Introduction to Competition Act

The competition act of 2002 was passed by the parliament of India so as to form a commission to oversee the business operations of companies and individuals in the country following fair practices of competition and economic growth of the country. This act applies to the whole of republic of India except for Jammu and Kashmir. It applies for agreement, acquisition or any cartel involving business transactions that has an economic impact for the country.

Objective

The main objective of the act is to promote fair practices and act as a forum for grievances and conflicts regarding the state of competition and economic cooperation among companies operating in India

Functions

Prohibition of certain anti-competitive agreements.

Prevention of abuse of dominant market position, and

Regulation of combinations.

Anti-competitive agreements include that of production, supply or distribution that may result into dominant position of a company or enterprise creating unfair competition in the market. It also encompasses practices like direct or indirect bid rigging or collusive bidding, determination of purchase or sale prices and the limiting of production or supply to practice uncompetitive business processes.

Dominant position refers to unfair practices in determining purchase or sale prices, determining conditions directly or indirectly using the dominant market position and indulging in practice or practices resulting in denial of market access

The acquisition of company or an enterprise by a person or a group of persons is limited to those that have voting rights and assets in India itself in the range of rupees 1 thousand crores or turnover of such amount or in India or outside India, in aggregate, the assets of the value of more than five hundred million US dollars, including at least rupees five hundred crores in India, or turnover more than fifteen hundred million US dollars, including at least rupees fifteen hundred crores in India.

Who can make a complaint?

•         Any person, consumer, consumer association or trade association can make a complaint against anti-competitive agreements and abuse of dominant position.

•         A person includes an individual, Hindu Undivided Family (HUF), company, firm, association of persons (AOP), body of individuals (BOI), statutory corporation, statutory authority, artificial juridical person, local authority and body incorporated outside India.

•         A consumer is a person who buys for personal use or for other purposes.

Orders the Commission can pass in case of anti-competitive agreements and abuse of dominance

During the course of enquiry, the Commission can grant interim relief restraining a party from continuing with anti competitive agreement or abuse of dominant position

To impose a penalty of not more than 10% of turn-over of the enterprises and in case of cartel – 3 times of the amount of profit made out of cartel or 10% of turnover of all the enterprises whichever is higher

•         After the enquiry, the Commission may direct a delinquent enterprise to discontinue and not to re-enter anti-competitive agreement or abuse the dominant position

•         To award compensation

•         To modify agreement

•         To recommend to the Central Govt. for division of enterprise in case it enjoys dominant position.

CASE1: Dish TV v/s Prasar Bharti

Information filed by: Dish TV

Against: Prasar Bharti

Background of the Informant and the accused:

The informant (Dish TV) is a Direct to Home (DTH) service provider; it is a division of the Zee Network Enterprise. Dish TV was India’s first DTH entertainment service; they revolutionized television viewing in the country. It utilized the best available television viewing technology for their customers by transmitting high quality programmes straight to viewer’s living rooms through satellites. This ensured DVD picture quality and unparalleled stereophonic sound effects to the customers with uninterrupted transmission service.

Prasar Bharti is a public service broadcaster of the country, it is a statutory body constituted under the Prasar Bharti (Broadcasting Corporation of India) Act of 1990. The objective of the Act is to ensure that the citizens of the country are informed on all matters of public interest by transmitting fair and unbiased information. To provide adequate coverage to diverse fields ranging from education and rural development to the environment, family welfare, sports and science/technology. They are also enlisted with the responsibility to promote research and development in broadcasting facilities and technology. They are also involved in the commercial activities of broadcasting Television programmes including advertisements.

The Allegation:

The informant (Dish TV) had filed a case against Prasar Bharti under section 19 of the Competition Act, 2002 accusing them of taking advantage of their dominant position and for uncompetitive practices. Dish TV reported that they had approached Prasar Bharti for airing their advertisement on the DD National channel on commercial basis. This request was rejected by Prasar Bharti citing reasons that the commercial advertisement of private DTH platforms are not allowed on DD. Dish TV reject this explanation as the advertisement sought to be telecast does not fall under any of the prohibited categories under the advertisement code of Doordarshan. Due to these events the representatives of Dish TV appeared before the Competition Commission of India on the 25th of November 2010 and submitted information to substantiate their claim.

The information provided by Dish TV to the Competition Commission of India to substantiate their claim in its written submission is as follows:

Prasar Bharti also operates a free to air Dish to Home service platform (DD Direct Plus) after obtaining due approval from the Ministry of Information and Broadcasting. Therefore the Dish to Home service of Prasar Bharti is a direct competitor of the informant (Dish TV).

Doordarshan telecasts the advertisements of private service and state service operators in the telecom industry such as Airtel, Vodafone, BSNL, MTNL, etc. It also telecasts the advertisements for other private products and services.

There is no prohibition in the ‘Advertisement Code’ of the Doordarshan for telecasting the advertisements of Dish to Home service platforms.

Prasar Bharti is involved in uncompetitive behaviour and is taking advantage of its dominant position by promoting and monopolizing the market for its own Dish to Home service

Prasar Bharti is in direct violation of the fundamental rights of not only the informant but also the citizens of the country by denying them the latest information on satellite based digital delivery technology and hence are unaware of the numerous subscription based and free channels provided by the informant.

The Verdict after due investigation

The Competition Commission of India held preliminary investigations after receiving a written submission from the representatives of the Informant. It discussed these matters in its ordinary meeting held on the 21st of December 2010.

2.1 The ‘Cable Network Regulation Act, 1995’ makes it mandatory for all cable and Dish to Home operators to air all the channels of Prasar Bharti. Due to the provisions of this act Prasar Bharati channels have got enormous coverage and popularity.

2.2 The informant has claimed that Prasar Bharti has taken advantage of its dominant position as its channel Doordarshan has maximum coverage in the country. Although the problem of the informant lies in the fact that it has not been allowed to air its advertisement on Doordarshan, it has taken the viewership market of Prasar Bharti as the relevant market in their written submission to the Competition Commission of India.

2.3 The relevant market in this case should be the advertisement air time and not the viewership coverage of Doordarshan.

2.4 The informant in its written submission has not provided any incriminating evidence to prove that Prasar Bharti has indulged in uncompetitve behaviour due to their dominant position.

2.5 Prasar Bharti has not indulged in any malpractice as there are a number of other free to air channels apart from Doordarshan, it has certain privilages as per legislation passed by the parliament which allows it to air its channels on all cable and Dish to Home networks.

2.6 The Competition Commission of India is of the opinion that there is no prima facie evidence to implicate that Prasar Bharti’s DD National channel is in a dominant position to sell and telecast commercials.

References

Official website of the Competition Commission of India – http://www.cci.gov.in/

CASE2: M/s Best Xerox Centre v/s Xerox Modi India Limited

Informant: M/s Best Xerox Centre, Proprietor Smt .Sunder Jain

Opposite Party: Xerox Modi India Limited(MX)

Background of the accused:

Xerox ModiCorp Limited (XML) is a subsidiary of Xerox Corporation, USA. It was incorporated in 1983. Xerox Modi India Limited has been involved in three successful transitions in India which are from copying to printing,black and white to colour and stand-alone analog to digital, networked products. Xerox Corporation offers document solutions, services and systems which includes colour and black-and-white printers, digital presses, multi-function devices and digital copiers designed for offices and production-printing environments. It also offers

associated supplies, software and support .

The Allegation:

A case was filed by M/s Best Xerox Centre through its sole proprietor Smt.Sunder Jain against Xerox Modi India Limited under Section 26(2) of the Completion Act,2002

According to the informant the opposite party illegally used its dominant position by unilaterally changing the terms of arbitration. The allegation was that the abuse of dominant position is for coercing Best Xerox Centre (BXC) to sign the Full Service Maintenance Agreement (FSMA) with an arbitration clause in which Xerox Modi (Xerox) had the exclusive right to appoint the arbitrators.

The informant had purchased a Xerox machine at a price of Rs8,05,800 from the Xerox Modi India Limited in 1997.The grievance of the informant was regarding the condition of appointment of arbitrator and venue of arbitration was changed by the opposite party in the Full Service Maintenance Agreement (FSMA) on 11/12/1997.The conditions were different than the one mentioned in the sale invoice dated 30/09/1997 and 21/11/1997.

The information provided by to the Smt .Sunder Jain to Competition Commission of India to substantiate their claim in its written submission is as follows:

The arbitration clause as per the sale invoice dated 30/09/1997 and 21/11/1997 stated that if there was a dispute or a difference in opinion arising between the two parties then it would be referred to the arbitration of board of arbitrators which would comprise of on nominee each from MX and Best Xerox Centre and an umpire. The venue would be Hemkunt Tower ,New Delhi-110019

Now the amended clause of FSMA stated that if there was a dispute or a difference in opinion arising between the two parties then it would be referred to the arbitration of a sole person appointed by the Chairman of board of the directors of MX.I t also stated that all proceedings of such arbitration would be governed by the Arbitration & Conciliation Act,1996. The venue was the same – Hemkunt Tower ,New Delhi-110019.

This showed that there was a difference in the clauses of the invoices.So, it was alleged that the opposite party was trying to misuse its dominant position which was apparently clearly comparing the sale invoices and in the FSMA. The informant also alleged that the opposite party had deliberately incorporated very liberal terms to lure them ( M/s Best Xerox Centre) into purchasing the machine.

But now since the machine was already bought by the informant, the opposite party incorporated very restrictive terms in the service agreement, so as to discourage the consumer (M/s Best Xerox Centre) from raising any dispute to after sales service.

The informant also alleges that the opposite party was trying to take advantage as it held monopoly in the market of Xerox machines. The technical service engineer and spare parts were also not available in the open market. So, the consumer was left with no option but to agree with the conditions stated in the FSMA.

Request by the informant was to penalize the opposite party for unfair trade practices and abuse of dominant position.

The Verdict after due investigation

After going through the various documents the Commission found that the informant had brought nothing on record that suggested that the maintenance agreement was mandatory for them as purchaser. So a user has ample choice of selecting a vendor for servicing. Though Xerox had a considerable edge over the other competitors there were different vendors like Canon and HCL Toshiba available.

Also there were many manufactures of photocopiers and so the allegation of Xerox taking advantage of a monopolistic condition did not baseless.

So, the verdict of the Commission was that that the informant was not able to place any credible or cogent evidence or material to show or establish any infringement of Section 3 or 4 of the Competition Act,2002 .

The allegations were therefore unsubstantiated and uncorroborated. Thus the commission was of the view that no prima facie case was made out for making a reference to the Director General for conducting investigation and the proceedings were therefore closed.

References

http://www.ibef.org/download/XeroxModicorp.pdf

http://practicalacademic.blogspot.com/2011/02/dallah-real-estate-best-xerox-and.html

CASE3: Eximcorp v/s Google India

Information filed by: Eximcorp India Pvt Ltd

Against: M/s.Google India Pvt.Ltd.

Background of the Informant and the accused:

The informant (Eximcorp ) is a leading Wood & Wood panel products trading Company in India in distribution business. It was set up in the year 1996 .Though its business operations are global across the Continents, primary focus is on distribution in the Indian market. Its head office is located at Delhi in India with business centers in Kolkata and Chennai at present besides presence of field representatives in most business cities in North India.

Google Inc. is an American multinational public corporation invested in Internet search, cloud computing, and advertising technologies. Google is in business of hosting and developing a number of Internet-based services and products and generates profit primarily from advertising through its AdWords program. The company was founded by Larry Page and Sergey Brin, often dubbed the “Google Guys”. It was first incorporated as a privately held company on September 4, 1998, and its initial public offering followed on August 19, 2004 .

The Allegation:

The informant (Eximcorp) had filed a case against Google India under section 19 of the Competition Act, 2002 accusing opponent of making business practices which are inappropriate & discriminatory in nature.Eximcorp had approached google for the advertisement.However dissatisfied with the payment handling by the google,the informer requested to close its acoount & return any unused advances on 30th September,2010.But Google refused to carry out the transfer of fund without being informed some banking confidential details.The informant also alleged that the bidding process introduced by the google to place advertisements on ‘Ad Words’ is non-transperent.Eximcorp also alleged that refusal to accept payments from Indian customers by credit cards is a discriminatory practice based on geographical or political location of the client.

The information provided by Eximcorp to the Competition Commission of India to substantiate their claim in its written submission is as follows:

Eximcorp has stated that for the Ad services the customer is required to pay through the process of bidding per click. In keeping in mind the opponent reserves the right of placing the web page of the client in first or second page of search engine results, the informant alleged that opposite party’s business practices are not transparent & accountable by virtue of its dominant position.

The informant also informed that the bidding process based on key words requires the client to bid for each click by the visitors on search engine subject to minimum limit set out by Party no.1,as equal to bid by others for the same key words. But such limit can be changed without any prior notice in that case the placement stops running automatically until the same is upgraded to the minimum level of minimum suggested by google. In the absence of any information about the bidder whose bid has been the basis of minimum limit set out by the google ,it can not be demonstrated that the same has not been manipulated by google to take advantage of the process lacking transparency.

Also the adjustment to advances received by google for the total number of clicks on the web page does not demonstrate any ID of the visitor at least in terms of the informant address.

The Verdict after due investigation

The Competition Commission of India held preliminary investigations after receiving a written submission from the representatives of the Informant. It discussed these matters in its ordinary meeting held on the 10th of January 2011.

It found that banking details requirement by the opponent party to transfer the funds are as under banking requirement. RTGS/IFSC code, account details are prerequisite to transfer funds online Opposite party has two payment options (Prepay/postpay)for all customers in India. Credit card facility is available only to post paid customers. The facility in India is as same as other countries. Hence, practice of refunding unused funds used by google can not held discriminatory.

Order of the advertisements on the page depends on the quality score and minimum bid placed by the advertiser. This is completely an automated process. Also seeking the information of the ID of the visitor who visits the site of the informant can not be called as lack of transparency.

Prima facie, it appears that the case is an individual consumer dispute having no bearing on competition on India.

There is no proper evidence on record that that opposite parties are indulging in any anticompetitive activities which can lead to adverse effects on competition. Therefore , the commission is of view that ,prima facie, there is no violation of any provisions of section 3 or 4 under this act.

The commission is therefore of the view that no prima facie case is made out for making a reference to the Director General for conducting any investigation in this matter under section 26(1) of this act and the proceedings are closed forthwith.

Hence commission closed this case under section 26(2) of this act.

References

Official website of the Competition Commission of India – http://www.cci.gov.in/

CASE 4: (Travel agents association of India v/s British Airways)

Information filed by: Travel Agents Association of India Pvt Ltd (TAA)

Against: British Airways

Background of the Informant:

The informant Travel Agents Association of India (TAAI) was formed towards the end of the year 1951 by a group of twelve leading Travel agents, who felt that the time had come to create an Association to regulate the Travel industry in India. The primary purpose was to protect the interests of those engaged in the industry, to promote its orderly growth and development and to safeguard the rights of the travelling public. TAAI represents all that is professional, ethical and dynamic in our nation’s Travel related activity and has been recognized as the voice of the Travel and Tourism industry in India. With a membership data base of over 2400 Active; Allied and Associate members comprising of IATA accredited Travel Agencies; Airlines & General Sales Agencies; Hotels and Tour operators.

Background of the Accused:

British Airways is the flag carrier of the United Kingdom with its head quarters in Waterside near Heathrow airport, London. It is the largest airline in the UK and one of the biggest international legacy carriers in the world with services to all the continents on the earth. British Airways has been flying to India ever since its creation in 1971 with the merging of BOAC and BEA.

The Allegation:

The case is regarding a recent decision by British Airways to cancel its authorization to various private travel agents throughout India. India comes under region 3 of IATA (International Air Transport Association) and hence the informant first went to it to sought legal actions. But due to IATA’s non involvement because of its non jurisdiction, the matter was brought before the Indian Government. The informant complaints that the decision by British Airways is totally against the ground reality and promotes unhealthy competition as the company has in fact got into partnerships with certain big travel agents. This is not fair and hence is acting as an obstacle for the flying public. The public will have less alternatives of buying tickets and the individual travel agents will have to bear losses as British Airways is a significant player in the Indian air market.

The information provided by TAA to the Competition Commission of India to substantiate their claim in its written submission is as follows:

One of the most important information was regarding the market share and the strong customer base British Airways has in India. It is one of the leading carriers between India and the UK and carries a lot of connecting traffic to US, Canada and other places through its hub in London-Heathrow airport. The informant claimed that because of this strong consumer base, it was unfair on the company’s part to deny them an alternative ticket purchase option and the other value added services provided by the travel agents to these fliers.

The informant also informed that the decision by British Airways was not practically employed by the company as it had instead of terminating its contracts with 3rd party organizations, made deals with other big private travel agents for ticket sales and promotion. This was not only against a fair competition but also contradictory to the company’s own policy.

Last but not the least, the informant claims that British Airways was manipulating its customers preferences and choices by its dominant position in the market on the expense of the survival of the travel agents in the country.

The Verdict after due investigation

The Competition Commission of India held preliminary investigations after receiving a written submission from the representatives of the Informant. It discussed these matters in its ordinary meeting held on the 15th of September 2010.

Though the informant has claimed that in spite of the opposite party’s decision to exclude travel agents from sale of tickets, it has entered into arrangements with certain big travel agencies in the country. As the informant has not given any substantial evidence or data to support how this has affected the competitive nature of the market, the “Prima facie” evidence is lacking hence under section 3 of the law, no such case can be formed.

There is no proper evidence on record that the opposite party is indulging in any anticompetitive activities which can lead to adverse effects on competition. Therefore, the commission is of view that, prima facie, there is no violation of any provisions of section 3 or 4 under this act.

Prima facie, it appears that the case is an individual consumer dispute having no bearing on competition on India, hence the claim of the informant that the opposite party has violated section 4 is rejected.

The commission is therefore of the view that no prima facie case is made out for making a reference to the Director General for conducting any investigation in this matter under section 26(1) of this act and the proceedings are closed forthwith.

Hence commission closed this case under section 26(2) of this act.