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TMI Blog2023 (1) TMI 196X X X X Extracts X X X X X X X X Extracts X X X X ..... Director General to investigate under section 26(2) are far wider than the powers of the police under the Code of Criminal Procedure, 1973, is also true. However, similar contentions taken up by the very same counsel in FLIPKART INTERNET PVT. LTD., AMAZON SELLER SERVICES PRIVATE LIMITED VERSUS COMPETITION COMMISSION OF INDIA AND ORS. [ 2021 (7) TMI 1398 - KARNATAKA HIGH COURT] were repelled by the Division Bench of this Court and the same has attained finality - It would once again be fruitful to advert to the foundational philosophy of competition law. The central concern is that firm or firms can harm competition and inflict harm on customers and ultimately end consumers where they possess some degree of market power. Even otherwise, there are several checks balances against the abuse of power vested in the Commission which comprises of experts and qualified persons as its constituent members. Commission s stature and track record as can be ascertained from several rulings of the Apex Court and various High Courts, is also a fair assurance against the abuse of power. An opportunity of hearing is also provided to the stakeholders at the stage of investigation and thereafter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tentially resulted in denial of market access to parallel importers resellers of Boxed Micro-Processors for Desktop and Laptop PCs (ii) the risk of higher pricing for the said articles in India. The relevant portion of said order at paragraph 43 reads as under: 43. Based on the above analysis of the facts and materials presented by the Informant and Intel, the Commission is of the prima facie opinion that the new differentiated India specific warranty policy of Intel in regard to its Boxed Micro-Processor is in contravention of Section 4(2)(a)(i) of the Act. The same also prima facie results in limiting or restricting the market for Boxed MicroProcessors for Desktop and Laptop PCs in the territory of India in contravention of Section 4(2)(b)(i) of the Act as well as results in denial of market access to parallel importers in contravention of Section 4(2)(c)(i) of the Act. Consequently, under the provision of Section 26(1) of the Act, the Commission directs the Director General ( DG ) to cause an investigation into the matter and submit an investigation report within a period of 150 days of this order. 2. A Co-ordinate Bench of this Court vide ad interim order dated 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rated in 2015 under the provisions of the Companies Act, 2013. It is also engaged in the import sale of information technology products namely storage solutions (RAM hard disks), security hardware (CCTV cameras), computers (desktops laptops) display solutions (TFT, computer monitors). Between March 2017 and January 2018, it imported about 4000 boxed microprocessors of Intel claiming warranty in five instances for as many as 34 units of microprocessors. In three of the five instances, claims for warranty were stated to have been raised in Dubai, UAE and the same were honored . However, in so far as the claim for warranty in India is concerned, the 1st petitioner informed the respondent to contact the point of purchase, in view of its revised warranty policy of April 2016. (ii) The 2nd Respondent lodged the information with the Commission on 11.02.2019 u/s 19(1)(a) of the 2002 Act alleging that petitioner s warranty policy is in contravention of Section 3 4 of the 2002 Act in as much as they were refusing to provide the warranty in India for boxed microprocessors which are imported from authorized sources abroad but not those sourced from the Intel authorized deal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ummer Vacation, 2022. Thereafter, the matter was heard on several dates, the last one being 10.08.2022. 4. SUBMISSIONS MADE ON BEHALF OF PETITIONERS: The impugned order being in derogation of earlier decisions of the Commission and Hon ble Delhi High Court, is not sustainable. It violates the principles of precedent and legal certainty and defeats their legitimate expectation inasmuch as they had reframed their warranty policy in the light of observations made in the said decisions involving comparable factual legal matrix. Modification of warranty policy consistent with observations made in similar cases is part of normal business practice and therefore, cannot be termed as abuse of dominance. The impugned order apart from being violative of principles of natural justice is arbitrary discriminatory. Investigation of the kind has serious consequences implications on the business reputation and therefore, could not have been casually directed by invoking draconian provisions of the 2002 Act. Petitioners pressed into service several Rulings in support of their case. 5. CONTENTIONS PUT FORTH ON BEHALF OF RESPONDENTS: (a) The Respondent-Commission represented by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Development and Competition Law: India and Canada Compared , Vol. 5(1), Trade L. Dev, (2013) contextualises the enactment of 1969 Act and 2002 Act as under: The MRTP Act was passed in a context of growing evidence of concentration in Indian industry, manifested in the absolute size and dominance of family-owned business groups. It drew its inspiration directly from the Directive Principles of State Policy in Articles 38 and 39 of the Constitution Its core chapter on concentration of economic power singled out large undertakings (those whose assets, together with those of their interconnected undertakings exceeded a certain size) and dominant undertakings (those whose market share exceeded onethird). After the adoption of economic reforms in 1991, several official committees in the late 1990s suggested that India needed a new competition law to replace the MRTP Act. Although, a draft Bill was drawn up in 1999, the Competition Act was passed only at the end of 2002 (ii) Given the central place of competition in the market economy, the Raghavan Committee Report (Report of the High Level Committee on Competition Policy and Law, Government of India, 2000 ) la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to inquire into certain agreements and dominant position of enterprises in terms of sections 3 4. (iv) Section 26 of the 2002 Act, as recast by 2007 amendment, lays down the procedure for a layered inquiry, which is ordinarily initiated on receiving information from any person whether aggrieved or not, or suo motu as well. The Apex Court in COMPETITION COMMISSION OF INDIA vs. STEEL AUTHORITY OF INDIA LIMITED ((2010) 10 SCC 744 ) (hereinafter SAIL ) at paragraph 21, said as under: When such information is received, the Commission is expected to satisfy itself and express its opinion that a prima facie case exists, from the record produced before it and then to pass a direction to the Director General to cause an investigation to be made into the matter. This direction, normally, could be issued by the Commission with or without assistance from other quarters including experts of eminence. The provisions of Section 19 do not suggest that any notice is required to be given to the informant, affected party or any other person at that stage. Such parties cannot claim the right to notice or hearing but it is always open to the Commission to call any `such person', for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; the persons assailing the same have an onerous task of rebuttal. Courts exercising writ jurisdiction under Articles 226 227 of the Constitution ordinarily do not have the expertise in matters like this and therefore, should loathe to interfere, subject to all just exceptions. B. AS TO CONTENTION OF PRECEDENT LEGAL CERTAINTY IN VIEW OF DECISION IN ASHISH AHUJA CASE AND KAPIL WADHWA CASE: Learned Sr. Advocates appearing for the petitioners submitted that the impugned order made under section 26(1) of 2002 Act directing investigation runs counter to what the Commission had said done in Case No.17/2014 between ASHISH AHUJA vs. SNAPDEAL.COM decided on 19.05.2014 and the Delhi High Court decision in KAPIL WADHWA, supra. They argued that the petitioners had reframed their warranty service policy as a part of their normal business practice consistent with the observations made in the said cases, which have since attained finality and therefore, the impugned order being repugnant to principles of precedent legal certainty, is liable to be voided. This is controverted by the learned ASG appearing for the Commission. Let me examine the said cases: IN RE ASHISH AHUJA CASE: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e even from authorized distributors of the petitioners warranty on those products would not avail in India, but may be claimed from the place of purchase. This becomes evident from what is stated on Intel s website which begins with the heading How to obtain warranty service . It specifically reads only Intel products sold by Intel Authorized Distributors in India and purchased in India are eligible for warranty sale within India. The list of Intel Authorized Distributors in India is located at https:/wwssl.intel.com/content/ww/xa/en/resellers/where to buy/overview.html... IN RE KAPIL WADHWA CASE: (iii) Petitioners heavy reliance on the decision of Hon ble Delhi High Court in KAPIL WADHWA, supra would not come to their aid and reasons are not far to seek: the said case involved issues arising out of the Trademarks Act, 1999 and they were outside the penumbra of the 2002 Act. At paragraph 73, the Court said as under: What is pleaded is that the physical features of the printers sold abroad are different from the features of the printers sold in India. But this is irrelevant as long as the goods placed in the International market are not impaired or condition chang ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the course of their business and that they can justify the same on the basis of what is decided in those cases; they plead res judicata. Before considering this contention, it is profitable to peruse what SIR WILLIAM DE GREY in THE DUCHESS OF KINGSTON S CASE ((1776) 1 Leach 146 ) had said about true meaning scope of the doctrine. It is as under: From the variety of cases relative to judgment being given in evidence in civil suits, these two deduction seem to follow generally true; first, that judgment of a court of concurrent jurisdiction, directly upon the point, is, as a plea, a bar, or as evidence conclusive, between the same parties, upon the same matter, directly in question in another court; secondly that the judgment of a court of exclusive jurisdiction, directly on the point, is, in like manner, conclusive upon the same matter, between the same parties, coming incidentally in question in another court, for a different purpose. But neither the judgment of a court of concurrent or exclusive jurisdiction is evidence of any matter which came collaterally in question, though within their jurisdiction, nor of any matter incidentally cognizable, nor of any matter to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impugned order is only a step in aid of that. The scope of inquiry is much broader and not restricted to the material placed on record by the parties only. The directions issued by the Commission in its order under section 26(1) of the Act are not parties specific but address the alleged anti competitive practices in the industry in general, the punitive or corrective action being confined only to the parties, notwithstanding. Added, the Commission too having satisfactorily treated this differential aspect of the matter at paragraph 38 of the impugned order observed as under: The Commission however, observes that the facts of the said case are entirely different from the present case. In that case, it was not the situation that SanDisk would not produce warranty services on products purchased from authorized distributors of SanDisk merely because the purchases are made from outside India. Further, in that case, SanDisk did not limit its warranty policy in any particular country/ies D. AS TO PROCEEDINGS UNDER 2002 ACT BEING IN REM : (i) The submission of learned Senior Advocate, Mr.Sajan Poovayya appearing for the petitioners that pursuant to the observation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. They will not put anything in writing not even into words. A nod or wink will do. Competition law targets these forms of economic conduct which interfere with the effective operation of competitive markets, which are aimed to deceive the unaware, innocent buyers. At the same time, competition law eliminates obstacles to innovation, expansion and promotes competition as a value. Competition law tries to ensure that the interest of an individual or a group of individuals should not subvert the broader community interest (iii) The principal intent and policy content of 2002 Act, i.e., consumer well being public interest have to be borne in mind while construing the observations at paragraph 15 of SAMIR AGRAWAL which employ the term in rem. Further, it is profitable to see what Justice Oliver Wendell Holmes had said in TOWNE vs. EISNER (245 U.S. 418 (1918)): A word is not a crystal, transparent and unchanged; it is the skin of a living thought and may vary greatly in colour and content according to the circumstances and time in which it is used... . It would also be pertinent to peruse the observations at paragraph 17 of EXCEL CORPORATION CARE LTD. vs. COMPETITION C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the observations at paragraph 15 of the said decision: A look at section 19(1) of the Act would show that the Act originally provided for the receipt of a complaint from any person, consumer or their association, or trade association. This expression was then substituted with the expression receipt of any information in such manner and by the 2007 Amendment. This substitution is not without significance. Whereas, a complaint could be filed only from a person who was aggrieved by a particular action, information may be received from any person, obviously whether such person is or is not personally affected. This is for the reason that the proceedings under the Act are proceedings in rem which affect the public interest. That the CCI may inquire into any alleged contravention of the provisions of the Act on its own motion is also laid down in section 19(1) of the Act. Further, even while exercising suo motu powers, the CCI may receive information from any person and not merely from a person who is aggrieved by the conduct that is alleged to have occurred. This also follows from a reading of section 35 of the Act, in which the earlier expression complainant or defendant ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... right or obligation of the parties in controversy; every order in the suit cannot be regarded as a case decided within the meaning of s. 115 of the Code of Civil Procedure. That being the position, the reliance of Mr. Poovayya on Salmond s Jurisprudence, (4th Edition, 66 67) which discusses the doctrine of precedent and a bit of res judicata, their scope application, would not much come to the aid of his clients. E. AS TO SECTION 26 BEING DRACONIAN AND DAMAGE TO PETITIONERS REPUATTION: (i) As already mentioned above, the scheme under section 26 of the 2002 Act envisages layered proceedings: What Professor Sudhanshu Kumar (S.M.Dugar, GUIDE TO COMPETITION ACT, 2002 , 8th Edition, Lexis Nexis, pp 856 860, (2021) ) writes about the scheme of section 26 is worth reproducing: Commission for forming an opinion whether or not there exists a prima facie case which requires investigation is required to take cognizance of the averments contained in the reference or information and the documents supplied In an appropriate case, the Commission may also hold preliminary conference and ask the informant or the person against whom allegation of anticompetitive co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estigate under section 26(2) are far wider than the powers of the police under the Code of Criminal Procedure, 1973, is also true. However, similar contentions taken up by the very same counsel in FLIPKART supra were repelled by the Division Bench of this Court and the same has attained finality. (iii) It would once again be fruitful to advert to the foundational philosophy of competition law. The central concern is that firm or firms can harm competition and inflict harm on customers and ultimately end consumers where they possess some degree of market power (Richard Whish, David Bailey, Competition Law , Tenth Edition, Oxford University Press, pg. 1 24, (2021) _ . This central concern arises from market power a particular firm holds; the concept of market power being the ability to reduce output or capacity, to raise prices, to reduce the quality of products, to limit the choice available to customers and/or to suppress innovation without fear of a damaging competitive response by other firms Id. The aim of 2002 enactment is: preventing practices which have an adverse effect on the competition; promoting sustaining competition in the markets, in order to protect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Competition Act whereby it could approach the appellate tribunal aggrieved by any decision or direction or order inter alia under sub-section (2) of Section 26 of the Competition Act. The (2004) 11 SCC 26. commission is expected to form an opinion about the existence of a prima facie case for contravention of certain provisions of the Competition Act and then passes a direction for the DG to cause an investigation into the matter. Post the report of the DG it can proceed further or close the proceedings. (Competition Commission of India v. Steel Authority of India Anr.7 confirmed in CCI v. Bharti Airtel case.) That stage had not even arisen. The final report of the CCI was yet to mature and the CCI was not even bound by the report of the DG 37. The aforesaid gave an opportunity to respondent Nos. 5 6 also to approach the Court and interdict the proceedings which ought to have been concluded a long time ago. It would, in our view, have been beneficial even to the State to have come to a conclusion one way or the other. The interdict post the investigation report by the DG and prohibiting the CCI from carrying out its mandate under the Competition Act is unsustainable. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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