2019 (12) TMI 3 - HC - Law of Competition

Court Overturns CCI Orders Due to Procedural Errors; Subsequent Actions and Notices Annulled.

Star India (P.) Ltd. Versus Competition Commission of India

The court granted the Writ Petitions, nullifying the CCI's Impugned Orders dated 27th July, 2018, and 31st July, 2018, issued under Section 26(1) of the ... Whether or not the 7th December, 2015 Order decided the necessary jurisdictional facts which in turn enabled CCI to pass the Impugned Order commencing investigation? HELD THAT:- A bare perusal of the 7th December, 2015 Order demonstrates that it pertains only to general/industry-wide issues relating to the concept of RIO and the law declared therein is intended to be prospective in operation. This is evident from the fact that TDSAT did not deal with the finer and specific issues of discriminatory conduct alleged by NSTPL against Media Pro, Taj and Star in the First TDSAT Petition. In fact, none of the specific reliefs sought against Media Pro, Star and Taj in the First TDSAT Petition were even considered, let alone granted, when passing the TDSAT Order. The 7th December, 2015 Order does not consider, let alone find, that NSTPL is 'similarly placed' with other distributors. The order merely holds that HITS technology operators, being part of the addressable systems (as opposed to analogue/ non-addressable systems) are at par with other addressable system technology operators and must, therefore, receive the same treatment. The factors peculiar to NSTPL's market position, which would determine whether NSTPL is in fact 'similarly placed with other distributors' such as (i) viewership, (ii) advertisement revenue potential, (iii) regional, cultural, linguistic considerations, and (iv) other special considerations have not even been considered in the 7th December, 2015 Order - the liability, once determined, will constitute the final adjudication of the rights and liabilities of the Petitioners and NSTPL inter se. In the Impugned Order, in order to hold a prima facie contravention of Section 3(4), CCI ought to have formed a prima facie view that there exists an agreement either between Star/Sony and NSTPL which provides for a refusal to produce, supply, distribute, store or trade in goods or provision of services with/to NSTPL and that such agreement causes AAEC - Since there is no prima facie finding by CCI on AAEC, according to us, the mandatory jurisdictional pre-requisite of a prima facie view of contravention of Section 3(4) is absent. Therefore, once again, we are unable to find any reasonable justification justifying CCI's failure to apply the aforesaid analysis whilst passing the Impugned Order. This being so, the Impugned Order cannot stand the test laid down under the Act. The present Writ Petitions against the Impugned Order are maintainable and this Court ought to interfere with the Impugned Order in view of the fact that the procedure laid down under the Competition Act was not adhered to whilst passing of the Impugned Order. Petition allowed. Issues Involved:1. Jurisdiction of the Competition Commission of India (CCI) under the Competition Act, 2002.2. Prima facie finding of anti-competitive practices.3. Applicability of the Supreme Court’s decision in CCI v. Bharti Airtel.4. Adjudication of in-personam disputes by Telecom Disputes Settlement and Appellate Tribunal (TDSAT).5. Compliance with Section 26(1) of the Competition Act.6. Reconciliation of accounts and determination of liabilities.Detailed Analysis:1. Jurisdiction of the Competition Commission of India (CCI) under the Competition Act, 2002:The judgment emphasizes that the CCI could only exercise its jurisdiction if TRAI and/or TDSAT had found that the parties engaged in anti-competitive practices. The Supreme Court in CCI v. Bharti Airtel laid down that CCI's jurisdiction is contingent upon a prior finding of regulatory breach by TRAI/TDSAT. The court held that the issues raised by NSTPL (price discrimination, non-disclosure of schemes, anti-competitive conduct) are jurisdictional facts that must be decided by TDSAT before CCI can proceed.2. Prima facie finding of anti-competitive practices:The court found that CCI failed to form a prima facie view with some reasons before passing the order under Section 26(1) of the Competition Act. The Impugned Order lacked a necessary finding on appreciable adverse effect on competition (AAEC), which is a mandatory jurisdictional pre-requisite. The court cited the Supreme Court’s decision in CCI v. Steel Authority of India, which mandates that CCI must express its mind in no uncertain terms that a prima facie case exists.3. Applicability of the Supreme Court’s decision in CCI v. Bharti Airtel:The court extensively referred to the Supreme Court’s decision in CCI v. Bharti Airtel, which held that CCI cannot proceed with an investigation unless TRAI finds fault with the conduct of a service provider. The court reiterated that the principles laid down in CCI v. Bharti Airtel apply to in-personam disputes, and the issues raised by NSTPL were materially distinct from the general industry-wide issues decided in the 7th December, 2015 Order by TDSAT.4. Adjudication of in-personam disputes by Telecom Disputes Settlement and Appellate Tribunal (TDSAT):The court noted that the specific disputes between NSTPL and the Petitioners (Star and Sony) regarding price discrimination and non-disclosure of schemes were pending adjudication in the Second TDSAT Petition. The 7th December, 2015 Order dealt with general industry-wide issues and did not decide the specific allegations made by NSTPL. The court held that the determination of whether NSTPL was similarly situated with other distributors and entitled to the same rates and incentives was a jurisdictional fact to be decided by TDSAT.5. Compliance with Section 26(1) of the Competition Act:The court found that CCI did not satisfy the ingredients of Section 3(4) of the Competition Act, which requires a prima facie finding of an agreement refusing to deal and that such agreement causes or is likely to cause AAEC. The court emphasized that CCI must undertake an analysis in terms of factors listed under Section 19(3) of the Competition Act before directing an investigation. The Impugned Order lacked this analysis and did not consider whether the Petitioners' actions would have any AAEC.6. Reconciliation of accounts and determination of liabilities:The court noted that the issue of reconciliation of accounts and the determination of NSTPL's liabilities were pending adjudication in the Second TDSAT Petition. TDSAT had directed that the question of liability and inter-party disputes between NSTPL and Star would be decided in the Second TDSAT Petition. The court held that the issues raised by NSTPL in the Second TDSAT Petition are jurisdictional facts that must be decided before CCI could have ordered an investigation.Conclusion:The court allowed the Writ Petitions, quashing the Impugned Orders dated 27th July, 2018 and 31st July, 2018 passed by CCI under Section 26(1) of the Competition Act, 2002. The court held that the procedure laid down under the Competition Act and the Supreme Court’s pronouncement in CCI v. Bharti Airtel was not adhered to while passing the Impugned Order. Consequently, all actions and notices by the Director General pursuant to the Impugned Order were also quashed and set aside.