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TMI Blog2011 (5) TMI 1067X X X X Extracts X X X X X X X X Extracts X X X X ..... ved into a more comprehensive Indian Electricity Act 1910, which was the first basic framework for electricity industry. It provided for private electricity licences in specified areas for supply of electricity. In the post independence period, with the objectives of extending electrification and achieving regional economic development, the electricity sector was nationalized in 1948. Under the Electricity (Supply) Act, 1948, State Electricity Boards (SEBs) were established. The SEBs were mainly funded by the states and they carried out the objectives of the state policies. The commercial viability of the SEBs started getting affected in 1970s due to a host of reasons and the Government amended the Electricity Act, 1948 in 1985 to provide for 3% as minimum return. Despite this safeguard, SEBs over a period of time suffered financially and in terms of their performance. In the year 1991, steps towards comprehensive reforms in the power sector were undertaken. 1.3 In 1990s, India ranked eighth in the world in terms of annual electricity generation. About 75 percent of the country's electricity generation comprised of thermal power plants, followed by hydro (15 percent), and ga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... responsibility for the introduction of open access at the distribution level rests with the State Electricity Regulatory Commissions. Open access transactions at interstate transmission have increased from 778 in 2004-05 to 5933 in 2006-07. The number has reached 9560 in 2007-08 and 9347 in 2008-09. Background of Power Reforms in Delhi 1.5 In 1905, M/s John Fleming Company was granted the licence to supply power to the inhabitants of Delhi. In the year 1951, Delhi State Electricity Board (DSEB), was established replacing a private utility, in pursuance of the policy for the power industry mandated by the Electricity (Supply) Act, 1948, entrusting the sector primarily to the new institution of State Electricity Boards. DSEB was replaced in 1958 by the Delhi Electric Supply Undertaking (DESU) which was created as a wing of the newly established Delhi Municipal Corporation. Till 1997, Delhi Electric Supply Undertaking (DESU) used to control generation, transmission and distribution of electricity in Delhi. DESU was an integrated utility with generation, transmission and distribution functions serving all of Delhi except the NDMC and MES (Cantonment) areas, to which it supplied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nected load of about 5600 MW, energy sales of about 8000 Gwh and an annual revenue of about ₹ 3000 crore (US $630 million). 1.8 At present, in the area of generation, Pragati Power Corporation Limited (PPCL) and Indraprastha Power Generation Company Ltd. (IPGCL) are Government Companies within the meaning of Companies Act, 1956 and are wholly owned by the Government of National Capital Territory of Delhi. Further, they are also the generating Companies as defined under Section 2(28) of The Electricity Act, 2003. IPGCL is generating electricity from its three power stations viz (i) Indraprastha (ii) Rajghat and (iii) Gas Turbine Power Station. Pragati Power Corporation Limited (PPCL) is supplying power from its power station at Pragati, Ring Road, I.P. Estate, New Delhi. The power generated from these power stations is being supplied to the transmission Company i.e. Delhi Transco Limited, which is also a Govt. of NCT of Delhi Undertaking. The transmission related functions are being carried out by Delhi Transco Limited (formerly Delhi Power Supply Company Limited), which is supplying electricity for distribution to three DISCOMs - NDPL, BSES Rajdhani, BSES Yamuna together w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Electricity Regulatory Commissions Act, 1998 shall be deemed to be the State Regulatory Commissions. 1.12 The mandate of DERC, inter alia, is to determine the tariff for electricity, wholesale/bulk, grid or retail, as the case maybe; to determine the tariff payable for the use of the transmission facilities; to regulate power purchase and procurement process of the licensees and transmission utilities including the price at which the power shall be procured from the generating companies, generating stations or from other sources for transmission, sale, distribution and supply in the National Capital Territory of Delhi; to aid and advise the Government in matters concerning electricity generation, transmission, distribution and supply in the National Capital Territory of Delhi; to regulate the operation of the power system within the National Capital Territory of Delhi; to set standards for the electricity industry in the National Capital Territory of Delhi including standards related to quality, continuity and reliability of service; to aid and advise the Government in the formulation of its power policy; to issue licences for transmission, bulk supply, distribution or supply o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the following characteristics: 1.17.1 Transactions between generators, end users and a number of possible intermediaries, including retailers, power exchanges and brokers, take place freely with in the constraints imposed by the network). Thus, on the demand side, end users are free to choose their supplier; on the supply side, generators can sell their electricity to any other market players. 1.17.2 Network activities and prices are regulated and, in particular, there are provisions to ensure non-discriminatory third party access to the network, often including some form of separation of network activities from generation and end-user supply. 1.17.3 There is an independent system operator, which means that the system operator is not owned or, at least, not controlled by the owners of generation assets. 1.18 A major challenge in the process of reforms is removal of barriers to entry: competition requires a sufficient number of competitors. If supply is only with a few firms, competition generally fails to develop and prices may remain persistently above their competitive levels. An adequate market structure in all parts of the supply chain has been considered as essenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... National Capital Territory of Delhi were running 2.5% higher than the error margin limit and were thus leading to overcharging of the consumers. The Hindustan Times vide its report published on 09.06.2008 had reported the fact that the High Court in its judgment had reported that digital electricity meters with a error margin of more than 1% should be considered as faulty. 2.3 As per averments, the DISCOMs purchase and install the meters on their own and the consumers are not allowed to procure and buy the meters of BIS Standard manufactured by any of the manufacturer for installing the same. Allegedly almost 82% of the meters installed by the above enterprises are found to be running on the plus side of 2.5% of the prescribed limit and hardly any meter is running on the slower side i.e. the minus side of 2.5%. 2.4 The informant has alleged that DISCOMs are abusing their dominant position by imposing unfair and discriminatory conditions in purchase of goods (i.e. electricity meters) and also services, thereby leading to foreclosure of competition by hindering entry into the market. 2.5 It has been also alleged that the practice carried on and the decision taken by all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ying on practices which are likely to cause appreciable adverse effect on competition. 3. The informant has prayed for the following reliefs: 3.1 (a)The enquiry be made by Commission, into above mentioned contravention of the provisions contained in Section 3(1), (2), (3) (a) (b) read with Section 4(1), 4(2) (a) (i) of the Competition Act, 2002; (b)The DISCOMs be directed to discontinue and not to re-enter the above agreements and to discontinue the practice and the decisions taken by them leading to indirect determination of the sale prices of the services rendered by them (c)The DISCOMs be directed to discontinue the abuse of their dominant positions, which imposes unfair and discriminatory conditions in purchase of goods and services their consumers. (d)The DISCOMs be further penalised for the above violations to the extent of 10% of their average turnover for the last three preceding financial year; (e)The Commission should pass further orders which it deems fit and proper in the facts and circumstances of the present case. 3.2 The Informant has also prayed to the commission to grant an ex-parte ad-interim order Under Section 33 of the Act for restraini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... position. 7.3 DG after examining the alleged infringement of provisions of Section 3 of the Act has concluded that the informant has alleged contravention of the provisions of Section 3(1), 3(2) and 3(3) (a), (b) of the Act, but no evidence of any agreement or action in concert has been furnished, to establish that the DISCOMs, based upon their understanding or through an agreement and independent of any regulatory mechanism, have indulged in the acts prescribed in these sections. From the investigation conducted also, no evidence could be found to establish contravention of the provisions of Section 3(1) and 3(3) of the Act. Based upon available evidence on record, contraventions of Section 3(1) read with Section 3(3) remain unsubstantiated. 7.4 In order to examine the allegation of abuse of dominance the DG has defined elaborately the relevant market in this case. He has discussed this issue in detail and analysed that within the electricity sector, following four segments have traditionally been identified as constituting different product markets: i) generation and wholesale, the production of electricity in power stations; ii) transmission, the transport of electr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SES Yamuna and NDPL enjoy position of monopoly in their respective areas of operation. The distribution and supply functions are not segregated because of the prevalent state of licensing conditions. In the market of meters also, these DISCOMs are engaged in installation of meters on their own or in a miniscule portion through their approved manufacturers/vendors. No other vendor can enter this market. In providing services of billing as well, the DISCOMs are having monopoly status since no other market player can provide these services to the consumers. Thus, it may be said that as per the provisions of explanation (a) to Section 4(2), the three DISCOMs are enjoying dominant position in their respective areas of operations. 7.9 In the report all the factors mentioned in Section 19(4) have been analysed in detail before determining the dominant position of DISCOMs. After examining all the factors mentioned above DG has conclusively established the dominance of the three enterprises in the relevant market of distribution and supply of electricity, meters and providing services of billing in their respective areas of operations. 7.10 The DG has further investigated into the act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he entry in market of meters is severely restricted. 7.12 As per the DG Report it is also shown that DISCOMs have not made much effort to educate the consumers properly. They do not give freedom to the consumers to choose meters of their own choice from any other supplier. 7.13 The DG has also reported that from the information gathered during investigation it was revealed that not just 82% but more than 92% of the meters are running on the positive side. Some are running on positive side beyond 2.5% also. The DG has also commented that these DISCOMs are earning additional revenue running into millions of rupees from such methods and by adopting wrong billing cycles. 7.14 The DG has concluded that the investigation clearly showed that the competition in the relevant market of meters has been restricted in the areas of operations of DISCOMs of Delhi. The DISCOMs have denied entry in the market of meters, have used unfair means in the supply of electricity to consumers and in turn the consumers have been charged excessively. The choice of meters should not have been restricted to the meters supplied by DISCOMs or by their approved manufacturers/vendors. Instead, the DISCOMs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iction to delve into matter pertaining to electrical meters and specifications thereof in view of the elaborate and exhaustive provisions carved out under the Electricity Act 2003 and rules and regulations made thereunder. iv) The report submitted by DG deserves to be rejected as the DG has wrongly defined the relevant product market' as distribution and supply of electricity and allied facilities like metering and reading of meters, billing etc. The relevant product market in case of distribution companies is supply of electricity and not the meters and as such the report and the conclusion that distribution companies are abusing their dominant position has to be rejected. v) It has been submitted that the distribution companies cannot be dominant of market in the meters. The meters are manufactured by meter manufacturers and not by the distribution companies. There is no concept of indirect dominance in law. vi) Extraneous factors like billing, fastness of meters, billing cycle cannot be taken into account by the DG as the same do not figure under the provisions of Competition Act. It cannot be imported for determination of the relevant market. These are consumer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as an abuse of dominant position by the subordinate authority (this Commission). iii) The DG has misdirected the investigation which appears to proceed to examine issues like alleged fastness of the meters, billing process adopted by the DISCOMs which are not relevant for the purpose of competition issues and are no longer res Integra in view of the judgment of High Court of Delhi in Suresh Jindal v. BSES, RPL and in the case of BRPL v. V.K. Jain. iv) There was no evidence before the Commission that was provided to it on or subsequent to the date of filing the information which could conceivably constitute material to come to the conclusion of prima facie case. The only basis for order dated 26.11.2006 appears to be 2 newspaper reports filed originally by informant. v) The opposite parties while challenging the legality, validity and propriety of the consequent actions including the investigations and the present proceedings submitted that the Commission decision is predicated upon a misconstrued or wrong application of findings. The DG has concluded that the relevant market is the supply of electricity through electronic meters whereas the Secretary of Commission in its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y overlap of jurisdiction with the sectoral regulator (DERC)? (ii) Whether the DISCOMs have entered into any agreement or carrying on any practice which indirectly determines the sale price of electricity and limits or controls the production and supply of electronic meters in violation of Section 3(1) read with 3(3)(a) and (b) of the Act ? (iii) What is the relevant market in this case? (iv) Whether the opposite parties are in dominant position in the relevant market? (v) (sic) the opposite parties are abusing their dominant position in terms of the provisions of Section 4 of the Competition Act, 2002 ? 12. Determination of issue No. 1 12.1 As already narrated supra in para 5 of this order that on receipt of the information the matter was referred to the Delhi Electricity Regulatory Commission (DERC) for its comments on the allegations levelled in the information. The DERC vide its letter dated 30-09-2009 has categorically opined that matters relating to electricity tariff have to be decided as per the provisions of Electricity Act, 2003 and DERC Regulations. Accordingly CCI may not be appropriate forum to deal with such issue. However specific issues alluded to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 3 of the Act, DG has come to the conclusion that neither any evidence of any agreement or action in concert was furnished by the informant nor any evidence could be found during the course of investigation to establish the contravention of Section 3 of the Act. DG has observed that based upon available evidence on record, contravention of Section 3(1) read with Section 3(3) remained unsubstantiated. 13.3 On perusal of the record it is apparent that informant has not furnished any material to substantiate the allegation that the alleged conduct of DISCOMs is emanating from any agreement or concerted practice. DG has also not found any evidence which could lend support to the allegations made by the informant. There is not an iota of evidence on record to show any concerted action on part of DISCOMs. Making bare assertions, shorn of any evidence, is not sufficient to establish the contravention. In the absence of any evidence to the contrary there is no reason to disagree with the Conclusion drawn by the DG. Therefore, issue No. 2 is answered in negative. 14. Determination of Issue No. 3 14.1 Since in the instant case, the issue under examination is abuse of dominant posi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .4.1 Section 19(5) For determining whether a market constitutes a relevant market for the purposes of this Act, the Commission shall have due regard to the relevant geographic market and relevant product market . 14.4.2 Section 2(r) defines relevant market as the market which may be determined by the Commission with reference to the relevant product market or the relevant geographic market or with reference to both the markets; 14.4.3 In Section 2 (s) relevant geographic market has been defined as a market comprising the area in which the conditions of competition for supply of goods or provision of services or demand of goods or services are distinctly homogenous and can be distinguished from the conditions prevailing in the neighbouring areas; 14.4.4 Section 2 (t) defines relevant product market as a market comprising all those products or services which are regarded as interchangeable or substitutable by the consumer, by reason of characteristics of the products or service their prices intended use; 14.4.5 While determining the Relevant Geographic Market and Relevant Product Market factors mentioned in Section 19(6) and 19(7) are to be looked into respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Further, DERC has permitted open access in keeping with the provisions of the Electricity Act only for consumers of 1 MW and above only. Presently, the open access for consumers of less than 1 MW has not been introduced and therefore, consumers' choice in the case of electricity supply source has not been initiated. 14.8 In the areas of operations of the three DISCOMs, conditions for supply of goods or provision of services are distinctly homogeneous and can be distinguished from the conditions prevailing in the adjoining areas. In the absence of parallel licenses no other company can operate in the areas of operation of these DISCOMs. In words there are no other suppliers in the areas of operations of these DISCOMs and there is no viable alternative product which can serve as substitute to electricity. 14.9 Therefore, the appropriate relevant market in the instant case would be relevant product market comprising of distribution and supply of electricity and relevant geographic market comprising of the areas of operations of the three licensee companies-BRPL, BYPL and NDPL as assigned in their respective licenses. 14.10 In the present sets of facts and circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nant position in relevant market in itself does not fall foul of the Competition Act. It is not the dominance, but its abuse, which is prohibited in law. 16.2 Once the dominance of the DISCOMs in the relevant market of electricity supply has been found to be established, it is now to be examined whether by their conduct they have abused their dominant position or not. The Commission has considered all relevant facts and materials brought out by the DG's investigation as well as the submissions made by DISCOMs in the present matter. 16.3 Since the Commission has identified the relevant market as supply of electricity to the consumers in the respective licensed areas of DISCOMs in Delhi the only pertinent abuse this relevant market, which has been alleged by the informant and found established by the DG, is overcharging the consumers due to fast running of meters. 16.4 In order to examine the above abuse the provisions of Section 4(2)(a)(i) and (ii) of the Act are to be kept in mind, which state that there shall be an abuse of dominant position if a dominant enterprise or group directly or indirectly imposes unfair or discriminatory (i) condition in purchase or sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... through meters, which are not correct, tantamount to imposing unfair conditions in sale of electricity and consequently abuse of their position of dominance in terms of provisions of Section 4(2) (a) (i) of the Competition Act, 2002 16.10 On the other hand, the DISCOMs have contended that DG has relied on test results supplied by Public Grievance Cell but that report has not been shared with the DISCOMs and hence, findings of the DG are against the principle of natural justice. 16.11 It has been further contended that the report of CPRI supplied by Public Grievance Cell and relied upon by the DG is defective and is not based on any survey and sample size is too small to be held to be representative in character for all the consumers in Delhi. The three DISCOMs have approximately 30 lakh consumers out of which DG has referred to only 2014 meters which comes to less than 0.1 % of the total consumers to whom electricity is being supplied in Delhi. Further, even the Ministry of Power in its report had accepted that the sample size was defective and too small. 16.12 DISCOMs have also contended that the DG has failed to appreciate the fact that the relevant BIS standards appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meters to be running fast. Therefore, the test results compiled by CPRI cannot be taken to be representative sample so as to draw a conclusion that more than 90% of the meters in Delhi are running on positive side. Similar view was expressed by the Committee constituted by the Ministry of Power in its report submitted in September, 2008. This report finds place as Annexure F in the DG report. 16.17 It is also borne out from the examination of said test results reproduced in DG report that out of 2014 meters tested till November, 2014, only 96 meters (0.76%) have been found to be erring on positive side beyond permissible limit of + 2.5% specified by BIS for Class 1 meters. This number is insignificant considering the fact that total consumers in Delhi are more than 40 lakhs. Furthermore, it is not discernible from the DG report that out of 96 meters showing error beyond the permissible limit how many of them were tested before May 20 2009 when Section 4 of the Act came into force. The report is also silent about the fact that how many meters out of 96 defective meters were replaced by the DISCOMs before the date of enforcement of the Act. As regards those meters which were foun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est, install and seal the meter. 21. Regulation 35 issued by DERC thus permit consumers to buy their own meters or opt for meters supplied by the Distribution Companies for which security deposit is collected and rental paid. While installation, testing and sealing of meters are to be done by the DISCO Ms themselves as part of their licensed activity, in so far as retail supply of meters are concerned, DISCO Ms are not the sole providers and consumers through regulatory provisions are given the choice to procure meters from the open market. It is the consumer choice that prompts us to consider the market for meters as a distinct market and not as an integral part of the market for 'distribution and retail supply of electricity'. In other words, it draws a distinction between the markets for retail supply of electricity and the instrument of measuring consumption. This Supplementary Order is to examine dominance of DISCOMs in the meter market and its alleged abuse. 22. The issues for determination are same as stated in the Majority Order: 1. Determination of relevant product/geographical market 2. Determination of dominance 3. Abuse of dominance Determinat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om distant markets. In view of these factors, the relevant geographic market for retail supply of meters would be restricted to the licensed distribution area of the DISCO Ms. Determination of issue No. 2 28. As observed in the Majority Order dominance of DISCOMs in the distribution and retail supply of electricity market is statutorily established. In the market for meters, purchases of meters by DISCOMs are all-India. This market is competitive as there are about 200 meter manufacturers in the country. No facts and evidences are brought on record in the DG's report to demonstrate that the DISCOMs in Delhi account for a large share of the country-wide sale of meter manufacturers to establish their dominant position. 29. DISCOMs procure and install meters for the consumers from an empanelled list of manufacturers/vendors. Consumers can purchase directly from this empanelled list or from the DISCOMs. Dominance of DISCOMs in the meter market is attributed to the restricted purchases of BIS meter from the panel. 30. It is essential to assess dominance in terms of the factors listed in Section 19(4) of the Competition Act, 2002. As borne out in the evidences gathered by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h respect to the contravention of Section 4(2)(a)(i) and (ii), which state that there shall be an abuse of dominant position if a dominant enterprise or group directly or indirectly imposes unfair or discriminatory (i) condition in purchase or sale of goods or service; or (ii) price in purchase or sale (including predatory price) of goods and services. 38. The informants allegation of violation of Section (4) is with regard to i) unfair condition in the purchase of meters sold by the DISCOMs and ii) unfair condition in the supply of electricity on account of the presence of fast running of meters. 39. Further, it has been alleged that competition in the meter market has been foreclosed by the DISCOMs, which amounts to contravention of Section 4(2) (c) of the Competition Act, which states that there shall be an abuse of dominant position if a dominant enterprise or group, indulges in practices resulting in denial of market access (in any manner) 40. Central to the argument of AoD (under Section 4) by the DISCOMs is that of consumer choice and its exercise which is allegedly lacking. Evaluating the role and requirement of 'consumer choice' in the meter market i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and electricity are bundled products and the DISCOMs are the sole providers of it. 46. Nevertheless, it is important to examine whether given a choice, the consumers would have opted for purchasing their own meters. Consumer decisions are guided by several considerations, which inter-alia include, price, preference, convenience, specifications, quality and reliability, after-sales service etc. 47. Firstly, bulk purchase by the DISCOMs enables them to get a discount on the price of meters. It is unlikely that individual purchases will be entitled to such discounts. There is no denying that a consumer buys or has the incentive to buy the meters from the market if there is a price or quality differential between the two sources, i.e., DISCOMs and other vendors/manufacturers and only if the differential is wide enough to cover for any transaction cost that a consumer will need to incur from buying from the market rather than the supplier of electricity. No such facts pertaining to price differential has been brought on record. It cannot be conclusively stated that consumers will gain from lower prices in the market if they are given the choice to switchover from Discom to the man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as free testing and free first burn out replacement tend to dampen consumer initiatives. 52. The NCR region consists largely of household consumers and commercial establishment. Open Access is not yet available to these consumers. In terms of quantum of electricity consumed and in terms of supply it is very unlikely that consumers will be inclined to exercise their choice in the purchase of meters. 53. The informant has additionally alleged that the DISCOMs have through their conduct restricted the market for meters and denied access of the NCR meter market to eligible manufacturers other than the handful of specified manufacturers/vendors. Competition has been hindered through erection of entry barriers. Foreclosure of competition was examined in the light of existing 200 meter manufacturers in the country. The argument that listing on website provides publicity only to a few manufacturers is not a sufficient ground to suggest foreclosure. Empanelment does not deny other manufacturers entry in the meter market of DISCOMs as the list of vendors is revised at regular intervals. Vendors are selected on the basis of competitive bidding. An all India meter market in which large ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstitute, Bangalore showed that a sample survey of the electric meters was carried out in Delhi of the different DISCOMs. The results of the sample survey of 2041 meters showed that 1847 meters had an error on the positive side. In fact 91.7% of meters had errors on the positive side. The permissible limit for an errors is 2.5% whereas in the sample many meters showed error in excess of +2.5% on the positive side. In fact a high powered committee under the Ministry of Power considered the report and got a study conducted by CEA about 2,44,305 consumer metres and it was found that 74.38% of the meters had errors on the positive side. On the basis of the reports it can be concluded that many of the meters installed by DISCOMs did not give accurate measurement of electricity and therefore the consumers in Delhi were put to a loss. This could result due to the low competition in the market. As the DISCOMs were supplying electricity through meters which were not correct, it amounts to imposing unfair conditions in sale of electricity and abuse of dominance as unfair conditions have been put on the consumers. 63. The question is whether the sample size was too small to come to a conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we have to consider under Section 19(4) of the Act is (i) Market share of the enterprise - the market share of the enterprise is hundred percent as there is no competitor and it is monopoly market. (ii) and resources of the enterprise - compared to the consumer the size and the resources and enterprise in the monopoly market is extremely large. (iii) Size and importance of the competitors - there are no competitors as it is a monopoly market. (iv) Economic power of the enterprise including commercial advantages over competitors - as it is a monopoly market there cannot be comparison with the competitors. (v) Vertical integration of the enterprises or sale of services network of such enterprises - the enterprises are vertically integrated as the supplier of electricity, supply of meters and the billing is all done by the DISCOMs. (vi) Dependence of consumers on the enterprise - the consumers are totally dependent on the enterprise as there is no other competitor in the monopoly market. (vii) Monopoly in a dominant market were acquired as a result of any statute or by virtue of being a government company or a public sector undertaking or otherwise - the DISCOMs are a monopoly and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relevant facts only in brief and will refrain from narrating the details. However, to further clarify certain aspects, I would like to give additional reasons at appropriate places while agreeing with the majority view. Accordingly, I proceed to pass the order as follows: 69. The relevant facts relating to the instant information may be summarized as under: 69.1 The present information has been filed by Neeraj Malhotra (the informant) under Section 19 of the Act against North Delhi Power Limited (NDPL/ opposite party No. 1), BSES Rajdhani Power Limited (BRPL/ opposite party No. 2) and BSES Yamuna Power Limited (BYPL/ opposite party No. 3) (collectively the opposite parties) alleging the violations of the provisions of Section 3(1), 3(2) and 3(3)(a) and 3(3)(b) read with the provisions of Section 4(1) and 4(2)(a)(i) of the Act. 69.2 As per the information, the opposite parties are private companies engaged in supply and distribution of electricity to the consumers within the territory of Delhi for consideration. It has been alleged that the opposite parties have made it compulsory for their consumers to install the meter provided by the opposite parties and that these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation had been directed by the Department of Power, the PGC, Government of NCT of Delhi. 69.9 It is alleged by the informant that the opposite parties are abusing their dominant position within the public domain by imposing unfair and discriminatory conditions in purchase of goods i.e. electricity meters and also services, thereby leading to a foreclosure of competition by hindering entry into the market and violating the provisions of Section 4(1) and 4(2)(a)(i) of the Act. 69.10 The informant has also alleged that the opposite parties function as a cartel and the practice carried on and the decision taken by them, jointly and severally, has the effect of determining the prices of the services being supplied by them and being purchased by its consumers. Further, it is alleged that the opposite parties are overcharging the consumers and thus their practices and decisions have the effect of indirectly determining the sale prices of the services rendered by them. 69.11 It has also been alleged that the arrangement, understanding and concerted action on the part of the opposite parties to supply and install the electricity meters themselves and not allowing its consumers to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .11.2009 passed under Section 26(1) of the Act directing the DG to conduct an investigation into the matter. In the Order following directions for investigation were also given; a) Whether the information is readily available to the electricity consumers regarding their right of getting the meter of their choice installed? b) Whether meters are easily available in the market? In other words, whether consumers have wider choices to procure meters in case they desire to install their own meters? c) Whether there are enough number of suppliers of meters to the consumers and whether they are operating competitively? d) Factual position in respect of the allegations that almost 82% of the meters installed by the DISCOMs are found to be running on the plus side by 2.5% as alleged and hardly any meter is running on slower side? e) Efforts made by the Respondents to educate/ help consumers for redressing grievances regarding choice of installation of their own meters, replacement of defective meters etc. the level and extent of advertisements, publicity campaigns by the Respondents in this context inter-alia need to be looked into. 72. The DG in compliance with the direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d relied on extraneous reasons for the purposes of competition investigations such as the CEA regulations, BIS standards etc. It has also been contended that the DG'S findings are based on wrongful assumptions/ definition of 'relevant market'. In view of the above submissions, it is argued that DG'S conclusion that the opposite parties are abusing their dominant position has to be rejected. 74.4 That the issues such as the alleged fastness of the meter/ billing processes adopted by them are not relevant for the purposes of competition issues and are extraneous and have no bearing on the issues before the Commission. It is submitted that the above issues are no longer res-integral in view of the judgments of the Hon'ble High court of Delhi in (a) Suresh Jindal v. BSES Rajdhani Power Limited 126 (2006) DLT 49 : 132 (2006) DLT 339, as upheld by the Hon'ble Supreme Court in (2008) 1 SCC 341 and (b) BRPL v. V.K. Jain LPA No. 748 of 2009 wherein Hon'ble Division Bench of Delhi High Court has upheld the accuracy limits as provided under the Indian Standards. 74.5 That the issues such as alleged fastness of the meter/ billing processes are highly technical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... site parties. It was explained that such list is only indicative and that consumer is free to buy meter from any other manufacturer provided they meet the aforesaid criteria. It is submitted by the opposite parties that the list of dealers is displayed on website for the benefit of consumers and for awareness of the public, the opposite parties have distributed lakh of pamphlets and have published advertisements in newspapers so that consumers can choose their own meters. 74.9 That with respect to the alleged fastness of meters, the DG has relied on a report which is based on assumptions and conjectures and has been repudiated by the Ministry of Power. It is further argued that the process adopted by the DG in coming to the conclusions is flawed and the report as such deserves to be rejected. It is further contended that report also cannot be relied upon by the DG as the copies of the same were not supplied to the opposite parties and hence, the findings of the DG are against the principles of natural justice. 75. The opposite party No. 1 has specifically submitted that it has taken and continues to take certain initiatives towards enhancing consumer awareness regarding the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods or provision of services that involves anti-competitive practices. The present matter relates to allegations of abuse of dominance and anti-competitive agreement by and between the opposite parties with respect to the supply of electricity which is a service as defined in Section 2(u) of the Act and meters which are covered under the definition of goods provided in Section 2(i) of the Act respectively. 81. Section 2(u) of the Act defines 'service' to include supply of electrical or other energy. The definition reads: service means service of any description which is made available to potential users and includes the provision of services in connection with business of any industrial or commercial matters such as banking, communication, education, financing, insurance, chit funds, real estate, transport, storage, material treatment, processing, supply of electrical or other energy, boarding, lodging, entertainment, amusement, construction, repair, conveying of news or information and advertising; 82. Section 2(i) of the Act provides an inclusive definition of 'goods'. As per the definition in the Act 'Goods' means goods as defined in the Sale o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw will supersede a general law. Accordingly in the present matter, the provisions of the Competition Act, 2002 will supersede the provisions of the Electricity Act. 87. Even if for the sake of argument, it is assumed that both legislations are special legislations for the purposes of the present matter then also as per the well known doctrine of Leges posteriores priores conterarias abrogant i.e. the later law abrogates the earlier contrary law, the provisions of the Competition Act, 2002 would prevail. The Hon'ble Supreme Court of India has laid down in no uncertain terms that in case both the Acts are special Acts, it is the later Act which must prevail. This principle has been upheld by the Hon'ble Supreme Court in several decisions including in the case of Solidaire India Ltd. v. Fairgrowth Financial Services Ltd. and Ors. (2001) 3 SCC 71; Allahabad Bank v. Canara Bank 2000 (4) SCC 406; Maharashtra Tubes Ltd. v. State Industrial and Investment Corporation of Maharashtra Ltd. 1993 (2) SCC 144; Sarwan Singh v. Kasturi Lal AIR 1977 (SC) 265 and Shri Ram Narain v. Simla Banking and Industrial Co. Limited AIR 1956 (SC) 614. 88. The Electricity Act, 2003 was notified i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f India. On examining the facts and the ratio of the Hon'ble Supreme Court in these cases, it is found that they relate to different issues and are therefore, not relevant in the present matter. The case of Arun Agarwal v. Nagreeka Exports (P) Limited and Anr. : (2002)10 SCC 101, involved an objection regarding the jurisdiction of the High Court and it was held that the question of jurisdiction of the court should be decided as a preliminary issue and not at the time of hearing. However, the above case relates to Order XIV of the Code of Civil Procedure Code, 1908. The case cited by the opposite parties viz., K. Kamaraja Nadar v. Kunju Thevar and Ors. AIR 1958 SC 687, involved the issue as to whether the election tribunal and the High Court should have decided the preliminary objection before proceeding further in the election petition and the interpretation of Sections 82 and 117 of the Representation of the People Act, 1951. The third authority relied upon by the opposite parties i.e. Union of India v. Ranbir Singh Rathaur and Ors. (2006) 11 SCC 696, dealt with preliminary objection as regards the maintainability of the writ petition before the High Court. These cases involve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ERC has opined that CCI has jurisdiction to entertain the matter. Therefore, the argument of the opposite parties that the preliminary objections raised by them should have been decided before proceeding with the matter on merits cannot be accepted and the same is rejected. Accordingly, Issue II is decided in the negative. Issue III: Whether the opposite parties have violated the provisions of Section 3 of the Act. 97. Section 3 of the Act prohibits an enterprise from entering into any agreement which causes or is likely to cause an appreciable adverse effect on competition in India and renders any such agreement void. As per Section 3(3) of the Act, any agreement between or practice carried on/ decision taken by enterprises engaged in identical or similar trade of goods or provision of services, which inter alia (a) directly or indirectly determines purchase or sale prices or (b) limits or controls production, supply, markets, technical development, investment or provision of services shall be presumed to have an appreciable adverse effect on competition. The scope of the term 'agreement' mentioned in Section 3 of the Act as defined in Section 2 (b) of the Act includ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... busing their dominant position by imposing unfair and discriminatory conditions in purchase of electricity through allegedly fast running meters is established. (i) What are the relevant market(s) in the present matter and whether the opposite parties are in a dominant position in such market(s). If so, in what manner. 100.1 Section 2(r) of the Act defines 'relevant market' as the market which may be determined by the commission with reference to the 'relevant product market' or the 'relevant geographic market' or both. The relevant geographic market as defined under Section 2(s) of the Act comprises of the area in which the conditions of competition for supply provision of goods and services or demand thereof are distinctly homogenous and can be distinguished from the conditions prevailing in the neighboring areas. Section 2(t) of the Act defines a relevant product market as a market comprising of all those products or services which are regarded as interchangeable or substitutable by the consumer. The relevant geographic market and the relevant product market which may be delineated with regard to the all or any of the factors in Section 19(6) and 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be present or do not operate in any other market relating to meters including the market of 'distribution/ supply of meters'. Therefore, the contention of the opposite parties in this regard is also devoid of any merit. 100.5 Pursuant to the policy decisions, various regulations and guidelines, BIS standards etc. electricity in the relevant geographic markets can be supplied to consumers by means of only a particular type of meter which as per the prescribed specifications and BIS standards (Consumer Meter). The Consumer Meters (of BIS standard) supplied by different players are interchangeable and substitutable. There are many suppliers of such Consumer Meters in the relevant geographic market. It is pertinent to note that the nature of and conditions prevalent in the market of 'manufacturing Consumer Meters' and the market of 'distribution/ supply of Consumer Meters' are significantly different and resultantly these markets constitute two separate and distinct markets altogether. Even if the opposite parties are not operational in the market of manufacturing Consumer Meters as contended by them, they are in fact actively engaged in the business of di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NDPL [OP No. 1] 0 100 2 BRPL [OP No. 2] 0 100 3 BYPL [OP No. 3] 0 100 100.10 On considering the guiding factors under Section 19(4) of the Act, it is found that the opposite parties enjoy a dominant position in the relevant market of distribution/ supply of Consumer meters. The DG in his report has discussed in detail about the applicability of the factors under Section 19(4) of the Act, hence, agreeing with the view of the DG, and for the sake of brevity, I do not wish to restate the same in detail. 100.11 In view of the above statistics and other material on record, it is found that all three opposite parties enjoy a dominant position in their respective licensed areas in not only the relevant market of distribution/ supply of electricity but also in the relevant market of distribution/ supply of Consumer Meters. 100.12 I may mention that as per the majority view, there is only one relevant market i.e. the market of distribution/ supply of electricity in the present case and the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeta Gouri that the opposite parties are in a dominant position in the relevant market of distribution/ supply of Consumer Meters. I fully concur with these observations and findings. However, the learned Member has proceeded to observe that the absence of information as regards the consumer choice cannot be categorized as abuse of dominance. The order also includes an analysis as to whether the consumers would be inclined to exercise the choice, if available, in purchase of meters. With great respect, I beg to differ from the observations and the finding of the learned Member on the issue of abuse of dominance. 101. For the purposes of Section 4 of the Act, after it is determined that an enterprise is enjoying a dominant position in the relevant market it must be examined whether the conduct of such enterprise falls within the ambit of the abusive conduct in terms of Section 4(2) of the Act. It may also be noted that for proving a contravention under Section 4 of the Act, it is sufficient to establish that the conduct of a dominant enterprise is covered under any of the sub-clauses of Section 4(2) of the Act. 102. At the outset, to determine sub-issues (ii) and (iii), it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all be tested, installed and sealed by the Licensee. The said meter will, however, have to be consistent with the CEA Regulations published under Section 55 of the Act and should have all additional features approved by the Commission. The features approved by the Commission shall be posted on the website of the Licensees.... 102.5 Thus as per the above Regulation, the consumer may procure a meter conforming to the regulations, consistent with the CEA Regulations with all additional features approved by the DERC. The regulations also provide that if any consumer elects to provide his own meter at any stage, the same shall be procured by the licensee at consumer's cost or the consumer may purchase on his own. Further, under the DERC Regulations 2007, the licensees are obliged to post on their website the features approved by the relevant authority. 102.6 It is important to note that one of the major differences between the DERC Regulations 2002 and DERC Regulations 2007 is that the new DERC regulations do not restrict the customers' choice in meters to only the licensee i.e. the opposite parties or the vendors approved by them. 103. Thus, it is manifest that the new ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er a list of approved manufacturers/ vendors of meters nor technical specifications of the meters as per the DERC Regulations 2002 was posted on the site. During the course of the proceedings, the information under the caption install Your Own Meter' was amended and read as below: As per the applicable Laws, Regulations in force currently, a consumer may himself procure the meter from the vendors certified by the licensee conforming to licenses technical specifications 105.3 This is significant to mention that a list of only those vendors who were approved by the opposite party No. 1 was uploaded on the amended website. It is noted that the amended information merely removed the reference to the repealed regulations by replacing the same with the words 'applicable laws'. However, the details on the site continued to communicate that the choice of meter for the consumer was limited to the vendors certified by the opposite party No. 1. The versions of the website referred to above are annexed to in the report of the DG as Exhibits 3, 4 and 5. 105.4 On going through these Exhibits, it is seen that the opposite party No. 1 placed a list of only five vendors and f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion that a consumer who opts to install his own meter may procure the same only from the vendors approved by the opposite parties Nos. 2 and 3. As per the DG report, the opposite parties Nos. 2 and 3 provided a list of only four vendors and seven dealers of the listed vendors on their website. As per the report of the DG, there was no information available on website to the effect that consumers can purchase Consumer Meters from any other vendor, if they so choose. It may be noted that the opposite parties Nos. 2 and 3, by placing incomplete information on their website have, in effect, restricted the choice of the consumers to only the vendors approved by the opposite parties Nos. 2 and 3. 108. The opposite party No. 1 has submitted that it has taken and continues to take certain initiatives towards enhancing consumer awareness regarding their right to procure their own Consumer Meters according to prescribed standards and specifications. The opposite party No. 1 has listed the different methods adopted in this regard including posting The information on their website, displaying printed posters at all consumer care centers, distributing pamphlets, broadcasting of radio jingle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this term differently in different cases. 113. In a matter relating to an unfair trade practice in the context of the Monopolies and Restrictive Trade Practices Act, 1969, the Hon'ble Supreme Court in the case of H. M. M. Limited v. Director General, Monopolies and Restrictive Trade Practices Commission Civil Appeal No. 2939 of 1989, 11 August 1998) observed that for holding a trade practice to be unfair, it must be found that it causes loss or injury to the consumer. 1114. The Supreme Austrian Federal Court while deciding the matter of R. v. Re A Loyalty Bonus Scheme (2001) E.C.C. 19, involving loyalty bonuses and exclusive supply requirements imposed on its customers by an undertaking which dominates a market, observed: Usual methods of competition are permitted and will only become unfair if there are particular circumstances which make competition to provide services obstructive. This is the case if a particular action which may be accounted competition to provide services becomes an obstructive measure directly aimed against the competitor and hindering (If not actually preventing) in offering its services in an appropriate manner in the market, thereby ruling out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act including Section 18 of the Act wherein the objectives in the preamble to protect consumer interests are reinforced. The Hon'ble Supreme Court of India has in the Steel Authority of India case (cited supra), observed as under: ... [T]he Act requires not only protection of trade but also protection of consumer interest. 119. A healthy and a competitive economy is imperative to safeguard consumer interests. Among others free choice, price and quality are central to the consumer interest. A market is said to be competitive if consumers can choose between a range of substitutable products and suppliers face no obstacles to supply products or services. The choice available to the consumers must necessarily be a real and genuine choice and not a notional one. Further in the present case, the consumer also has a right under the sectoral Jaws to be informed about the makes and models of Consumer Meters. Depriving the consumers of making an informed choice or misguiding them to make an ill-informed decision jeopardizes the interest of the consumers. 120. The hypothesis that a consumer may prefer to procure Consumer Meters from the opposite parties over other supplie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir respective licensed areas. There is no doubt that the opposite parties are in a dominant position not only in the relevant market of distribution/supply of electricity but also in the relevant market of distribution/ supply of Consumer meters. 123. While Section 4 of the Act does not prohibit an enterprise from holding a dominant position in a market, it does place a special responsibility on such enterprises, in requiring them not to abuse their dominant position. As per Section 4(2) of the Act, there shall be an abuse of dominant position, if an enterprise inter alia directly or indirectly, imposes unfair or discriminatory conditions in purchase or sale of goods or services or indulges in practice or practices resulting in denial of market access in any manner. However, the said section does not contain an exhaustive list of the activities that would amount to a contravention of its provisions. The actions, practices and conduct of an enterprise in a dominant position have to be examined in view of the facts and circumstances of each case to determine whether or not the same constitutes an abuse of dominance in terms of Section 4 of the Act. In this regard, it is relevant t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsumers but also restricted market access to the other distributors/ suppliers of the Consumer Meters in the relevant market of distribution/ supply of Consumer Meters 128. The conduct of the opposite parties of publishing a list of only the approved vendors on the websites and misguiding the consumers that the meters may be procured either from the opposite parties or their approved vendors has already been discussed in detail. 129. As mentioned earlier, Section 55 of Electricity Act read with Regulation 6 of CEA Regulations prescribe that if any consumer elects to purchase a meter, the same may be purchased by him stipulating only that the meters shall bear BIS mark, meet the requirements of the CEA regulations and have additional features as approved by the appropriate authority. It is noted from the report of the DG that as on 10.02.2010 there were ten manufacturers in Delhi and eighty two all over India including some foreign firms as per the BIS website. However, the opposite party No. 1 placed a list of only five vendors and five dealers of the listed vendors on their site and the opposite parties Nos. 2 and 3 provided a list of only four vendors and seven dealers of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion by imposing unfair and discriminatory conditions in purchase of electricity through allegedly fast running meters is established. 133. The informant has also alleged that the meters provided by the opposite parties record higher readings than the actual consumption by the consumers. Hence, the issue that the opposite parties are abusing their dominant position by imposing unfair and discriminatory conditions in purchase of electricity through allegedly fast running meters is to be examined separately. 134. It has been established that the opposite parties have hindered with the consumers' option to procure a meter of their own choice. The DG, in the course of investigation, has also found that there is substance in the allegations that the meters provided by the opposite parties do not give the correct measurement of electricity. In this regard, the DG has relied on the reports in the press relating to claims that the meters were moving fast and the report of the testing drive undertaken by the PGC through the CPRI. 135. According to the applicable specifications published by the BIS, the permissible error limit under on-site conditions for Class 1.0 meters is 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d meters, the CPRI inspected only thirty two meters as a representative sample. Extending the above logic, it seems that the CPRI inspected only 1056 (approx) as representative meters in the 33 lots inspected by the CPRI and not all the 655,544 meters as argued by the opposite party No. 2. It appears that the representative sample of 2014 tested by the PGC is larger than the representative sample inspected by CPRI. Further, it seems that CPRI conducted the tests of the six lakh meters of the opposite parties Nos. 2 and 3 at the instance of its client BSES viz., opposite parties Nos. 2 and 3. Hence, the findings in CPRI's report also cannot be considered independent and impartial. For the reasons stated above, this argument of the opposite party No. 2 is not acceptable. 139. However, after perusing the material on record, it is found that the findings of the DG in relation to fastness of the meters are primarily based on tests of 2014 meters conducted by the PGC through the CPRI. This sample seems too small and consists of meters under complaint. Hence, the sample taken in the above test cannot be said to be a representative sample of all the consumer meters. It is found that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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