Amazon and Flipkart found violating Competition law in India-DG investigation report out
COMPAT by its order dated 01 July 2016 has set aside the penalty impose
d by the Competition Commission of India (CCI) on India Trade Promotion Organization (ITPO) for allegedly adopting a discriminatory time-gap policy for holding exhibition/fairs at Pragati Maidan, New Delhi and the alleged discrimination practiced in allotment of spaces to private organizers. ITPO is a Government owned non-profit making company meant to promote, organize and participate in industrial trade and other fairs and exhibition show-rooms in India and abroad. Pragati Maidan, New Delhi is one of the assets placed under the disposal of ITPO by the Government of India. ITPO also manages and rents out spaces at Pragati Maidan, in consonance with guidelines/ instructions and circulars issued from time to time by the Government of India.
It was alleged that ITPO had been maintaining a time-gap of 15 days’ between two “third party events‟ of similar profile before and after the event; whereas in case of ITPO’s own organized events/exhibitions, the time gap restriction was 90 days before and 45 days after the event in case of ITPO events (which was amended to 90 days before and after the event in 2011).
During the detailed investigation by the Director General (DG), it was opined that the time-gap policy was not per-se unfair, yet the conduct of ITPO in implementing the same by stipulating difference in time gap between ITPO’s own events as compared with those of 3rd parties was found abusive.
The CCI ,agreeing with the DG , held that by stipulating favorable time gap restrictions for its own events as compared to third party organized events, ITPO imposed unfair and discriminatory conditions on the third party event organizers at Pragati Maidan, in violation of Section 4(2)(a)(i) of the Competition Act, 2002(Act). Further, increase in the time gap restrictions for holding third party events, before and after ITPO’s own events of similar profile, amounted to denial of market access to the third parties, who compete with ITPO for organizing events at Pragati Maidan, in violation of provisions of Section 4(2)(c) of the Act. The CCI also held that ITPO has used its dominant position in the relevant market of venue provider in Delhi for organizing events to protect and enhance its position in the market of event organization and thereby contravened the provisions of section 4(2)(e) of the Act. The CCI imposed a penalty of INR 6.75 Crores on ITPO at the rate of 2% of its average turnover for the preceding three years.
In Appeal, the COMPAT noted that although ITPO has informed the CCI during the preliminary hearing that it had drafted a competition friendly policy and it would be communicated to the stakeholders and the CCI in due course, the CCI nonetheless issued an investigation order. The COMPAT stated that the DG was obsessed with Pragati Maidan as the target for determination of the relevant market. DG made no attempt to compare Delhi with the other venues available not only in National Capital Region but places like Bangalore, Chennai, Mumbai and Hyderabad. According to COMPAT, the DG proceeded on the assumption that being the largest complex in Delhi, which is capital of the country, Pragati Maidan is the only venue which can be treated as the relevant market. The CCI also erroneously approved the finding of the DG with respect to the relevant market. The COMPAT accepted the economic rationale provided by ITPO that time-gap policy was meant to ensure that no confusing signals are given in case of time-overlap of similar exhibitions and events. Holding similar events concurrently leads to unhealthy competition and practices such as grabbing each other’s exhibitors, visitors and also taking advantage of publicity efforts of one organizer. Such time-gap policy is also followed by leading venue owners worldwide.
The COMPAT held that both the DG and the Commission committed grave illegality by not considering the economic rationale submitted by the parties, especially since ITPO has a choice of utilizing its own asset to its advantage vis-à-vis third parties, though the rationale was admitted by the DG. Relying upon a landmark judgment of the European Court of Justice in Oscar Bronner GmbH Co. KG v. Mediaprint ECJ, [1998] ECR I-7791, COMPAT agreed that a person/entity cannot be compelled to part with, permanently or temporarily, his/its own assets for the benefit of others, which may, at times detrimental to his/its own interest, provided it can produce an objective justification for such refusal. As per COMPAT the economic rationale provided by the appellant ITPO, justified the difference in time gaps arrangements.
Lastly, the COMPAT also held that the penalty imposed on ITPO (at the rate of 2% of the average turnover of the past three years) is disproportionate and without setting out cogent reasons. The COMPAT sets aside the order of the CCI and the penalty imposed on ITPO. (Source: COMPAT order dated July 01, 2016)
Suggested Reading:
(i) CCI to investigate Mahyco Monsanto for abuse of dominance
(ii) CCI initiates investigation against Athletic Federation of India
(iii) CCI Order refusing interim relief against OLA Cabs in an ongoing investigation upheld by COMPAT
Related posts
