2013 (2) TMI 582 - Commission - Indian Laws

Section 4 of the Competition Act, 2002 invoked - Abuse of dominant position - Appellant company was engaged in activities including mining, logistics and infrastructure development used services of rail transport, owned and controlled by opposite parties (OP) for transportation of iron ore extracted from mines of informant - OP reclassified iron ore based upon its end-use, thereby imposing different freights on iron ore based on its end-use - Whether OP s action of reclassification and revision of rates/freight of commodities is violation of provisions of Act and abuse of dominant position? - Whether fixing a rate or issuing a rate circular amounts to a delegated legislation and whether the CCI could go into question of validity of such a circular which was stated to be in the nature of delegated legislation - Held that - In exercise of the function of reclassification and revision of rates/freight by railways was no prima facie violation of the provisions of the Act as the power of reclassification and revision of rates/freight is entrusted to the Central Government under section 31 of the Railways Act, 1989. The exercise of such functions by itself, in the absence of any other cogent evidence establishing that such conduct is in violation of the provisions of the Act, does not justify a direction by the Commission to recommend the DG to investigate and analyse the conduct of the opposite parties as by the statutory provision, the legislature has authorized the Central Government to classify and revise rates/freight with respect to carriage of passenger and goods uniformly applicable for all the entities who wanted to avail the services of Indian railways for transporting their goods. However, in the absence of any prima facie case of violations of the provisions of the Act, being made out on the basis of available material, no interference is warranted by the Commission in instant case as no abuse of dominant position is proved here.

Issues Involved:
1. Allegation of contravention of Section 4 of the Competition Act, 2002 by Ministry of Railways and The Railway Board.
2. Determination of relevant market and assessment of dominance.
3. Reclassification of iron ore freight rates based on end-use.
4. Examination of statutory functions and abuse of dominant position.
5. Analysis of whether the actions of the Ministry of Railways constitute sovereign functions or commercial activities.

Comprehensive, Issue-Wise Detailed Analysis:

1. Allegation of Contravention of Section 4 of the Competition Act, 2002:
The informant, M/s Mineral Enterprises Limited, filed a complaint under Section 19(1)(a) of the Competition Act, 2002, against the Ministry of Railways (OP No. 1) and The Railway Board (OP No. 2), alleging contravention of Section 4 of the Act. The informant, engaged in mining and logistics, used rail transport services for transporting iron ore and claimed that the reclassification of iron ore freight rates based on end-use was unfair and discriminatory, thereby constituting an abuse of dominant position.

2. Determination of Relevant Market and Assessment of Dominance:
The informant did not clearly define the relevant market, but implied it to be 'containerized transport of commodities by Railways in India'. The Commission examined whether the issuance of rate instructions by OP No. 2 amounted to abuse of dominant position. It was noted that the informant failed to establish a prima facie case of dominance or abuse thereof.

3. Reclassification of Iron Ore Freight Rates Based on End-Use:
OP No. 2 issued rate circulars adjusting freight rates and reclassified iron ore based on its end-use, charging lower rates for domestic consumption for manufacturing iron and steel, and higher rates for other domestic purposes or export. The informant argued that this classification was unfair and discriminatory, adversely affecting competition.

4. Examination of Statutory Functions and Abuse of Dominant Position:
The Commission reviewed the statutory functions under Section 31 of the Railways Act, 1989, which empowers the Central Government to classify or reclassify commodities and alter rates. It was concluded that OP No. 2 was exercising statutory functions, and no prima facie violation of the Act was established. The Commission found that the reclassification and rate revisions were within the statutory mandate and did not justify further investigation.

5. Analysis of Sovereign Functions vs. Commercial Activities:
A minority opinion highlighted the need to differentiate between sovereign functions and commercial activities. It was argued that the Ministry of Railways, performing commercial functions, should be considered an enterprise under the Competition Act. The minority view emphasized that government departments engaged in business activities should not be exempt from competition law scrutiny. The minority opinion also stated that the Commission should investigate if the rate circulars were anti-competitive, as the Ministry of Railways holds a dominant position in the relevant market.

Conclusion:
The majority of the Commission concluded that no prima facie case of abuse of dominant position was made out, and the proceedings were closed under Section 26(2) of the Act. However, a minority opinion suggested further investigation into the alleged anti-competitive practices, emphasizing that government entities performing commercial functions should be subject to competition law.

The Secretary was directed to communicate the decision to all concerned.

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