2021 (12) TMI 1517 - CCI - Law of Competition

Sports organizations deemed enterprises under Competition Act despite non-commercial nature, WhatsApp restrictions on players violate Section 4(2)

CCI found sports organizations qualified as enterprises under Competition Act, 2002, regardless of non-commercial nature, applying functional rather than ... Abuse of dominant position - Denial of market access / refusal to deal - Anti-competitive agreements and restriction of provision of services - Interim restraint under Section 33 of the Competition Act, 2002 - Definition of 'enterprise' and economic activityDefinition of 'enterprise' and economic activity - OP-1, OP-2 and OP-3 were prima facie held to be 'enterprise' within the meaning of the Act. - HELD THAT: - The Commission applied a functional test focusing on the economic nature of activities rather than formal status. Activities such as organising/conducting tournaments, distribution of prize money, trophies, medals and certificates, conducting coaching camps, selection of players, receipt of sponsorships, donations, royalty, advertising revenue and collection of subscriptions were treated as economic activities captured by the wide definition of 'enterprise'. The Commission observed that the Act covers non commercial economic activities as well and therefore the nature of functions performed by the OPs brought them within Section 2(h). [Paras 19, 20, 21, 22, 23]OPs prima facie qualify as 'enterprise' for the purposes of the Act.Abuse of dominant position - Relevant market for organization of table tennis events - OPs were prima facie held to be dominant in the relevant market delineated as the market for organization of table tennis leagues/events/tournaments in India. - HELD THAT: - Relying on the organisational pyramidal structure from district to national level and the roles played by OP-1, OP-2 and OP-3 in representing, coordinating, administering, marketing and developing the sport, the Commission was of the prima facie view that the OPs collectively occupied a dominant position in the delineated relevant market. [Paras 24, 25]OPs prima facie hold a dominant position in the relevant market for organisation of table tennis events.Denial of market access / refusal to deal - Anti-competitive agreements and restriction of provision of services - Interference with provision of services - The WhatsApp communication by OP-1 and certain clauses of OP-3's Memorandum of Association were prima facie found to be restrictive and to contravene Sections 3 and 4 of the Act (including Section 4(2)(c), Section 4(2)(a)(i) and Section 4(2)(b)(i) and Section 3(1)/3(3) as noted). - HELD THAT: - The Commission observed that the WhatsApp message of 30.10.2020 purportedly restricted players/clubs/academies from joining or participating in unaffiliated organisations and threatened suspension/non acceptance of tournament entries, which prima facie constituted conduct restricting market access and fell within the prohibitions in Section 4(2)(c). Likewise, impugned clauses in OP-3's MOA prima facie appeared unfair and restrictive, limiting market access and the provision of services, engaging the prohibitions in Section 4(2)(a)(i) and 4(2)(b)(i), and were also captured by Section 3(1) read with Section 3(3). The findings were expressed as prima facie observations to justify further inquiry. [Paras 26, 27, 28]WhatsApp communication by OP-1 and specified MOA clauses of OP-3 prima facie violated the Act by restricting market access and controlling provision of services.Interim restraint under Section 33 of the Competition Act, 2002 - Interim relief was granted restraining OP-1 from communicating so as to restrict or dissuade players/parents/coaches/clubs from joining or participating in tournaments organised by associations/federations/confederations not recognised by OP-1; OP-1 was also directed not to threaten players and to ensure compliance until further orders. - HELD THAT: - The Commission applied the statutory framework of Section 33 and the Supreme Court's guidance that interim restraints must be exercised sparingly but where satisfied that an act in contravention of Section 3 or Section 4 has been committed, continues or is about to be committed. The Commission recorded a satisfaction higher than a prima facie view: (i) existence of a prima facie contravention; (ii) necessity of restraint to prevent frustration of the sport's promotion and adverse effect on competition; and (iii) likelihood of irreparable harm to players and other federations if interim measures were not issued. On this basis, and having regard to the material including a petition by players, the Commission issued a reasoned interim order restraining OP-1 and warned of consequences under Section 42 for non compliance. The order was made without prejudice to the final inquiry and directed continued investigation. [Paras 32, 33, 34, 35, 36]Interim injunction granted restraining OP-1 from restricting or threatening players regarding participation in non recognised events; order to remain till further orders or final decision.Investigation by the Director General - The matter was directed to the Director General for investigation and report, and the Commission recorded that the DG shall carry out the investigation without being swayed by the interim observations. - HELD THAT: - Pursuant to the prima facie satisfaction recorded under Section 26(1), the Commission directed the DG to investigate the allegations regarding contraventions of Sections 3 and 4 and to submit the investigation report within the prescribed period. The Commission clarified that observations in the interim order do not amount to final adjudication and the DG must conduct the investigation independently. [Paras 2, 29, 36]DG directed to investigate the matter and submit a report; interim observations not to influence the investigation.Final Conclusion: The Commission, having recorded prima facie findings that the OPs perform economic activities amounting to 'enterprise', and that the OPs are prima facie dominant and have engaged in restrictive conduct (notably OP 1's WhatsApp communication and certain OP 3 MOA clauses), directed an investigation by the DG and granted an interim injunction restraining OP 1 from communicating so as to restrict or threaten players from participating in events not recognised by OP 1; the interim order is without prejudice to the final outcome of the investigation and adjudication. Issues Involved:1. Alleged contravention of Sections 3 and 4 of the Competition Act, 2002 by the Opposite Parties (OPs).2. Determination of whether the Opposite Parties qualify as an 'enterprise' under the Competition Act, 2002.3. Examination of alleged anti-competitive conduct and abuse of dominant position by the Opposite Parties.4. Consideration of interim relief to the Informant.Detailed Analysis:1. Alleged Contravention of Sections 3 and 4 of the Competition Act, 2002:The Informant, TT Friendly Super League Association, alleged that the Opposite Parties, namely The Suburban Table Tennis Association, Maharashtra State Table Tennis Association, and Table Tennis Federation of India, engaged in anti-competitive practices violating Sections 3 and 4 of the Competition Act, 2002. The Commission observed that the Opposite Parties were involved in activities that prima facie appeared to restrict players from participating in non-affiliated tournaments, thereby denying market access to players and organizers. Such conduct was noted as potentially violating Section 4(2)(c) of the Act.2. Determination of Whether the Opposite Parties Qualify as an 'Enterprise':The Commission addressed the preliminary objection raised by OP-1, claiming it was not an 'enterprise' under Section 2(h) of the Act. The Commission clarified that the definition of 'enterprise' includes entities engaged in economic activities, regardless of profit motives. The activities of the Opposite Parties, such as organizing tournaments and generating revenue through sponsorships and fees, brought them within the purview of an 'enterprise' under the Act.3. Examination of Alleged Anti-Competitive Conduct and Abuse of Dominant Position:The Commission assessed the relevant market as the 'market for organization of table tennis leagues/events/tournaments in India' and noted the pyramidal structure of the Opposite Parties governing the sport from district to national levels. The WhatsApp message from OP-1's General Secretary restricting players from participating in non-affiliated tournaments was considered an abuse of dominant position under Section 4(2)(c). Additionally, certain clauses of OP-3's Memorandum of Association were found to be restrictive and unfair, potentially violating Sections 4(2)(a)(i) and 4(2)(b)(i) of the Act.4. Consideration of Interim Relief to the Informant:The Informant sought interim relief to prevent the Opposite Parties from restricting players from participating in its friendly events. The Commission, applying the principles for granting interim relief, found that the conditions for such relief were met. The Commission restrained OP-1 from issuing communications that dissuade players from joining non-affiliated tournaments and directed OP-1 to comply with these instructions until further orders. The Commission emphasized that this interim order does not reflect a final opinion on the case's merits and directed the Director General to conduct an unbiased investigation.In conclusion, the Commission identified prima facie evidence of anti-competitive conduct by the Opposite Parties, necessitating an investigation and interim measures to protect the interests of players and maintain competitive practices in the sport of table tennis.