CCI issues order against Hyundai Motor India Limited (HMIL) for anti-competitive conduct, imposes penalty of Rs. 87 crore for the anti-competitive conduct.

The Competition Commission of India (CCI) has found Hyundai Motor India Limited (HMIL) to be in contravention of the provisions of Section 3(4)(e) read with Section 3(1) of the Competition Act, 2002 for imposing arrangements upon its dealers which resulted into Resale Price Maintenance in sale of passenger cars manufactured by it. Such arrangements also included monitoring of the maximum permissible discount levels through a Discount Control Mechanism. Further, HMIL was found to have contravened the provisions of Section 3(4)(a) read with Section 3(1) of the Act for mandating its dealers to use recommended lubricants/ oils and penalising them for use of non-recommended lubricants and oils.

The final order has been passed today on informations filed by the dealers of HMIL viz. Fx Enterprise Solutions India Pvt. Ltd. and St. Antony’s Cars Pvt. Ltd.

Apart from issuing a cease and desist order against HMIL, CCI has imposed a penalty of Rs. 87 crore upon HMIL for the anti-competitive conduct. The penalty has been levied @ 0.3% of the average relevant turnover of HMIL of preceding three years. CCI noted in its order that for the purposes of determining the relevant turnover for the impugned infringement, revenue from sale of motor vehicles alone have been taken into account.

A copy of the CCI’s order passed in Case Nos. 36 & 82 of 2014 has been uploaded on the website of CCI at www.cci.gov.in.

CCI imposes penalty on bidders for cartelisation in tenders of Indian Railways

The Competition Commission of India (CCI) has imposed penalties on three firms for bid rigging of tenders floated by Indian Railways for procurement of Brushless DC fans in the year 2013.

A final order has been passed by CCI in a case taken up suo moto under Section 19 of the Competition Act, 2002 (‘the Act’) based on the information received from Central Bureau of Investigation, New Delhi. 

CCI has held that the firms had shared the market by way of allocation of tenders of Indian Railways for Brushless DC fans amongst themselves under an agreement/ arrangement and indulged in bid rigging/ collusive bidding in contravention of the provisions of Section 3(3)(c) and 3(3)(d) read with Section 3(1) of the Act. The anti-competitive conduct of the firms has been established based on exchange of rates to be quoted in upcoming tenders amongst the errant firms, numerous calls amongst the key persons of these firms before and during the period of the tenders and admission by one of the firms which confirmed and revealed the existence and modus operandi of the cartel. 

Accordingly, a penalty of Rs. 2.09 crores, Rs. 62.37 lakhs and Rs. 20.01 lakhs and was imposed on the firms M/s Western Electric and Trading Company, M/s Pyramid Electronics and M/s R. Kanwar Electricals respectively in terms of proviso to Section 27 (b) of the Act. While imposing penalty, Commission took into consideration all the relevant factors including the duration of the cartel, volume of the tender affected by the cartel and value thereof and decided to impose penalty on M/s Pyramid Electronics and M/s Western Electric and Trading Company calculated at 1.0 time of their profit respectively in the year 2012-13 and on M/s R. Kanwar Electricals at the rate of 3 percent of its turnover for the year 2012-13. 

Additionally, considering the totality of facts and circumstances of the case, penalty was also imposed on persons-in charge of the three firms i.e., Shri Sandeep Goyal of M/s Pyramid Electronics, Shri Ashish Jain of M/s R. Kanwar Electricals and Shri Ramesh Parchani of M/s Western Electric and Trading Company at the rate of 10 percent of the average of their income for the last three preceding financial years. 

CCI had received an application under Section 46 of the Act read with Regulation 5 of the Competition Commission of India (Lesser Penalty) Regulations, 2009 from M/s Pyramid Electronics. This application was received when the investigation in the matter was in progress and the report from the DG was pending. 

Considering the co-operation extended by M/s Pyramid Electronics in conjunction with the value addition provided by it in establishing the existence of cartel and the stage at which it had approached CCI, it was granted 75 percent reduction in the penalty than would otherwise have been imposed, had it not cooperated with the Commission. Accordingly, the penalty imposed on M/s Pyramid Electronics was reduced to Rs. 15.59 lakhs and penalty imposed on Shri Sandeep Goyal was reduced to Rs. 11,648 only.

CCI imposes penalties on cement companies for bid-rigging

The Competition Commission of India (‘CCI’) has imposed penalties on 7 cement companies for bid rigging of a tender floated by the Director, Supplies & Disposals, Haryana, in the year 2012, for procurement of cement to be supplied to Government Departments/ Boards/ Corporations in the State of Haryana. 

A final order has been passed by CCI pursuant to a reference filed under Section 19(1)(b) of the Competition Act, 2002 (‘the Act’) by the Director, Supplies & Disposals, Haryana. 

CCI has held that the cement companies, through their impugned conduct, have engaged in bid-rigging, in contravention of the provisions of Section 3(3)(d) read with Section 3(1) of the Act, which eliminated and lessened competition and manipulated the bidding process in respect of the impugned tender. The bid-rigging has been established from quoting of unusually higher rates in the impugned tender (than rates quoted in tenders of previous years), determining different basic prices for supply of cement at the same destination through reverse calculation, quoting of quantities in the impugned tender such that the total bid quantity almost equalled the total tendered quantity, quoting of rates for the districts in a manner that all cement companies acquired L1 status at some of the destination(s) etc. The anti-competitive conduct was re-affirmed through SMS exchanged and calls made amongst the officials of the cement companies. 

Accordingly, penalty of Rs. 18.44 crore, Rs. 68.30 crore, Rs. 38.02 crore, Rs. 9.26 crore, Rs. 29.84 crore, Rs. 35.32 crore and Rs. 6.55 crore has been imposed upon Shree Cement Limited, UltraTech Cement Limited, Jaiprakash Associates Limited, J.K. Cement Limited, Ambuja Cements Limited, ACC Limited and J.K. Lakshmi Cement Limited. The penalty has been levied @ 0.3% of the average turnover of the cement companies of preceding three years. While imposing penalties, Commission took note of potential delay which would have occurred in the execution of public infrastructure projects due to cancellation of the impugned tender. At the same time, due consideration was given to factors such as peculiarity of the tender process which created uncertainty in procurement, total size of the impugned tender and competition compliance programmes put in place by some companies while determining the quantum of penalty. 

The cement companies have been directed to cease and desist from indulging in the acts/ conduct which have been held to be in contravention of the provisions of the Act. 

A copy the CCI’s order passed in Ref. Case No. 05 of 2013 has been uploaded on the website of CCI at www.cci.gov.in.

Competition Commission of India Finds Hyundai, Reva and Premier to be in Contravention of the Competition Law

The Competition Commission of India (‘the Commission’), in its order dated 27.7.15 has found 3 Car Companies, namely, Hyundai Motor India Ltd. (Hyundai), Mahindra Reva Electric Car Company (P) Ltd. (Reva) and Premier Ltd. (Premier) to be in contravention of the provisions of the Competition Act, 2002 (‘the Act’). The instant order is in continuation of Commission’s main order in the same case dated 25.08.2014 vide which the Commission had inter alia imposed penalties on fourteen out of the seventeen car companies under Section 27 of the Act.

The order against Hyundai has remained pending pursuant to the writ petition filed by it in the Madras High Court challenging the jurisdiction of the Commission. In regards, Reva and Premier, the order remained pending because of the applications filed by them requesting for striking out of their names from the array of parties. Accordingly, the Commission decided to pass a separate order against these three car companies after affording them reasonable opportunity to make their submissions in respect of the findings of the Director General (DG) in its investigation.

After taking into account the findings of the DG and the detailed submissions by these three car companies, the Commission found their conduct to be in violation of the provisions of section 3(4) of the Act with respect to their agreements with local Original Equipment Suppliers (OESs) and agreements with authorized dealers whereby they imposed absolute restrictive covenants and completely foreclosed the aftermarket for supply of spare parts and other diagnostic tools. Further the Commission found that the said car companies, who were found to be dominant in the aftermarkets for their respective brands, abused their dominant position under section 4 of the Act. The car companies were found to be indulging in practices resulting in denial of market access to independent repairers as the latter were debilitated to provide services in the aftermarket for repair and maintenance of cars for want of genuine spare parts. Further, these car companies were also found to be using their dominant position in the market for spare parts and diagnostic tools to protect their market for repair services, thereby distorting fair competition.

The Commission has prescribed the same corrective measures to Hyundai, Reva and Premier as were prescribed in the main order dated 25.08.2014 to infuse competition in the after sales market in the automobile sector. To reiterate, the order directed the car companies to cease and desist from indulging in conduct which has been found to be in contravention of the provisions of the Act. The car companies were also directed to adopt appropriate policies which shall allow them to put in place an effective system to make the spare parts and diagnostic tools easily available in the open market to customers and independent repairers. Further, the Commission directed the car companies to not to put any restrictions or impediments on the operation of independent repairers/garages.

The Commission imposed a penalty calculated at the rate of 2% of its average turnover on Hyundai amounting to Rs. 420.2605 crores (Rupees Four Hundred and Twenty Crores, Twenty Six Lakhs and Five Thousand only) which is to be deposited within 60 days of receipt of the order. Considering the mitigating factors that worked in favour of Reva and Premier, the two car companies were absolved from paying monetary penalty.

Detailed order can be seen at Commission’s website www.cci.gov.in

'Walt Disney' didn't abuse its dominance by requiring release of its movies in India only via Digital Cinema platform

K SERA SERA DIGITAL CINEMA (P.) LTD. V. DIGITAL CINEMA INITIATIVES, LLC [2015] 57 TAXMANN.COM 443 (CCI)

Where informant filed complaint against ‘Digital Cinema Initiatives’ and ‘Walt Disney Company India’ (‘Opposite Parties’) for releasing their movies in India only through Digital Cinema Initiatives (DCI) compliant servers and projectors and DCI compliant format was found to be better than non-DCI compliant format, Opposite parties s had not contravened sections 3 and 4 of Competition Act, 2002 (‘the Act’)

Facts:

• The informant was a Digital Cinema Service provider. Its business mainly involved digital projection and screening of films in India through a specific technology known as its proprietary Sky Cinex Technology.
• The informant filed complaint against opposite parties alleging that they had entered into an anti-competitive agreement amongst themselves to release their movies in India in digital form only through Digital Cinema Initiatives (DCI) compliant servers and projectors.

The Competition Commission of India held as under:

• It was found that DCI compliant server was better than non-DCI compliant format, as far as quality and security were concerned
• The Informant failed to show that the alleged conduct of opposite parties was likely to have appreciable adverse effect on the competition
• Since no material was placed on record to infer anti-competitive agreement as envisaged under section 3 of the Act and the opposite parties were not dominant in the relevant market, no case of contravention of sections 3 and 4 of the Act was made out against them.

Competition Appellate Tribunal dismisses complaint of Adidas against Nike as latter had taken permission of ICC to use Sachin’s name on T-shirts

ADIDAS INDIA MARKETING (P.) LTD. V. NIKE INDIA (P.) LTD. [2015] 56 TAXMANN.COM 344 (Competition Appellate Tribunal)

Where pursuant to sponsorship agreement with International Cricket Association Nike was permitted to use names of cricketers including Sachin Tendulkar on its sports products for purpose of advertising, it could not be said that Nike had violated separate agreement between Adidas and Tendulkar entered for advertising Adidas sports product; unfair trade practice could not be alleged

Facts:

• The complainant-company Adidas and the respondent-company Nike were engaged in business of manufacturing, distributing and selling quality footwear, sports equipments and other products and were competitors in the market.
• The Complainant's brand, i.e., Adidas was endorsed by Cricketer Sachin Tendulkar pursuant to an agreement between both parties.
• Later on, Nike signed an agreement for sponsorship and supply of footwear, apparel and related cricketing accessories with International Cricket Association and sold T-shirts bearing names of various members of Indian Cricket Team including Sachin Tendulkar’s
• Accordingly, Adidas filed complaint alleging unfair and restrictive trade practice indulged by Nike.

The Competition Appellate Tribunal held as under:

• Since sponsorship and licence agreement entered between Nike and Cricket association permitted former to use name of members of cricket team for purpose of advertising in different ways, same did not amount to unfair trade practice.
• The products such as T-shirts and Tees manufactured by Nike did not violate agreement entered between Adidas and Tendulkar; hence, Nike could not be held to have indulged in any unfair trade practice and, thus, complaint was to be dismissed.

Subway doesn't have dominant position in fast foods restaurant chains due to presence of Pizza Hut, KFC, etc

RAMAMURTHY RAJAGOPAL V. DOCTOR'S ASSOCIATES INC (2015) 57 TAXMANN.COM 357 (CCI)

Competition Act: Due to the presence of many competitors in the market of fast food restaurant chains, like Pizza Hut, KFC, McDonald's, Cafe Coffee Day, etc., consumers have several options to choose from. Subway neither has strength to operate independently of its competitors, nor the ability to affect its competitors and consumers. Therefore, Subway does not enjoy a dominant position in the relevant market of fast food restaurant chains.

Facts:

• The Informant and Subway Systems India Private Limited ('Subway') entered into a franchise agreement for operating "Subway" at Chennai. The Informant alleged that certain clauses of the franchise Agreement contravened the provisions of section 4 of the Competition Act, 2002 ('the Act').

• The Informant alleged that the market share of Subway in the market of fast food restaurant chain exceeded 30%, thus, Subway had abused its dominant position by imposing unfair conditions in franchisee agreement.

• Based on the above allegations, the Informant prayed for initiation of an investigation against the Subway under section 26(1) of the Act

The Competition Commission of India held as under:

• Commission observed that these allegations did not have any appreciable adverse effect on the competition in the market of fast food restaurant chains since the size of such market was huge as compared with the market size of Subway. Therefore, the impact of alleged unfair conditions in franchise agreement, if any, was negligible. Thus, conduct of Subway would not contravene any provision of section 3 of the Act

• Due to the presence of many competitors in the market of fast food restaurant chains, like Pizza Hut, KFC, McDonald's, Cafe Coffee Day, etc., consumers had several options to choose from. Subway neither had strength to operate independent of its competitors, nor the ability to affect its competitors and consumers. Therefore, Subway did not enjoy a dominant position in the relevant market of fast food restaurant chains.