Market Dominance Abuse: Company Fined for Unfair Gas Sales Agreement Practices, Ordered to Modify Terms.

The Commission determined that the opposite party abused its dominant position in the relevant market by imposing unfair conditions on buyers through various clauses in the Gas Sales Agreement (GSA). The Commission found violations of section 4(2)(a)(i) of the Act, particularly in clauses related to billing, payment, force majeure, and termination. As a result, the opposite party was ordered to cease such conduct, modify the GSA, and pay a penalty of 4% of its average turnover over the past three years, totaling Rs. 2567.2764 lakhs. Additionally, the opposite party was required to file an undertaking and deposit the penalty within specified timeframes.

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Issues Involved:
1. Relevant Market
2. Dominance in the Relevant Market
3. Abuse of Dominant Position

Issue-wise Detailed Analysis:

1. Relevant Market:
The Commission defined the "relevant market" as the market of supply and distribution of natural gas to industrial consumers in the district Faridabad. It was determined based on the characteristics, intended use, and price of natural gas, which differ for industrial, domestic, commercial, and transportation consumers. The Commission agreed with the DG that natural gas is distinct from other energy sources due to its characteristics, such as being a cleaner and more efficient fuel that does not require storage facilities. The relevant geographic market was determined as Faridabad because the Government of Haryana authorized only one service provider (the opposite party) to build and operate a CGD network in the district, making the conditions of competition homogeneous.

2. Dominance in the Relevant Market:
The Commission found the opposite party to be dominant in the relevant market as it held a 100% market share, being the only entity authorized by the Government of Haryana to set up and operate a CGD network in Faridabad. The dominance was further supported by the absence of any countervailing buying power, market structure, and entry barriers. The Commission noted that the distribution of natural gas is regulated by the Petroleum and Natural Gas Regulatory Board (PNGRB), which grants infrastructure exclusivity and marketing exclusivity to authorized entities, reinforcing the dominant position of the opposite party.

3. Abuse of Dominant Position:
The Commission examined various clauses of the Gas Sales Agreement (GSA) and found some of them to be abusive and in contravention of the Act:

- Clauses 9 (Quality of Gas) and 10 (Measurement and Calibration): The Commission concluded that the clauses regarding the certification of gas quality and measurement were not abusive as the opposite party relied on certificates from its supplier (GAIL) and provided mechanisms for dispute resolution through mutual consultation and arbitration.

- Clause 11 (Shut Down and Stoppage of Gas): The Commission found that the clause absolving the opposite party from liability for disruption of gas supply was not abusive, as it was a reflection of the upstream agreement with GAIL and was evenly balanced.

- Clause 12 (Contract Price): The Commission agreed with the DG that the clause allowing the opposite party to revise gas prices was not abusive due to the peculiarities of the gas industry and the market-driven nature of gas prices.

- Clause 13 (Billing and Payment): The Commission found sub-clauses 13.5 and 13.7 to be abusive as they imposed unfair conditions on buyers, such as the unilateral right of the opposite party to decide interest rates on delayed payments and the absence of an obligation to pay interest on excess payments made by buyers.

- Clause 14 (Payment Security): The Commission did not find the clause requiring buyers to maintain a security deposit or bank guarantee to be abusive, as it was necessary for the inter-dependent nature of the business and the opposite party was paying interest on cash deposits.

- Clause 17 (Expiry and Termination): The Commission found the clause allowing the opposite party to terminate the agreement if the buyer failed to take 50% or more of the cumulative Daily Contracted Quantity (DCQ) for 45 consecutive days to be abusive, as it imposed unfair conditions compared to the longer period available to the opposite party from GAIL.

- Clause 16 (Force Majeure) and Clause 11.2.1 (Shutdown, Unplanned Interruption, and Disruption): The Commission found these clauses to be abusive as they allowed the opposite party to unilaterally accept or reject force majeure requests and obliged buyers to meet Minimum Guaranteed Off-take (MGO) payment obligations even during emergency shutdowns.

Conclusion:
The Commission concluded that the opposite party had contravened the provisions of section 4(2)(a)(i) of the Act by imposing unfair conditions on buyers under the GSA. The Commission directed the opposite party to cease and desist from such conduct, modify the GSA in light of the findings, and imposed a penalty of 4% of the average turnover of the last three years, amounting to Rs. 2567.2764 lakhs. The opposite party was also directed to file an undertaking and deposit the penalty amount within specified periods.

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