TaxTMI 
TaxTMI 
2013 (5) TMI 169
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....given to both BCCI and the informant for perusal of all relevant records and making their submissions, both in writing and orally before the Commission. 2. Factual Background 2.1 The Opposite Party (OP), BCCI, is a society registered under Tamil Nadu Societies Registration Act, 1975 with the primary objectives as stated in the Memorandum of Association (MoA) of controlling the game of cricket in India, promoting the game in India, framing the laws of cricket in India, selecting teams to represent India in Test Matches, ODIs and Twenty 20 matches played in India or abroad. It is a 'full member' of International Cricket Council ("ICC"). 2.2 A party related to the OP is ICC. ICC is the global governing body for international cricket. It is responsible for administration of men's and women's cricket including the management of playing conditions and officials for Test Match and One Day International (ODI) Cricket and the staging of international cricket events for men, women and juniors. It has three categories of members viz. Full Members, Associate Members and Affiliate Members. 2.3 Full Members are the governing bodies for cricket of a country recognised by the ICC, or nations a....
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....r statements and perused all the documents related to bidding for franchise or media rights for IPL. 3.3 After examination of the replies/documents etc. received from the parties, the submissions of the Informant, DG analysed the various issues. Applicability of Competition Act on BCCI BCCI's submissions 3.4 During the course of investigation, BCCI contended that it is a 'not-for-profit' society for the promotion of sport of cricket and its activities is outside the purview of the Act, especially Section 3 and 4. It also submitted that its commitments are neither driven by nor conditional upon commercial considerations. The revenue obtained by BCCI is ploughed back into the game of cricket. 3.5 BCCI also cited a decision by Hon'ble Supreme Court of India in Secretary, Ministry of Information and Broadcasting (MoI&B), Govt. of India(GoI) v. Cricket Association of Bengal [1995] 2 SCC 161. The SC in that case held, "...It must further be remembered that sporting organizations such as BCCI/CAB in the present case, have not been established only to organize the sports events or to broadcast or telecast them. The organization of sports events is only a part of their various objects....
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....sing on panels within the grounds, conclusion of contracts related to television broadcasting rights etc. and for all such purpose, FIFA is an 'undertaking'. 3.10 The DG also drew support from the decision of Hon'ble High Court in WP(C) No. 5770/2011, dated 4-11-2011 in the case of Hemant Sharma v. Union of India, where while disposing the writ petition, Hon'ble High Court considered Chess Federation as an enterprise within the meaning of provisions of Section 2(h) of the Act. DG considered similarity in roles of BCCI and Chess Federation as National Associations for sport of Cricket and Chess respectively and accordingly based his findings. 3.11 In view of the activities of BCCI being in commercial sphere and legal principles as laid down in the above decisions, DG concluded that BCCI is an enterprise for the purpose of Section 2(h) of the Act. Relevant Market BCCI's submissions 3.12 BCCI submitted that the market for various rights related to IPL such as franchise rights, media rights etc. are separate markets as these rights are not interchangeable. 3.13 BCCI also stated that each of the rights in relation to IPL is intrinsically different, with different price, demand fun....
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....operations temporarily. 3.19 On the basis of above facts as analysed, DG held that BCCI is in a position of strength, in the relevant market. DG's findings on alleged Abuse of Dominance Issue 1:Grant of franchise rights 4.1 The informant had alleged that there were irregularities in the process of grant of franchise rights for teams such as agreement between the IPL and bidders and bidders were advised about the amount of bid for a particular team. This lack of transparency was alleged as an act of bid rigging and leading to creation of entry barriers to new entrants in the market. 4.2 DG examined in detail the process of grant of franchise rights as well as the terms of franchise agreements. 4.3 As per the DG, there were attempts of bid rigging by using arm twisting tactics by IPL Commissioner Sh. Lalit Modi. DG's findings on this were based on the contents of the show cause notices issued by BCCI to Sh. Lalit Modi. BCCI defended by submitting that (i) the agreement (if any) between the BCCI-IPL and the bidders does not qualify as horizontal agreement envisaged under Section 3 of the Act; (ii) Sh. Lalit Modi was acting outside the scope of his authority; (iii) the Invitation....
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....ield and maintaining integrity of IPL. 4.7 The DG also found Clause 5.5 of the Franchise Agreement to be unfair and discriminatory, as it provides restrictive conditions on the franchises for not selling the product of IPL without prior approval of BCCI. BCCI submitted that the underlying product in Clause 5.5 is the league marks of BCCI, which are its intellectual property and the clause is not intended to act as an hindrance, but for protection of intellectual property. Also, as the same condition is applicable to all the franchises, it cannot be regarded as discriminatory. 4.8 On the issue of grant of franchise rights, DG found BCCI guilty of contravention of Sections 4(2)(a)(i)), 4(2)(b)(i)) and 4(2)(c) of the Act. Issue 2: Grant of media rights 5.1 On November 30, 2007, BCCI issued an ITT for IPL media rights for a period of 10 years commencing 2008 and ending 2017 on a worldwide basis. The media rights were to be granted for 5 IPL seasons with an option to the successful bidder to renew for further 5 seasons. Also, it was clarified by BCCI that bids for 10 year period would be considered. The bids were to be submitted for the Global package, India Package and Internationa....
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.... with this clause may have a material impact on the licensee's rights and obligations pursuant to this agreement". 5.4 On March14 2009, as submitted by BCCI, due to certain irremediable breaches of the 1st India Territory Agreement by Sony, the agreement was terminated. On 15th March 2009, the 1stRoW Agreement was also terminated by a deed of mutual agreed termination made between BCCI, WSGI and WSG Mauritius (not a party to original agreement).Pursuant to termination of 1st India Territory Agreement with Sony, as required under Clause 29 (as above), BCCI entered into 2nd India Territory Agreement with WSG Mauritius granting the rights till 31st December 2017. This agreement contained Clause 13.5 which provided that WSG Mauritius shall sub licence rights under the said agreement within 72 hours of the signing. In the event of failure to sub-licence, the agreement shall stand automatically terminated. WSGI failed to sub-licence even during extended time provided by BCCI and as a result, a termination letter dated 25th March 2009 was issued to WSG Mauritius, duly acknowledged by WSG Mauritius. For RoW, the 2nd RoW agreement was entered into again with WSGI for the period ending Dece....
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....fresh tenders after termination of 1st India and RoW Agreement to the unilateral conduct of Sh. Modi. In fact, BCCI stated that a show cause notice dated April 26, 2010 to Sh. Modi had been given on this issue. The period was attributed to nascent stage of IPL and consequent revenue assurance for both the parties. Issue 3: Grant of Other Rights 6.1 Global Title sponsorship rights were awarded to DLF pursuant to open tender process. Associate Sponsorship rights were awarded to various companies for different period and amount without any tender process, based on discussions, negotiations and proposals. The size of the agreement was Rs. 444 crores. On the award of contracts for transport, event management, catering, tickets etc. BCCI, stated that based on operational requirement, they suggested hotels/airlines/vendors to franchisees who in turn entered into an agreement. Almost all the franchisees also admitted that BCCI has 'facilitated' the award of contracts to various vendors. Based on this testimony of BCCI and its franchisees the DG concluded contravention of Section 4(2)(c). 6.2 BCCI submitted that the contracts for associate sponsorship rights did not involve substantial c....
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.... indicated the need to look further into the possibility of overlaps in the two roles in functioning of BCCI leading to competition concern. 7.3 Thus in addition to the issues as pointed out above, the Commission examined the dual role of BCCI for anti-competitive practices. Therefore the issues for determination in this case are: i. What is the de facto status of BCCI? ii. Whether BCCI has abused its dominant position in the relevant market in contravention of Section 4 of the Act? This involves the following steps:- a. Defining the relevant market b. Assessment of dominance of BCCI in the relevant market as defined c. Analysis of conduct of BCCI for contravention of Section 4 of the Act. 7.4 As stated above, sports activities are considered to have specificities that make them distinct businesses. This aspect has been emphasised by the opposite party. Thus, before examining the above issues, a review of sports sector is necessary to understand the specificities of sport, cricket in particular. Review of Sports Sector Sports Organizational Structure: A pyramid 8.1 Major s....
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....ricket events are structured in a format where the participating teams represent their respective states/nation by donning the state/national colours. The success of teams bestows the honour to the team and respective state/nation. Playing for honour is the essence of the sport in this format. This structure forming part of pyramid goes right down to grass root level targeting development of talent pool of players and preparing them for rigours of International Cricket. There are several levels/rounds of cricket matches and based on the performance in these matches players are eventually selected for representing the country. The various events forming part of First Class Cricket/International Cricket in India include: i. Ranji Trophy: The Ranji Trophy is a domestic first-class cricket championship played in India between different city and state sides, equivalent to the County Championship in England and the Sheffield Shield in Australia. Most of the teams playing in the Ranji Trophy represent states of India; there are three teams that represent individual cities (Mumbai, Baroda and Hyderabad) and two teams based in Delhi but with no regional affiliatio....
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....s stated above. (i) What is the de facto status of BCCI? 8.7 This question is of prime importance as the role of BCCI has never been clearly articulated. During the deposition, in clarification to a question raised by the Commission as to the exact nature of BCCI, whether it is a regulator (de facto or de jure) or an enterprise or a completely different body that needs defining, BCCI stated that it is not a regulator. BCCI further elaborated that the team which participates in International events is representative of BCCI and not India. Despite these assertions, the Commission notes that BCCI both in their written and oral submissions refer alternatively to their role either as custodian of cricket or organizer of events depending on the role considered appropriate for the circumstances. For instance, in the submissions BCCI has referred to its role in setting the rules and regulations of the game which are considered as regulatory activities. DG in his report also refers to the regulatory activities of BCCI. In the case of IPL, BCCI however, has assumed the role of organiser of events. Donning two hats by BCCI without clarity on roles merits an examinat....
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.... ♦ If necessary, to control and arrange all or any inter-territorial disputes. ♦ To settle disputes or differences between Associations affiliated to the Board and appeals referred to it by any such Associations. ♦ To adopt if desirable, all rules or amendments passed by the Marylebone Cricket Club as soon as eight territorial cricket associations were created. Representatives of the eight associations would then come together to constitute the Board. In late 1928, only six associations - Southern Punjab Cricket Association, Cricket Association of Bengal, Assam Cricket Association, Madras Cricket Association and Northern India Cricket Association - had been formed. 8.12 The Provisional Board met in Mumbai in December 1928 during the Quadrangular tournament to discuss the next course of action. It was at this meeting that decision to form a proper board for control of cricket in India was taken and BCCI was established. Five months later, the ICC admitted BCCI as a Full Member representing India. Institutional Form of BCCI 8.13 At present, BCCI is registered under Tamil Nadu Societies Registration A....
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....mit/deny the entry of competing leagues. Thus by virtue of Section 32 of ICC rules, the 'right of approval' is vested with BCCI. This 'right of approval' is clearly a regulatory role. 8.18 ICC also vests the rights of deciding on any factor related to cricket with its members and declares the members as 'custodian' of sport as stated in Explanatory note to Section 32.3. "...Any other factor that the Member, as the custodian of the sport in its territory, considers to be relevant". 8.19 ICC very clearly declares that the members of ICC are the custodian of sport of cricket. The word 'custodian' clearly highlights the intent of ICC and its members to regulate/control the sport of cricket in their respective jurisdictions. 8.20 Another evidence of BCCI as being a de facto regulator and the team participating in International events being Indian team and not a representative of BCCI is found in the ICC guidelines specifying full member criteria. It expressly states the performance of 'national team' as one of the parameters. 8.21 Some of the important statements from the ICC Player Eligibility Regulations are quoted as under; "The ICC is the international....
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.... and the Board is bound by any decision taken by the Government of India in this regard. It is further stated that in the year 2002 the Government had refused permission to the Board to play cricket in Pakistan. It is also submitted that the Government of India accepts the recommendation of the Board in regard to awarding "Arjuna Awards" as the National Sports Federation representing cricket. In the said affidavit the Government of India has stated before this Court that the activities of the Board are like that of a public body and not that of a private club. 8.24 The following conclusions can be drawn from the aforementioned facts: (a) The historical evolution of BCCI enabled it to attain a monopoly status, a first-mover advantage, in the organization of cricket events in India. But the position that BCCI has attained today could not have come without the support of Government of India. BCCI has been a beneficiary on account of provision of land for stadiums at subsidized rates, tax exemptions in the past event if no specific earmarked grants by GoI have been given. In substance the 'first mover' advantage and the implicit recognition by GoI as the national association for cric....
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....lude any activity of the Government relatable to the sovereign functions of the Government including all activities carried on by the departments of the Central Government dealing with atomic energy, currency, defence and space". (Section 2(h)) 8.26 The Act focuses on the functional aspects of an entity rather than institutional aspects. The scope of the definition on the institutional front has been kept broad enough to include virtually all the entities as it includes 'person' as well as departments of the government. The specific exception has been provided only to the activities related to the sovereign functions of the government. It is in substance the nature of activity that would decide whether the entity is an enterprise for the purpose of the Act or not. Thus, from the discussion, it suffices that the 'not-for-profit' society form as claimed by the OP does not take BCCI out of the definition of the enterprise and the activities of BCCI would be tested for its status as an enterprise. 8.27 The same view has been held internationally in a number of cases related to sports bodies. The Grand Chamber of ECJ observed in a similar case against ELPA (the authority participating....
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....ases C-180/98 to C-184/98 Pavlov and Others [2000] ECR I-6451, paragraph 75). Provided that that condition is satisfied, the fact that an activity has a connection with sport does not hinder the application of the rules of the Treaty (Case 36/74 Walrave and Koch [1974] ECR 1405, paragraph 4, and Case C-415/93 Bosman [1995] ECR I-4921, paragraph 73) including those governing competition law (see, to that effect, Case C-519/04 P Meca-Medina and Majcen v. Commission [2006] ECR I-6991, paragraphs 22 and 28)..."[Source C-49/07, REFERENCE ibid.) Thus, it is conclusive that all Sports Associations are to be regarded as an enterprise in so far as their entrepreneurial conduct is concerned and treated at par with other business establishments. 8.29 In India also in a recent decision, Delhi High Court held All India Chess Federation (which performs similar functions as BCCI for the game of Chess) to be an enterprise for the purpose of the Act. (Source: Hemant Sharma v. Union of India, Delhi High Court, WP(C) 5770/2011, date of decision 04/11/2011). 8.30 In line with the provisions of the Act, international jurisprudence, and Delhi High Court decision in case of Chess Federation, it is co....
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....cator of demand preferences of the ultimate viewer of the sport. The data is as under: Revenue from Cricket data: (a) As per information in public domain, the total advertisement revenue for the year 2009-10 was Rs.9000 crore. An amount of Rs. 700 crore was made by Sony Max in 45 days of IPL. Doordarshan was expected to earn only Rs. 110 Crore from the Commonwealth Games telecast (Source: (b) '3 Idiots', was described in Economic Times as the most expensive movie on TV was telecasted in July 2010 and advertisement slots were offered at Rs.2.2 lakh for 10 seconds, while the general rate for 45 day long IPL event for that year was around Rs.4-5 lakh per 10 seconds, which subsequently increased to Rs.10 lakh for 10 seconds. This evidences that cricket is not comparable to the general entertainment programs in terms of ad revenue. (c) The general entertainment programs such as Saath Nibhana Saathiya which have consistent TRP of 4, don't earn more that 1.5-2 lakhs for prime time slot. (d) The channel's revenue market share (Set Max) increased from a pre IPL level of 5.7% to 28.8%. It....
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....emi-final or final, the TRP exceeds 10. (iii) The analysis of Top 10 programs of the week reveal that Set Max does not make to the Top 10 category without IPL and with IPL, it has around 5 to 7 programs in Top 10. The changes in TRP suggest that the regular soaps such as Sathiya...are not preferred once the IPL is on, which emphasises the attractiveness and uniqueness of the cricket events. 8.36 Considering the basic test of non-transitory relative price rise of 5% to 10% also known as SNNIP test for a cricket event and considering the consumer behaviour, it seems quite unreasonable to believe that a consumer would substitute cricket event with any other form of entertainment viz. Films, TV shows etc. or any other sporting event. There is enough behavioural evidence to suggest the same is reflected in data regarding viewership above. 8.37 The price of cricket event be it the price of tickets for live audience or the prices for advertisement slots for broadcasts also points to a truly distinct market. The uniqueness of cricket events from the view point of the stakeholders as well as the ultimate viewers is reflected in revenues associated with sport vis....
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....ption etc. as has been discussed. It is equally important to note that a number of matters that are dealt with under the pyramid structure may not necessarily be inherent and proportionate to the achievements of purely sporting objectives; rather they contain a strong commercial dimension, especially related to club rules or the statutes. There are concerns that the sports federations may go beyond what is required for the proper organization of sport. With a phenomenal increase in commercial dimensions of the sport, there is a great incentive for Sports Federations to use their regulatory powers for protecting their own commercial interests. The situation where the regulator is also the economic beneficiary leading to role overlap is definitely a competition concern. The Commission, while it appreciates the regulation of the sport, is mandated to examine if the system of regulation falls foul of the Act, in its organisational role especially where, commercial dimension of the sport is involved. 8.41 In the given case, BCCI was already the monopoly organizer of First Class Cricket leagues and matches in India. With the advent of the 'private professional league', BCCI extended its....
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....vents played under its jurisdiction that the individual or organization in question has not participated in any form of Disapproved Cricket for a specified period." 8.44 Thus, considering the ICC bye-laws as above, the Commission notes that BCCI approval is required by any prospective private professional leagues and binding for access to the vital inputs (stadium, list players) required to ensure successful conduct of the league. Thus, the approval of BCCI is critical to the organization and success of any competing league and is a very important source of dominance for BCCI. 8.45 The concern on regulatory powers being a potential source for abuse of dominance was also expressed in the decision of Grand Chamber of the European Court of Justice in MOTOE case. The Court insisted that, "...a system of undistorted competition, such as that provided for by the treaty, can be guaranteed only if equality of opportunity is secured between the various economic operators. To entrust a legal person such as ELPA, the National Association for Motorcycling in Greece, which itself organizes and commercially exploits motorcycling events, the task of giving the competent administration its conse....
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....the infrastructure owned and controlled by BCCI. Over a period of time, BCCI or its member sports federations were allotted land by GoI at subsidized rates for construction of stadiums to help the cause of development of the sport and was also granted tax exemptions. With the changed paradigm in cricket this emerged as a tool of significant commercial advantage for BCCI. 8.49 Dominance also stems from the role of BCCI as an organizer of First Class/International Cricket events. With this role, BCCI controls a pool of cricketers under contract with BCCI for First Class/International events. The sentiments of Indian fans are reflected in the slogan seen at many matches which reads, "Cricket is my religion and Sachin is my God". Thus to an Indian cricket fan, these players are icons and their participation can make any league a success. BCCI's ability to control an input which is indispensable to the success of cricket events is also a source of dominance for it. 8.50 If historical evidences are considered, we have the case of ICL which is now temporarily suspended. The reasons for the failure of the league were lack of infrastructure facilities, BCCI/ICC's refusal to approve the le....
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....uding the procedures followed and the agreements entered into, to determine whether there was any anti-competitive conduct on the part of BCCI. On examination of the IPL media rights agreement, the Commission noted Clause 9.1(c)(i), which reads as follows: "BCCI represents and warrants that it shall not organize, sanction, recognize, or support during the Rights period another professional domestic Indian T20 competition that is competitive to the league". This agreement as noted earlier, has been entered between BCCI and MSM for a period of 10 years. Thus, BCCI has clearly bound itself not to organize, sanction, recognize any other private professional domestic league/event which could compete with IPL. Clause 9.1(c)(i) clearly and unambiguously amounts to a practice through a contractually binding agreement resulting in denial of market access to any potential competitor, and is decidedly a violation of Section 4(2)(c) of the Act. 8.56 The Commission examined the above clause further considering the provisions in ICC bye laws Section 32 regarding "Disapproved Cricket". The insistence on rival leagues to get approval from National Sports Federation defended on the grounds of th....
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....rriving at a commercial agreement, which is at the root of a violation of Section 4(2)(c). 8.59 The Commission has noted that, BCCI by virtue of its role as the custodian of cricket vested with the rights to sanction a cricket event thereby facilitating the success of the event took unto itself the right of restricting economic competition in sporting event. The Commission however, strongly holds the view that competition is essentially for benefits to be widespread. The game of cricket and the monetary benefits of playing professional league matches must be spread out and not concentrated in a few hands, in a few franchisees. In a country of large young population more private professional leagues opens up more venues for youngsters to play cricket, to earn a livelihood and to find champions where least expected. BCCI in its dual role of custodian of cricket and organizer of events has on account of role overlap restricted competition and the benefits of competition. The objective of BCCI to promote and develop the game of cricket has been compromised. The Commission, therefore, concludes that BCCI has abused its dominant position in contravention of Section 4(2)(c) of the Act. ....