Category: Abuse of Dominant Position

The E – Retailer War Has Reached India.

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A recent Economic Times article reported how a number of “small brick-and-mortar retailers have banded together to seek protection from e-commerce companies, which they say are undercutting them with predatory pricing. The retailers, mostly from Bangalore – home base for Flipkart, India’s largest e-tailer – have written to the Competition Commission of India, complaining that their online counterparts are selling goods below cost and skirting Indian laws on foreign direct investment in retail.”

This is not surprising and frankly, it was only a matter of time. In fact, in one of our previous posts, we focused on the Department of Justice (DoJ) complaint filed against the five publishers (Hachette, Penguin, Simon and Schuster, Macmillan and Harper Collins) alleging their agreement with Apple to be anti-competitive. 

My personal opinion is that this is part of the Schumpeterian Cycle of “Creative Destruction”, and this struggle is inevitable. To be honest, in the larger scheme of the economic world, this disputes is trivial, as instances of such disputes abound in economic history.

FIFA 2014 Antitrust Investigation

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This is for all the football fans among the readers of this Blog.

FIFA Partner Faces Brazil World Cup Antitrust Complaint

For the sake of information, the Antitrust authority in Brazil is  the Conselho Administrativo de Defesa Econômica (C.A.D.E.), literally translated as the Council for Economic Defence.

 

Fire Sales in the Aviation Sector: Are they Really a Competition Law Abuse ??

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Much has been said about the recent “Fire Sale” tactics adopted most recently by Jet Airways and also by SpiceJet in the past. While we debate on whether this is fit case to be considered by the C.C.I., I have to submit that in my  personal opinion, this incident can probably not be classified as an incident of predatory pricing, the reasons for which are as follows:

“Fire sales” or “pricing games” cannot per se be considered anti-comeptitive or a Predatory Pricing tactic. The Competition Act, 2002 clearly defines the phrase as when goods or the provision of services are sold BELOW COST. There is no proof that the sale of these tickets is actually below cost, as is further affirmed by the article itself which clarifies that the tickets are exclusive of taxes, effectively bringing the prices at par with other airline ticket prices.

As to the airline declaring losses in a particular quarter or the general lack of financial health in the aviation sector, such general economic scenarios cannot be used to determine Predatory Pricing or any evidence thereof. Predatory Pricing must be determined according to the specific incident which is alleged as Predatory Pricing, i.e., it would be required to show that the tickets that were sold in the fire sale itself were below cost. In the case where one can show them as having been sold above cost, the financial health of the airline would be irrelevant. Furthermore, if the airline could show that my selling large volumes, it was in fact able to make a profit, it would further render the case of he C.C.I. all the more weak.

One may counter this by submitting that my argument is inherently contradictory as a loss making airline would imply tickets having been sold at below cost. However, this is where the peculiarities of the aviation sector itself would need to be taken into consideration. The entire sector is suffering from severe financial strain due to many other factors other than the variable price of tickets. I am of the opinion one could successfully argue that it is these additional factors which play a significant role in the final balance sheet of the airline rather than one individual incident of fire sale.

A Comment on the T.R.A.I. Consultation Paper on “Monopoly/Market dominance in Cable TV services” Part – II

Part II of my comments on the T.R.A.I. Consultation paper on “Monopoly/Market dominance in Cable TV services” can be found on the India Law and Technology Blog

 

Both posts were infact, initially supposed to be on the I.L.T.B., but unfortunately, due to a communication gap between Apar (the founder of the Blog) and me, I ended up putting the first part here.

 

Click here to see the post.

 

 

A comment on the T.R.A.I. Consultation Paper on “Monopoly/Market dominance in Cable TV services” Part – I

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The Telecom Regualatory Authority of India on 3rd June, 2013 released Consultation Paper No.: 5/2013 titled “Monopoly/Market dominance in Cable TV services”. The paper was in response to a reference received on 12th December, 2012 from the Ministry of Information and Broadcasting seeking TRAI’s recommendations under Section 11(1)(a) of T.R.A.I. Act.

With this post I aim to proffer answers to the questions raised by the Regulator and aim to provide suggestions as requested by them.

1. Do you agree that there is a need to address the issue of monopoly/market dominance in cable TV distribution? In case the answer is in the negative, please elaborate with justification as to how the ill effects of monopoly/market dominance can be addressed?

Absolutely yes. Ironically, it is T.R.A.I. itself which has caused the problem of dominance in the first place. Earlier, before the implementation of Digital Access Service (D.A.S.), i.e., what is commonly referred to as the “Set Top Box”, Cable TV could either be analogue or non-addressable viz. the cable TV signal is not digital. In the case of non-addressable platforms, Local Cable Operators (L.C.O.’s) had the option of downlinking Free to Air (F.T.A.) channels directly from broadcasters without the help from Multi System Operators (M.S.O.’s). Pay channels were ofcourse obtained by LCO’s through M.S.O.’s as these are transmitted by broadcasters in encrypted form as required. However, after the amendment of the Cable T.V. Act, 1995 in November 2011, it became obligatory for each cable operator to transmit or re-transmit programs of any channel in encrypted form through a digital addressable system. Consequently, only M.S.O.’s can receive signals from the broadcasters as per the Cable TV Networks Rules, 1994 as amended on 28th April 2012. Therefore, as per the paper,

“The MSO maintains a Subscriber Management System (SMS) where details about each customer and his/her channel preferences are stored. All the channels are now decrypted at the customer end through a set top box (STB) programmed by the MSO as per details in the Subscriber Management System. Therefore, in the DAS environment, MSOs play a key role in distribution of both FTA and pay channels.”

Which brings us to the condition which must be imposed to the above affirmative, that this dominance is predominantly at the State level. There does not appear to be a national dominance as most MSO’s operate on a regional basis. Therefore, the relevant market while examining such a question of dominance must be taken to be a respective state. I had highlighted this point in an earlier post while discussing similar issues before the C.C.I.

Also, since at present D.A.S. has still not been fully implemented across the entire country, it may be difficult to determine the true level of dominance of M.S.O.’s in each state. Till that time, the T.R.A.I. may consider our suggestion on the substitutive ability of the services as enumerated in the earlier post.

2.Do you agree that the state should be the relevant market for measuring market power in the cable TV sector? If the answer is in the negative, please suggest what should be the relevant market for measuring market power? Please elaborate your response with justifications.

Yes. The reasoning for which has already been elaborated above.

3. To curb market dominance and monopolistic trends, should restrictions in the relevant cable TV market be:

(i) Based on area of operation?
(ii) Based on market share?
(iii) Any other?
Please elaborate your response with justifications.

At the outset, I feel ex-ante restrictions are not the best method of tackling dominance in the sector as not only could they hurt competition compliance but experience shows it is often difficult to predict or theorize the effects or consequences of such regulations and this generally results in a huge spate of litigation. However, if such regulations are to be implemented, then they should NOT be based on the market share of an M.S.O. since it would be a herculean task to ensure competitiveness through regulations in each separate state (since the market share would be based on each specific state.) Moreover, market shares are subject to changes through regular competitiveness and acquisitions. Lastly, it is a well accepted principle of competition law, and which the T.R.A.I. should also follow, that dominance itself is not considered an offence but an abuse of that dominance is considered an infringement of competition law. Rather, it would be better to draft certain general rules on abuse of dominance in the Cable TV sector which may be enforced on an ex-post facto basis.

 

To be Contd.

Why the CCI Google Investigation faces Difficulty.

A recent Economic Times Article states that the “probe by Indian authorities to examine if Google abused its dominant position in the Internet search engine market is progressing at a sluggish pace, mainly due to a lack of understanding on Internet-related issues.” Furthermore, it also stated that “India (presumably through the C.C.I.) has sought the FTC’s help in this matter.”

While the reason stated above is probably true, I feel another important reason the investigation faces difficulty is becaue of the direction the D. G. Office seems to be taking to reach its goal. This is evident from the second line quoted above, where the article states that the C.C.I. is looking for aid from the F.T.C. There is no harm in asking for aid from others, but in this case, the Commission may be asking for aid from the wrong people. One needs to understand that the F.T.C. and the European Commission have SETTLED their cases with Google on the basis of certain commitments they received from the company. (See here for the F.T.C. commitments and here for the E.U. commitments). It is more than evident from their respective press release and the commitments received from Google that both the competition authorities never approached the investigation with an intention to prosecute. Their primary intention was merely to ensure competitiveness without disrupting the market (being the internet search engine market and online advertisement market) to the best possible extent. The merits of such an approach are of course debatable, but are presently outside the scope of this post. What is important is that settlements require a mediative approach (far different from an adjudicatory approach) and this is not the approach the C.C.I. wishes to follow. Even if it wishes to, it as of now can’t, as explained in a previous post.

It is better if the Commission looks eastwards to the Australian Competition and Consumer Commission (A.C.C.C.) for help. The judgement of the Federal Court of Australia is the only case which Google has lost on allegations against its Adwords programme, which is the primary subject of investigation even in India.Google-confused

N. Sanjeev Rao v. Andhra Pradesh Hire Purchase Association, Case No. 49/2012

The case of N. Sanjeev Rao v. Andhra Pradesh Hire Purchase Association, Case No. 49/2012, which was recently dismissed by the Commission, highlights two important developments which are a must in Indian competition jurisprudence.:

1.  It is necessary that the Parliament pass the Competition Amendment Bill, 2012 (see here and here for our previous posts on the same) at the earliest to recognise the concept of collective dominance under the Competition Act. Personally, I am of the opinion that too many genuine cases are getting dismissed due to this wide lacuna within the Act.

2. The Commission should apply a certain amount of pragmatism while deciding the relevant market in a particular case. For example, in this case, it is obvious that the market should have been, as submitted by the informants, “private auto financiers market in the cities of Hyderabad and Secunderabad, Andhra Pradesh.” The decision of the CCI that there was no case to differentiate private auto financers and other banking/non-banking entities which are in the business of extending automobile finance is clearly erroneous in light of practical realities. It is a well known fact that autowallahs would never qualify for an automobile loan with any decent bank, which is the exact reason why they need to resort to such financers in the first place, thus creating a clear distinction between the two different financial markets.

Belaire owners’ Association v. DLF, Case No. 19/2010 (Supplementary Order)

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The CCI has just come out with the Supplementary Order in the case of Belaire owners’ Association v. DLF, Case No. 19/2010 (Main Order/Supplementary Order) which contains the Modified Buyers’ Agreement (begins from page 25 of the document). A clause by clause analysis of the new agreement would not be only be time consuming (which unfortunately, due to ongoing examinations, I presently don’t have) but would till a large extent be mundane and irrelevant. What is important to summarise are the following points:

1. The CCI has clarified that any such agreement, including the modified agreement drafted by it in this case, would have to comply with the laws and regulations of the respective state (in this case, Haryana) and no agreement, whether framed by the Commission or any other party, could supersede any such Acts,  Rules and Regulations.

2. The CCI decided to basically draft an entirely new agreement along with all the modifications it considers necessary rather than specify specific clauses which require amendment.

Furthermore, this Order in no way affects the merits of DLF’s appeal before the COMPAT. Rather, the reason the COMPAT has directed the CCI to draft a Modified Buyers’ Agreement was to clarify the Commissions stand to help in the effective adjudication of the appeal.