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Law of Competition - Case Laws

Showing 241 to 260 of 341 Records

• 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.

  ---

• 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).

  ---

• 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.

  ---

• 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.

  ---

• 2015 (12) TMI 1893
  

  Cartelization by the manufacturers of cement and manipulation of prices - Section 19(1)(a) of Competition Commission Act, 2002 - constitutional validity of Rule 3 of the Competition Commission of India (Selection of Chairperson and other Members of the Commission) Rules, 2003 - violation of principles of natural justice.

  HELD THAT:- In a number of decisions, the High Courts and Supreme Court have repeatedly ruled that the Commissions, Tribunals and other administrative bodies clothed with the power to adjudicate upon the rights of the parties or pass orders adversely affecting a person or a body of persons or imposing penalty for contravention of any statutory provision or otherwise are bound to act justly, fairly and in consonance with the principles of natural justice.

  In Mahipal Singh Tomar v. State of Uttar Pradesh [2013 (5) TMI 1064 - SUPREME COURT], the Supreme Court examined the issue relating to violation of natural justice in a case where copy of the enquiry report was not furnished to the affected person and he was not given opportunity to represent his cause against the allegation of large scale irregularities in the placement of selected candidates in different colleges.

  The Chairperson did not have the opportunity of hearing the arguments of the advocates for the parties, which lasted for three days i.e. 21st, 22nd and 23rd February, 2012 and yet he became party to the decision. Obviously, he did not know what are the nature and contents of the arguments of the seven Senior Advocates and other advocates, who appeared for the parties. The minutes of the meetings recorded on those dates do not show that the remaining six Members had recorded the arguments advanced by the learned advocates, as was done by the officer who heard the arguments in Ossein and Gelatine Manufacturers' Association of India v. Modi Alkalies and Chemicals Limited and Another [1989 (8) TMI 347 - SUPREME COURT]. The Chairperson's participation in the decision making process had salutary effect on the final verdict.

  The arguments of Respondents that no prejudice has been caused to the appellants due the participation of the Chairperson in the decision-making process cannot be accepted. It is not possible to make a guesswork of what would have been the fate of the case if the Chairperson had not taken part in the decision-making process. One does not know whether the remaining six Members would have reached a positive conclusion that the appellants are not guilty of violating Sections 3(3)(a) and 3(3)(b) read with Section 3(1) of the Act and/or they would not have imposed the particular penalty under Section 27 of the Act.

  The impugned order is vitiated due to the violation of one of the facets of the principles of natural justice, we do not consider it necessary to deal with and decide other points argued by the learned counsel for the appellants for assailing the order under challenge - The impugned order is set aside and the matter is remitted to the Commission for fresh adjudication of the issues relating to alleged violation of Sections 3(3)(a) and 3(3)(b) read with Section 3(1) of the Act by the appellants. The appellant shall be entitled to withdraw the amount deposited by them in compliance of the interim order passed by the Tribunal.

  Appeal allowed.

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• 2015 (12) TMI 1776
  

  Anti-Competitive Activity - cord blood banking - umbilical cord stem cell banking services - It is the case of the appellant that Cryo-Save based in Bangalore and Babycell based in Lonavala were prepared to pay higher amount per case, it chose Cryobanks because of better technology - Smt. Manju Jain entered into an agreement with LifeCell to obtain its umbilical cord stem cell banking services - appellant having an arrangement with Cryobanks and LifeCell cannot be permitted to provide its services to the hospital whee Smt. Manju Jain visited - alleged abuse of dominant position - contravention of Section 3(1) of Competition Act, 2002.

  Whether the finding recorded by the majority of the Commission that the appellant is guilty of acting in violation of Section 3(1) of the Act is legally sustainable?

  Whether the penalty of ₹ 3,81,58,303/- imposed by the Commission by taking into consideration total turnover of the appellant for last three financial years is legally justified?

  Held that:- A plain reading of Section 3 makes it clear that sub-section (1) thereof can be invoked only if the agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services causes or is likely to cause an appreciable adverse effect on competition within India. Sub-section (2) of Section 3 is declaratory in nature. It provides that any agreement entered into in contravention of the provisions of Section 3(1) shall be void. Sub-section (3) contains a presumption of an appreciable adverse effect on competition if the agreement has any of the effects/consequences enumerated in clauses (a) to (d). Sub-section (4) lays down that any agreement amongst enterprises or persons at different stages or levels of the production chain in different markets, in respect of production, supply, distribution, storage, sale or price of, or trade in goods or provisions of services including those specified in clauses (a) to (e) shall be an agreement in contravention of sub-section (1) if such agreement causes or is likely to cause an appreciable adverse effect on competition in India.

  While recording a finding that the appellant is guilty of violation of Section 3, the Jt. DG and the Commission completely overlooked that the agreement entered into between the appellant and Cryobanks did not, in any manner, restrict the choice of the service provider in the relevant market i.e. market for stem cell banking. By virtue of the agreement, the appellant could provide stem cell banking services to the patients who wanted to avail such services only through Cryobanks but the latter was free to enrol any patient(s) for such services to be availed in any other hospitals, maternity homes etc. - The Jt. DG and the Commission confused the basic issue by presuming that the stem cell banking service was an integral part of the maternity services provided by the appellant hospital and this confusion has resulted in miscarriage of justice in as much as the appellant has been found to be guilty of violating Section 3(1) of the Act without any evidence that the refusal of the appellant to allow LifeCell to provide stem cell banking services to Smt. Manju Jain had appreciable adverse effect on competition.

  Section 3 speaks of anti-competitive agreement and Section 4 deals with abuse of dominant position. A finding that the particular agreement is anti-competitive or any enterprise or group of enterprises are guilty of abuse of dominant position can be recorded only with reference to the particular goods, product or service. An enterprise may be engaged in manufacture, production, supply, distribution, etc. of multiple products. Another enterprise like the appellant may be engaged in providing multi-dimensional services. Such enterprise may be found guilty either of entering into anticompetitive agreement with reference to particular product/goods or services or may be held guilty of abuse of dominant position in respect of such product/goods or services, but the finding of violation of Sections 3 and/or 4 of the Act recorded by the competent authority i.e. the Commission cannot be made applicable to agreements entered into between the enterprise and another person in respect of other products, goods or services qua there is no allegation of anti-competitive agreements or abuse of dominant position and the turnover of other products and services cannot be clubbed with the one qua which a finding of violation of the provisions of the Act is recorded.

  The appellant has been providing multiple healthcare services, maternity service being one of them and stem cell banking which is being provided by a third party (Cryobanks), can at best be considered as a small part of the maternity services provided to those who are desirous of availing such services. Therefore, even if the finding of the majority of the Commission that the agreement entered into between the appellant and Cryobanks is violative of Section 3(1) of the Act is to be upheld, the turnover of the appellant with reference to stem cell banking services only could be taken into consideration for the purpose of imposing penalty and not the turnover with reference to other services or income derived from other sources.

  Appeal allowed.

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• 2015 (12) TMI 1773
  

  Anti-competitive Activities - bid rigging - Cartel - contract for supply of feed valves by Respondent No. 2 - suppression of material facts - it was alleged that the appellants have indulged in bid- rigging/collusive bidding and thereby contravened the provisions of Section 3(1) read Section 3(3)(a) and 3(3)(d) of the Act - penalty imposed on average turnover - case of appellant is that findings recorded by the DG and the Commission on the issues of formation of cartel and bid rigging/ collusive bidding is perverse.

  Held that:- The cartel is an association of producers who by agreement among themselves attempt to control production, sale and prices of the product to obtain a monopoly in any particular industry or commodity. Analysing the object of formation of a cartel in other words, it amounts to an unfair trade practice which is not in the public interest. The intention to acquire monopoly power can be spelt out from formation of such a cartel by some of the producers. However, the determination whether such agreement unreasonably restrains the trade depends on the nature of the agreement and on the surrounding circumstances that give rise to an inference that the parties intended to restrain the trade and monopolise the same.

  The observation made by the Commission that the appellants had adopted a strategy which involved supplementary/complementary bidding by EL and FTRTIL is based on pure conjectures and is liable to be rejected because before making this observation, the Commission did not give any opportunity to the two appellants to have their say. Similarly, the observation made by the Commission that the Tender Committee committed an illegality in overlooking the bids of EL and FTRTIL is ex facie erroneous. Once the competent authority had laid down particular conditions required to be fulfilled by the tenderer and the two of the three tenderers failed to comply with the same, the Tender Committee and Respondent No. 2 cannot be said to have committed any illegality by not acting upon their tenders. The Tender Committee could have recommended for fresh tendering and Respondent No. 2 could have accepted that recommendation but their failure to do so cannot lead to an inference that they have acted with ulterior motive or that the Tender Committee ought to have waived the defects/deficiencies and allowed the two appellants i.e. EL and FTRTIL to participate in the bid or called them for negotiations.

  The variation in the quantum of price quoted by the appellants is also evident from the statement furnished by the learned counsel for Respondent No. 2. Therefore, it must be held that both the DG and the Commission committed grave error by relying upon the so-called past conduct of the appellants in quoting identical price as a plus-factor for arriving at a conclusion that they had formed a cartel.

  The findings and conclusions recorded by the DG and the Commission that the appellants are guilty of cartel formation and bid-rigging are legally unsustainable - also, the penalty imposed by the Commission is based on erroneous interpretation of Section 27(b) and is liable to be set aside.

  The impugned order is set aside and the penalty imposed on the appellants by the Commission is quashed - Appeal allowed.

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• 2015 (11) TMI 1818
  

  Refusal of order of investigation - Whether the Competition Commission of India (for short, the Commission) is legally correct and justified in refusing to order an investigation into the alleged abuse of dominant position by Respondent Nos.3 to7?

  HELD THAT:- While examining information received under Section 19, the Commission has only to satisfy itself whether or not there exists a prima facie case requiring an investigation. If the Commission finds that the averments contained in the information do not disclose any prima facie case, then only it can order closure of the matter. However, for that purpose the Commission cannot delve deep into the merits of the allegations, rely upon undisclosed material and record a finding on the tenability or otherwise of the allegations.What we wish to emphasise is that while scrutinising the allegations contained in the information, the Commission should not confuse the formation of prima facie opinion with the final determination of the issues raised by the informant.

  In view of the judgement of the Supreme Court in COMPETITION COMMISSION OF INDIA VERSUS STEEL AUTHORITY OF INDIA LTD. [2010 (9) TMI 215 - SUPREME COURT], an order passed by the Commission under Section 26(1) cannot be made subject- matter of appeal under Section 53-B but legality and propriety of an order passed under Section 26(2) can certainly be subjected to judicial scrutiny by the Tribunal. In other words, if in exercise of the appellate power vested in it under Section 53-B the Tribunal is satisfied that the negative opinion formed by the Commission on the issue of existence of a prima facie case is vitiated by an error of law, then it can set aside the impugned order and direct an investigation under Section 26(1) of the Act.

  Unfortunately, in the present case, the Commission has not undertaken an exercise to find out whether the information and written submissions filed by the appellant along with documents disclose a prima facie case. Instead, it went on to examine the merits of the allegations, relied on the information available on the website of the Ministry of Petroleum and Natural Gas, took into consideration the installed refining capacity of the industry as a whole and held that none of the players in the relevant market is in dominant position. The Commission then referred to the Market Guidelines and made a categorical observation that the guidelines relate to quantity and quality control aspects and the same do not appear to fall foul of any of the provisions of the Actand the impugned agreement is not likely to create any barrier to the new entrants in the market nor it drives the existing competitors out of the market - This approach of the Commission is not consistent with the philosophy underlying in Section 26(1).

  Thus, there are no hesitation to hold that a prima facie case is disclosed from the allegations made by the informant and the Commission committed an error by refusing to order an investigation under Section 26(1) - impugned order is set aside and the matter is remanded to the Commission for issue of a direction to the Director General under Section 26(1) for conducting an investigation - appeal allowed.

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• 2015 (9) TMI 1691
  

  Refusal to direct an investigation - Section 19(1)(a) of the Competition Act, 2002 - closure of case under Section 26(2) of the Act - whether the appellant should be non-suited on the ground that he had not approached the Commission with clean hands and that he has been representing and espousing the cause of M/s. B.S.N. Joshi & Sons Ltd.?

  HELD THAT:- A reading of the plain language of Section 18 shows that the Commission is under an obligation to ensure that practices having adverse effect on competition are eliminated. The Commission is also duty bound to promote and sustain competition, protect the interest of consumers, and ensure freedom of trade carried on by other participants in markets in India. Of course, the exercise of power under Section 18 is subject to other provisions of the Act. Section 19(1) empowers the Commission to inquire into the allegations of contravention of Section 3(1) of Section 4(1) of the Act. This can be done by the Commission on its own motion or on receipt of any information from any person, consumer or their association or trade association or on a reference made by the Central Government or the State Government or a statutory authority. While determining whether or not an agreement has an appreciable adverse effect on competition under Section 3, the Commission is required to take into consideration all or any of the factors enumerated in Clauses (a) to (f) of Section 19(3) of the Act.

  It is significant to note thatParliament has neither prescribed any qualification for the person who wants to file an information under section 19(1)(a) nor prescribed any condition which must be fulfilled before an information can be filed under that section. There is nothing in the plain language of Sections 18 and 19 read with Section 26(1) from which it can be inferred that the Commission has the power to reject the prayer for an investigation into the allegations involving violation of Sections 3 and 4 only on the ground that the informant does not have personal interest in the matter or he appears to be acting at the behest of someone else - In a given case, the Commission may not act upon an information filed under section 19(1)(a) but may suo moto take cognizance of the facts constituting violation of Section 3(1) or Section 3(4) of the Act and direct an investigation. The Commission may also take cognizance of the reports appearing in print or electronic media or even anonymous complaint/representation suggesting violation of Sections 3 and 4 of the Act and issue direction for investigation under Section 26(1). The only limitation on the exercise of that power is that the Commission should feel prima facie satisfied that thereexist a prima facie case for ordering into the allegation of violation of Sections 3(1) or 4(1) of the Act.

  Thus, the appellant cannot be non-suited by accepting the argument of the learned counsel for the respondents that he is espousing the cause of M/s. B.S.N. Joshi & Sons Ltd. The fact that the appellant is practising as an advocate with the counsel who has been representing M/s. B.S.N. Joshi & Sons Ltd. in other cases is not sufficient to draw a dubious inference that he is prosecuting the interest/cause of M/s. B.S.N. Joshi & Sons Ltd. That apart, the respondents have not disputed that the appellant is a consumer of electricity generated and supplied by Respondent No. 2. Therefore, its locus to file an information under section 19(1)(a) cannot be questioned.

  Whether the majority order of the Commission is vitiated by an error of law and calls for interference under Section 53-B of the Act? - HELD THAT:-If in exercise of the appellate power vested in it under Section 53- B the Tribunal is satisfied that the negative opinion expressed by the Commission on the issue of existence of a prima facie case is vitiated by an error of law then it may set aside the impugned order and direct an investigation under Section 26(1) of the Act - A reading of the impugned order shows that while refusing to order an investigation into the allegations made by the appellant that Respondent Nos. 3 to 5 had formed a cartel and successfully prevented competition in the matter of award of liaison work for procurement of quality coal and supervision of transportation thereof, the majority of the Commission altogether over looked the unequivocal finding recorded by the Supreme Court in the order passed in Contempt Petition No. 245/2007.

  Another grave error committed by the Commission is that even though it did take cognizance of the chart containing the rates quoted by Respondent Nos. 3 to 5 for the year 2010 but totally ignored the allegations made in the information and the documents filed on 15.10.2003. Thus there is no escape from the conclusion that the view expressed by the majority of the Commission that no prima facie case is made out for directing an investigation under Section 26(1) suffers from a patent legal infirmity.

  The majority order of the Commission is set aside. The Director General shall now conduct investigation into the allegations contained in the information filed by the appellant under section 19(1)(a) and submit a report to the Commission within three months. However, it is made clear that while making investigation, the Director General shall not proceed on the premise that Respondent No. 2 was a part of the cartel - Appeal allowed.

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• 2015 (7) TMI 1443
  

  Reasonableness of rate of interest payable on refund of registration amount - HELD THAT:- The Commission has clearly erred in interfering with the contractual rate of interest in absence of any finding against the actions and orders of the appellant. Without returning a finding that there was any unfair trade practice or any restrictive/monopolistic trade practice pursuant to inquiry under the provisions of the Act, the Commission clearly erred in compensating the respondent with a higher rate of interest. Even the basis for grant of higher interest is without discussion of any material. The judgment and order under appeal indicates no material for coming to the impugned finding that payment of interest on the registration amount should not be less than one charged from the applicants when they commit a default. A default clause is introduced to deter any delay or default and hence such penalty is by its very nature a deterrent one. That by itself offers a reasonable justification for the appellant to charge a higher rate of interest in the case of delay/default. So far as interest on the registration amount is concerned it stands on a different footing. In absence of relevant pleadings and evidence it cannot be presumed that the appellant has resorted to any unfair trade practice as defined under Section 36A or has increased its price unreasonably or made unreasonable earnings by investing the registration amount in accounts bearing higher interest.

  Conclusion - The Commission has clearly erred in interfering with the contractual rate of interest in absence of any finding against the actions and orders of the appellant.

  Tthe impugned order of the Commission awarding interest at the rate of 12% per annum on the registration amount and also award of Rs. 5000/- towards litigation charges are found to be against law and unjustified. The impugned judgment and order is therefore set aside - appeal allowed.

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• 2015 (7) TMI 828
  

  Validity of impugned order - Abuse of dominant position - Practice of anti-competitive activities - Held that:- The duties of the Director General are enumerated in Chapter V of the Competition Act, 2002. Section 41(1) obliges the Director General, to assist the Commission in investigating into any contravention of the provisions of the Act or any Rules or Regulations made thereunder. But, he shall do so only "when so directed by the Commission." But, Sub-Section (2) of Section 41 confers upon the Director General, the same powers as are vested upon the Commission under Section 36. In other words, the Director General has powers to summon and enforce the attendance of any person to examine him, to order the discovery and production of documents, to receive evidence on affidavit, to issue Commissions for the examination of witnesses or documents and to requisition the production of any public record or document. The provisions of Sections 240 and 240A of the Companies Act, 1956 are made applicable to an investigation made by the Director General, as they would apply to an Inspector appointed under the Companies Act.

  As a matter of fact, if a person fails to comply, without reasonable cause, with a direction given by the Director General in terms of Section 41(2), such a person is liable to be punished with fine. Therefore, it is clear that the role of the Director General is actually to assist the Competition Commission in the effective discharge of its duties. - Therefore, Section 19(1)(b) may have to be read and understood in the context of Section 21 and 21A of the Competition Act, 2002. If so done, it will be very clear that the word "Statutory Authority" found in Section 19(1)(b), Section 21 and Section 21A cannot include the Director General. There is yet another reason for my conclusion. The Proviso to Section 21(1) empowers a Statutory Authority to make a reference suo motu to the Commission. But the Director General is not empowered to initiate an investigation suo motu. Therefore, the Director General cannot come within the definition of the expression "Statutory Authority".

  First contention that the permission to expand the scope of the enquiry cannot be construed as the initiation of investigation suo motu by the Director General. So long as the Competition Commission has the power to initiate an enquiry suo motu and take the assistance of the Director General in the conduct of such enquiry and so long as there is no bar for the Director General to provide information under Section 19(1)(a) of the Act, the petitioner cannot find fault either with the Director General or with the Commission. In this case the Director General did not rope in other car manufactures, of his own accord. The Director General, by filing a memo, merely brought to the notice of the Commission that there are other car manufactures who follow the very same practices, as followed by the three Respondents named by Mr.Kataria. The Commission directed the Director General to include the others also within the purview of the initiation of investigation suo motu by the Director General.

  Commission must record its reasons for forming a prima facie opinion with reference to the information furnished to the Commission. After pointing out in para 93 of its decision that the functions performed by the Commission are in the nature of preparatory measures in contrast to the decision making process, the Supreme court nevertheless held in para 97 that at the stage of forming a prima facie view under section 26 (1), the Commission should record minimum reasons for formation of a prima facie opinion. Therefore, it is contended by the petitioner that since the order dated 26.04.2011 does not contain any reason and does not reflect the formation of a prima facie opinion, the impugned proceedings are vitiated.

  The powers conferred upon an Inspector under Section 240 and 240A of the Companies Act, 1956 are just procedural in nature. The power conferred under these provisions include the power (i) to require any body corporate to furnish information or to produce such books and papers as he may consider necessary; (ii) to keep in his custody any books and papers; (3) to examine someone on oath; and (4) to seize documents. All that sub-section (3) of Section 41 says is that these powers can be exercised by the Director General, subject to the powers conferred by the Commission under sub-section (2) of Section 41 read with sub-section (2) of Section 36. - Therefore, the Director General merely placed an additional information before the Commission by his memo dated 19.04.2011. If the Commission had not issued a direction on 26.04.2011, the Director General could not have proceeded against all other car manufactures. The direction issued by the Commission on 26.04.2011 would tantamount to a directions under Section 41(1). Therefore, the question of overstepping of jurisdiction did not arise.

  Commission or the Director General had not done anything in a manner otherwise than what is prescribed in the Act and the Regulations. As stated earlier, the Director General did not suo motu initiate any investigation. He merely placed before the Commission, an information already available in the complaint lodged by the individual. It was an additional information that could be taken note of under the Proviso to Section 26(1). The Commission had already formed a prima facie opinion and recorded its reasons in respect of the three named car manufacturers. Therefore, it was not necessary for the Commission to again and again record reasons. The Commission did not come to any conclusion with regard to the writ petitioners, on the basis of any special pleadings as against them. The decision taken by the Commission was only to expand the scope of the investigation. Therefore, I do not think that either the Director General or the Competition Commission overstepped the jurisdiction vested in them in law. - Decided against Appellants.

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• 2015 (4) TMI 1354
  

  Anti-competitive practices in the nature of ‘exclusive agreements’ with sellers of goods/services - It has been urged that due to such practices, the consumer is left with no choice in regards to terms of purchase and price of the goods and services as thebuyer/consumercan either accept the terms and conditions in totality of the e-portal or opt not to buy the product - contravention of the provisions of section 4 of Competition Act, 2002 - HELD THAT:- For analysing allegations pertaining to contravention of section 3 (4) read with section 3(1) of the Act, it is necessary to first establish the existence of an agreement/arrangement. Once the agreement is proved, the next enquiry is into the effects of such agreement/arrangement; the test being AAEC as per the factors laid down under section 19(3) of the Act.

  Though the OPs have denied exclusive arrangements, accepting that such exclusive arrangement did in fact exist, the important question is whether such arrangements/agreements are anti-competitive. Section 3(1) of the Act unequivocally condemns only such agreement/arrangement/understanding which has or is likely to have an AAEC in the market. Section 3(3) of the Act presumes AAEC in case of certain horizontal agreements/arrangements which have been specifically identified therein. However, vertical agreements/arrangements under section 3(4) and other agreements/arrangements which do not fall under section 3(3) are anti-competitive only when AAEC is proved.

  The bare perusal of the agreement on the touchstone of the factors laid out suggests that such agreements do not result into AAEC. It does not seem that such arrangements create any entry barrier for new entrants. It seems very unlikely that an exclusive arrangement between a manufacturer and an e-portal will create any entry barrier as most of the products which are illustrated in the information to be sold through exclusive e-partners (OPs) face competitive constraints. For example, mobile phones, tablets, books, camera etc., are neither alleged nor seem to be trodden by monopoly or dominance. Further, it does not appear that because of these exclusive agreements any of the existing players in the retail market are getting adversely affected, rather with new e-portals entering into the market, competition seems to be growing.

  With regard to allegations pertaining to section 4 of the Act, the relevant market needs to be determined where OPs are operating. In this context, the Commission is convinced with the OPs that every product cannot be taken as a relevant market in itself. Irrespective of whether we consider e-portal market as a separate relevant product market or as a sub-segment of the market for distribution, none of the OPs seems to be individually dominant - the Commission does not consider it necessary to go into the question of abuse of dominance by the OPs as raised by the Informant and ADCTA.

  The Commission is of the prima facie view that no case of contravention of the provisions of either section 3 or section 4 of the Act is made out against the OPs - the matter is closed under the provisions of section 26(2) of the Act.

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• 2015 (4) TMI 1234
  

  Jurisdiction - power of CCI to recall/review an order u/s 26(1) of Competition Act, 2002 - Whether CCI has the power to recall/review an order passed by it of directing/causing investigation in exercise of powers under Section 26(1) of Competition Act, 2002? - Held that:- Order of the CCI/direction to the DG, CCI in exercise of power under Section 26(1) of the Act, to cause investigation, is capable of review/recall - Such a power though found to exist has to be sparingly exercised.

  Such a power has to be exercised on the well recognized parameters of the power of review/recall and without lengthy arguments and without the investigation already ordered being stalled indefinitely. In fact, it is up to the CCI to also upon being so called upon to recall/review its order under Section 26(1) of the Act to decide whether to, pending the said decision, stall the investigation or not, as observed hereinabove also. The jurisdiction of review/recall would be exercised only if without entering into any factual controversy, CCI finds no merit in the complaint/reference on which investigation had been ordered. The application for review/recall of the order under Section 26(1) of the Act is not to become the Section 26(8) stage of the Act.

  The respondent No. 1 CCI has the power to recall/review the order under Section 26(1) of the Act but within the parameters and subject to the restrictions - The respondent No. 1 CCI in the present case dismissed the application of the appellants for review/recall being of the opinion that it is not vested with such a power - The matter has thus to be remanded to the respondent No. 1 CCI for consideration of the application of the appellants for review/recall afresh - appeal allowed by way of remand.

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• 2015 (4) TMI 377
  

  Contravention of provisions related to car maintenance and repairing services - Section 19(1)(a) of the Competition Act, 2002 - Held that:- The Commission has perused the information available on record including written submissions and heard the counsel of the Informant. The Commission notes that the matter is related to deficiency in services provided by OP 3 and OP 4 in repairing the engine of the car owned by an individual. Therefore, in the opinion of the Commission the subject matter of the present information does not fall within the domain of the competition law. In light of aforesaid observation, an assessment of the alleged abusive conduct of the Opposite Parties is not required.The Commission further notes that the Informant has made some vague allegations of collusion against all the Opposite Parties but there is nothing on record to substantiate such allegations.

  In the light of the above facts and situation, the Commission finds that no, prima facie, case is made out against the Opposite Parties. Therefore, the case deserves to be closed down under Section 26(2) of the Act.

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• 2015 (4) TMI 343
  

  Revision of package rates applicable under Central Government Health Scheme (CGHS) - Different rates of reimbursement to the private hospitals based on their accreditation with National Accreditation Board for Hospitals (NABH) - Indulging in unfair trade practice - Contravention of provisions of Section 3 and 4 of Competition Act ,2002 -

  Held that:- The activities performed by the above said entities cannot be covered under the definition of enterprises in terms of Section 2(h) of the Act as they are not engaged in any commercial or economic activities and as such provisions of Section 4 of the Act are not attracted against them. Therefore no, prima facie, case is made out under the provisions of Section 4 of the Act in the matter.The different rates prescribed by DGHS for NABH accredited hospitals cannot be considered as anti-competitive in any manner, rather it would act as an incentive to non-accredited hospitals to secure such accreditation and provide quality health care services, which will ultimately benefit the patients.

  As regards the allegations of violation of Section 3 of the Act, the Informant has not submitted any cogent evidence stating existence of any agreement, in any manner, between the Opposite Parties in the matter. Thus, prima facie, no case in terms of Section 3 of the Act is made out against the Opposite Parties.

  In view of the aforesaid, the Commission holds that no prima facie case is made out against the Opposite Parties either under the provisions of Section 3 or Section 4 of the Act for making a reference to the Director General for conducting investigation into the matter. - Order to close the proceedings.

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• 2015 (4) TMI 307
  

  Application for approval of Scheme of Arrangement under Section 391-394 of the Companies Act,1956 - Objections received from Sales promotion employees of transferor company and one Unsecured creditor - Observations made by Official Liquidator and Regional Director - Held that:- It was submitted that it does not dispute the locus of employees, who filed the applications. He submitted that it is a small group of 750 employees out of total 13000- 14000. All the rights of the existing employees of the Transferee Company have been fully protected under Clause 13 of the Scheme of Arrangement. It has been specifically mentioned therein.

  Further submitted that the objector was one of the unsecured creditor to the extent of ₹ 17,86,276.80. A sum of Euro 45,000 were paid to the objector in June, 2014, which cleared entire debt due against the transferor company. Once it was not the creditor of the Transferor Company, it had no locus to file the application.

  In the report of the Official Liquidator, it has been stated that the Scheme of Arrangement is prejudicial to the interest of revenue and public at large, as the Scheme is designed to set off “Carry Forward and Set Off Accumulated Losses and Unabsorbed Depreciation” of the Transferor Company against profits of the profit making Transferee Company. The Scheme was sent to the Income Tax Department. No comments have been received. In case it is legally permissible for the Transferor Company to carry forward and set off all the losses, it shall be entitled to the benefit in case the law does not put a restriction thereon.

  In response to observation made by Regional Director it was submitted that scheme has been prepared in terms of Accounting Standard-14. Copy of the Scheme was sent to the Chief Commissioner of Income Tax, Chandigarh. How ever, no comments have been received.Also all legal formalities required shall be complied with by the Transferor Company.

  A perusal of the order passed by the Commission shows that exhaustive exercise was carried out to find out the effect of merger on the public at large. The Commission has issued comprehensive directions in consonance with the provisions of the Competition Act, which are to be complied with by the Transferor / Transferee Companies.No doubt, the Commission has taken full care of the interest of the consumers of the medicines manufactured by both the companies, however, still as an abundant caution, it is added that during the period the entire process of Divestment is completed, the monitoring agency shall also monitor the prices of the drugs manufactured by the combined entity.

  For the reasons afore-stated and on consideration of all the relevant facts and the procedural requirements contemplated under Sections 391 to 394 of the Companies Act, 1956 and the relevant Rules the Scheme of Arrangement approved.

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• 2015 (4) TMI 306
  

  Discriminatory conditions in franchisee agreement for sale of premium sports goods - Contravention of provisions of Section 4 of the Competition Act - Denial to collect unsold goods - Held that:- The Commission finds two fundamental flaws in the allegations made by the Informant. Firstly, 'the Agreement' which was termed as unfair and arbitrary was entered into in 2003 when the alleged dominant group had not even come into existence. Secondly, even if the submission of the Informant regarding dominance of the Adidas AG Group is accepted post the formation of group in 2005, the conduct of the Adidas AG Group vis-a-vis the Informant remained same (as 'the Agreement' was said to be continued on same terms and conditions). Further, as per Informant's own submissions, the agreement with M/s Neelkanth Traders was more favourable than the one with it which fact goes against the allegation of abuse by the Adidas AG Group.

  The Commission further notes that the allegation of the Informant regarding the Opposite Party No. 3 not taking back the dead stock lying in the custody of the Informant which allegedly inflicted financial harm on it, prima facie does not raise any competition concern. Otherwise also, the Informant did not provide any correspondence sent to the Opposite Party No. 3 regarding the dead stock lying at its store between February, 2009 (when the last sale of the Opposite Party No. 3's products from the Informant's Franchise was being made) and 16 January, 2014 when allegedly a request was made to take back the dead stock.

  Based on the foregoing, the Commission is of the considered opinion that the conduct of the Adidas AG Group, prima facie, does not amount to any contravention of the provisions of Section 4 of the Act. Therefore, even though the Adidas AG Group appears to be a dominant group in the relevant market defined supra, the facts available on record show no violation of provisions of Section 4 of the Act in the present matter. - Case closed down.

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• 2015 (4) TMI 271
  

  Acquisition of power company - Regulation 14 of the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 - Held that:- It is observed that as the Acquirers have only a small presence in power generation in India, the proposed acquisition of the Target SPVs by the Acquirers, is not likely to have any appreciable adverse effect on competition in India.

  Considering the facts on record and the details provided in the notice given under sub-section (2) of Section 6 of the Act and the assessment of the combination after considering the relevant factors mentioned in sub-section (4) of Section 20 of the Act, the Commission is of the opinion that the proposed combination is not likely to have appreciable adverse effect on competition in India and therefore, the Commission hereby approves the proposed combination under sub-section (1) of Section 31 of the Act. - Acquisition approved.

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• 2015 (4) TMI 231
  

  Abuse of dominant position by imposing unfair condition in agreement - Contravention of provisions of Section 4 of the Competition Act - Held that:- It is the case of the Informant that some of the clauses of 'the Agreement' are unilateral, one sided and unfair which is violative of the provisions of Section 4 of the Act. Such unfair clauses include the Opposite Party can unilaterally abandon of project without giving any reason to the buyers and its liability is limited to refunding the deposited money with 9 % simple interest; the Opposite Party can alter/modify the building plan, etc. without the consent of buyers; the buyer is required to pay an interest of 15% - 18% per annum for any delayed payment of instalment whereas the Opposite Party is to refund only the amounts received from the buyer without interest or in some cases 9% interest in the event of cancellation of the project, no provision for adequate compensation to buyers in case of failure on the part of the Opposite Party to deliver the possession within the stipulated time; unfair and one sided formation of owners' association by the Opposite Party, etc. Having examined the clauses of 'the Agreement' it appears that some of them are unilateral, one sided and loaded in favour of the Opposite Party.

  Based on the above, the Commission is of the view that the above said conduct of DLF Group, emanating from its dominant position in the relevant market, prima facie, amounts to imposition of unfair terms and conditions on the commercial office buyers which is anti-competitive as per the provisions of Section 4(2) (a) (i) of the Act.It is a fit case for investigation by the Director General (DG). - The Commission directs the DG for investigation into the matter.

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• 2015 (4) TMI 214
  

  Anti competitive practices - genuine spare parts of automobiles manufactured by respondents are not made freely available in the open market - even the technological information, diagnostic tools and software programs required to maintain, service and repair the technologically advanced automobiles manufactured by each of the aforesaid OPs were not freely available to the independent repair workshops - The OPs and their respective dealers, as a matter of policy, refuse to supply genuine spare parts and technological equipment for providing maintenance and repair services in the open market and in the hands of the independent repairers - restrictive practice carried out by the OPs in conjunction with their respective authorized dealers, amounts to denial of market access to independent repair workshops - OPs charge arbitrary and high prices to the consumers who are forced to avail the services of the authorized dealers of the OPs for repairing and maintaining their automobiles since the genuine spare parts, diagnostic tools and the technological information required to service their cars are not made available by the OPs to independent repair workshops - contravention of sections 3(3)(a) and 3(3)(b) of the Competition act - violation of section 3(4)(d), section 4(2)(a), 4(2)(b) and 4(2)(c) of the Act.

  Jurisdiction of commission to inquire the conduct of those OPs which were not named specifically in the information filed by the Informant - Held that:- Commission is a statutory body, established under the Act with the legislative mandate inter alia to prevent the practices having adverse effect on competition, to promote and sustain competition in the markets, to protect the interests of consumers and to ensure freedom of trade carried on by other participants in the markets, in India. To perform the above mentioned functions, under the scheme of the Act, the Commission is vested with inquisitorial, investigative, regulatory, adjudicatory and advisory jurisdiction. The Commission is entitled to evolve its own procedure under section 36(1) of the Act for conducting inquiry as contemplated under the provisions of the Act. Further, the said inquiry is set into motion before the Commission in accordance with the provisions of section 19 of the Act, which is to be conducted by the Commission as per the procedure provided under section 26 of the Act. Under section 26(1) of the Act, the Commission has to form only a prima facie opinion as to the existence of contravention of any provision of the Act and pass a direction to the DG to cause an investigation to be made into the matter and submit its report. The direction under section 26(1) is an administrative direction to the DG for investigation of contravention of provisions of the Act, without entering upon any adjudicatory or determinative process. It does not effectively determine or affect rights or obligation of the parties.

  Although only 3 OPs were named in the information but the information and additional information disclosed that the allegations were not confined to the named OPs and the Informant had requested the Commission to inquire into alleged anti-competitive conduct of other OEMs also - The direction of the Commission was with respect to alleged anti-competitive conduct by the said industry in general and not specifically qua the car manufacturers named in the information. This is apparent from the order of the Commission dated April 26, 2011 which was passed after considering the request of the DG when he found, at that stage that alleged anti-competitive conduct was not confined to the named entities in the information but was prevalent across the industry. - Commission is of the opinion that the objections taken by the OPs regarding jurisdiction of the Commission are not only contrary to the scheme of that but also do not capture the factual position in the correct perspective. Based on above discussion the contention raised by the OPs has no force and is liable to be rejected.

  Whether the Opposite Parties have violated the provisions of section 4 of the Act as has been alleged - Determination of Relevant Market - Held that:- DG, during the course of its investigation, considered the nature of the business and conduct of the OEMs and concluded that the product market in the automobile sector can be categorized under the two heads: Primary Market and Secondary Market - DG has concluded that once the primary product has been purchased, consumer choice is confined to those aftermarket products or services compatible with that primary product - 'relevant market' for cars and that of spare parts consists of multiple markets, i.e., a market for primary products and separate markets for the secondary product(s) associated with each primary product (e.g. one market for all cars, individual markets for spare parts and repair and maintenance services. The Commission is of the view that the primary basis for determination of the existence of a 'systems market', as argued by the OEMs, do not exist in the present case.

  The Commission is of the view that in the current case compatibility between the primary market products and secondary market products are of primary importance. - a 'systems market' does not exist in the present case and that the relevant product market consists of the primary market for the sale of automobiles and the secondary markets for the sale of spare parts and repair and maintenance services. The Commission is of the opinion that for the purpose of this case, in order to correctly determine the relevant product market, the delineation of the primary market into separate automobile segments is not necessary.

  Whole life cost analysis - OEMs themselves do not have the data regarding the future maintenance/service costs of their own brand of vehicles. Even in instances where the OEM does possess such internal estimates, the same is considered confidential and is not shared with the consumers. If the OEMs are themselves not in possession of the basic data, to expect that an average prospective owner of a car will be able to overcome the hurdle of the high cost of information gathering and thereafter successfully engage in analyzing such data, given the various future variables to successfully undertake a whole life cost analysis would be unreasonable. Therefore, the whole life costing theory is not a feasible test for an average unsophisticated consumer in the Indian automobile market. Therefore, the Commission is not in agreement with the submissions of the OEMs that the average car owner undertakes a life cycle cost analysis before purchasing a car in the primary market.

  Reputation Effects - Commission, believes that reputational effects will not be enough to deter an OEM in the primary market from increasing prices in the secondary market if the consumers of the OEM are "locked-in" the aftermarket.

  A purchaser of a product in the primary market is to a great extent locked in with the primary product and the feasibility of switching to another primary product to avoid a price increase in the secondary market of spare parts or repair services is greatly limited - The higher is the price of the installed base, i.e., the cost of the primary market equipment, the more difficult it is to switch to another product for incremental rise in the price of the consumable parts in the secondary market.

  OEMs not only have the incentive, but have in practice, raised prices of the spare parts in the locked-in automobile aftermarket of India. Therefore, it is no longer a theoretical possibility whether consumers may be subjected to exploitative price abuse in the aftermarkets. Given the above mentioned findings of the DG, the submissions of the OEMs that they are disincentivized from charging higher prices in the aftermarket due to reputational concerns in the primary market are moot. Further, the high ratio of locked-in to new customers reduces the penalty in the primary product market of increasing aftermarket prices.

  Cluster Markets - The concept of cluster markets was applied to spare parts by the U.S. Ninth Circuit court in Image Technical Servs v. Eastman Kodak Co. [1997 (8) TMI 510 - United States Court of Appeals,Ninth Circuit]. The circuit court held that there could be a relevant market for Kodak photocopier replacement parts, notwithstanding lack of substitutability, because both independent service organizations and customers needed "all parts" in order to service or use their image machines. - From the consumer's perspective the technical differentiation between a gear box and an anti-lock system does not necessarily put such spare parts in different relevant product markets; since from the perspective of the consumer; "commercial reality" requires that she focuses on the aggregation of such products in order to service and use her Honda car. Therefore, under section 2(t); such aggregated class of products would be the appropriate relevant product market.

  The Commission is of the opinion that there exist three separate relevant markets; one for manufacture and sale of cars, another for sale of spare parts and another for 'sale of repair services'; although the market for 'sale of spare parts' and 'sale of repair services' are inter-connected. Further the Commission is of the opinion that a 'clusters market' exists for all the spare parts for each brand of cars, manufactured by the OEMs, in the Indian automobile market. - Commission is of the opinion that there exist two separate relevant markets; one for manufacture and sale of cars and the other for the sale of spare parts and repair services in respect of the automobile market in the entire territory of India.

  Assessment of Dominance of OEMs - In order to determine if the OEMs are in a dominant position, as per the provisions of Explanation (a) to section 4(2) of the Act, viz., "dominant position" means a position of strength, enjoyed by an enterprise, in the relevant market, in India, it is necessary to first examine the competitive structure of the said relevant market - Section 19(4) of the Act, provides the factors which the Commission shall take into account by the Commission, to determine if an enterprise is dominant under section 4 of the Act. One such factor is "market share of the enterprise." Market shares provide a useful first indication of the market structure and of the relative importance of the various undertakings active on the market (Hilti v. Commission [1994 (3) TMI 378 - EUROPEAN COURT OF JUSTICE].

  Each OEM has a position of strength which enables it to affect its competitors in the secondary market, i.e., independent service providers in its favour, thereby limiting consumer choice and forcing the consumers to react in a manner which is beneficial to each OEM, but detrimental to the interests of the consumers - The perusal of the agreements entered by the OEMs with the local OESs has revealed that invariably there are restrictions on the OES from supplying parts directly to third parties without the prior written consent of the OEMs. The restrictions have been placed upon the OESs ability to sell spare parts directly to third parties, where such spare parts are being manufactured by the OEMs using the drawings/ designs/ specifications/ knowledge/ toolings/ moulds/jigs/ IPRs/ trademarks etc of the OEMs. The DG has observed that none of the OEMs have confirmed even a single instance where the permission has been granted to the OESs in terms of the agreements to sell spare parts to third parties.

  Denial of market access is specifically aimed at adopting a course of conduct with a view to exclude a competitor from the market by means other than legitimate competition and such exclusionary abusive conduct allows the OEMs to further strengthen their dominant position and abuse it. - It is the opinion of the Commission that in such cases a violation of section 4(2)(c) of the Act is clearly established - OEMs have submitted that the spare parts and diagnostic tools, workshop manuals are their proprietary materials and therefore accessible only to the authorized dealers network of each OEM. The Commission notes that unlike section 3(5) of the Act, there is no exception to section 4(2) of the Act. Therefore, if an enterprise is found to be dominant pursuant to Explanation (a) to section 4(2) and indulges in practices that amount to denial of market access to customers in the relevant market; it is no defence to suggest that such exclusionary conduct is within the scope of intellectual property rights of the OEMs. On the basis of aforesaid, the Commission is of the opinion that the OEMs have denied market access to independent repairers and other multi brand service providers in the aftermarket without any commercial justification.

  Unfair Price - Fact that the OEMs are the only source of genuine spare parts compatible to its brand of automobiles in the aftermarket allows such OEMs to use the opportunities arising out of its dominant position to reap trading benefits which it would not have reaped if there had been normal and sufficiently effective competition. - Given the complete dependence of the users on the OEM for their spare parts requirements, the interest of consumers are not safeguarded in form of competitive prices of spare parts in the present scheme of things. The cost benefit, if any, that may arise from the OEM having its own distribution channels also does not seem to be passed onto the customer in the form of low prices of spare parts and there appears no justifiable efficiency factors in the form of any benefits to the consumers.

  Exploitative pricing conduct by each OEM is a manifestation of lack of competitive structure of the Indian automobile market. The Commission is therefore of the opinion, that structurally modifying the competitive nature of the Indian automobile market will itself induce market self-correcting features, by enhancing consumerchoice and access of independent repairers to effectively compete in the Indian aftermarket. Such remedies, in the opinion of the Commission shall have a rationalizing effect on prices of the products in the Indian automobile aftermarket.

  Leveraging - owners of various brands of automobiles are completely dependent on the authorized dealer network of the OEMs and are not in a position to exercise option of availing services of independent repairers. In most cases, the users of car wanting to purchase the spare parts have to necessarily avail the services of the authorized dealers of the OEM. It is therefore found that such OEMs use their dominance in the relevant market of supply of spare parts to protect the other relevant market namely; the aftersales service and maintenance thereby violating Section 4(2)(e) of the Act. Even in case of OEMs where the spare parts are available to the independent repairers as well as the owners of cars in the open market, the independent repairers are still foreclosed from the aftermarket for repairs and maintenance of the various brands of automobiles manufactured by the OEMs. This is because none of the OEMs allow their diagnostic tools, repair manuals etc., to be sold in the open market.

  The submissions of the OEMs and those of the multi-brand service providers appear to be contradictory. If the data submitted by the OEMs is correct, and an increasing number of car owners are using the services of independent service providers in the post-warranty period, then there would have been no reason for the multi-brand service providers to allege their inability to service their customers in the post-warranty period. - Commission finds the OEMs (OPs) to be indulging in anti-competitive practices resulting in contravention of section 4(2)(a)(i), 4(2)(a)(ii), 4(2)(c) and 4(2)(e) of the Act.

  Whether the opposite parties have violated the provisions of section 3 as has been alleged - Held that:- The mere selling of spare parts and diagnostic tools in the aftermarket by the OESs does not violate the intellectual property rights in such spare parts. Additionally, the OEMs can through its contractual agreements with the OESs ensure that its intellectual property rights are not compromised and are protected. The OEMs can contractually require the OESs to produce the finished spare parts (which are meant to be sold in the open market) in compliance with the applicable industry standards and other consumer laws of India ensuring that the safety of consumers purchasing such spare parts is not compromised. It is opined that there is a requirement for the creation of a collaborative space between the independent repairers, multi-brand operators, the OEMs and their OESs so that they can play an effective role in curbing the usage of spurious spare parts and providing the automobile consumers of India with competitive and efficient repair and maintenance options. Therefore, the restrictions placed on the OESs adversely affects the competition in the automobile sector and falls within the mischief of section 3(4), read with section 3(1).

  The argument of the OEMs of putting the restrictions on OESs for sale of their proprietary parts to third parties as reasonable conditions for claiming the exemption under section 3(5)(i) is found to be unacceptable devoid of any merit. - Therefore, since the exception under section 3(5)(i) is not applicable to the agreements between OEMs and OESs, the contravention found by the Commission under section 3(4)(c) & (d), read with section 3(1) stands established.

  Opposite Parties (OPs) have contravened the provisions of sections 3(4)(b), 3(4)(c), 3(4)(d), 4(2)(a)(i) and (ii), 4(2)(c) and 4(2)(e) of the Act, as applicable. As elucidated in detail in the order, the Commission does not accept the "unified systems market" in this case specifically, and in the Indian market conditions in general. The kind of parameters which have been defined even in other jurisdictions and literature for accepting the systems market approach do not normally exist in the Indian market, including in regard to availability of relevant information (e.g. life-cycle cost) to the consumers, his ability/inability to take a rational/analytical decision based on complex data which may or may not be available, the reputational impact of anti-competitive conduct in the aftermarket on the firm's product in the primary market etc. These factors are aggravated in the Indian market situation due to some globally recognised different characteristics of Indian consumer (including cost-consciousness) and the complex nature of aftermarkets.

  The parties are hereby directed to immediately cease and desist from indulging in conduct which has been found to be in contravention of the provisions of the Act.

  As regards imposition of penalty, the Commission notes that the OPs have violated the provisions of both sections 3 & 4 of the Act. Anti-competitive conduct of the opposite parties has restricted the expansion of spare parts and independent repairers segment of the economy to its full potential, at the cost of the consumers, service providers and dealers.

  The directions of the Commission will be complied with by the opposite parties in letter and spirit. Each OP is directed to file individual undertakings, within 60 days of the receipt of their order, about compliance to cease and desist from the present anti-competitive conduct, and initiation of action in compliance of other directions. This will be followed by a detailed compliance report on all directions within 180 days of the receipt of the order. The amount of penalty will be paid by the OP within 60 days of the receipt of the order. - Decided in favour of appellant.

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