COMPETITION APPELLATE TRIBUNAL NEW DELHI

Transcription

1 1 COMPETITION APPELLATE TRIBUNAL NEW DELHI APPEAL NO. 116 OF 2012 [Under Section 53-B of the Competition Act, 2002 against the order dated passed by the Competition Commission of India in Case No.36 of 2011 ] CORAM Hon ble Mr. Justice V.S. Sirpurkar Chairman Hon ble Shri Rahul Sarin Hon ble Ms. Pravin Tripathi In the matter of : 1. M/s. Fast Way Transmission Pvt. Ltd. Lajja Tower, Sham Nagar, (Near PF Building), LUDHIANA (Punjab). 2. M/s. Hathway Sukhamrit Cable & Datacom Pvt. Ltd., Lajja tower Basement, Sham Nagar (Near PF Building), LUDHIANA (Punjab). 3. M/s. Creative Cable Network Pvt. Ltd. Through its Managing Director, 301, Major Sham Singh Road, Opposite District Court, LUDHIANA (Punjab). 4. Mr. Gurdeep Singh, 57-b, Rajguru Nagar, LUDHIANA (Punjab) Appellants - Versus - 1. Kansan News Pvt. Ltd. Through its Director and Authorized Signatory : Mr. Kanwar Sandhu, 177, Industrial Area, Phase I, CHANDIGARH

2 2 2. Competition Commission of India Through its Secretary, Hindustan Times House, 18-20, Kasturba Gandhi Marg, NEW DELHI Respondents Appearances : Shri Meet Malhotra, Senior Advocate with Shri Vaibhav Gaggar, Shri Abhimanyu Chopra, Ms. Palak and Ms. Reena Kumari, Advocates for the Appellants. Ms. Prachi Vashisht with Ms. Sanya Talwar, Advocates for Respondent No. 1. Ms. Soni Singh, Advocate with Ms. Shabistan Aquil, DD (Law) of Respondent No. 2. ORDER OF THE BENCH DELIVERED BY HON BLE MEMBER, SHRI RAHUL SARIN An appeal has been filed under Section 53-B of the Competition Act, 2002 (hereinafter referred to as the Act ) challenging the order of the Competition Commission of India (CCI) dated passed in Case No. 26/ At the outset, it will be useful to recount brief facts of the case. An information was filed by M/s. Kansan News Pvt. Ltd. (Informant before CCI and the respondent No. 1 herein) under Section 19(1)(a) of the Act for the alleged infringement of Sections 3 and 4 of the Act. The informant is a broadcaster of news and current affairs TV channel named Day and Night News operating in the states of Punjab, Haryana, Himachal Pradesh and Union Territory of Chandigarh. The Appellants are engaged in the business of distribution of cable network channels of broadcasters. They are M/s. Fastway Transmmissions Pvt. Ltd. (Appellant No. 1), M/s. Hathway Sukhamrit Cable and Datacom Pvt. Ltd. (Appellant

3 3 No. 2) and M/s. Creative Cable Network Pvt. Ltd. (Appellant No. 3) and are multisystem operators (MSOs). Appellant No. 4 is an operator in Punjab and Union Territory of Chandigarh through the third appellant and Mr. Gurdeep Singh (Appellant No. 4) is the Managing Director of Appellant No. 1 and is directly managing and controlling the affairs of Appellant No. 4. It is contended that Appellants Nos. 1 to 3 have control of over 90% of the cable network distribution system in the State of Punjab and the Union Territory of Chandigarh. Appellant No. 4 has political clout and has virtually eliminated all small cable operators by taking them over. Thus, any broadcaster who wishes to telecast and access the viewers in the State of Punjab has no other option but to approach the Appellants. Mr. Gurdeep Singh holds the majority share of all the other Appellants. The Respondent No. 1 alleges that the appellants have as a group formed a cartel abusing their dominant position and are acting in an illegal, arbitrary and discriminatory manner resulting in denial of market access to the television channels which is a violation of Section 4 of the Act. It is alleged by the informant/respondent No. 1 that by illegally and simultaneously terminating the agreements for carriage of channels of the informant, the Appellants have acted as a cartel adversely affecting the competition by denying the broadcast of news and current affairs channel of the informant in the State of Punjab and UT of Chandigarh violating Section 3 of the Act. The informant/respondent No. 1 contends that after entering into agreements with Appellants Nos. 1 to 3, respondent s channel was

4 4 transmitted effectively for about two months from August, But since October, 2010, it was disrupted on several occasions. When the Finance Minister of Punjab, Shri Manpreet Singh Badal, quit the Government as well as Shiromani Akali Dal, a coverage accorded to him was either blacked or tuned out and in one instance, the Appellants patched the audio of a cartoon channel on the channel of Respondent No. 1. In December, 2011, a report on Youth Akali Dal patron was also switched-off by the Appellants. On December , the channel of Respondent No. 1 was muted out. Likewise the slot of the channel on the cable spectrum was altered without information. Letters were sent to the Appellants informing them about these interruptions but they did not respond to any of the letters. The Appellants stated that interruption were due to technical problems. When the informant offered to rectify those problems and requested them to permit their technical experts to visit the head-ends of the Appellants, they did not respond to their request. 3. A legal notice was issued to them and, in retaliation, the transmission of the informant s channel was unilaterally terminated. Due to the illegal and anti-competitive activities of the Appellants, Respondent No. 1 has been suffering huge financial losses as well as losses in terms of damage to reputation in the market. It is contended that the Appellants have formed a cartel by limiting the provision of services of broadcasting of TV channels through cable network in the State of Punjab. It is further contended that by

5 5 limiting and denying access to the news and current affairs channel of Respondent No.1, the Appellants have violated the provisions of Sections 3(3)(b) and 4(2)(c) of the Act. It is further alleged that the Appellants have acted in an unfair, illegal and discriminatory manner by terminating the channel placement agreements unilaterally and thereby adversely affecting competition by abusing its dominant position and violated provisions of Section 3(4)(b) of the Act. Moreover, the Appellants have also violated the provisions of Telecommunication (Broadcasting and Cable Services) Interconnection Regulations, 2004 (hereinafter referred to as the Telecommunication Regulations ). 4. In its report, the DG found that there are four main supply side players in the cable TV services such as Broadcasters, Aggregators, Multi-System Operators (MSO) and Local Cable Operators (LCO). The broadcasters role in the supply chain includes transmitting or up-linking the content signals to the satellite (from where they are down-linked by the distributor). The Multi System Operator is a distribution agent who undertakes the distribution of TV channels from one or more broadcasters. The role of the aggregator in the supply chain is to provide bundling and negotiation services for subscription revenue on behalf of the broadcasters. 5. The role of the MSO is to downlink the broadcaster s signals, decrypt and encrypt channels and provide a bundled feed consisting of multiple channels to the LCO. The role of the LCOs in the supply chain is to receive a feed (bundled signals) from the MSOs and

6 6 retransmit these signals to subscribers in his area of operations through cable network. 6. According to the DG, the television programmes distribution market in India consists of four platforms, namely, Terrestrial TV, Cable TV, DTH and IP TV. Terrestrial TV is available free and is, therefore, different from the other platforms. IP TV is a new platform which is not available throughout the country. The popular platforms in India are cable TV which has a wide network and subscriber s base and DTH with better quality and flexible programming which is the choice of higher income group people in India. 7. According to the DG, Appellant No. 4, Mr. Gurdeep Singh, holds majority share in the Appellants Nos. 1 to 3 and manages the affairs of those parties. It is further reported that the total turnover of the group from cable TV operation during the financial year was more than Rs. 200 Crores. Considering the share of Punjab State at about 2% of the total cable network in India, its turnover clearly makes the Fastway Group, a dominant player in the region of Punjab. The competitors of the Appellants Group are some small MSOs with single analog head-ends, comprising a very small network and subscriber s base. Further, that the consumers of Cable TV in Punjab and Chandigarh have huge dependency on the Appellants Group and they do not have any substitute to switch over. The DG has reported that at the time of ICC World Cup, the Appellants Group did not transmit the ESPN/Star Channels on its

7 7 network and the consumers have no option of other cable network. The Telecom Disputes Settlement & Appellate Tribunal (TDSAT) adjudicating the case in favour of ESPN directed the Appellants/Opposite Parties to pay Rs. 27,321,376/- together with interest. On the basis of the evidence gathered by the DG, he has concluded that the Fastway group is abusing its dominance in the relevant market and imposing discriminatory conditions on the stakeholders which have resulted in harm to the consumers and the TV industry as a whole by depriving the access to the relevant market. The DG also reports that the Fastway group has not only gained dominance in the relevant market but also has destroyed the competition from the relevant market. Before their entry, there were two major players viz. Hathway Sukhamrit and WWII who were having almost equal share in the State of Punjab. However, after entry of Fastway both the aforesaid started losing their market share. Later, Fastway group has acquired control of Hathway and Mr. Gurdeep Singh is in control of its operations. Thus, the Fastway group has eliminated the competition from the relevant market. Based on the findings of investigation, the DG has concluded that the conduct of the Fastway Group reflects abuse of dominance in violation of the provisions of Sections 4(2)(a), 4(2)(b)(i) and 4(2)(c) of the Act. 8. After consideration of the report of the DG, notice was issued to all the parties concerned and their

8 8 submissions/comments/objections/replies accepted and duly considered. 9. The CCI has found that a cable TV service provider cannot operate beyond its jurisdiction and moreover the conditions of competition or provision of Cable TV in different States differ on account of difference in consumer preferences and choices. Keeping in view the consumer preferences, the relevant geographic market in the present case was delineated to be Punjab and UT of Chandigarh. 10. Based on the report of the DG, the CCI found that the Appellants Nos. 1, 2 & 3 can be said to be part of a group within the meaning of clause (b) of the explanation to Section 5 of the Act but Appellant No. 4 is not a part of the group. Considering the market share of the Appellants group, the CCI concludes that the group is a dominant player in the relevant market. 11. After going through the findings of the DG regarding the conduct of the Appellants Group, the CCI found that by denying the informant to retransmit its news channel through their cable network the Appellants Group cannot be said to have limited or restricted the provision or market of cable service, because the informant is not a participant in the relevant market and the service of market of cable TV is not getting affected. The CCI thus found that the Appellants group has not contravened the provisions of Section 4(2)(b)(i) of the Act. However, due to acts of the

9 9 Appellants, it has resulted in loss to informant-broadcaster as well as denial of services to consumers who want to watch the channel of the Respondent No. 1. Respondent No. 1 has also been denied and effectively wiped out from the relevant market by the conduct of the Opposite Parties. The informant has been denied market access and opportunity to compete and thus, violation of the provisions of Section 4(2)(c) stands established. 12. The CCI also finds that allegation of the informant/respondent No. 1 that the Appellants have formed a cartel is not sustainable as no case of anti- competitive agreement of the nature mentioned in Section 3(3) of the Act was made out. It also cannot be said that the Appellants have formed the cartel. The allegation of Respondent No. 1 that the Appellants have violated Section 3(4)(d) by unilaterally terminating the channel placement agreement has no basis. It was also held that there is no agreement within the meaning of Section 3(4)(d) in this case as the agreement was among entities falling along different levels of supply or production chain. Thus, there was no agreement of an anti-competitive nature. The CCI has observed that the allegation of the informant that the Appellants have acted unilaterally to terminate the channel placement agreement itself suggest that there is no agreement between the two parties which could have caused appreciable adverse effects on competition in the relevant market in India and, therefore, the CCI is of the view that no violation of Section 3 of the Act is made out against the Appellants.

10 However, the Commission has found that : Opposite Parties group has contravened the provisions of Section 4(2)(c) of the Act and considering the gravity of contravention decided to impose a penalty on the concerns of the Opposite Parties group who are operating as 6% of their average turnover for the last 3 proceeding financial year under Section 27(b) of the Act. Appellant No. 1, M/s. Fastway Transmission Pvt. Ltd, has been imposed a penalty of Rs. 6,83,72,287/-. Second appellant, M/s. Hathway Sukhamrat Cable and Datacom Pvt. Ltd. is imposed a penalty of Rs. 61,31,664/- and the third appellant namely, M/s. Creative Cable Network is imposed a penalty of Rs. 58,97,189/-. The penalty is directed to be paid within 90 days from the date of receipt of the order. In exercise of powers under Section 27 of the Act, the CCI has also directed that the contravening Opposite Parties should cease and desist from indulging in anticompetitive practices which have the effect of denial of market. 14. This matter was heard at length. The learned senior counsel appearing for the Appellants seriously contended that the CCI has based its findings on a complete misreading of the provisions of the Act. It was stated before us that the Appellants are MSOs engaged in the business of downloading signals uplinked by the broadcaster (Respondent No. 1herein) under an agreement between them. These signals are then distributed to subscribers directly or through local cable operators. It was further pointed out in the analogue platform operated by the Appellants the operational capacity was available for upto 80 channels as against the then existing channels of over 550. It was only after an arrangement

11 11 was arrived at between them that an agreement was entered into to download and carry the signals of the broadcaster to the ultimate subscribers or viewers. Such agreements were covered by the Telecommunication Regulations. 15. It was further emphasized before us that the dispute between the parties was one of a commercial nature. The Respondent No. 1, in fact, took recourse to the High Court at Chandigarh and the Hon ble Supreme Court but without any success. Thereafter, the matter was also agitated before the TDSAT but no substantial relief was given to them. It was in this background that the allegation of anti-competitive behavior was brought against the Appellants before the CCI when the matter was in fact sub-judice before the TDSAT. 16. The main contention which was fervently asserted before us was that the alleged abusive conduct of the Appellants in terminating their agreement did not in any way impact the broadcast of the channels of the Respondent No. 1 as clearly other platforms like DTH & Free to Air were available to them. It was further stressed that the MSO was clearly free to choose as to which channels to carry based on their commercial interests and consumer preferences. The provision of cable services and relations between the parties were in any case governed by the Telecommunication Regulations. By not recognizing the legal and contractual rights of the parties under the extant Telecommunication regime and concluding that by termination of

12 12 contract and not dealing with the Respondent No.1, the Appellants have acted in an abusive and anti-competitive manner, is clearly an instance of misreading of the provisions of the Act in the absence of any obligations of the Appellants to must carry the channel of Respondent No It was in this view of the matter that the learned senior counsel for the appellants strongly urged before us that the order of the CCI is ex-facie wrong as it was based on factual and legal infirmities and cannot be sustained and needs to be set aside. 18. The DG, after investigation, had found that the Appellants behaviour was abusive and anti-competitive on the following counts: (i) Unfair and discriminatory conditions on the broadcasters and ICOs in violation of section 4(2)(a)(i); (ii) Limiting and restricting the provision of services in cable TV for the broadcaster and consumers in violation of the provisions of the Section 4(2)(b)(i) of the Competition Act; (iii) Denying market access to the broadcasters and other stakeholders in contravention of the provisions of section 4(2) of the Act. 19. The CCI upon examination and consideration of the replies and submissions and materials on record returned a finding of denial of market access and opportunity to compete to the broadcaster and consequential violation of Section 4(2)(c) of the Act.

13 13 The only issue that was agitated before us was, therefore, the question of violation of Section 4(2)(c) of the Act. We now, therefore, turn to consider this limited controversy. We will focus our attention only to the charge having been found proven against the Appellants. From an examination of the impugned order, it is found that the relevant portion of the order which covers this finding is the following : However, due to the fact that the subscriber base of the OPs is in excess of 40 lacs, every broadcaster including the informant is dependent upon their network. In such a situation, the Commission observes that the OP is in position to affect the market in its favour. Due to its market power, the OP group has denied the opportunity for transmission of channel of the informant. The group has no justification for termination of the agreement and its argument for justifying its conduct is not based on any sound footings. Its argument regarding shortage of spectrum constraint might have been considered at the time of entering into agreement with the informant upon charge of premium from the broadcaster. Once that was considered, the question of shortage of spectrum during the period of agreement does not arise. Similarly the argument of low TRP is also not justified since in pasts there has been no practice of review of any agreement on the basis of TRP ratings in the middle of an agreement. The Commission observes that the argument of spectrum shortage and low TRP is merely an afterthought to justify its conduct The conduct of OP has resulted in loss to the informant-broadcaster as well as denial of services to the consumers who want to watch the channel of the informant. As on date the informant has access to only 56,000 household on the cable TV in the state of Punjab

14 14 & Chandigarh, where about 45 lacs households are connected on cable network. Thus the informant has been effectively wiped out from the entire relevant market by the conduct of OPs In the light of the facts and circumstances of this case, the Commission observes that due to the acts of the OP group, the informant has been denied the market access and opportunity to compete and holds that violation of the provisions of section 4(2)(c) of the Act gets established. 20. Before we proceed to consider the finding of the CCI and the challenge raised before us against the impugned order, it will be useful to examine the relevant provision of Section 4(2)(c) of the Act which reads as follows : Section 4. Abuse of dominant position. (1) No enterprise or group shall abuse the dominant position. (2) There shall be an abuse of dominant position under sub-section (1), if an enterprise or a group, - (a) directly or indirectly, imposes unfair or discriminatory - (i) condition in purchase or sale of goods or services; or (ii) price in purchase or sale (including predatory price) of goods or service. (b) limits or restricts (i) production of goods or provision of services or market therefor; or (ii) technical or scientific development relating to goods or services to the prejudice of consumers; or (c) indulges in practice or practices resulting in denial of market access in any manner;

15 From an examination of the relevant provisions, it is apparent that the fundamental premise is that a denial of market access is occasioned only to a competitor. Further, that such a denial is occasioned by one competitor indulging in a practice or practices which result in such a denial. This is so because in a free market environment all players are expected to operate in an open and level playing field platform where one player (competitor) engages in a practice which results in denial of such an opportunity to another similarly placed player (competitor) then certainly anti-competitive behaviour is encountered. However, where two players are operating in different levels in the market or operating in different transactions or services, can it be said that they are in competition with each other in the market? Further, if they are not competing with each other in equivalent products, transactions or services, how can one engage in denial of market access to the other? 22. Let us now come to the facts of the case. It is the admitted position that the Appellants are MSO s who are engaged in the business of downloading the signals from the satellite for the purpose of providing feeds to the subscribers either directly or through the LCOs the local cable operators. The Respondent No. 1 is engaged in the business of broadcasting the signals by uplinking it to the satellite and have an arrangement with MSOs for downloading and carrying their signals and feeding them for the subscribers (viewers). In this scenario, can it be said that the

16 16 broadcasters and the MSOs are competing with each other. The answer would evidently be no as they are both at different levels of the supply chain. It is germane to consider that the CCI, while determining the issue of whether there was any agreement under Section 3(4)(d) of the Act had come to the following conclusion : There is no case of an agreement within the meaning of Section 3(4)(d) among entities falling along different supply or production chain in the matter which may be said to be anti-competitive. This clearly establishes that the CCI itself had recognized that the Appellants and the Respondent No. 1 were different levels of the production or supply chain in the market of cable T.V. services. Hence, where was the question of competing with each other. It is true that the relations of interconnecting between the broadcaster and the MSO are governed by the Telecommunication Regulations which regulate the respective legal and contractual rights. Be that as it may, there is no room for considering that the broadcaster and the MSOs are competing with each other in the given supply chain of the provisions of cable TV services in the extant regulated telecommunication regime. Thus, the question of denial of market access to the broadcaster by a MSO cannot arise in the instant case. 23. The CCI has concluded that owing to its market power, the Appellants group has denied the opportunity of transmission of the TV channel of the broadcaster by illegal termination of their contract. We are unable to accept this finding in the peculiar facts

17 17 and circumstances and application of the relevant provisions of the Act. In the first instance, the CCI have not considered whether the broadcaster and the MSO were competing with each other. Even if it was found that they were competitors, the CCI has not found that there has been denial of market access as a result of a practice adopted by them of termination of contract. When viewed in the light of the definition of practice in Section 2(m) means : practice includes any practice relating to the carrying on of any trade by a person or an enterprise, it surely cannot be said that termination of the contract by the MSO is a practice adopted for carrying on the trade by the MSO. Furthermore, no case has been made out to show that the termination of contract by the Appellants was on account of their conduct of abuse of the dominant position as a group and that in fact it resulted in denial of market access to the informant/broadcaster. In the wake of the fact that the broadcaster and the MSO (Appellants) provide two different services in the gamut of the supply chain in the market of cable TV services is a relevant consideration which cannot be lost sight of. The two services are separate services and are not in competition with each other. Thus, by no stretch of imagination it could be established that by termination of a contract of interconnection of services between two service providers, there has been a denial of market access to the actual transmission of the channels to the viewers and further that there has been a denial of services to the viewers causing consumer harm. As we are on the limited controversy of denial of market access to the broadcaster

18 18 i.e. Respondent No. 1 by the MSO (Appellants), we find that in the given conceptus of facts and circumstances of the instant case and the specific provisions of Section 4(2)(c) of the Act, we are satisfied that no case of violation has been made out by the CCI. 24. The learned counsel for the CCI made valiant efforts in defending the findings of the CCI. The main stay of the contentions was that considerable consumer harm has been caused as the viewers have been denied the opportunity to view the TV channels of the broadcaster. It was also asserted that the abusive behaviour of the Appellants of termination of the contract and thus denying the opportunity of transmission to the viewers had in fact caused considerable loss to the broadcaster. We are unable to appreciate these contentions. We have found that the finding of Section 4(2)(c) of the Act could not have been arrived at in the given facts and circumstances of the instant case and the application of law. We find no merit in the contentions raised by the learned counsel for the CCI. 25. Considerable emphasis was also placed by the learned senior counsel for the appellants on the plea that the order of the CCI was ex-facie wrong as it ignored the findings of the TDSAT and the fact that the relations between the broadcaster and the MSO were governed by the Telecommunication Regulations. We recognize that as per the extant Telecommunication regime whereby TRAI and TDSAT regulate this sector and whereby certain legal and statutory rights have emerged for the operators in this sector. Be

19 19 that as it may, we desist from making any observations in this regard as we find that it is no longer necessary for us to determine this issue on account of our conclusion that the impugned order of the CCI cannot be sustained in view of the peculiar facts and circumstances of the case and the application of the relevant provisions of the Statute. 26. In this view of the matter and on the basis of the reasons stated in the detailed discussion above, we find that the impugned order of the CCI dated cannot be sustained. In this event, therefore, we set aside the order of the CCI and allow the appeal. However, in the facts and circumstances of the case, there shall be no order as to costs. Pronounced in open Court on this 2 nd day of May, [Justice V.S. Sirpurkar] Chairman [Rahul Sarin] [Pravin Tripathi]

20 20 COMPETITION APPELLATE TRIBUNAL Appeal No.16/2014 with IA No.27/2014 (Under Section 53B of the Competition Act, 2002 against the order dated passed by the Competition Commission of India in Case No.24/2013) CORAM Hon ble Mr. Justice V.S. Sirpurkar Chairman Hon ble Shri Rahul Sarin Hon ble Mrs. Pravin Tripathi In the matter of : Sumit Sahni Appellant Versus Competition Commission of India and Ors. Respondents Appearances : Advocate for the Complainant O R D E R 2 nd May 2014 After much deliberation, the learned counsel seeks to withdraw the appeal. Allowed to withdraw with liberty to approach any other forum as is available in law. No costs. (Justice V.S. Sirpurkar) Chairman (Rahul Sarin) (Pravin Tripathi)

21 21 COMPETITION APPELLATE TRIBUNAL Appeal No. 17/2014 (Under Section 53B of the Competition Act, 2002 against the order dated passed by the Competition Commission of India in Case No.87/2013) CORAM Hon ble Mr. Justice V.S. Sirpurkar Chairman Hon ble Shri Rahul Sarin Hon ble Mrs. Pravin Tripathi In the matter of : Globale Tax Traders Appellant Versus Villiam Grant & Sons Ltd. & Ors. Respondents Appearances : Advocate for the Appellant O R D E R 2 nd May 2014 Issue notice. The matter shall be listed on 17 th July (Justice V.S. Sirpurkar) Chairman (Rahul Sarin) (Pravin Tripathi)