2025 (5) TMI 1921 - CCI - Law of Competition

Bank cleared of anti-competitive practices allegations under Competition Act Sections 3 and 4, case closed

Shri Umar Javeed and Shri Aaqib Javeed Versus Jammu and Kashmir Bank

CCI dismissed allegations against a bank regarding anti-competitive practices under Sections 3 and 4 of the Competition Act, 2002. The Commission found ... Anti-competitive practices - contravention of the provisions of Sections 3 and 4 of the Competition Act, 2002 - abuse of dominant position - HELD THAT:- The Commission notes that institutions ordinarily enter into agreements with Bank of their choice for availing/providing banking facility/services to/for their employees. Such kind of arrangements are usually decided mutually by both the parties on agreeable terms and conditions. Further, from the perusal of MoU dated 12.09.2018 entered between OP and Government of J&K, it appears that the primary purpose of the same was to confer preferential treatment to the entities/permanent employees of Government of J&K in terms of offering customized, hassle free and personalized banking services. It appears that there is no prohibition for any entity and the banking institution from approaching each other for such kind of arrangements/services. Such kind of issues usually do not fall under the perimeter of competition law as they do not disclose any concern warranting intervention under the provisions of the Act. The MoUs and agreements entered into between the OP and two-wheeler/four-wheeler dealers/manufacturers for facilitating their customers loan facility for purchasing these products cannot be considered as anti-competitive, ipso facto, and are not likely to cause an appreciable adverse effect on competition, as mandated under Section 3 of the Act. Regarding the allegation of tie-in arrangement which is enforced by OP while providing locker facility in terms that a customer is required to purchase a fixed deposit of Rs. 15,000/- for a period of ten years apart from payment of annual rent, the Commission notes that no agreement indicating such tie-in arrangement has been provided by the Informants. However, as per the ‘Standard Operating Procedure’ available on the website of OP, having a fixed deposit as alleged by the Informants do not appear to be a mandatory requirement. Therefore, allegation of tie-in arrangement with regard to locker facility appears to be misplaced. Further, even otherwise, deficiency in services or non-adherence of prescribed norms for banking operation cannot be given colour of competition concern. Conclusion - No prima facie case is made out against the OP for violation of Sections 3 and 4 of the Act. Accordingly, the Information is ordered to be closed forthwith in terms of the provisions of Section 26(2) of the Act. The Secretary is directed to communicate to the Informants, accordingly. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Commission under the Competition Act, 2002, were:Whether the agreements/MoUs entered into by the dominant bank with various entities, including government departments, universities, vehicle dealers, and others, constitute anti-competitive agreements in contravention of Section 3 of the ActRs.Whether the bank's alleged dominant position in the relevant market of retail banking services in the Union Territory of Jammu & Kashmir, particularly in the Kashmir province, amounts to abuse of dominance under Section 4 of the ActRs.Whether the alleged tie-in arrangement requiring customers to purchase fixed deposits to avail locker facilities constitutes an unfair condition or abuse of dominance under Section 4Rs.Whether the agreements restricting employees or customers to avail banking services exclusively from the bank result in appreciable adverse effect on competition (AAEC) in the relevant marketRs.Whether the Informants have established a prima facie case warranting inquiry and penalties under Sections 3 and 4 of the ActRs.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Whether the agreements/MoUs entered into by the bank with various entities constitute anti-competitive agreements under Section 3 of the ActRs.The relevant legal framework under Section 3 prohibits agreements which cause or are likely to cause appreciable adverse effect on competition within India. The Commission examined the nature of the agreements entered into by the bank with entities such as the Government of J&K, universities, police department, vehicle dealers, and HPCL.The Commission noted that such agreements are common in the banking sector where institutions mutually agree on banking arrangements for their employees or customers. The MoU dated 12.09.2018 with the Government of J&K was scrutinized and found to primarily aim at providing preferential, hassle-free, and personalized banking services rather than restricting competition or forcing exclusivity.Regarding agreements with vehicle dealers (Royal Enfield, Piaggio, Maruti Suzuki, Tata Motors), the Commission observed that these tie-ups facilitating loans exclusively through the bank do not ipso facto constitute anti-competitive agreements. The Commission emphasized that such arrangements do not necessarily cause appreciable adverse effect on competition, as they are part of normal business practices to streamline financing options for consumers.The Commission also considered the argument that employees were constrained to open accounts only with the bank to receive salaries. It held that such institutional arrangements do not fall within the ambit of competition law unless they demonstrably restrict market competition or consumer choice in a manner that harms competition.Consequently, the Commission found that the agreements/MoUs did not prima facie disclose any anti-competitive conduct warranting intervention under Section 3.Issue 2: Whether the bank's dominant position in the relevant market amounts to abuse of dominance under Section 4 of the ActRs.The relevant market was identified as 'Retail Banking Services' in the Union Territory of Jammu & Kashmir, with particular focus on the Kashmir province. The bank claimed a market share exceeding 50% in the region, indicating dominance.Section 4 prohibits abuse of dominant position, including imposing unfair or discriminatory conditions or tying arrangements. The Informants alleged that the bank abused its dominance by imposing unfair conditions such as requiring fixed deposits to avail locker facilities and exclusive tie-ups with dealers.The Commission analyzed the alleged tie-in arrangement regarding locker facilities, where customers purportedly had to maintain a fixed deposit of Rs. 15,000 for ten years. The Commission found no documentary evidence supporting this claim. The bank's published Standard Operating Procedure did not mandate such fixed deposits as a precondition for locker facilities.Further, the Commission clarified that deficiencies in service or non-adherence to banking norms do not constitute abuse of dominance under competition law. The alleged tie-in arrangement was thus found to be unsubstantiated and misplaced as a competition concern.Therefore, no prima facie case of abuse of dominance under Section 4 was established.Issue 3: Whether the alleged restrictions on consumer choice through exclusive agreements cause appreciable adverse effect on competitionRs.The Commission noted that while the bank is dominant, the presence of 24 other public and private banks with thousands of branches and ATMs in the region ensures competitive availability of banking services. The exclusive agreements with dealers and institutions were found to be aimed at operational convenience and uniformity rather than exclusion of competitors.The Commission reasoned that such arrangements do not necessarily restrict consumer freedom or competition in the market to an extent that would trigger competition law intervention. The absence of evidence demonstrating market foreclosure or consumer harm was critical in this determination.Issue 4: Whether the Informants have made out a prima facie case warranting inquiry and penalties under Sections 3 and 4Rs.After examining the information and material on record, the Commission concluded that the allegations did not disclose any prima facie case of contravention of Sections 3 or 4. The agreements and practices complained of appeared to be normal commercial arrangements without appreciable adverse effect on competition or abuse of dominance.Accordingly, the Commission decided to close the Information under Section 26(2) of the Act, without initiating a formal investigation or imposing penalties.3. SIGNIFICANT HOLDINGSThe Commission's key legal conclusions include the following verbatim reasoning:'Such kind of arrangements are usually decided mutually by both the parties on agreeable terms and conditions. Further, from the perusal of MoU dated 12.09.2018 entered between OP and Government of J&K, it appears that the primary purpose of the same was to confer preferential treatment to the entities/permanent employees of Government of J&K in terms of offering customized, hassle free and personalized banking services.''The MoUs and agreements entered into between the OP and two-wheeler/four-wheeler dealers/manufacturers for facilitating their customers loan facility for purchasing these products cannot be considered as anti-competitive, ipso facto, and are not likely to cause an appreciable adverse effect on competition, as mandated under Section 3 of the Act.''Having a fixed deposit as alleged by the Informants do not appear to be a mandatory requirement. Therefore, allegation of tie-in arrangement with regard to locker facility appears to be misplaced. Further, even otherwise, deficiency in services or non-adherence of prescribed norms for banking operation cannot be given colour of competition concern.''No prima facie case is made out against the OP for violation of Sections 3 and 4 of the Act. Accordingly, the Information is ordered to be closed forthwith in terms of the provisions of Section 26(2) of the Act.'Core principles established include:Mutually agreed banking arrangements with institutions for employee/customer banking services do not inherently violate competition law.Dominance in a market does not ipso facto imply abuse; specific conduct causing appreciable adverse effect on competition must be demonstrated.Allegations of tie-in arrangements or unfair conditions must be supported by documentary evidence; mere assertions or service deficiencies do not constitute abuse of dominance.Section 3 and 4 interventions require a prima facie case showing appreciable adverse effect on competition or abuse of dominance, failing which the Information must be closed.Final determinations on each issue were that no anti-competitive agreement or abuse of dominance was established, and the Information was closed without further investigation or penalty.