in OP’s market share, entry barriers are not insurmountable, there exist countervailing market forces that constrain the behavior of OP and the nature of competition in dynamic, innovation-driven markets, the Commission is of the considered view that OP’s dominance in the relevant market remains unsubstantiated - Provisions of Section 4 of the Act clearly stipulate that dominant position can be held by only one enterprise or one group. Section 4(2) states that "There shall be an abuse of dominant position, if an enterprise or a group-." The term ‘a’/‘an’ used in section 4(2) evidently states the singular form, which shows that the intention of the legislature was never to hold more than one enterprise to be in a dominant position, unless they are part of the group within the meaning of Section 5 of the Act.
Section 19(4) of the Act, which enlists factors assessment of dominance, is also of relevant in this regard. The plain reading of the factors mentioned under Section 19(4) signifies that the focal point of such assessment is the alleged dominant entity, around which the assessment revolves. If there was any scope of more than one entity being envisaged by the Act, factors like ‘size and resources of competitors’, ‘economic power of the enterprise including commercial advantages over competitors’ etc. would not have found place under Section 19(4) of the Act - Furthermore, in Section 28 of the Act, which specifically deal with division of enterprises enjoying dominant position, the usage of the words unambiguously indicates that the Act does not provide for more than one enterprise to be dominant in the relevant market.
The Act does not allow for more than one dominant player under Section 4. Rather the existence of two strong players in the market is indicative of competition between them, unless they have agreed not to compete, which also can be only be looked into under Section 3 of the Act, not Section 4. Hence, the present argument of the Informant regarding the collective dominance of OP and Uber is rejected herewith - The in-depth analysis in the preceding paragraphs clearly demonstrates that, during the period under investigation, OP did not have the ability to act independently of its competitors or consumers in the market. In the absence of dominance of OP, examination of abuse or any analysis of pricing strategy by OP is neither warranted nor permitted under the provisions of the Act.
The Commission does not fully disagree with the Informants that the low prices of OP are not because of cost efficiency, but because of the funding it has received from the private equity funds. But as discussed above, there is no evidence that the access to such funding was inequitable and that the market for financing was not competitive and had aberrations. Moreover, it was their penetrative pricing strategy that facilitated them to garner high market shares in short span of time as well as develop the networks to a size that could provide sufficient positive externalities to the participants of the network.
The Commission is of the view that the evidence on record does not establish the dominance of OP and its consequent abuse within the provisions of Section 4 of the Act - the cases are thus hereby closed.
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2017 (6) TMI 1399
Abuse of dominant position by WhatsApp Inc. - contravention of the provisions of Section 4 of 19(1)(a) of the Competition Act, 2002 - alleged abusive conduct of the OP in compelling the users, through change in its terms of service and privacy policy, to share their account details and other information with 'Facebook' and indulging in the practice of predatory pricing by not charging any subscription fee from its users in violation of the provisions of Section 4 of the Act.
Dominance of the OP in the relevant market - HELD THAT:- The Commission notes that in India a number of other players such as Apple with iMessage, BlackBerry with BBM, Samsung with ChatON, Google with Google Hangouts and Microsoft with Skype are providing consumer communication apps and are also active in the provisions of smartphone hardware and operating systems - According to a study conducted by 'TNS/TNC Connected Life Study 2015', 56% of the internet users in India use 'WhatsApp' and 51% use 'Facebook' every day. Further, amongst India's internet users, 'WhatsApp' tops the list of instant messaging apps. Further, citing a study conducted by Global Web Index, the Informant has submitted that 64% of mobile users in India use 'WhatsApp' which is the largest as compared to any other mobile messaging app usage. Based on the above, the Commission is of the opinion that the OP is in a dominant position in the relevant market.
Abusive conduct of the OP in the relevant market - HELD THAT:- There are no significant costs preventing the users to switch from one consumer communication apps to another. It may be due to the following reasons: (i) all consumer communication apps are offered for free of cost or at a very low price (mostly free), (ii) all consumer communication apps are easily downloadable on smartphones and can co-exist on the same handset (also called 'multi homing') without taking much capacity along with other apps, (iii) once consumer communication apps are installed on a device, users can pass on from one app to its competitor apps in no-time, (iv) consumer communication apps are normally characterised by simple user interfaces so that costs of switching to a new app are minimal for consumers, and (v) information about new apps is easily accessible given the ever increasing number of reviews of consumer communication apps on apps store like google play store etc. - the Commission is of the view that even though 'WhatsApp' appears to be dominant in the relevant market, the allegations of predatory pricing have no substance and the OP has not contravened any of the provisions of Section 4 of the Act.
The Commission finds that no prima facie case of contravention of the provisions of Section 4 of the Act is made out against the OP in the instant matter. Accordingly, the matter is closed under the provisions of Section 26(2) of the Act.
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2017 (6) TMI 1316
Anti-competitive agreements - Price collusion amongst competitors through a series of "hub - and - spoke" arrangements - Refusal to Deal - Discount Control Mechanism - resale price maintenance in contravention of Section 3(4)(e) of the Act - Tie-in arrangements - contravention of the provisions of Section 3 of the Act - HELD THAT:- To analyze the alleged abusive conduct, the Commission is of the opinion that any assessment of competition has to be made in the context of markets and therefore, the Commission would use the terms upstream and downstream markets while analysing the alleged anti-competitive vertical restraints in the present cases.
Upstream Market - HELD THAT:- passenger cars can be purchased across the country, though different state-level road taxes and registrations may be applicable. Further, dealerships and distributions of all passenger cars are prevalent across the territory of India. Accordingly, the upstream geographic market consists of the entire territory of India.
Downstream Market - HELD THAT:- The downstream geographic market may be taken as the territory of India, as the conditions of competition for the distribution and dealership of Hyundai cars are uniform across the country. Though there may be price differences in terms of road tax and registration, Hyundai has distributorships and dealerships across the country and its cars are sold across the territory of India. Accordingly, the relevant (downstream) geographic market may be defined as territory of India.
Refusal to Deal [Section 3(4)(d)] - HELD THAT:- The Commission is of considered opinion that Clause 5(iii) of the Dealership Agreement has not restricted, in form or in practice, any dealer in any manner from operating other OEM dealerships. The avowed objective of the clause appears to ensure that HMIL dealers do not free ride on facilities and services provided by HMIL. Further, such stipulation ensures that HMIL is kept posted with the financial and investment activities of its dealers to ensure that funds meant for functioning of the dealership business are not diverted elsewhere. No evidence has been adduced by the parties to demonstrate that HMIL restricted its dealers from acquiring dealerships of competing manufacturers - the Commission is of the opinion that Clause 5(iii) does not impose an exclusive supply obligation in contravention of Section 3(4)(b) or a refusal to deal in contravention of Section 3(4)(d) read with Section 3(1) of the Act.
Resale Price Maintenance - HELD THAT:- The Commission is of the view that the OP has sought to impose an arrangement that results in RPM, which includes monitoring of the maximum permissible discount level through a "Discount Control Mechanism" and a penalty punishment mechanism upon non-compliance of the discount scheme. The level of discount was determined by the OP for each model and variant of the passenger cars and the OP had also appointed a Mystery Shopping Agency to collect data from dealers for such monitoring and reporting to the OP. Based on the above, the Commission is of the opinion that the OP has contravened the provisions of Section 3(4)(e), read with Section 3(1) of the Act.
Tie-in arrangement [Section 3(4)(a)] - CNG Kits - HELD THAT:- The Commission is of the considered opinion that in cases where warranty is cancelled for use of non-CEV CNG kits, the same may be objectively justified. The OP may also have a legitimate interest in ensuring that alternative brands of CNG Kits are not used, as the OP would be bearing the costs of warranty. Accordingly, cancellation of warranty upon use of non-CEV CNG kits does not, as a general rule, amount to a contravention of Section 3(4)(a), read with Section 3(1) of the Act.
Tie-in arrangement [Section 3(4)(a)] - Lubricants & Oils - HELD THAT:- In so far as the OP mandates its dealers to use particular oil/lubricants and penalises its dealers where non recommended oils are used, it would amount to "tie-in arrangement" in contravention of Section 3(4)(a), read with Section 3(1) of the Act. However, for the reasons given in the context of CNG kits (objective justification and legitimate business interest), cancellation of warranty upon use of non- recommended oils/lubricants does not amount to contravention of Section 3(4)(a), read with Section 3(1) of the Act.
Tie-in arrangement [Section 3(4)(a)] - Car Insurance Services - HELD THAT:- Mere recommendation that the dealers consider/suggest the insurance companies partnered with the OP will not amount to tie-in arrangement. It is opined that the OP has not violated Section 3(4)(a) of the Act with respect to the allegation that the OP has tied the sale of its cars with selected insurance vendors only.
Tie-in arrangement [Section 3(4)(a)] - Tying the sale of premium vehicles to non-premium - HELD THAT:- The DG, did not find contravention of the provisions of Section 3(4)(a) of the Act by HMIL having any arrangement of selling both segment (premium and non-premium) cars. The Commission is in agreement with the conclusion of the DG on this count as the Informants could not adduce any credible evidence to support this allegation.
To conclude, The Commission is of the considered view that HMIL has contravened the provisions of Section 3(4)(e) read with Section 3(1) of the Act through arrangements which resulted into Resale Price Maintenance. Such arrangements also included monitoring of the maximum permissible discount levels through a Discount Control Mechanism - HMIL is directed to cease and desist from indulging in conduct that has been found to be in contravention of the provisions of the Act
Imposition of monetary penalty - HELD THAT:- The starting point of determination of appropriate penalty should be to determine relevant turnover and thereafter, to calculate appropriate percentage of penalty based on facts and circumstances of the case - the Commission notes that the infringing anti-competitive conduct of HMIL in the instant case included putting in place arrangements, which resulted into Resale Price Maintenance by way of monitoring of maximum permissible discount level through a Discount Control Mechanism and a penalty mechanism for non-compliance of the discount scheme. Such conduct pertains to and emanates out of sale of motor vehicles. Hence, for the purposes of determining the relevant turnover for this infringement, revenue from sale of motor vehicles alone has to be taken into account.
The Commission decides to impose penalty on HMIL at the rate of 0.3 % of its average relevant turnover of the last three financial years - Tthe Commission imposes a penalty of ₹ 87 crore on HMIL for the impugned conduct in contravention of the provisions of Section 3(1) read with Section 3(4) of the Act - The Commission directs HMIL to deposit the penalty amount within 60 days of receipt of this order.
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2017 (6) TMI 925
Composite Scheme of Arrangement - Held that:- Transferee company has in compliance with Section 230(5) of the Companies Act, 2013 read with Rule 8 of Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, has issued the notice to the respective statutory authorities in Form No.CAA.3 on February 17, 2017 by way of registered post as a way of service upon (a) The Regional Director; (b) The Registrar of Companies; (c) The Competition Commission of India; (d) The Commissioner of Income Tax; (e) The Securities and Exchange Board of India; (f) National Stock Exchange; and (g) Bombay Stock Exchange.
As stated supra, all stake holders of company are put under due notice as per law, of the proposed Scheme of Arrangement and the Chairman appointed by the Tribunal has also conducted the required meeting of shareholders as per due process of law. As such, the scheme in question has the approval of majority of all stake holders of the company. All statutory compliances have been made by the company for approval of the scheme in question.
It is of the considered view that the Company petition deserved to be allowed as prayed for. The Composite Scheme of Arrangement as approved by the Board of Directors is hereby sanctioned and further declare it is binding on all the Shareholders, Secured Creditors, Unsecured Creditors/Trade Creditors and Employees of the Petitioner Company and also on the Petitioner Company itself.
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2017 (5) TMI 1764
Scheme of compromise or arrangement - Jurisdiction - power of Tribunal to grant dispensation of the shareholders' meeting regarding the proposed scheme of amalgamation where all the shareholders have given consent - scope of Companies Act - Companies Act, 2013 has authorized only for the dispensation of the meeting of creditors where creditors having at least 90% value agreed and confirmed by way of an affidavit scheme - the matter was heard before the Bench - both the member differ on certain points and gave separate judgements and on that basis the matter was referred to the Hon'ble President under the provisions of Section 419(5) of the Companies Act, 2013 for constituting larger Bench - matter was then referred to the 3rd Member, Ms. Manorama Kumari, Member (Judicial).
HELD THAT:- Hon'ble President, NCLT referred the matter to the 3rd Member, Ms. Manorama Kumari, Member (Judicial) who has given a separate judgement and has passed order, which is annexed herewith as Annexure C.
As per Ms. Manorama Kumari, Member (Judicial),
There is imperative need to examine Section 230 and Section 232 of the Companies Act, 2013 and Rules made thereunder including the NCLT Rules, 2016 in the context of the objectives of the new Act and the legislative history behind this subject - Section 230(3) Companies Act, 2013 and Section 232(2) of the said Act and Rule 6 of the Companies (Compromises, Arrangements and Amalgamations Rules 2016, both start with the word "Where" and this has to be read with the word "may" as mentioned hereinabove. Now a question arises, that what was the legislative intent and the ratio decidendi behind using the word "may" and it is important to understand as to why the High Courts have exercised discretion under Section 391(1) of the Companies Act, 1956. It has to be accepted that the word "may" introduces an element or an essence of discretion and whenever the question of discretion comes in, authority follows and perhaps that is the reason why the authority and the inherent powers are granted so that in the interest of justice the same can be exercised in appropriate situations.
It cannot be ignored that almost all the High Courts have exercised this discretion since long and dispensed with the calling of the meetings in appropriate situations. The precedents created by the High Courts to dispense with the requirement of convening the meetings are worth and continuation of such precedents are virtue in the era of ease of doing businesses as well as future course of corporate actions. A settled issue should not be unsettled without proper reasons. Thus the notion that calling of meetings is mandatory does not stand.
In this case, number shareholders of both the applicant companies are very small (including majority common shareholders) and all of them have given their consents for the scheme in writing and the financial position of applicant/ amalgamated company shall have positive net worth post effectiveness of the Scheme and there has been no compromise with the creditors and that the respective creditors would, in no way, be affected by the scheme and that all the liabilities of the Amalgamating Company shall stand transferred to the Amalgamated Company. Scheme does not contemplate any corporate debt restructuring exercise.
Section 232 of the Companies Act, 2013 is a specific provision carved out by the legislature when both the conditions mentioned in clauses (a) and (b) of sub-section (1) of Section 232 of the said Act are satisfied - The Tribunal is empowered to take appropriate steps in the interest of justice under Rule 11 of National Company Law Tribunal Rules, 2016 read with Rule 24(2) of Companies (Compromises, Arrangements and Amalgamations) Rules, 2016.
Various directions regarding holding, convening as well as dispensing of various meetings issued.
Application allowed.
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2017 (5) TMI 542
Validity of anti-competitive agreement - offending the provisions of Section 3(3) of the Competition Act, 2002 - penalty imposed by COMPAT - CCI jurisdiction to hold enquiry - Held that:- Merely because the purported agreement between the appellants was entered into and bids submitted before May 20, 2009 are no yardstick to put an end to the matter. No doubt, after the agreement, first sting was inflicted on May 8, 2009 when the bids were submitted and there was no provision like S. 3 on that date. However, the effect of the arrangement continued even after May 20, 2009, with more stings, as a result of which the appellants bagged the contracts and fruits thereof reaped by the appellants when Section 3 had come into force which frowns upon such kinds of agreements.
We are, thus, of the opinion that inquiry into the tender of March 2009 by the CCI is covered by Section 3 of the Act inasmuch as the tender process, though initiated prior to the date when Section 3 became operation, continued much beyond May 20, 2009, the date on which the provisions of Section 3 of the Act were enforced. We agree with the COMPAT that the role of the appellants did not come to an end with the submission of bid on May 08, 2009.
No doubt, clause (d) of sub-section (3) of Section 3 uses both the expressions ‘bid rigging’ and ‘collusive bidding’, but the Explanation thereto refers to ‘bid rigging’ only. However, it cannot be said that the intention was to exclude ‘collusive bidding’. Even if the Explanation does contain the expression ‘collusive bidding’ specifically, while interpreting clause (d), it can be inferred that ‘collusive bidding’ relates to the process of bidding as well. Keeping in mind the principle of purposive interpretation, we are inclined to give this meaning to ‘collusive bidding’. It is more so when the expressions ‘bid rigging’ and ‘collusive bidding’ would be overlapping, under certain circumstances which was conceded by the learned counsel for the appellants as well.
We are, therefore, of the opinion that the two expressions are to be interpreted using the principle of noscitur a sociis, i.e. when two or more words which are susceptible to analogous meanings are coupled together, the words can take colour from each other. We, thus, answer Issue No. 1 in the negative by holding that the CCI was well within its jurisdiction to hold an enquiry under Section 3 of the Act in respect of tender of March, 2009.
Jurisdiction of DG/CCI to investigate into the boycott of 2011 FCI’s tender - Held that:- The starting point of inquiry would be the allegations contained in the complaint. However, while carrying out this investigation, if other facts also get revealed and are brought to light, revealing that the ‘persons’ or ‘enterprises’ had entered into an agreement that is prohibited by Section 3 which had appreciable adverse effect on the competition, the DG would be well within his powers to include those as well in his report. Even when the CCI forms prima facie opinion on receipt of a complaint which is recorded in the order passed under Section 26(1) of the Act and directs the DG to conduct the investigation, at the said initial stage, it cannot foresee and predict whether any violation of the Act would be found upon investigation and what would be the nature of the violation revealed through investigation. If the investigation process is to be restricted in the manner projected by the appellants, it would defeat the very purpose of the Act which is to prevent practices having appreciable adverse effect on the competition. We, therefore, reject this argument of the appellants as well touching upon the jurisdiction of the DG.
2009 tender of the FCI, all the three appellants had quoted the same price, i.e. ₹ 388 per kg. for the APT - Held that:- We feel that COMPAT has examined the matter in right perspective. After examining the record, one finds that important fundamental conditions were the same which used to be in the earlier tenders. In 2009 tender, a specific quantity of 600 MT was prescribed. At that time, all the three appellants participated and did not object to the same. As against this in 2011 tender, the tentative annual requirement of APT was stated to be 400 MT and not 75 MT per month. The condition referred to by the appellants was not for supply of 75 MT per month. It only stated that in a given month the tenderer should have capacity to supply 75 MT. It was nowhere stated that 75 MT will have to be supplied by the successful tenderer every month. In any case, from the conduct of the three appellants, it becomes manifest that reason to boycott the May 2011 tender was not the purported onerous conditions, but it was a concerted action. Otherwise, if the appellants were genuinely interested in participating in the said tender and were aggrieved by the aforesaid conditions, they could have taken up the matter with the FCI well in time. They, therefore, could request the FCI to drop the same (in fact FCI dropped these conditions afterwards when the matter was brought to their notice). However, no such effort was made. As pointed out above, M/s. Excel Crop Care wrote the letter only a day before, just to create the record which cannot be termed as a bona fide move on its part.
We feel that COMPAT has examined the matter in right perspective. After examining the record, one finds that important fundamental conditions were the same which used to be in the earlier tenders. In 2009 tender, a specific quantity of 600 MT was prescribed. At that time, all the three appellants participated and did not object to the same. As against this in 2011 tender, the tentative annual requirement of APT was stated to be 400 MT and not 75 MT per month. The condition referred to by the appellants was not for supply of 75 MT per month. It only stated that in a given month the tenderer should have capacity to supply 75 MT. It was nowhere stated that 75 MT will have to be supplied by the successful tenderer every month. In any case, from the conduct of the three appellants, it becomes manifest that reason to boycott the May 2011 tender was not the purported onerous conditions, but it was a concerted action. Otherwise, if the appellants were genuinely interested in participating in the said tender and were aggrieved by the aforesaid conditions, they could have taken up the matter with the FCI well in time. They, therefore, could request the FCI to drop the same (in fact FCI dropped these conditions afterwards when the matter was brought to their notice). However, no such effort was made. As pointed out above, M/s. Excel Crop Care wrote the letter only a day before, just to create the record which cannot be termed as a bona fide move on its part.
Penalty - whether penalty under Section 27(b) has to be on ‘total/entire turnover’ of the company covering all the products or it is relatable to ‘relevant turnover’? - Held that:- In the absence of specific provision as to whether such turnover has to be product specific or entire turnover of the offending company, we find that adopting the criteria of ‘relevant turnover’ for the purpose of imposition of penalty will be more in tune with ethos of the Act and the legal principles which surround matters pertaining to imposition of penalties. Cases at hand itself amply demonstrate that the CCI’s contention, if accepted, would bring about anomalous results. In the case of M/s. Excel Crop Care Limited, average of three years’ turnover in respect of APT, in respect whereof anti-competitive agreement was entered into by the appellants, was only 32.41 crores. However, as against this, the CCI imposed penalty of ₹ 63.90 crores by adopting the criteria of total turnover of the said company with the inclusion of turnover of the other products as well. Likewise, UPL was imposed penalty of 252.44 crores by the CCI as against average of the three years’ turnover of APT of ₹ 77.14 crores. Thus, even when the matter is looked into from this angle, we arrive at a conclusion that it is the relevant turnover, i.e., turnover of the particular product which is to be taken into consideration and not total turnover of the violator.
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2017 (4) TMI 1652
Constitutional validity of Regulation 35 and the proviso to Regulation 37(1) of the Competition Commission of India (General) Regulations, 2009 as well as Regulation 6 of the Competition Commission of India (Lesser Penalty) Regulations, 2009 - bid-rigging cartel in the market for Conveyor Belt Sector in India - commercial and confidential price sensitive information prior to submission of bids.
HELD THAT:- As is evident from the material available on record, suo moto proceedings have been initiated under Section 26(1) of the Act and an order has been passed by CCI directing the Director General to investigate whether there is any contravention of Section 3 of the Act. The report by the Director General is yet to be submitted. Though the petitioners in the present petitions have challenged the validity of certain statutory Regulations, it is apparent that their main grievance is regarding the letter dated 11.01.2016 whereby the CCI rejected the request of the petitioners for inspection of the records and supply of certified copies of the documents. A perusal of the letter dated 11.01.2016 shows that the request of the petitioners was rejected on the ground that (i) the information sought is confidential in terms of the provisions of the Act and the Regulations made thereunder and (ii) the matter has been referred to the Director General for investigation and the same is currently pending, thus, the request may be referred to the Director General directly in terms of the provisions of CCI (General) Regulations, 2009.
It is also a settled principle of law that the requirement of principles of natural justice must depend on the circumstances of the case, the nature of the enquiry, the rules under which the tribunal is acting, the subject matter to be dealt with and the consequences that may visit a person after such enquiry from out of the decision pursuant to such enquiry - the respondents cannot be held to have committed any error in rejecting the request of the petitioners for inspection of the documents.
Since the power to make subordinate legislation is derived from the enabling Act, it is fundamental that the delegate on whom such a power is conferred has to act within the limits of authority conferred by the Act. Rules cannot be made to supplant the provisions of the enabling Act but to supplement it.
As held in Supreme Court Employees’ Welfare Association Vs. Union of India [1989 (7) TMI 333 - SUPREME COURT], the validity of a subordinate legislation is open to question if it is ultra vires the constitution or the governing Act or repugnant to the general principles of the laws of the land or is so arbitrary or unreasonable that no fair minded authority could ever have made it. It was also held that the rules are liable to be declared invalid if they are manifestly unjust or oppressive or outrageous or directed to be unauthorized and/or violative of the general principles of law of the land or so vague that it cannot be predicted with certainty as to what it prohibited or so unreasonable that they cannot be attributed to the power delegated or otherwise disclose bad faith.
Conclusion - Though delegated legislation can also be challenged as being unreasonable, the unreasonableness is not to be judged in the same standard as unreasonableness of administrative action. The delegated legislation can be struck down unreasonable only if it is manifestly arbitrary or if so unreasonable that Parliament never intended to confer such power on the Regulator.
It cannot be held that the impugned regulations are either arbitrary or unreasonable, much less, the same are contrary to the parent Act - the validity of the impugned Regulations upheld - petition dismissed.
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2017 (3) TMI 1692
Jurisdiction of the Competition Commission of India - Section 3 of the Competition Act, 2002 - protection in the name of language - prohibition on telecasting dubbed serial ‘Mahabharat’.
Held that:- In the instant case, admittedly the Coordination Committee, which may be a ‘person’ as per the definition contained in Section 2(l) of the Act, is not undertaking any economic activity by itself. Therefore, the ‘agreement’ of such a ‘person’, i.e. Coordination Committee, it may not fall under Section 3(1) of the Act as it is not in respect of any production, supply, distribution, storage, acquisition or control of goods or provision of services. The Coordination Committee, which is a trade union acting by itself, and without conjunction with any other, would not be treated as an ‘enterprise’ or the kind of 'association of persons' described in Section 3. A trade union acts as on behalf of its members in collective bargaining and is not engaged in economic activity. In such circumstances, had the Coordination Committee acted only as trade unionists, things would have been different. Then, perhaps, the view taken by the Tribunal could be sustained.
The Coordination Committee (or for that matter even EIMPA) are, in fact, association of enterprises (constituent members) and these members are engaged in production, distribution and exhibition of films. EIMPA is an association of film producers, distributors and exhibitors, operating mainly in the State of West Bengal. Likewise, the Coordination Committee is the joint platform of Federation of Senior Technician and Workers of Eastern India and West Bengal Motion Pictures Artistes Forum. Both EIMPA as well as the Coordination Committee acted in a concerted and coordinated manner. They joined together in giving call of boycott of competing members i.e. the informant in the instant case and, therefore, matter cannot be viewed narrowly by treating Coordination Committee as a trade union, ignoring the fact that it is backing the cause of those which are ‘enterprises’ - When some of the members are found to be in the production, distribution or exhibition line, the matter could not have been brushed aside by merely giving it a cloak of trade unionism. For this reason, the argument predicated on the right of trade union under Article 19, as professed by the Coordination Committee, is also not available.
When the lenses of the reasoning process are duly adjusted with their focus on the picture, the picture gets sharpened and haziness disappears. One can clearly view that prohibition on the exhibition of dubbed serial on the television prevented the competing parties in pursuing their commercial activities - the CCI rightly observed that the protection in the name of the language goes against the interest of the competition, depriving the consumers of exercising their choice. Acts of Coordination Committee definitely caused harm to consumers by depriving them from watching the dubbed serial on TV channel; albeit for a brief period.
Appeal allowed.
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2016 (12) TMI 1734
Anti-Competitive act - Quantum of penalty - The Commission has calculated the penalty at the rate of 2% against the maximum of 10% on the average turnover of the Appellants for the years 2010-2011, 2011-2012 and 2012-2013 - Held that:- The term 'turnover' is interpreted for the purposes of Section 27(b) of the Act to mean value of goods and services which are made subject matter of investigation under Section 26 of the Act and hence liable for punishment under Section 27 of the Act - Penalty has to be calculated with reference to the gross premium received by UIICL as insurance provider under RSBY/CHIS scheme and penalty for each of the Appellants will be a proportion of their share in such premium.
In determining the rate of penalty at 2%, the Commission has considered the peculiarities of the insurance sector and the importance of insurer solvency for the consumer, as a mitigating circumstance. Bid rigging in public procurement for a social welfare scheme was treated to be an aggravating circumstance.
The aggravating circumstance identified by the Commission does not apply to the facts of this case. It cannot be denied, and the Commission had taken cognizance of the internal note of OICL(reproduced in paragraph 6.6 of this Order) indicating that the Appellants were aware of the likelihood of incurring losses and OICL actually refused to share business, but despite that, UIICL proceeded to bid for the tender. From such conduct, it is evident that the Appellants who were Public Sector Companies, in their zeal to participate in a Government sponsored Health Insurance Scheme benefiting the poor, ignored prudence and the restraints of the competition law. Such conduct cannot constitute an aggravating circumstance.
However, the burden of penalty will ultimately be transferred to public, as the Appellants are owned by the Government - the penalty be restricted to 1% of the relevant turnover.
Appeal allowed in part.
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2016 (9) TMI 1679
Involvement in anti-competitive practices - abuse of dominant position - main allegation in Ext.P1 complaint is that a ban has been imposed by the second opposite party namely, the Film Employees Federation of Kerala and its affiliated trade unions - HELD THAT:- The fact that the petitioners have neither filed objections to the report submitted by the Director General nor did not appear before the Commission for the hearing proposed on the report, is not in dispute. It is seen that in the notices issued to the petitioners dated 23.12.2015, it was categorically mentioned that in case the petitioners do not file their objections against the report, it will be presumed that they have nothing to say in the matter and the Commission will proceed with the complaint on that basis, indicating clearly that if they do not establish that the report of the Commission as against them is incorrect, proceedings will be continued against them also as if they have contravened the provisions of the Act. The direction of the Commission in Ext.P3 that the proceedings before the Commission will be continued as if the petitioners have nothing to say in the matter is also, therefore, in order.
The materials on record indicate that the proceedings commenced pursuant to the complaint preferred by the second respondent is yet to be over. A final decision on the issue as to whether the opposite parties in the complaint have contravened the provisions of the Act will be rendered by the Commission only when it disposes of the complaint - The scheme of the Act does not contemplate two separate proceedings against the opposite parties as also against the office bearers of the opposite parties who are liable to be proceeded under Section 48 of the Act. The proceedings under the Act, going by its scheme, is a composite one. As such, the guilt, if any, of the persons who come under Section 48 of the Act also needs to be examined simultaneous to the guilt of the opposite parties.
Conclusion - The Commission is well within its powers to initiate action against them also under the Act.
There is no merit in the writ petition and the same is, accordingly, dismissed.
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2016 (5) TMI 1625
Whether the Commission could, without recording a finding that All Kerala Chemists and Druggists Association, of which the appellants are the President and the Secretary respectively with effect from 11.08.2013, has contravened the provisions of the Competition Act, 2002? - HELD THAT:- In the present case, investigation into the role of the persons incharge of and responsible to Respondent No. 5 for the conduct of its affairs was initiated by the Commission at the threshold i.e. while passing order dated 29.09.2014 under Section 26(1) of the Act and Jt. DG returned a finding in paragraph 8 of his report that the appellants are equally complicit in the practices being carried on and the decisions being taken by Respondent No. 5, which were found to be contrary to the provisions of the Act. This exercise was ex facie contrary to the plain language of Section 48 of the Act. That apart, in the absence of a determination by the Commission that Respondent No. 5 had acted in contravention of Section 3, the finding recorded by the Jt. DG in paragraph 8.2.2 of his report about the alleged complicity of the appellants in the anti-competitive practices being carried on and the decisions taken by Respondent No. 5 could not have been made basis for passing an order under Section 27(b) or 27(g) and on that ground alone, the penalty imposed on Appellant No. 1 and the direction contained in the second part of paragraph 14 of the impugned order are liable to be set aside.
The record produced before the Tribunal does not show that the Commission had, at any point of time, informed the appellants that it was intending to impose penalty on either of them under Clause (b) of Section 27 of the Act. Therefore, they did not get any opportunity to show that paragraph 5 of the order passed by the Commission under Section 26(1) and the conclusion recorded by the Jt. DG in paragraph 8.2.2 of his report were ultravires the provisions of the Act and also represent their cause against the proposed penalty. Thus, there is no escape from the conclusion that the penalty imposed on Appellant No. 1 is vitiated due to violation of the principles of natural justice.
Whether the direction given by the Commission to Respondent No. 5 not to associate the appellants with its affairs including administration, management or governance for a period of two years is legally sustainable? - HELD THAT:- Clause (g) of Section 27, which gives power to the Commission to pass such other orders or issue such other directions as it may deem fit has to be interpreted by applying the rule of contextual interpretation and keeping in view the objects sought to be achieved by enactment of the Act, namely, to prevent practices having adverse effect on competition, to promote and sustain competition in markets, to protect interest of consumers and to ensure freedom of trade carried on by other participants in the markets in India and for matters connected therewith or incidental thereto. The powers vested in the Commission under Clauses (a), (b), (d) and (e) of Section 27 are in consonance with one of the objectives of the Act i.e. to prevent practices having adverse effect on competition - in exercise of power vested in it under Section 27(g), the Commission cannot make an order or issue a direction which would directly or indirectly impinge upon the provisions of other statutes. The election to the offices of the President and the Secretary of Respondent No. 5 and such like bodies are governed by the provisions contained in the Travancore Cochin Literary, Scientific and Charitable Societies Registration Act, 1955, rules, regulations and by-laws made thereunder.
The order passed by the Tribunal dismissing the appeal filed by AKCDA (Appeal No. 17 of 2016) has no bearing on the present case because the only issue raised by the appellant in that case was whether the Commission was justified in holding it guilty of having acted in contravention of Section 3(3)(b) read with Section 3(1) of the Act and the same was answered in affirmative. The question whether the Commission could penalise the appellants by invoking Section 27(g) and that too without giving them action-oriented notice and opportunity of hearing was neither raised nor considered by the Tribunal. Therefore, dismissal of the appeal filed by AKCDA cannot be relied upon for denying relief to the appellants.
Conclusion - The deeming provisions contained in Section 48 can be invoked only after it is found that the company has contravened the provisions of the Act. The CCI must comply with principles of natural justice and cannot exercise powers that interfere with statutory rights under other laws.
The impugned order is set aside in so far as it relates to the imposition of penalty on Appellant No. 1 @ 10% of the average of his income of preceding three financial years - appeal allowed.
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2016 (5) TMI 1624
Suppression of facts by the Informant makes the present proceedings infructuous - penalty under section 45(1)(b) of the Competition Act, 2002 - contravention of any of the provisions of section 3 of the Act.
Whether the suppression of facts by the Informant makes the present proceedings infructuous, as alleged by the Opposite Parties? - Whether the Informant is liable to be penalized under section 45(1)(b) of the Act? - HELD THAT:- Although it is not intended to penalise Respondent No. 2 by imposing fine under Section 45 of the Act, having carefully perused the detailed information prepared by him on 31.03.2014 and his affidavit dated 09.04.2014, we do not have the slightest hesitation in recording a finding that he had deliberately suppressed the vital facts and documents from the Commission, which resulted in passing of the order under Section 26(1) on the premise that Appellant No. 1 had refused to appoint Respondent No. 2 as a stockist and supply the medicines on the ground of non-production of NOC from AKCDA - It is neither the pleaded case of Respondent No. 2 nor it has been argued before us that he is an illiterate person. Rather, the facts brought on record show that he is a graduate and has been in the business of medicines as a stockist of various pharmaceutical companies for last more than one decade. Therefore, he cannot plead innocent ignorance for rebutting the charge of deliberately concealing the material facts and documents from the Commission.
Whether the conduct/practices of OP 2 and/or OP 3 amount to contravention of any of the provisions of section 3 of the Act? - HELD THAT:- The findings recorded by the Commission about the alleged complicity of Appellant No. 1 in the anti-competitive practices/conduct of Respondent No. 3 are self-contradictory and are perverse. Once the Commission found that Respondent No. 3 had been issuing diktats to the pharmaceutical companies or coercing them to insist on production of NOC for appointment of a person as a stockist or supply of medicines, the element of agreement/concurrence automatically disappears and Appellant No. 1 could not have been held guilty of acting in violation of Section 3(1) of the Act.
It is also an admitted position that after his appointment as a stockist by the competent authority i.e. Appellant No. 3, Respondent No. 2 applied for supply of medicines and the needful was done without asking for NOC from AKCDA. Indeed, it is not even the case of Respondent No. 2 that Appellant No. 1 or any of its officers had demanded NOC before his appointment as a stockist in March, 2014 or thereafter. Thus, the entire edifice of the finding recorded by the Commission that Appellant No. 1 had acted in violation of Section 3(1) falls to the ground.
Whether the Commission could have held Appellants Nos. 2 and 3 guilty by invoking Section 48(1) of the Act? - HELD THAT:- Section 48 finds place in Chapter VI of the Act, which contains various provisions relating to penalties that can be imposed by the Commission. Section 42 confers power upon the Commission to penalize any person, who, without reasonable cause, fails to comply with the orders or directions issued by it under Sections 27, 28, 31, 32, 33, 42A and 43A of the Act. Under Section 42(2), the Commission can impose fine to the extent of rupees one lakh for each day during which such non-compliance occurs, subject to a maximum of rupees ten crore - The extent of penalty which can be imposed under that section extend to one percent of the total turnover or the assets, whichever is higher, of such a combination. Section 44 provides for imposition of penalty on a person, who is a party to a combination and makes false statement in any material particular, or knowing it to be false, or omits to state any material particular knowing it to be material. The extent of penalty which can be imposed under this section is rupees fifty lakh to one crore. Section 45 empowers the Commission to punish any person who fails to provide necessary information or documents, omits to state any material fact knowing it to be material, or willfully alters, suppresses or destroys any document which is required to be furnished. Section 46 confers power upon the Commission to impose lesser penalty than the one specified in the preceding sections.
Since the provision contained in Section 48(1) raises a presumption of guilty against every person, who, at the time of contravention of the provisions of the Act by the company, was incharge of, and was responsible for the conduct of its business and visits him with penalty, the same deserves to be construed strictly and in our view, the deeming provisions contained in the two sub-sections of Section 48 can be invoked only after it is found that the company has contravened the provisions of the Act or any rule, regulation, order made and direction issued thereunder. The use of the word 'committed' in the two sub-sections necessarily implies that before any person incharge of and responsible to the company or director, manager etc. of the company can be proceeded against and punished by invoking the deeming provisions contained in Section 48(1) and/or (2), there must exist an affirmative finding by some competent authority that the company has contravened the provisions of the Act or any rule, regulation etc. - in the absence of a determination by the Commission that the company has committed contravention of any of the provisions of the Act or any rule, regulation etc., the deeming clause contained in Section 48(1) cannot be invoked for punishing the person incharge of and responsible to the company for the conduct of its business. Similarly, the deeming provision contain in Section 48(2) cannot be invoked for penalising any director, manager, secretary or other officer of the company whose consent or connivance or negligence may have resulted in contravention of the provisions of the Act or of any rule, regulation or order made or direction issued thereunder by the company unless a finding is recorded by the competent authority that the company has in fact contravened the provisions of the Act.
In the present case, the Commission initiated investigation into the role of the persons incharge of and responsible for the conduct of business to Appellant No. 1 at the threshold. This is crystal clear from paragraph 5 of order dated 29.09.2014 passed by the Commission under Section 26(1) of the Act. However, the issues framed by the Jt. D.G. in Chapter 5 of his report, which have been extracted in the earlier part of this order, do not contain any indication that the role of Appellants Nos. 2 and 3 was also to be investigated. On his part, Respondent No. 2 neither averred/alleged nor he led any evidence to prove that Appellants Nos. 2 and 3 were incharge of and were responsible to Appellant No. 1 for the conduct of its business. The Jt. D.G. did record a conclusion that Appellant No. 1 is equally complicit in the decisions being taken by AKCDA for appointment of stockists and supply of medicines.
After considering the report of the Jt. D.G. in its ordinary meeting held on 23.04.2015, the Commission did direct that copy thereof be supplied to the parties and 11 individuals including Appellants Nos. 2 and 3 but the proceedings recorded in that meeting or the communications sent to the two appellants did not contain any indication about the action proposed to be taken against them under Section 48(1) of the Act - Appellants Nos. 2 and 3 did not get an opportunity to show that Section 48(1) cannot be invoked against them because they were neither the incharge of nor responsible to Appellant No. 1 for the conduct of its business. Therefore, it must be held the penalty imposed by the Commission on Appellants Nos. 2 and 3 by invoking Section 48(1) is also vitiated due to the violation of rule of audi alteram partem and is liable to be declared as nullity.
In any case, once the Tribunal has come to the conclusion that the finding recorded by the Commission against Appellant No. 1 is legally unsustainable, the consequential penalty imposed by the Commission on Appellants Nos. 1, 2 and 3 cannot be sustained and is liable to be quashed.
Conclusion - The evidence did not support the allegations of anti-competitive conduct or the individual liability of Appellants Nos. 2 and 3.
The impugned order set aside - appeal allowed.
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2016 (5) TMI 1623
Maintainability of petition under Article 226 of the Constitution of India - contravention of provisions of Sections 3(3)(a) & (b) of the Competition Act - HELD THAT:- An agreement, in law, may be oral or in writing but requires a meeting of minds of the parties entering into agreement on all the essentials of the subject qua which they are entering into agreement so as to bind each other thereto and compel performance or to measure damages in lieu of performance. Such meeting of the minds, in the absence of a writing, has to be proved as a fact and without it being so proved, there cannot be said to be contravention of Section 3(1).
Section 2(b) of the Act while defining ‘agreement’, takes within its ambit “any arrangement” or “understanding” or “action in concert”, even if arrived at informally and even if not intended to be enforceable. Thus, an agreement within the meaning of Section 3(1) will be found if the action of parties are found to be in pursuance to some common intention, even if not in pursuance to an ‘agreement’ within the definition of Contract Act, 1872, but in pursuance to an ‘understanding’ or ‘arrangement’. Conversely it follows that merely because two or more persons are doing similar or identical thing, will not find an agreement within the meaning of Section 3(1) unless some, if not all the way, meeting of their minds or common intention to do so is established.
Whether the words “practice carried on” refers to a situation resulting even without meeting of minds? - whether a practice carried on by those engaged in same trade even without any meeting of minds to carry on such a practice would be covered? - HELD THAT:- Section 2(m) defines a “practice” as including relating to the carrying on of any trade. However what is peculiar is that Section 3(3) which contains the words “practice carried on” is only raising a presumption as to what the same words in Section 3(1) mean. Section 3(3) by itself is neither prohibitory nor a voiding provision as Sections 3(1) and 3(2) respectively are. Thus, the words “practice carried on” have to be understood as a practice of trade in pursuance to meeting of minds.
In the absence of any evidence of meeting of minds between any two or more developers of real estate with an intention of causing an appreciable adverse effect on competition, there could be no violation of Section 3 as was complained/ informed of by the petitioner/informer. Mere formation of an association i.e. the respondent No.5 CREDAI, is not violation of Section 3, without it being further established that such an association was to or has resulted in appreciable adverse effect on competition. DG, which is an investigative agency of CCI and with whose findings/recommendations CCI, which has adjudicatory role is not bound, found such violations because of finding certain common practices followed by all the developers of real estate surveyed/examined by DG. CCI has however found such practices to be not a result of any common intention. CCI has further found such practices to be not having any appreciable adverse effect on competition.
No error is thus found in the impugned order of the CCI - The petition is dismissed.
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2016 (5) TMI 1458
Validity of the Telecom Consumers Protection (Ninth Amendment) Regulations, 2015, notified on 16.10.2015, (to take effect from 1.1.2016), by the Telecom Regulatory Authority of India - Manifest arbitrariness and unreasonableness - violation of the fundamental rights under Articles 14 and 19(1)(g) of the Constitution - Amendment made in the exercise of powers conferred by Section 36 read with Section 11 of the Telecom Regulatory Authority of India Act, 1997 - credit only the calling consumer (and not the receiving consumer) with one rupee for each call drop (as defined), which takes place within its network, upto a maximum of three call drops per day.
Held that:- The power to make the Impugned Regulation is traceable to Section 36(1) of the Telecom Regulatory Authority of India Act, 1997 - though the Regulation making power under the said Act is wide and pervasive, and is not trammeled by the provisions of Section 11, 12(4) and 13, it is a power that is non-delegable and, therefore, legislative in nature. The exercise of this power is hedged in with the condition that it must be exercised consistently with the Act and the Rules thereunder in order to carry out the purposes of the Act. Since the regulation making power has first to be consistent with the Act, it is necessary that it not be inconsistent with Section 11 of the Act, and in particular Section 11(1)(b) thereof. This is for the reason that the functions of the Authority are laid down by this Section, and that the Impugned Regulation itself refers to Section 11(1)(b)(i) and (v) as the source of power under which the Impugned Regulation has been framed - Under clause 5, the licensor reserves the right to modify the terms and conditions of the licence if in the opinion of the licensor it is necessary or expedient so to do in public interest or in the interest of security of the State or for the proper conduct of telegraphs. It may be stated that no modification of the licence has in fact been attempted or has taken place in the facts of the present case.
Violation of Fundamental Rights - Held that:- One of the tests for challenging the constitutionality of subordinate legislation is that subordinate legislation should not be manifestly arbitrary. Also, it is settled law that subordinate legislation can be challenged on any of the grounds available for challenge against plenary legislation - the language of the Regulation is definite and unambiguous – every service provider has to credit the account of the calling consumer by one rupee for every single call drop which occurs within its network. The Explanatory Memorandum to the aforesaid Regulation further makes it clear, in paragraph 19 thereof, that the Authority has come to the conclusion that call drops are instances of deficiency in service delivery on the part of the service provider. It is thus unambiguously clear that the Impugned Regulation is based on the fact that the service provider is alone at fault and must pay for that fault. In these circumstances, to read a proviso into the Regulation that it will not apply to consumers who are at fault themselves is not to restrict general words to a particular meaning, but to add something to the provision which does not exist, which would be nothing short of the court itself legislating. For this reason, it is not possible to accept the learned Attorney General’s contention that the Impugned Regulation be read down in the manner suggested by him.
The other string to the bow of this argument is that the Impugned Regulation would be worked in such a manner that the service provider would be liable to pay only when it is found that it is at fault. This again falls foul of constitutional doctrine.
The appellants have strongly contended that a 2% allowance of call drops on the basis of averaging call drops per month has been allowed to them by the Quality of Service Regulations -
Held that:- First and foremost, the 2009 Quality of Service Regulation is made under Section 11(1)(b)(v), which is the very Section which is claimed to be the source of the Impugned Regulation. Secondly, both regulations deal with the same subject matter – namely, call drops, and both regulations are made in the interest of the consumer. If an average of 2% per month is allowable to every service provider for call drops, and it is the admitted position that all service providers before us, short of Aircel, and that too in a very small way, have complied with the standard, penalizing a service provider who complies with another Regulation framed with reference to the same source of power would itself be manifestly arbitrary and would render the Regulation to be at odds with both Articles 14 and 19(1)(g) - it is clear that the Quality of Service Regulations and the Consumer Regulations must be read together as part of a single scheme in order to test the reasonableness thereof. The countervailing advantage to service providers by way of the allowance of 2% average call drops per month, which has been granted under the 2009 Quality of Service Regulations, could not have been ignored by the Impugned Regulation so as to affect the fundamental rights of the appellants, and having been so ignored, would render the Impugned Regulation manifestly arbitrary and unreasonable - Secondly, no facts have been shown to us which would indicate that a particular area would be filled with call drops thanks to the fault on the part of the service providers in which consumers would be severely inconvenienced. The mere ipse dixit of the learned Attorney General, without any facts being pleaded to this effect, cannot possibly make an unconstitutional regulation constitutional.
The licence conditions, which are a contract between the service providers and consumers, have been amended to the former’s disadvantage by making the service provider pay a penalty for call drops despite there being no fault which can be traceable exclusively to the service provider, and despite the service provider maintaining the necessary standard of quality required of it – namely, adhering to the limit of an average of 2% of call drops per month - it is clear that the laying down of a penalty de hors condition 28, which, as we have seen, also requires establishing of fault of the service provider when it does not conform to a quality of service standard laid down by TRAI, would amount to interference with the licence conditions of the service providers without authority of law. On this ground also, therefore, the Impugned Regulation deserves to be struck down.
Transparency - Held that:- Under Section 4(1) every public authority is not only to maintain all its records duly catalogued and indexed but is to publish, within 120 days from the enactment of the said Act, the procedure followed by it in its decision making process, which includes channels of supervision and accountability - Under Section 8, there is no obligation to give to any citizen information disclosure of which would prejudicially affect the sovereignty and integrity of India, the security of the State etc. Subject, therefore, to well-defined exceptions, openness in governance is now a legislatively established fact.
The Impugned Regulation is ultra vires the TRAI Act and violative of the appellant’s fundamental rights under Articles 14 and 19(1)(g) of the Constitution.
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2016 (5) TMI 882
Entitlement to officials of the petitioner summoned to be accompanied by the advocate(s) - case before the Competition Commission of India (CCI) under Section 26(1) of the Competition Act, 2002 wherein the petitioner was one of the opposite parties in the case related to a cartel/bid-rigging; - Held that:- Section 30 of the Advocates Act confers on an advocate a right to practice inter alia before any person legally authorized to take evidence. The DG, by the Competition Act, has been legally authorized to take evidence. Once that is so, in the light of dicta aforesaid of the Division Bench in Kingfisher Airlines Limited supra, has but to be held that an advocate has a right to practice before DG and which right to practice would include accompanying a person who has been summoned before the DG for investigation.
As before the Inspectors condemned or criticised, they must give the person a fair opportunity of correcting or contradicting what is said against the person. In my opinion the aforesaid is true of the role of the DG also and as a part of the duty to act fairly, DG ought to allow the officials of the petitioner summoned, if so desire, to be accompanied by Advocates. The fear of the DG of the Advocates is also not understandable. DG has full discretion to regulate its proceedings and ensure and control that the presence of the advocates does not delay its proceedings, as was the apprehension expressed. Sachs L.J., in his opinion in the aforesaid judgment observed that there must be “fairplay in action” though it may be “flexible” depending upon the situation so that the same does not result in “unsuitable procedures”. It was also noted that many men have deep rooted fear of becoming involved as defendants in actions arising out of their depositions and that it is difficult to even persuade a citizen to give evidence in road accident cases and that the Inspectors must in public interest take into account the fears of potential witnesses. Buckley L.J. in his opinion in the said judgment held that fair treatment required the Inspectors to give to persons being investigated the material against him and must put to him their proposed conclusions therefrom to give him fair opportunity to explain.
The objection of the respondent CCI/DG, to the officials of the petitioners summoned by the DG being accompanied with an advocate is thus overruled and it is declared that the officials of the petitioner summoned by the respondent shall be entitled to be accompanied by the advocate(s).
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2016 (4) TMI 1329
Anti-competitive Activities - Whether the appellants could be accused of bid-rigging/collusive bidding and held guilty of acting in contravention of Section 3(1) read with Sections 3(3)(a) and 3(3)(d) of the Competition Act, 2002 merely because they quoted substantially similar price for the product, namely, Polyester Blended Duck Ankle Boot Rubber Sole (hereinafter described as 'the Jungle Boots'),which is required to be manufactured as per the specifications prescribed by the Director General (Supply and Demand) (DGS&D) and is mostly purchased by the Government Agencies like Paramilitary Forces, State Police, Railways etc. on the basis of the Rate Contracts executed on annual basis? - Held that:- Unfortunately, neither the DG nor the Commission gave due weightage to the aforesaid factors and heavily banked on the factors like identical or near identical price quoted by the appellants in response to Tender Enquiry dated 14.06.2011 and the so-called plus-factor for recording a finding that the appellants had contravened Section 3(1) read with Sections 3(3)(a) and 3(3)(d) of the Act - the findings and conclusions recorded by the DG and the Commission that the appellants had indulged in collusive bidding/bid-rigging and thereby violated Section 3(1) read with Section 3(3)(a) and 3(3)(d) of the Act are legally unsustainable and the impugned order is liable to be set aside.
Whether in exercise of powers vested in it under Section 27(b) of the Act, the Commission could impose penalty on the total turnover of the appellants for the three preceding financial years? - Held that:- The Commission committed grave illegality by imposing penalty @5% of the average turnover of the appellants in respect of all the products manufactured by them for the last three preceding financial years. The respondents have not disputed that all the appellants are multi-product companies and the Jungle Boots is only one of the products manufactured by them - the Commission is not entitled to impose penalty on the defaulting enterprise/person by taking into consideration its total turnover for the preceding three financial years.
The impugned order is set aside and the penalty imposed by the Commission on the appellants is quashed - appeal allowed.
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2016 (3) TMI 1485
Whether the petition is maintainable - Scope of judicial review - Abuse of dominant position - Ericsson is an "enterprise" under Section 2(h) of the Competition Act, 2002, and whether Section 4 of the Act applies to its licensing of patents or not - Jurisdiction of CCI to entertain the complaints of Micromax and Intex under the Competition Act, 2002 - Whether the allegations made could be construed as an abuse of dominance? - The disputes, being subject matter of suits, could not be entertained by CCI - Whether Micromax/Intex could maintain a complaint for abuse of dominance since they had contested Ericsson’s claim for infringement? - Whether impugned orders are without jurisdiction as being perverse?
Whether the petition is maintainable - Scope of judicial review - HELD THAT:- In the facts of the present case, the Ericsson has produced communications from the DG which require Ericsson to produce "(i) certified copies of all email communication during the period January 2011 to March 2013 by the executives or Ericsson who are or have been related to the discussion/negotiation with Indian companies. The executives include Sh. Harish Sharma, Mr. Max Olofsson, Mr. Alex Fasell, Mr. Chris Houghton and other senior executives from Ericsson global". Ericsson had also placed letter dated 15th June, 2015 addressed to the Additional Director General, CCI which indicates that the Ericsson had received four probe notices (till 15th June, 2015) and was called upon to submit the detailed facts regarding Ownership and Shareholding pattern of Ericsson; copies of audited statements of accounts; details of patents relating to mobile telecom standardisation held by Ericsson; claim-chart mapping with Standards, list of SEPs of Ericsson, basis for charging licence fees as percentage of final product, illustrative rate charged to similarly placed parties; cost incurred etc. Further, certain senior employees of Ericsson have also been summoned to record their statement on oath before the DG.
Whether the impugned orders passed under Section 26(1) of the Competition Act can be subjected to judicial review under Article 226 of the Constitution of India? - HELD THAT:- Indisputably, scope of Article 226 of the Constitution of India is very wide.
It is also well settled that although, the High Court does not sit as an Appellate Court to correct every error but in cases where an authority has acted outside the scope of its jurisdiction, the High Court would interfere under exercise of its jurisdiction under Article 226 of the Constitution of India. It is well recognised that the High Court would interfere in orders passed by any authority or subordinate court where "(1) there is an error manifest and apparent on the fact of the proceedings such as when it is based on clear misreading or utter disregard of the provisions of law and (2) a grave injustice or gross failure of justice has occasioned thereby."
The contention that the present petition is not maintainable, is without merit.
Jurisdiction of CCI to entertain the complaints of Micromax and Intex under the Competition Act, 2002 - HELD THAT:- A plain reading of Section 4(1) of the Competition Act indicates that it proscribes any enterprise from abusing its dominant position. Thus, for the purposes of Section 4(1) of the Act, an enterprise must be the one which is in a 'dominant position'. The expression 'dominant position' is defined under Explanation (a) to Section 4 of the Competition Act to mean "a position of strength, enjoyed by an enterprise, in the relevant market, in India, which enables it to (i) operate independently of competitive forces prevailing in the relevant market; or (ii) affect its competitors or consumers or the relevant market in its favour;" It, plainly, follows that alleged abuse of dominance would have to be considered in the context of the relevant market in which an enterprise is found to be in a dominant position.
The question whether Ericsson is an enterprise within the meaning of Section 2(h) of the Competition Act would, thus, have to be answered by ascertaining whether it is engaged in any activity relating to production, supply, distribution, acquisition or control of articles or goods. Admittedly, Ericsson has a large portfolio of patents and is, inter alia, engaged in developing technologies and acquiring patents. Thus, if patents are held to be goods, Ericsson would indisputably fall within the definition of ‘enterprise’ within the meaning of Section 2(h) of the Competition Act, since it is admittedly engaged in activities which entail acquisition and control of patents.
It is well settled that the provision of any statute must be read in the context of the statute as a whole. A non-obstante clause is a well known legislative device used to give an overriding effect to certain provisions over the others which are inconsistent with those provisions; in the present case, Section 60 of the Competition Act expressly provides that the provisions of the Competition Act shall have effect notwithstanding anything inconsistent in any other law. However, the said provision must be read in the context of the Competition Act as a whole and the mischief that is sought to be addressed by the Competition Act.
A prospective licensee who applies for a compulsory licence is expected to have made, prior to his application, efforts to obtain a licence on reasonable terms. However, it further specifies that this consideration would not be relevant where the conduct of a patentee is found to be anti-competitive - if CCI has finally found a patentee's conduct to be anti-competitive and its finding has attained finality, the Controller would also proceed on the said basis and - on the principle akin to issue estoppel - the patentee would be estopped from contending to the contrary - the contention that the jurisdiction of CCI under the Competition Act is ousted in matters relating to patents cannot be accepted.
Whether the allegations made could be construed as an abuse of dominance? - HELD THAT:- Given the nature of the right that a patentee enjoys, it is not easy to reconcile a patent holder's refusal to grant a licence to use his patent as a violation of antitrust laws. The interface between IPR rights and antitrust laws have been a subject matter of debate in various jurisdictions and more particularly in cases where a patentee holds an SEP.
In the present case, apart from instituting suits for infringement against Micromax and Intex, Ericsson has also threatened Micromax with complaints to SEBI, apparently, while Micromax was contemplating and/or in the process of floating a public offer of its shares. Such threats were, undoubtedly, made with the object of influencing Micromax to conclude a licensing agreement. It is not necessary for this Court to examine whether in the facts of this case, such threats also constitute an abuse of Ericsson's dominant position. Suffice it to state that in certain cases, such threats by a proprietor of a SEP, who is found to be in a dominant position, could be held to be an abuse of dominance. Clearly, in certain cases, such conduct, if it is found, was directed in pressuring an implementer to accept non- FRAND terms, would amount to an abuse of dominance.
The disputes, being subject matter of suits, could not be entertained by CCI - HELD THAT:- The contention that since, by virtue of Section 61 of the Competition Act, the jurisdiction of the Civil Courts is barred in relation to matters that CCI or COMPAT are empowered to decide and some issues before the CCI and in the suits are common, the subject matter would be outside the scope of the Competition Act, also cannot be accepted. The question whether there is any abuse of dominance is solely within the scope of the Competition Act and a civil court cannot decide whether an enterprise has abused its dominant position and pass orders as are contemplated under Section 27 of the Competition Act. Merely because a set of facts pleaded in a suit may also be relevant for determination whether Section 4 of the Competition Act has been violated, does not mean that a civil court would be adjudicating that issue. Further, merely because certain reliefs sought by Micromax and Intex before CCI are also available in proceedings under the Patents Act also does not exclude the subject matter of the complaints from the scope of the Competition Act. An abuse of dominant position under Section 4 of the Competition Act is not a cause that can be made a subject matter of a suit or proceedings before a civil court.
Whether Micromax/Intex could maintain a complaint for abuse of dominance since they had contested Ericsson’s claim for infringement? - HELD THAT:- The expression “willing licensee” only means a potential licensee who is willing to accept licence of valid patents on FRAND terms. This does not mean that he is willing to accept a licence for invalid patents and he has to waive his rights to challenge the patents in question. Any person, notwithstanding that he has entered into a licence agreement for a patent, would have a right to challenge the validity of the patents. This is also clear from clause (d) of Section 140(1) of the Patents Act, which was introduced with effect from 20th May, 2003. The said clause expressly provides that it would not be lawful to insert in any contract in relation to sale or lease of a patented article or in a licence to manufacture or use of patented article or in a licence to work any process protected by a patent, a condition the effect of which may be to prevent challenges to validity of a patent. Thus, a licensee could always reserve its right to challenge the validity of a patent and cannot be precluded from doing so.
A potential licensee, could without prejudice to his rights to challenge the validity of patents could take such steps or proceedings which are premised on the patents being valid. The doctrine of election would have no application in this case and it is not necessary for a potential licensee to elect to accept the validity of patents in order to assail its abuse - it would not be necessary for Micromax or Intex to waive their rights to challenge a patent for instituting a complaint which is based on the premise that Ericsson’s patents are valid. The CCI, cannot be faulted for proceeding on the basis that Ericsson holds the SEP’s that it asserts it holds; at any rate, Ericsson cannot be heard to complain against CCI proceeding on such basis.
Whether impugned orders are without jurisdiction as being perverse? - HELD THAT:- The CCI, the DG and employees of the CCI are obliged to maintain confidentiality and secrecy of the confidential information provided by Ericsson and must take adequate measures to maintain the same. In a given case of negligence, the CCI/DG may not be immune from a claim of loss or damages if they fail to maintain confidentiality/secrecy of the sensitive information provided to them. As regards the conduct of investigation; needless to state that any arbitrary, unreasonable, capricious or malafide actions would be subjected to judicial review and it would be open for Ericsson to initiate fresh proceedings if the conduct of investigation or any actions of CCI/DG are contrary to the provisions of the Competition Act or fall foul of the constitutional standards required of an authority.
Conclusion - i) Ericsson is an enterprise under the Competition Act, allowing the CCI to investigate its conduct regarding patent licensing.
ii) The Patents Act and the Competition Act operate in their respective spheres without conflict, enabling the CCI to address anti-competitive practices in patent licensing.
iii) The allegations of excessive royalty demands and unfair licensing terms could constitute abuse of dominance, justifying CCI's investigation.
iv) The pendency of suits does not bar the CCI from exercising its jurisdiction under the Competition Act.
v) The CCI's orders are not perverse and are within its jurisdiction.
Petition dismissed.
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2016 (3) TMI 1327
Anti-Competitive Activities - interpretation of statute - meaning of 'Turnover' appearing in Section 27(b) of the Competition Act, 2002 - imposition of penalty under Section 27(b) or its proviso.
Whether the term 'turnover' appearing in Section 27(b) of the Competition Act, 2002 and its proviso means the total turnover of any enterprise or association of enterprises or person or association of persons, who may have entered into any agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services in violation of Section 3 of the Act or of an enterprise or a group which may be found guilty of abuse of dominant position within the meaning of Section 4? - Held that:- One of the well-recognized rules of interpretation of statutes is the rule of contextual interpretation. This rule requires that the Court should examine every word of a statute in its context. In doing so, the Court has to keep in view preamble of the statute, other provisions thereof, pari materia statutes, if any, and the mischief intended to be remedied. Context often provides the key to the meaning of the word and the sense it carries. Its setting gives colour to it and provides a cue to the intention of the legislature in using it.
The term 'turnover' used in Section 27(b) and its proviso will necessarily relate to the goods, products or services qua which finding of violation of Section 3 and/or Section 4 is recorded and while imposing penalty, the Commission cannot take average of the turnover of the last three preceding financial years in respect of other products, goods or services of an enterprise or associations of enterprises or a person or associations of persons. The definition of the term 'turnover' which includes value of sale of goods or services will necessarily mean the value of goods or services which are made subject-matter of investigation under Section 26 and order of punishment under Section 27. If the accusation/allegation relates to abuse of dominant position, then the Commission is required to take into consideration the factors enumerated in Section 19(4), (5), (6) and (7).
Whether while deciding the issue relating to imposition of penalty under Section 27(b) or its proviso, the Commission is required to follow some objective criteria and take into consideration factors like the nature of anti-competitive agreement and/or abuse of dominant position, appreciable adverse effect on competition, financial health of the enterprise and market condition? - Held that:- Proviso to Section 27(b) (unamended) was couched in a language, which made it mandatory for the Commission to impose on each producer, seller, distributor, trader or service provider included in a cartel, a penalty equivalent to three times of the amount of profits made out of such agreement by the cartel or 10% of the average of the turnover of the cartel for the last preceding three financial years, whichever was higher. It is thus clear that if the proviso to Section 27(b) had not been amended, then the Commission had no option but to impose penalty on each producer, seller, distributor, trader or service provider in cases involving formation of cartel. However, in its wisdom, Parliament amended the proviso and substituted the word 'shall' with the word 'may' - Since the legislature has not laid down any criteria for imposing penalty, the Commission is duty bound to consider all the relevant factors like - nature of industry, the age of industry, the nature of goods manufactured by it, the availability of competitors in the market and the financial health of the industry etc.
Unfortunately, the Commission has, while reiterating the penalty imposed on the appellants by the original order dated 24.02.2012, altogether ignored the principles laid down by the Supreme Court and the High Courts on the interpretation of statutes, which confer power upon the competent authority to impose penalty on a person who is found guilty of having acted in violation of the particular provision - Another error committed by the Commission is that even though it took cognisance of the mitigating factors highlighted by the appellants and others, it brushed aside the same simply because they were found guilty of forming a cartel and indulging in bid-rigging. The fact that many of the appellants were small scale units was also not given due weightage by the Commission while passing the impugned order.
The impression which we gather from the impugned order is that the Commission proceeded to decide the issue of penalty with a determination that the appellants who were found to be guilty of formation a cartel/collusive bidding must be punished so that others may learn a lesson from this. This approach is wholly inconsistent with the objective sought to be achieved by the Act, which is not only aimed at preventing practices having adverse effect on competition, but also to promote and sustain competition in market and to protect the interest of consumers. The Commission could not have over looked the fact that the appellants had reduced their rates after negotiations with IOCL and there was no evidence that they had made unwarranted profits by supplying cylinders at the particular rates.
The matter is again remitted to the Commission for deciding the issue relating to imposition of penalty under Section 27(b).
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2016 (3) TMI 1326
Anti-Competitive Activities - closure of proceedings of the case under Section 26(2) of the Competition Act, 2002 - discrimination followed by DGHS and ECHS between hospitals on the basis of their accreditation to the National Accreditation Board for Hospitals and healthcare providers (NABH) - appellant - informant has alleged that there is no scientific basis to this discrimination.
Whether DGHS and ECHS can be termed as 'enterprise' under Section 2(h) to make them liable under Sections 3 or 4 as the case may be?
Whether there has been any discrimination introduced by the fact of accreditation of hospitals to NABH by fixing higher rates for the accredited hospitals and thereby creating a discriminatory environment not based on sound reasons leading to abuse of dominance by Respondent Nos. 1 and 2?
Held that:- It can be clearly seen that CGHS is not just a facilitative mechanism but it also provides healthcare facilities by itself in the out-patient departments. In cases which require hospitalization or further specialized care, references are made to hospitals which are empanelled for the purpose. It is thus amply clear by its own admission that Respondent No. 1 is not just a facilitator for its target group to seek healthcare in empanelled hospitals but itself provides healthcare in its 273 allopathic dispensaries, 19 polyclinics, 73 labs and 85 Ayush hospitals. This network is further supplemented by private hospitals (648) and diagnostic centres (148). The last two are empanelled following a procedure given out in the Office Memorandum which has fixed differential rates for NABH accredited and non-accredited hospitals.
Central Government Health Scheme (CGHS) is a health scheme for serving/retired Central Government employees and their families." Further the DGHS is clearly in the nature of a service provider that does not perform a function which can be termed as inalienable, as explained in several cases referred above. It cannot be said to be performing a sovereign function and, therefore, warranting exclusion from the definition of enterprise. CGHS is clearly an enterprise which provides healthcare services to the target group and in order to do so, in view of the constraints on its capacity, it laterally complements its resources by empanelling hospitals which include private hospitals as well. Therefore, the process of empanelment is essentially an expansion of CGHS' activities of providing healthcare to the target group. It is not a facilitation but a clear provision of service.
The Commission has taken a simplistic view of the activities of a Government department and has erred in appreciation of the scope of the definition of enterprise.
Differential pricing for treatment/facilities provided by accredited and non-accredited hospitals - Held that:- Both sides did not dwell on the subject at length. Whether the differential pricing is justified or not or in what manner it creates alleged environment for abuse of dominance are matters of detailed investigation and this Tribunal would refrain from going into the same at this stage.
The matter is remitted to the Commission for reconsideration - the Commission would take a prima facie view on whether a case is made out for investigation under Section 26(1) recognizing that DGHS is covered under the definition of 'enterprise' under Section 2(h) of the Act.
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2016 (1) TMI 1515
Declination to continue the interim order granted - abuse of dominant position - contravention of Section 3 and 4 of the Competition Act, 2002 - scope of present appeal - main petition is still pending - whether it is necessary to continue the interim order dated 09.04.2015 as modified on 21.05.2015 till the disposal of the writ petition? - HELD THAT:- It is not required to enter into the merits of the case and express any opinion regarding the validity of the order of CCI dated 13.01.2015 which is impugned in the writ petition. Since it is an issue which needs adjudication in the writ petition, it is confined only to the issue whether the order of the learned Single Judge warrants interference in an intra court appeal.
The law is well settled that the appeals before the Division Bench under Letters Patent are against the exercise of discretion by the Single Bench and therefore it is impermissible to reassess the material and seek to reach a conclusion from the one reached by the Single Bench except where the exercise of discretion by the Single Bench has been shown to have been exercised arbitrarily or perversely or where the settled principles of law regulating grant or refusal of interim protection have been ignored.
In the present case, the respondents No.2 to 4 were supplying software for electronic payment solutions (BASE-24) to several banks in India which enables the said banks to process transactions at ATMs or at the point of sale terminals of different stores since the software facilitates communication of transactions with the relevant bank’s core banking network.
It is no doubt true that the said order was in operation till a final order came to be passed by CCI on 13.01.2015. However, a clear finding has been recorded by the majority members of CCI in the order dated 13.01.2015 that the alleged dominance of the respondents No.2 to 4 in the relevant market has not been established and consequently the issue of abuse of dominant position does not arise. While arriving at the said conclusion, CCI has taken into consideration the entire factual matrix of the case and assigned detailed reasons. CCI has also recorded a clear finding that the contravention of Section 3(4) read with Section 3(1) of the Act as alleged by the informant/appellant herein has not been established.
Conclusion - The learned Single Judge thought it fit that the interim order which enables the banks to take customization and integration services from the appellant qua the software owned by the respondents No.2 to 4 herein cannot be continued any longer and accordingly the order under appeal came to be passed - The mere fact that the interim relief has ensured continuous business operations for the appellant is not a valid ground for continuing the interim order. We are also unable to agree with the plea of the appellant that irreparable damage would be caused in the absence of the interim order. In the facts and circumstances of the case, the balance of convenience is not in favour of the appellant and therefore the discretion exercised by the learned Single Judge in discontinuing the interim relief cannot be held to be illegal or erroneous.
Appeal disposed off.
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