ORDERS By COMPETITION COMMISSION OF INDIA
A.
Anti-Competitive Agreements
Synopsis of the legal provisions
Section 3 of the Competition
Act, 2002 (“Act”)
prohibits an enterprise or association of enterprises or persons to enter into
agreements in respect of production, supply, distribution, storage, acquisition
or control of goods or provision of services, which causes or is likely to
cause appreciable adverse effect on competition in India.
Following kinds of agreements between enterprises,
persons or association of persons or enterprises, or practices or decisions
taken by association of persons or enterprises, including cartels,
engaged in similar or identical trade of goods or provision of services
is presumed to have appreciable adverse effect on competition:
a) Agreements or decisions that directly or indirectly
determine purchase or sale price.
b) Agreements that limit or control production, supply,
market, technical development, investment or provision of services.
c) Agreements to share market or source of production
or provision of services by way of allocation of geographical area of market or
type of goods or services, or number of customers in the market or any other
similar way.
d) Agreements that, directly or indirectly, result in
bid-rigging or collusive bidding.
However, agreements entered into by way of joint
ventures are excluded from above restriction if such agreements increase the
efficiency in production, supply, distribution, acquisition, or control of
goods or provision of services.
Under the Act, ‘cartel
includes an association of producers, sellers, distributors, traders, or
service providers who, by agreement amongst themselves, limit control or
attempt to control the production, distribution, sale or price of, or trade in
goods, or provision of services’.
Further, under section 19(3) of the Act, following
factors are to be considered by Competition
Commission of India (“CCI”)
in determining whether an agreement has appreciable adverse effect on
competition:
a) Creation of barriers to new entrants in the market.
b) Driving existing competitors out of the market.
c) Foreclosure of competition by hindering entry into
the market.
d) Accrual of benefits to consumers.
e) Improvement in production or distribution of goods
or provision of services.
f) Promotion of technical, scientific and economic
development by means of production or distribution of goods or provision of
services.
B.
Abuse of Dominant Position
Synopsis
of legal provisions
Section 4 of the Act prohibits any enterprise or
group to abuse its dominant position. ‘Dominant position’ has been defined 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 favor’.
In light of the above provisions, we produce the
summary of CCI’s orders passed in the month of November, 2012:
1. Ajay
Devgan Films v. Yashraj Films Private Limited & Others, decided
on November 05, 2012
Ajay
Devgan Films (“ADF”) filed a case against
Yash Raj Films Private Limited and Others (“YRF”),
alleging contravention of Section 3 and Section 4 of the Act.
As per
the filed information, ADF’s movie titled Son
of Sardar was set to release simultaneously with Jab Tak Hai Jaan on the day of Diwali. ADF alleged that YRF imposed
restrictive conditions in their agreements with single screen theatres, at the
time of release of their movie Ek Tha
Tiger. Pursuant to such agreements, single screen theatres were required to
compulsorily exhibit YRF’s upcoming movie Jab
Tak Hai Jaan on Diwali, if they want to exhibit Ek Tha Tiger on Eid. ADF alleged that such tie-in agreement between
YRF and single screen theatres were violative of Section 3(4)(a) of the Act.
ADF
further contended that Ek Tha Tiger was a big ticket film, bound to be a
blockbuster, whose exhibition was very profitable for single screen theatres.
Given to the big name and dominance of YRF, majority of the single screen
theatres agreed for exhibition of both the films. ADF alleged that this threat
of not allowing exhibition of Ek Tha
Tiger, if contract for release of Jab Tak Hai Jaan is not entered simultaneously, amounted to abuse of dominant position
by YRF and was violative of Section 4 of the Act.
CCI
stated that tie-in agreement per se is not prohibited by Section 3 of
the Act, unless it has an adverse effect on the competition. CCI held that the
impugned agreements did not have an adverse effect on the competition in India,
as they neither created any barrier for new entrants, nor drove existing
players out of the market. Single screen theatres had the right, to not enter
into the agreement with YRF and were free to screen any other film of their
choice. Single screen theatres took a business decision to screen two films of
YRF, rather than screening any other film that may get released. CCI further
observed that ADF is free to release its movie in multiplexes and other single
screen theatres, which have not entered into an agreement of such nature with
YRF. CCI, on the basis of an earlier report of DG, noted that single screen theatres
contribute only 35% of the total revenue, whereas multiplexes contribute 65% of
the total revenue. Hence, as per CCI, their non-significant position does not
cause any adverse effect on the competition.
On the
issue of violation of Section 4 of the Act, CCI opined that the no enterprise
or body could be held dominant market player only due to its big name.
Substantial market share and economic strength must be substantiated to prove
dominance in market. CCI held that ADF did not provide any information on the
market share of YRF, which can establish its market dominance. Further, on the
basis of the information available in the public domain, CCI noted that in Bollywood
itself, around 107 and 95 movies were released in the year 2011 and 2012,
respectively. YRF released only 2 to 4 of such movies in each of the
above-mentioned years. Based on the above analysis, CCI held that the position
of YRF in the relevant market of ‘exhibition of movies’ cannot be held
to be of dominance and therefore the impugned agreements were also not
violative of Section 4 of the Act.
Order of
Competition Appellate Tribunal
Aggrieved with the above-mentioned
order of CCI, ADF moved an appeal in Competition
Appellate Tribunal (“COMPAT”), seeking inter alia injunction on the
release and stay on the order of CCI. COMPAT held that it did not find a prima
facie case fit for granting injunction on the release and also denied
granting stay order for the following reasons:
1. None of the single
screen theatres, which entered into agreement with YRF were made party before
CCI or COMPAT.
2. There were many single
screen theatres,
which had exhibited Ek Tha Tiger
alone and refused to exhibit Jab Tak Hai
Jaan.
3. No figure pertaining
to the number of single screen theatres was provided, where Son of Sardar and Jab Tak hain Jaan
were screened on the day of release.
4. The agreements with single
screen theatres
were entered from month of May, 2012 till August, 2012. CCI observed that if
ADF did not come to CCI at that time, there would be no point in issuing
injunction at this stage.
2.
Exclusive
Motors Private Limited v. Automobili Lamborgini S.P.A.,
decided
on November 6, 2012
The case was filed by
Exclusive Motors Private Limited (“Exclusive
Motors”) against Automobili Lamborgini S.P.A. (“Lamborgini”) for violation of section 3 and 4 of the Act.
As per Exclusive
Motors, Lamborgini appointed Exclusive Motors as the importer and dealer of
Super Sports Car (“Sports Car”) for
Delhi, pursuant to a dealership agreement
in 2005. In the year 2011, Lamborgini appointed its group
company Volkswagen India Private Limited (“Volkswagen
India”) as the dealer and importer in Mumbai. Subsequently, upon failure of
parties to enter into a new dealership agreement, Lamborgini delivered a twelve
months’ termination notice to Exclusive Motors. Exclusive Motors alleged that after
appointment of Volkswagen India, the Sports Cars were sold to Exclusive Motors
on a higher price, as compared to Volkswagen India. Similarly, Volkswagen India
was also given propriety in delivery of Sports Cars and supply of spare parts.
Exclusive Motors further alleged that by
executing exclusive distribution agreement with Volkswagon India, Lamborgini
has restricted the entry of new entrants in the market of import and dealership
of Sports Car.
CCI stated that for an
agreement to fall under the purview of Section 3, it has to be an agreement
between two or more enterprises as defined under Section 2(h).
CCI applying the principle of ‘single economic entity’ held that since
Volkswagen India and Lamborgini are companies of Volkswagon group, such
agreement cannot be said to be between two enterprises as defined in Section
2(h) of the Act.
On violation of
Section 4, CCI concluded the relevant market to be the ‘market of Super Sports car in India’. CCI noted that Exclusive Motors
has not provided any information on the economic strength of Lamborgini. CCI
further noted that no entry barriers were created for new entry as these cars
are made on special order from consumers. Economic strength wise and resources
wise all manufacturers of Sports Cars stands on the same level. Further, as per
the information provided by Exclusive Motors, only 93 Sports Cars belonging to
all manufacturers were sold in India in last 5 years. Therefore, CCI held that
as the market for such cars is very small in India, none of the manufacturers
of the Sports Car can be said to be a dominant player in the relevant market.
On the basis of the
above observations CCI held that Lamborgini does not have dominance in the relevant
market.
3.
Accreditation
Commission for Conformity Assessment Bodies Private Limited v. Quality Council of India and National
Accreditation Board for Testing and Calibration Laboratories and others,
decided on November 7, 2012
The
case was filed by Accreditation Commission for Conformity Assessment Bodies
Private Limited (“Informant Company”)
against Quality Council of India (“Quality
Council”), National Accreditation Board for Testing and Calibration
Laboratories (“Accreditation Board”)
and 12 different ministries of Government of India for violation of Section 3
and 4 of the Act.
Quality
Council is a body set up jointly by Government of India and industry
associations such as ASSOCHAM, CII and FICCI to establish and promote quality
through national quality campaign. Accreditation Board is an autonomous body
for providing scheme of laboratory accreditation and competence of laboratories
in accordance with International Organization for Standardization (“ISO”). Informant Company has been
incorporated for the business of accreditation, which is a process of
certification of competency, authenticity or credibility.
Informant
Company alleged that Quality Council was falsely claiming that it carries out business under the aegis of International Accreditation Forum (IAF)
and that IAF does not allow more than one accreditation body from a country to offer
same scope of accreditation. Informant Company argued that due to above false claim
of the Quality Council, competition between accreditation bodies was hindered.
The Informant Company further alleged that Quality Council falsely claimed that
the membership of IAF is mandatory for services to be recognized globally.
Informant Company submitted that it has obtained a written explanation from
IAF, that its membership is not mandatory for an accreditation services
provider to be recognized globally.
Informant
Company also alleged violation of Section 3 of the Act on the ground that
Quality Council and Accreditation
Board
have entered into agreements with different government agencies and departments
to issue circulars and notifications, recommending it as the sole and exclusive
accreditation service provider.
On the basis of the information
provided, CCI observed that the relevant market for the present case was service
of granting accreditation certification to the companies who satisfy certain
minimum standards known internationally. As these certification agencies work on the pan India basis, CCI
concluded that the relevant geographical market in the present case would be
whole of India.
CCI
noted that accreditation is not only required for the government bodies but
almost every company is applying to get accreditation. Further,
the Informant Company did not provide any information/data to substantiate its
claim that Quality Council and Accreditation Board enjoyed dominant position. Therefore,
in the light of failure of Informant Company to provide relevant information
and data, CCI did not consider the issue of abuse of dominant position.
On the
issue of violation of Section 3 of the Act, CCI stated that the mere act of certain
Government agencies of choosing a particular agency for accreditation does not violate
provisions of Section 3 of the Act. The Act does not warrant the Government to equally distribute its work among all the accreditation agencies.
On the
basis of the above analysis, CCI held that no prima
facie case could be established against Quality
Council and Accreditation
Board for violation of Section 3 or Section 4 of the Act.
4.
DGCOM Buyers
and Owners Association, Chennai V. M/s. DLF Limited, New Delhi and M/s. DLF
Southern Homes Private Limited, Chennai
decided on November 27, 2012
DGCOM Buyers and Owners
Association (“Informant Association”)
is an association of buyers and owners of a residential project of M/s DLF Southern Homes Private Limited, Chennai (“DLF Chennai”). The said residential
project is situated on the Old Mahabalipuram Road IT Corridor, Chennai (“OMR IT Corridor”). The Informant
Association has alleged that after eighteen months of booking flats, the buyers
were made to sign an agreement which had highly abusive and one sided clauses, owing
to dominant position of DLF Chennai.
CCI taking into
consideration its earlier decisions and provisions of the Act stated that the
relevant market in the present case was provision
of services for development and sale of residential space in the geographical
area of Chennai. CCI noted that a large number of developers are developing
residential projects in Chennai. Further, as per the data provided by the Informant
Association, there were many similar residential projects launched by different
developers in OMR IT Corridor, whereas DLF Chennai was involved in just one
project in OMR IT Corridor.
On the basis of the
above observation, CCI held that no prima
facie case of dominance could be made against DLF Chennai for violation of
Section 4 of the Act.
C.
Combination
Registrations
1.
Combination
Registration No. C-2012/10/87, decided on October 29, 2012
The notice for
combination was jointly filed by Telewings Communication Services Private
Limited (“Telewings”) and Lakshdeep Investments and Services Private
Limited (“Lakshdeep”), pursuant to a Share
Subscription and Shareholder’s Agreement dated October 26, 2012 executed between
Telenor South Asia, Telewings and Lakshdeep. As per the proposed combination,
Lakshdeep will acquire 51% of Telewings from Telenor South Asia Investment Pte
Limited and Telenor South East Asia Investment Pte Limited.
Telewings is a private
limited company, which is part of Norway based Telenor group of companies (“Telenor Group”). Telenor Group
presently operates in telecommunication sector in India through Unitech Private
(TamilNadu) Limited (“Uninor”).
Lakshdeep is a private limited company, engaged in the business of investing
and financing activities, including trading in securities and transferable development rights.
On
the basis of the information provided in the notice, CCI observed that the
business of Telewings and Lakshdeep is not identical or substitutable and also
is not related to a same production chain. Therefore, CCI held that the
proposed combination was not likely to have an appreciable adverse effect on the
competition in India.
2.
Combination
Registration No. C-2012/10/83, decided
on October 30, 2012
The notice for
combination related to the proposed acquisition of shares of Transocean Offshore
Drillings Holding Limited (“TODHLs”)
and six offshore drilling rigs owned by indirect subsidiaries of Transocean
Limited by Shelf Drilling International Holdings Limited (“SDIHL”), Shelf Drilling International
Holdings APA1 Limited (“SDAPA1”), Shelf Drilling International Holdings
APA2 Limited (“SDAPA2”), Shelf Drilling International Holdings APA3
Limited (“SDAPA3”), Shelf Drilling International Holdings APA1 Limited (“SDAPA4”), Shelf Drilling
International Holdings APA1 Limited (“SDAPA5”), Shelf Drilling
International Holdings APA6 Limited (“SDAPA6”) (jointly referred to as “Acquirers”).
The notice was filed pursuant
to the execution of a share purchase agreement and six asset purchase agreements executed between the parties
to the combination, where SDIHL will acquire all issued and outstanding share capital
of TODHL and six offshore drilling units of Transocean Offshore International
Ventures Limited (“TOIVL”), R&B Falcon (A) Pty Limited (“RBFPL”),
Transocean Holdings LLC (“THL”) and Triton Holdings Limited (“Trinton”)
will be purchased by the remaining Acquirers.
As
per the notice, the Acquirers are newly created entities, incorporated under
the laws of Cayman Islands, and are owned by three private equity firms. TODHL,
TOIVL, THL, Trinton and RBFPL are wholly owned indirect subsidiaries of
Transocean Limited, which deals in providing offshore contract drilling
services for oil and gas wells across the world. Transocean Limited has
thirteen offshore mobile drilling units/rigs located in India.
Pursuant to the proposed
combination, Acquirers will acquire thirty eight drilling units, out of which seven
are located in India. On the basis of the information provided in the notice,
CCI observed that the Acquirers are new entities, which do not have any
business activity in India. Further, there is no vertical relationship between
the Acquirers and the companies, whose shares and assets are being acquired. Having
said that, CCI noted that only Lime Rock Partners (one of the private equity
firms that partially own the Acquirers) holds shares in two companies that
operate in a segment, which is vertical to the business of offshore drilling
services for oil and gas. However, CCI observed that market sales of both
such companies are relatively insignificant in India.
Therefore, on the
basis of the above observations, CCI held that the present
combination would not have appreciable adverse effect on the competition in
India.
3.
Combination Registration No C-2012/10/86,
decided on November 8, 2012
The
combination notice was filed pursuant to a Share Purchase Agreement dated
September 27, 2012 between Invesco Hong Kong Limited (“Invesco”), Religare Asset Management Company
Private Limited (“Religare AMC”),
Religare Trustee Company Private Limited, Religare Securities Limited (“RSL”), Religare Enterprises Limited (“REL”) and Religare Trustee Company
limited (“Religare Trustee”). The
proposed combination relates to the acquisition by Invesco of 49 per cent of
the equity share capital in each of Religare AMC and Religare Trustee from RSL.
As
per the notice, Invesco is a Hong Kong based company, which is engaged in the
business of providing asset management, dealing and advising on securities and
advising on futures contracts.
Religare
AMC and Religare Trustee are wholly-owned subsidiaries of RSL, which are
approved by Securities and Exchange Board of India (“SEBI”) to act as
Assets Management Company and Trustee, respectively of Religare Mutual Fund. RSL,
a public limited company is a wholly-owned subsidiary of REL and is engaged in
the business of, equity broking in the cash and derivatives segments, currency
futures, options broking and depository participant services. As per the
notice, RSL is a depository participant with National Securities Depository
Limited and Central Depository Services (India) Limited and is a member of the
National Stock Exchange of India Limited, Bombay Stock exchange Limited and MCX
Stock exchange Limited. Further, as per the notice, RSL is stated to be the
sponsor of Religare Mutual Fund.
CCI
observed that Invesco has no presence in the market of mutual fund and
portfolio management services in India. CCI referring to the information available
on the website of SEBI noted that there are more than 40 other asset management
companies and more than 250 portfolio managers in India. CCI opined that this
significant presence of other asset management companies and portfolio managers
implies significant competition in the market of mutual fund and portfolio
management services. CCI also noted that the market share of Religare Mutual
Fund is insignificant to the other players of the Indian mutual funds industry.
On
the basis of above analysis, CCI held that the proposed combination will not
have an appreciable adverse effect on the competition in India.
4.
Combination
Registration No. C-2012/11/90, decided on November 21, 2012
The
combination relates to the proposed acquisition by Standard Charted Bank Indian
branch (“SCB India”) of performing
loan portfolios of personal instalment loans, loans against property and home
loan finance from Barclays Bank Plc., India Branch (“Barclays India”) and Braclays Investments and Loans (India) Limited
(“BILIL”).
SCB
India is a branch of Standard Charted Plc., a company incorporated in England
and Wales, engaged in providing banking and financial services. Barclays India
is a branch of Barclays Bank Plc., a company incorporated in England and Wales,
engaged in banking and financial services. BILIL is a wholly owned subsidiary
of Barclays Bank Plc. and is a non-deposit taking Non-Banking Financial Company
(“NBFC”).
On
the basis of Reserve Bank of India’s (“RBI”) publications and reports,
CCI observed that as on March 31, 2012, there were around 86 scheduled
commercial banks, comprising of 26 public sector banks, 20 private sector banks
and 40 foreign banks, operating in India through their 83,229 offices. Further,
as on June 2012, there were 12,385 NBFC’s registered with RBI.
On
the basis of the information provided in the notice, CCI observed that Barclays India’s
and BILIL’s share in the market of instalment loan, loan against property and
home loan segment is very small out of the total loan segment in India. Further, the share of SCB
India is also very small in the above mentioned segment. CCI also noted that
there are many other large player in the market dealing with the loan segment.
Therefore,
on the basis of the above analysis, CCI held that the proposed combination is
not likely to have appreciable adverse effect on the competition in India.
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DISCLAIMER
This competition law alert has been prepared by
Sarthak Advocates and Solicitors. It is meant to be merely an informative
summary and should not be treated as a substitute for considered legal advice.
We welcome your comments and suggestions. For any comments, suggestions or
further clarifications, please contact us.
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