TaxTMI 
TaxTMI 
2011 (5) TMI 1067
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....e eastern part of India. The legislations of 1887 and 1903 that provided for private power and minimal regulation, evolved into a more comprehensive Indian Electricity Act 1910, which was the first basic framework for electricity industry. It provided for private electricity licences in specified areas for supply of electricity. In the post independence period, with the objectives of extending electrification and achieving regional economic development, the electricity sector was nationalized in 1948. Under the Electricity (Supply) Act, 1948, State Electricity Boards (SEBs) were established. The SEBs were mainly funded by the states and they carried out the objectives of the state policies. The commercial viability of the SEBs started getting affected in 1970s due to a host of reasons and the Government amended the Electricity Act, 1948 in 1985 to provide for 3% as minimum return. Despite this safeguard, SEBs over a period of time suffered financially and in terms of their performance. In the year 1991, steps towards comprehensive reforms in the power sector were undertaken. 1.3 In 1990s, India ranked eighth in the world in terms of annual electricity generation. About 75 percen....
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....pen access in inter-state transmission together with the regulations on inter state trading are issued by the CERC. The responsibility for the introduction of open access at the distribution level rests with the State Electricity Regulatory Commissions. Open access transactions at interstate transmission have increased from 778 in 2004-05 to 5933 in 2006-07. The number has reached 9560 in 2007-08 and 9347 in 2008-09. Background of Power Reforms in Delhi 1.5 In 1905, M/s John Fleming Company was granted the licence to supply power to the inhabitants of Delhi. In the year 1951, Delhi State Electricity Board (DSEB), was established replacing a private utility, in pursuance of the policy for the power industry mandated by the Electricity (Supply) Act, 1948, entrusting the sector primarily to the new institution of State Electricity Boards. DSEB was replaced in 1958 by the Delhi Electric Supply Undertaking (DESU) which was created as a wing of the newly established Delhi Municipal Corporation. Till 1997, Delhi Electric Supply Undertaking (DESU) used to control generation, transmission and distribution of electricity in Delhi. DESU was an integrated utility with generation, transmi....
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....d by the Delhi Government. At the time of privatization, as per reports, DVB had about 2.5 million customers with a connected load of about 5600 MW, energy sales of about 8000 Gwh and an annual revenue of about Rs. 3000 crore (US $630 million). 1.8 At present, in the area of generation, Pragati Power Corporation Limited (PPCL) and Indraprastha Power Generation Company Ltd. (IPGCL) are Government Companies within the meaning of Companies Act, 1956 and are wholly owned by the Government of National Capital Territory of Delhi. Further, they are also the generating Companies as defined under Section 2(28) of The Electricity Act, 2003. IPGCL is generating electricity from its three power stations viz (i) Indraprastha (ii) Rajghat and (iii) Gas Turbine Power Station. Pragati Power Corporation Limited (PPCL) is supplying power from its power station at Pragati, Ring Road, I.P. Estate, New Delhi. The power generated from these power stations is being supplied to the transmission Company i.e. Delhi Transco Limited, which is also a Govt. of NCT of Delhi Undertaking. The transmission related functions are being carried out by Delhi Transco Limited (formerly Delhi Power Supply Company Limit....
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....med to be the Central Commission and State Electricity Regulatory Commissions, established under Section 17 of the Electricity Regulatory Commissions Act, 1998 shall be deemed to be the State Regulatory Commissions. 1.12 The mandate of DERC, inter alia, is to determine the tariff for electricity, wholesale/bulk, grid or retail, as the case maybe; to determine the tariff payable for the use of the transmission facilities; to regulate power purchase and procurement process of the licensees and transmission utilities including the price at which the power shall be procured from the generating companies, generating stations or from other sources for transmission, sale, distribution and supply in the National Capital Territory of Delhi; to aid and advise the Government in matters concerning electricity generation, transmission, distribution and supply in the "National Capital Territory of Delhi; to regulate the operation of the power system within the National Capital Territory of Delhi; to set standards for the electricity industry in the National Capital Territory of Delhi including standards related to quality, continuity and reliability of service; to aid and advise the Governmen....
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....ertically integrated monopoly is the retail competition model. The retail competition model has been as containing the following characteristics: 1.17.1 Transactions between generators, end users and a number of possible intermediaries, including retailers, power exchanges and brokers, take place freely with in the constraints imposed by the network). Thus, on the demand side, end users are free to choose their supplier; on the supply side, generators can sell their electricity to any other market players. 1.17.2 Network activities and prices are regulated and, in particular, there are provisions to ensure non-discriminatory third party access to the network, often including some form of separation of network activities from generation and end-user supply. 1.17.3 There is an independent system operator, which means that the system operator is not owned or, at least, not controlled by the owners of generation assets. 1.18 A major challenge in the process of reforms is removal of barriers to entry: competition requires a sufficient number of competitors. If supply is only with a few firms, competition generally fails to develop and prices may remain persistently above the....
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....nt Inspection Report had admitted and concluded that almost 90% of the electricity meters which were checked in the National Capital Territory of Delhi were running 2.5% higher than the error margin limit and were thus leading to overcharging of the consumers. The Hindustan Times vide its report published on 09.06.2008 had reported the fact that the High Court in its judgment had reported that digital electricity meters with a error margin of more than 1% should be considered as faulty. 2.3 As per averments, the DISCOMs purchase and install the meters on their own and the consumers are not allowed to procure and buy the meters of BIS Standard manufactured by any of the manufacturer for installing the same. Allegedly almost 82% of the meters installed by the above enterprises are found to be running on the plus side of 2.5% of the prescribed limit and hardly any meter is running on the slower side i.e. the minus side of 2.5%. 2.4 The informant has alleged that DISCOMs are abusing their dominant position by imposing unfair and discriminatory conditions in purchase of goods (i.e. electricity meters) and also services, thereby leading to foreclosure of competition by hindering en....
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.... purchase or sale of goods or services. The DISCOMs have also been allegedly violating Section 3(1), 3(2), 3(3) (a) and (b) by entering into anti-competitive agreement or carrying on practices which are likely to cause appreciable adverse effect on competition. 3. The informant has prayed for the following reliefs: 3.1 (a)The enquiry be made by Commission, into above mentioned contravention of the provisions contained in Section 3(1), (2), & (3) (a) & (b) read with Section 4(1), 4(2) (a) (i) of the Competition Act, 2002; (b)The DISCOMs be directed to discontinue and not to re-enter the above agreements and to discontinue the practice and the decisions taken by them leading to indirect determination of the sale prices of the services rendered by them (c)The DISCOMs be directed to discontinue the abuse of their dominant positions, which imposes unfair and discriminatory conditions in purchase of goods and services their consumers. (d)The DISCOMs be further penalised for the above violations to the extent of 10% of their average turnover for the last three preceding financial year; (e)The Commission should pass further orders which it deems fit and proper in the fact....
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....ined. During the course of investigation statements of manufacturers of Electric Meter were also recorded. All these information gathered were confronted with the DISCOMs to explain their position. 7.3 DG after examining the alleged infringement of provisions of Section 3 of the Act has concluded that the informant has alleged contravention of the provisions of Section 3(1), 3(2) and 3(3) (a), (b) of the Act, but no evidence of any agreement or action in concert has been furnished, to establish that the DISCOMs, based upon their understanding or through an agreement and independent of any regulatory mechanism, have indulged in the acts prescribed in these sections. From the investigation conducted also, no evidence could be found to establish contravention of the provisions of Section 3(1) and 3(3) of the Act. Based upon available evidence on record, contraventions of Section 3(1) read with Section 3(3) remain unsubstantiated. 7.4 In order to examine the allegation of abuse of dominance the DG has defined elaborately the relevant market in this case. He has discussed this issue in detail and analysed that within the electricity sector, following four segments have traditional....
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....have/act independently of the competitive forces prevailing in the relevant market since they have been given specific and exclusive areas for distribution and supply of electricity. As on date, BSES Rajdhani, BSES Yamuna and NDPL enjoy position of monopoly in their respective areas of operation. The distribution and supply functions are not segregated because of the prevalent state of licensing conditions. In the market of meters also, these DISCOMs are engaged in installation of meters on their own or in a miniscule portion through their approved manufacturers/vendors. No other vendor can enter this market. In providing services of billing as well, the DISCOMs are having monopoly status since no other market player can provide these services to the consumers. Thus, it may be said that as per the provisions of explanation (a) to Section 4(2), the three DISCOMs are enjoying dominant position in their respective areas of operations. 7.9 In the report all the factors mentioned in Section 19(4) have been analysed in detail before determining the dominant position of DISCOMs. After examining all the factors mentioned above DG has conclusively established the dominance of the three e....
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....is would have allowed all those suppliers/manufacturers, who have got BIS licence to manufacture consumer meters under IS 13779:1999, to enter the meter market of Delhi. At present, due to the acts of DISCOMs, the entry in market of meters is severely restricted. 7.12 As per the DG Report it is also shown that DISCOMs have not made much effort to educate the consumers properly. They do not give freedom to the consumers to choose meters of their own choice from any other supplier. 7.13 The DG has also reported that from the information gathered during investigation it was revealed that not just 82% but more than 92% of the meters are running on the positive side. Some are running on positive side beyond 2.5% also. The DG has also commented that these DISCOMs are earning additional revenue running into millions of rupees from such methods and by adopting wrong billing cycles. 7.14 The DG has concluded that the investigation clearly showed that the competition in the relevant market of meters has been restricted in the areas of operations of DISCOMs of Delhi. The DISCOMs have denied entry in the market of meters, have used unfair means in the supply of electricity to consumer....
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.... directing the DG to conduct the investigation was passed without any basis. The conclusion regarding existence of a prima facie case is unsustainable and bad in law and on facts. iii) The Commission does not have jurisdiction to delve into matter pertaining to electrical meters and specifications thereof in view of the elaborate and exhaustive provisions carved out under the Electricity Act 2003 and rules and regulations made thereunder. iv) The report submitted by DG deserves to be rejected as the DG has wrongly defined the "relevant product market' as distribution and supply of electricity and allied facilities like metering and reading of meters, billing etc. The relevant product market in case of distribution companies is "supply of electricity" and not the meters and as such the report and the conclusion that distribution companies are abusing their dominant position has to be rejected. v) It has been submitted that the distribution companies cannot be dominant of market in the meters. The meters are manufactured by meter manufacturers and not by the distribution companies. There is no concept of indirect dominance in law. vi) Extraneou....
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....is already seized of the issue of fast meters and notice of enquiries have been issued to DISCOMs in the matter (CW No. 33 of 2009 under MRTP Act 1969). It is submitted that since the superior authority is looking this issue as an unfair trade practice such conduct cannot be treated as an abuse of dominant position by the subordinate authority (this Commission). iii) The DG has misdirected the investigation which appears to proceed to examine issues like alleged fastness of the meters, billing process adopted by the DISCOMs which are not relevant for the purpose of competition issues and are no longer res Integra in view of the judgment of High Court of Delhi in Suresh Jindal v. BSES, RPL and in the case of BRPL v. V.K. Jain. iv) There was no evidence before the Commission that was provided to it on or subsequent to the date of filing the information which could conceivably constitute material to come to the conclusion of prima facie case. The only basis for order dated 26.11.2006 appears to be 2 newspaper reports filed originally by informant. v) The opposite parties while challenging the legality, validity and propriety of the consequent actions includi....
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....the Act and violation of Section 4 after allowing sufficient opportunity. 11. ISSUES On the basis of the contentions, raised by the rival parties the following issues, relevant for deciding the matter, emerge for determination: (i) Whether the Commission has jurisdiction to look into the matter or there is any overlap of jurisdiction with the sectoral regulator (DERC)? (ii) Whether the DISCOMs have entered into any agreement or carrying on any practice which indirectly determines the sale price of electricity and limits or controls the production and supply of electronic meters in violation of Section 3(1) read with 3(3)(a) and (b) of the Act ? (iii) What is the relevant market in this case? (iv) Whether the opposite parties are in dominant position in the relevant market? (v) (sic) the opposite parties are abusing their dominant position in terms of the provisions of Section 4 of the Competition Act, 2002 ? 12. Determination of issue No. 1 12.1 As already narrated supra in para 5 of this order that on receipt of the information the matter was referred to the Delhi Electricity Regulatory Commission (DERC) for its comments on ....
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....n meters, also limits and controls the production and supply of electronic meters. It has been alleged that DISCOMs are violating the provisions of Section 3(1) read with Section 3(3) (a) and (b) of the Act. 13.2 After examining the allegations of informant in context of contentions made by DISCOMs before DG with regard to infringement of Section 3 of the Act, DG has come to the conclusion that neither any evidence of any agreement or action in concert was furnished by the informant nor any evidence could be found during the course of investigation to establish the contravention of Section 3 of the Act. DG has observed that based upon available evidence on record, contravention of Section 3(1) read with Section 3(3) remained unsubstantiated. 13.3 On perusal of the record it is apparent that informant has not furnished any material to substantiate the allegation that the alleged conduct of DISCOMs is emanating from any agreement or concerted practice. DG has also not found any evidence which could lend support to the allegations made by the informant. There is not an iota of evidence on record to show any concerted action on part of DISCOMs. Making bare assertions, shorn of an....
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....le prices are made available to the consumers. COMMISSION'S VIEW 14.4 Relevant market - As the DG and the DISCOMs have defined the relevant market in this case differently, therefore before examining the issue relating to the definition of relevant market it is pertinent to reproduce the relevant provisions of Competition Act 2002. 14.4.1 Section 19(5) "For determining whether a market constitutes a "relevant market" for the purposes of this Act, the Commission shall have due regard to the "relevant geographic market" and "relevant product market". 14.4.2 Section 2(r) defines "relevant market" as the market which may be determined by the Commission with reference to the relevant product market or the relevant geographic market or with reference to both the markets; 14.4.3 In Section 2 (s) "relevant geographic market" has been defined as a market comprising the area in which the conditions of competition for supply of goods or provision of services or demand of goods or services are distinctly homogenous and can be distinguished from the conditions prevailing in the neighbouring areas; 14.4.4 Section 2 (t) defines "relevant product market" as a market comprisin....
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....eemed licensees. The three licensees are BSES Rajdhani Power Limited (BRPL), BSES Yamuna Power Limited (BYPL) and North Delhi Power Limited (NDPL). These companies are engaged in the distribution and supply of electricity to the end consumers in the territory of Delhi. 14.7 These Licenses provide for supply of electricity by the DISCOMs to the consumers in their licensed areas. DERC has not issued any parallel licenses in any of the three areas. Further, DERC has permitted open access in keeping with the provisions of the Electricity Act only for consumers of 1 MW and above only. Presently, the open access for consumers of less than 1 MW has not been introduced and therefore, consumers' choice in the case of electricity supply source has not been initiated. 14.8 In the areas of operations of the three DISCOMs, conditions for supply of goods or provision of services are distinctly homogeneous and can be distinguished from the conditions prevailing in the adjoining areas. In the absence of parallel licenses no other company can operate in the areas of operation of these DISCOMs. In words there are no other suppliers in the areas of operations of these DISCOMs and there is n....
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....competitive forces prevailing in the relevant market since they have been given exclusive areas for distribution and supply of electricity. This leads to the irresistible conclusion that the three DISCOMs enjoy position of dominance in their respective areas of operation to the relevant market of supply of electricity to the consumers. 15.3 The Issue No. 4 is answered in affirmative. 16. Determination of Issue No. 5 16.1 Holding of a dominant position in relevant market in itself does not fall foul of the Competition Act. It is not the dominance, but its abuse, which is prohibited in law. 16.2 Once the dominance of the DISCOMs in the relevant market of electricity supply has been found to be established, it is now to be examined whether by their conduct they have abused their dominant position or not. The Commission has considered all relevant facts and materials brought out by the DG's investigation as well as the submissions made by DISCOMs in the present matter. 16.3 Since the Commission has identified the relevant market as supply of electricity to the consumers in the respective licensed areas of DISCOMs in Delhi the only pertinent abuse this relevant market....
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....des that there is substance in the allegation that the meters installed by the DISCOMs have an upward bias in measurement of electricity. 16.9 Based upon the analysis of the data supplied by Public Grievance Cell the DG has come to the conclusion that fast running of meters results in inflated bills for the consumers. In the end the DG has come to the following conclusion: The fact that the DISCOMs are supplying electricity to the consumers through meters, which are not correct, tantamount to imposing unfair conditions in sale of electricity and consequently abuse of their position of dominance in terms of provisions of Section 4(2) (a) (i) of the Competition Act, 2002 16.10 On the other hand, the DISCOMs have contended that DG has relied on test results supplied by Public Grievance Cell but that report has not been shared with the DISCOMs and hence, findings of the DG are against the principle of natural justice. 16.11 It has been further contended that the report of CPRI supplied by Public Grievance Cell and relied upon by the DG is defective and is not based on any survey and sample size is too small to be held to be representative in character for all the consumers ....
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....le of total consumers and is less than 0.1%. The size of the test results is too small, and in view of this it is difficult to take it as a representative sample of the large consumer base in Delhi. Moreover, it is also clear that the compilation of test results is not on account of any random sampling which had been undertaken by CPRI. In this test drive commencing from July, 2007, the meters of only those consumers were tested who were suspecting their meters to be running fast. Therefore, the test results compiled by CPRI cannot be taken to be representative sample so as to draw a conclusion that more than 90% of the meters in Delhi are running on positive side. Similar view was expressed by the Committee constituted by the Ministry of Power in its report submitted in September, 2008. This report finds place as Annexure F in the DG report. 16.17 It is also borne out from the examination of said test results reproduced in DG report that out of 2014 meters tested till November, 2014, only 96 meters (0.76%) have been found to be erring on positive side beyond permissible limit of + 2.5% specified by BIS for Class 1 meters. This number is insignificant considering the fact that t....
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....icensee may require the consumer to give him security for the price of a meter and enter into an agreement for the hire thereof, unless the consumer elects to purchase a meter". In Delhi, Regulation 35 of Delhi Electricity Supply Code and Performance Standard Regulations, 2007 stipulates, "The consumer, if so desires, may procure a meter conforming to the regulations issued by the authority under Section 55 of the Electricity Act and the licensee shall test, install and seal the meter." 21. Regulation 35 issued by DERC thus permit consumers to buy their own meters or opt for meters supplied by the Distribution Companies for which security deposit is collected and rental paid. While installation, testing and sealing of meters are to be done by the DISCO Ms themselves as part of their licensed activity, in so far as retail supply of meters are concerned, DISCO Ms are not the sole providers and consumers through regulatory provisions are given the choice to procure meters from the open market. It is the consumer choice that prompts us to consider the market for meters as a distinct market and not as an integral part of the market for 'distribution and retail supply of electrici....
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....competition in a particular license area are determined by the respective DISCO Ms which are distinctly homogeneous and can be distinguished from other license areas. Further, with reference to the factors laid down in Section 19(6) of the Competition Act 2002 it can be 'said that there are local specification requirements stipulated by the DISCO Ms, there may arise need for after-sales service and it may not be economical for individual consumers to procure meters from distant markets. In view of these factors, the relevant geographic market for retail supply of meters would be restricted to the licensed distribution area of the DISCO Ms. Determination of issue No. 2 28. As observed in the Majority Order dominance of DISCOMs in the distribution and retail supply of electricity market is statutorily established. In the market for meters, purchases of meters by DISCOMs are all-India. This market is competitive as there are about 200 meter manufacturers in the country. No facts and evidences are brought on record in the DG's report to demonstrate that the DISCOMs in Delhi account for a large share of the country-wide sale of meter manufacturers to establish their domina....
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....for meters, it is now to be examined whether by any of their conduct or practice they have abused their dominant position leading to distortion of market or foreclosure of competition. 37. The fact that an enterprise hold a dominate position is in itself not a contravention of the law. It is not the dominance, but its abuse, which is prohibited in the law. Abuse of Dominance is dealt with in Section 4 of the Competition Act and the allegation under consideration is with respect to the contravention of Section 4(2)(a)(i) and (ii), which state that there shall be an abuse of dominant position if a dominant enterprise or group directly or indirectly imposes unfair or discriminatory (i) condition in purchase or sale of goods or service; or (ii) price in purchase or sale (including predatory price) of goods and services. 38. The informants allegation of violation of Section (4) is with regard to i) unfair condition in the purchase of meters sold by the DISCOMs and ii) unfair condition in the supply of electricity on account of the presence of fast running of meters. 39. Further, it has been alleged that competition in the meter market has been foreclosed by the DISCOMs, whic....
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....consumers. It is however, shown in the forms submitted by the DISCOMs before the Commission. 45. The "factors enumerated in the preceding paragraphs, substantiate the fact that despite regulatory provisions, the consumers are unable to exercise their choice as the market is restricted to the DISCOMs and to the empanelled list specified by the DISCOMs. The prevalent information asymmetry in the market leads to the widely held presumption among the consumers that meters and electricity are bundled products and the DISCOMs are the sole providers of it. 46. Nevertheless, it is important to examine whether given a choice, the consumers would have opted for purchasing their own meters. Consumer decisions are guided by several considerations, which inter-alia include, price, preference, convenience, specifications, quality and reliability, after-sales service etc. 47. Firstly, bulk purchase by the DISCOMs enables them to get a discount on the price of meters. It is unlikely that individual purchases will be entitled to such discounts. There is no denying that a consumer buys or has the incentive to buy the meters from the market if there is a price or quality differential between....
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....rchase of meters by making the consumers believe that meters are to be bought mandatorily from the DISCOMs as part of the electricity supply may perhaps be a rather simplistic approach. The absence of information as regards consumer choice cannot be categorized as abuse of dominance. 51. All evidence proves to the point that consumers do not gain from purchasing on their own. DISCOMs by including the price within the tariff and by providing certain additional facilities as free testing and free first burn out replacement tend to dampen consumer initiatives. 52. The NCR region consists largely of household consumers and commercial establishment. Open Access is not yet available to these consumers. In terms of quantum of electricity consumed and in terms of supply it is very unlikely that consumers will be inclined to exercise their choice in the purchase of meters. 53. The informant has additionally alleged that the DISCOMs have through their conduct restricted the market for meters and denied access of the NCR meter market to eligible manufacturers other than the handful of specified manufacturers/vendors. Competition has been hindered through erection of entry barriers. F....
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.... even in the relevant meter market. 60. In view of the above findings the supplementary Older is in effect in agreement with the Majority Order. R. Prasad, (Member) 61. I've gone through the majority order of the Commission in this case as well as the dissenting order of Shri P. N. Parashar, Member. I agree with Shri Parashar on the issues discussed by him. On the other two issues, I am passing a separate order. 62. An enquiry from Central Power Research Institute, Bangalore showed that a sample survey of the electric meters was carried out in Delhi of the different DISCOMs. The results of the sample survey of 2041 meters showed that 1847 meters had an error on the positive side. In fact 91.7% of meters had errors on the positive side. The permissible limit for an errors is +/-2.5% whereas in the sample many meters showed error in excess of +2.5% on the positive side. In fact a high powered committee under the Ministry of Power considered the report and got a study conducted by CEA about 2,44,305 consumer metres and it was found that 74.38% of the meters had errors on the positive side. On the basis of the reports it can be concluded that many of the meters installe....
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....installed by DISCOMs instead of by the consumers, (iii) the billing market. Abuse of dominance exists in all the three markets. The issue has got to be seen with respect to the factors mentioned in Section 19(4) of the Competition Act 2002. There is no doubt that the DISCOMs are the dominant players in the areas which has been assigned to them because in that area they are in a position of strength which allows them to affect their consumers in its favour. The factors which we have to consider under Section 19(4) of the Act is (i) Market share of the enterprise - the market share of the enterprise is hundred percent as there is no competitor and it is monopoly market. (ii) and resources of the enterprise - compared to the consumer the size and the resources and enterprise in the monopoly market is extremely large. (iii) Size and importance of the competitors - there are no competitors as it is a monopoly market. (iv) Economic power of the enterprise including commercial advantages over competitors - as it is a monopoly market there cannot be comparison with the competitors. (v) Vertical integration of the enterprises or sale of services network of such enterprises - the enterprises....
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....-infringement of the provisions of Section 4(2) of the Competition Act, 2003 the Act) by the opposite parties also, I differ from the Majority Order. 68. The Majority Order deals in detail with the factual background, the report of the Director General (DG), the submissions and objections of the opposite parties as well as the scope and applicability of Section 3 and 4 of the Act. In order to avoid repetition of the facts and for the sake of brevity, I propose to restate the relevant facts only in brief and will refrain from narrating the details. However, to further clarify certain aspects, I would like to give additional reasons at appropriate places while agreeing with the majority view. Accordingly, I proceed to pass the order as follows: 69. The relevant facts relating to the instant information may be summarized as under: 69.1 The present information has been filed by Neeraj Malhotra (the informant) under Section 19 of the Act against North Delhi Power Limited (NDPL/ opposite party No. 1), BSES Rajdhani Power Limited (BRPL/ opposite party No. 2) and BSES Yamuna Power Limited (BYPL/ opposite party No. 3) (collectively the opposite parties) alleging the violations of t....
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....w the consumers to procure and buy the meters of BIS Standard manufactured by any of the manufacturers, thereby reducing the competition in the market in this field. It has been further alleged that almost 82% of the meters installed by the opposite parties are found to be running on the plus side of 2.5% of the prescribed limit. 69.8 It has been submitted by the informant that on the basis of the news item published in The Hindustan Times' on 08.04.2008, an investigation had been directed by the Department of Power, the PGC, Government of NCT of Delhi. 69.9 It is alleged by the informant that the opposite parties are abusing their dominant position within the public domain by imposing unfair and discriminatory conditions in purchase of goods i.e. electricity meters and also services, thereby leading to a foreclosure of competition by hindering entry into the market and violating the provisions of Section 4(1) and 4(2)(a)(i) of the Act. 69.10 The informant has also alleged that the opposite parties function as a cartel and the practice carried on and the decision taken by them, jointly and severally, has the effect of determining the prices of the services being suppli....
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....egulations. Accordingly, Competition Commission of India may not be appropriate forum to deal with such issues. Specific issues alluded to by the Petitioner accusing the DISCOMs of abuse of their dominant position may be looked into by the Competition Commission of India in terms of Competition Act, 2002. 71. After considering the views/ comments of the DERC and the entire relevant material on record, the Commission found that there exists a prima facie case in the present matter and vide Order dated 26.11.2009 passed under Section 26(1) of the Act directing the DG to conduct an investigation into the matter. In the Order following directions for investigation were also given; a) Whether the information is readily available to the electricity consumers regarding their right of getting the meter of their choice installed? b) Whether meters are easily available in the market? In other words, whether consumers have wider choices to procure meters in case they desire to install their own meters? c) Whether there are enough number of suppliers of meters to the consumers and whether they are operating competitively? d) Factual position in respect of the allegation....
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.... parties that they are in the business of distribution and retail supply of electricity and not in the business of manufacturing of meters. Accordingly, the opposite parties have argued that the relevant product market in this case is 'Supply of Electricity' and not the meter market. It is contended that the definition of 'relevant market' by the DG is wrong as he has ignored the provisions of Section 19(5), 19(6) and 19(7) of the Act, which provide parameters for defining relevant market and instead relied on extraneous reasons for the purposes of competition investigations such as the CEA regulations, BIS standards etc. It has also been contended that the DG'S findings are based on wrongful assumptions/ definition of 'relevant market'. In view of the above submissions, it is argued that DG'S conclusion that the opposite parties are abusing their dominant position has to be rejected. 74.4 That the issues such as the alleged fastness of the meter/ billing processes adopted by them are not relevant for the purposes of competition issues and are extraneous and have no bearing on the issues before the Commission. It is submitted that the above issues....
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....very year and hence it cannot be said that there is foreclosure of the competition. Further, it was submitted that the DERC has also recently amended and declared the competitive bidding guidelines which are binding upon the licensees i.e. the opposite parties. 74.8 That if any consumer elects to purchase a meter, the consumer has to procure the same only from the approved manufacturers because meters of such approved manufacturers meet the technical specifications and are compatible with the network of the opposite parties. It was explained that such list is only indicative and that consumer is free to buy meter from any other manufacturer provided they meet the aforesaid criteria. It is submitted by the opposite parties that the list of dealers is displayed on website for the benefit of consumers and for awareness of the public, the opposite parties have distributed lakh of pamphlets and have published advertisements in newspapers so that consumers can choose their own meters. 74.9 That with respect to the alleged fastness of meters, the DG has relied on a report which is based on assumptions and conjectures and has been repudiated by the Ministry of Power. It is further ar....
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.... relating to the electricity sector under Sections 60 and 66 of the Electricity Act. 79. It may be noted that the mandate of the Commission as enshrined in the preamble of the Act is: ... to prevent practices having adverse effect on competition, to promote and sustain competition in markets, to protect the interests of consumers and to ensure freedom of trade carried on by other participants in markets, in India, and for matters connected therewith or incidental thereto. 80. The Commission may look into any matter relating to goods or provision of services that involves anti-competitive practices. The present matter relates to allegations of abuse of dominance and anti-competitive agreement by and between the opposite parties with respect to the supply of electricity which is a service as defined in Section 2(u) of the Act and meters which are covered under the definition of goods provided in Section 2(i) of the Act respectively. 81. Section 2(u) of the Act defines 'service' to include supply of electrical or other energy. The definition reads: "service" means service of any description which is made available to potential users and includes the ....
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....ector unlike the Competition Act, 2002 which is an umbrella legislation and empowers the Commission to look into competition issues in any market and is not limited to a specific sector or industry. Hence, while in the electricity sector the Electricity Act may be a specific law so far as competition issues are concerned the Competition Act, 2002 is the specific law. 86. It is an established principle of statutory interpretation that generalia specialibus non derogant which means general provisions will not abrogate special provisions. Thus a specific law will supersede a general law. Accordingly in the present matter, the provisions of the Competition Act, 2002 will supersede the provisions of the Electricity Act. 87. Even if for the sake of argument, it is assumed that both legislations are special legislations for the purposes of the present matter then also as per the well known doctrine of Leges posteriores priores conterarias abrogant i.e. the later law abrogates the earlier contrary law, the provisions of the Competition Act, 2002 would prevail. The Hon'ble Supreme Court of India has laid down in no uncertain terms that in case both the Acts are special Acts, it is....
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.... Whether the preliminary objections raised by the opposite parties should have been decided before further proceeding with the matter on merits. 93. The contention of the opposite parties is that the order dated 26.11.2009 directing DG to investigate was unsubstantiated and without justification and reasoning or basis and have argued that the preliminary objections raised by them should have been decided before further proceeding with the matter on merits. 94. The opposite parties have placed reliance on various judgments of the Hon'ble Supreme Court of India. On examining the facts and the ratio of the Hon'ble Supreme Court in these cases, it is found that they relate to different issues and are therefore, not relevant in the present matter. The case of Arun Agarwal v. Nagreeka Exports (P) Limited and Anr. : (2002)10 SCC 101, involved an objection regarding the jurisdiction of the High Court and it was held that the question of jurisdiction of the court should be decided as a preliminary issue and not at the time of hearing. However, the above case relates to Order XIV of the Code of Civil Procedure Code, 1908. The case cited by the opposite parties viz., K. Kamaraja....
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....reference made to the Commission under the various provisions of the Act, as afore-referred. 96. Thus, in view of the above decision of the' Hon'ble Supreme Court, the relevant provisions of the Act and on the facts and circumstances of the case, the Commission was not required to hear the parties before deciding whether there exists a prima facie case or to decide the jurisdiction of the Commission at that stage. Moreover, none of the parties had raised this issue before the Commission at that stage. On the contrary, even the sectoral regulatory authority i.e. DERC has opined that CCI has jurisdiction to entertain the matter. Therefore, the argument of the opposite parties that the preliminary objections raised by them should have been decided before proceeding with the matter on merits cannot be accepted and the same is rejected. Accordingly, Issue II is decided in the negative. Issue III: Whether the opposite parties have violated the provisions of Section 3 of the Act. 97. Section 3 of the Act prohibits an enterprise from entering into any agreement which causes or is likely to cause an appreciable adverse effect on competition in India and renders any such agr....
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....are in a dominant position in such market(s). If so, in what manner; ii. Whether the opposite parties have imposed unfair conditions and hindered with the consumers' option to procure a meter of their own choice. If so, whether this amounts to an infringement Section 4(2)(a)(i) of the Act; iii. Whether the opposite parties have created entry barriers for the distribution/ supply of meters denying market access in the relevant market of meters in contravention of the provisions of Section 4(2) (c) of the Act; and iv. Whether the allegation that the opposite parties are abusing their dominant position by imposing unfair and discriminatory conditions in purchase of electricity through allegedly fast running meters is established. (i) What are the relevant market(s) in the present matter and whether the opposite parties are in a dominant position in such market(s). If so, in what manner. 100.1 Section 2(r) of the Act defines 'relevant market' as the market which may be determined by the commission with reference to the 'relevant product market' or the 'relevant geographic market' or both. The relevant geographic market as define....
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....strength from the letter and not the spirit of the documents and are liable to be rejected. The opposite parties have also argued that they are in the business of distribution and retail supply of electricity and not in the manufacturing of meters. It is pertinent to note that there is a difference between the markets of 'manufacturing of meters' and the 'distribution/ supply of meter and these constitute two separate and different markets. Not being present in one market relating to meters viz., 'manufacturing of meters' does not necessarily mean that the opposite parties cannot be present or do not operate in any other market relating to meters including the market of 'distribution/ supply of meters'. Therefore, the contention of the opposite parties in this regard is also devoid of any merit. 100.5 Pursuant to the policy decisions, various regulations and guidelines, BIS standards etc. electricity in the relevant geographic markets can be supplied to consumers by means of only a particular type of meter which as per the prescribed specifications and BIS standards (Consumer Meter). The Consumer Meters (of BIS standard) supplied by different players ....
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....all the consumers in the survey had procured the meters only from their respective distribution company namely the opposite parties. TABLE 2 INSTALLATION OF METER WHILE GETTING CONNECTION (%) S. No. Name of opposite parties Purchased by Self By Company 1 NDPL [OP No. 1] 0 100 2 BRPL [OP No. 2] 0 100 3 BYPL [OP No. 3] 0 100 100.10 On considering the guiding factors under Section 19(4) of the Act, it is found that the opposite parties enjoy a dominant position in the relevant market of distribution/ supply of Consumer meters. The DG in his report has discussed in detail about the applicability of the factors under Section 19(4) of the Act, hence, agreeing with the view of the DG, and for the sake of brevity, I do not wish to restate the same in detail. 100.11 In view of the above statistics and other material on record, it is found that all three opposite parties enjoy a dominant position in their respective licensed areas in not only the relevant market of distribution/ supply of electricity but also in the relevant market of distribution/ supply of Consumer Meters. 100.12 I may mention that as per the majority view, the....
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....nant position in the market of supply BIS approved meters to the end consumers in Delhi. 100.14 As per the above, it is found by Member, Dr. Geeta Gouri that the opposite parties are in a dominant position in the relevant market of distribution/ supply of Consumer Meters. I fully concur with these observations and findings. However, the learned Member has proceeded to observe that the absence of information as regards the consumer choice cannot be categorized as abuse of dominance. The order also includes an analysis as to whether the consumers would be inclined to exercise the choice, if available, in purchase of meters. With great respect, I beg to differ from the observations and the finding of the learned Member on the issue of abuse of dominance. 101. For the purposes of Section 4 of the Act, after it is determined that an enterprise is enjoying a dominant position in the relevant market it must be examined whether the conduct of such enterprise falls within the ambit of the abusive conduct in terms of Section 4(2) of the Act. It may also be noted that for proving a contravention under Section 4 of the Act, it is sufficient to establish that the conduct of a dominant ent....
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....shall be procured by Licensee at consumer's cost or the consumer may purchase on his own. Meter purchased by the consumer or on consumer's behalf, shall be tested, installed and sealed by the Licensee. The said meter will, however, have to be consistent with the CEA Regulations published under Section 55 of the Act and should have all additional features approved by the Commission. The features approved by the Commission shall be posted on the website of the Licensees.... 102.5 Thus as per the above Regulation, the consumer may procure a meter conforming to the regulations, consistent with the CEA Regulations with all additional features approved by the DERC. The regulations also provide that if any consumer elects to provide his own meter at any stage, the same shall be procured by the licensee at consumer's cost or the consumer may purchase on his own. Further, under the DERC Regulations 2007, the licensees are obliged to post on their website the features approved by the relevant authority. 102.6 It is important to note that one of the major differences between the DERC Regulations 2002 and DERC Regulations 2007 is that the new DERC regulations do not restrict ....
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....002 and the DERC Regulations 2007 was that the latter did not restrict the customers' choice in meters to only the licensee or the vendors approved by them. Further, neither a list of approved manufacturers/ vendors of meters nor technical specifications of the meters as per the DERC Regulations 2002 was posted on the site. During the course of the proceedings, the information under the caption install Your Own Meter' was amended and read as below: As per the applicable Laws, Regulations in force currently, a consumer may himself procure the meter from the vendors certified by the licensee & conforming to licenses technical specifications 105.3 This is significant to mention that a list of only those vendors who were approved by the opposite party No. 1 was uploaded on the amended website. It is noted that the amended information merely removed the reference to the repealed regulations by replacing the same with the words 'applicable laws'. However, the details on the site continued to communicate that the choice of meter for the consumer was limited to the vendors certified by the opposite party No. 1. The versions of the website referred to above are a....
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....rovide that a consumer may install any meter of BIS approved standard and specifications, the information supplied by opposite parties No. 2 and 3 on their website creates an impression that a consumer who opts to install his own meter may procure the same only from the vendors approved by the opposite parties Nos. 2 and 3. As per the DG report, the opposite parties Nos. 2 and 3 provided a list of only four vendors and seven dealers of the listed vendors on their website. As per the report of the DG, there was no information available on website to the effect that consumers can purchase Consumer Meters from any other vendor, if they so choose. It may be noted that the opposite parties Nos. 2 and 3, by placing incomplete information on their website have, in effect, restricted the choice of the consumers to only the vendors approved by the opposite parties Nos. 2 and 3. 108. The opposite party No. 1 has submitted that it has taken and continues to take certain initiatives towards enhancing consumer awareness regarding their right to procure their own Consumer Meters according to prescribed standards and specifications. The opposite party No. 1 has listed the different methods ado....
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....relating to an unfair trade practice in the context of the Monopolies and Restrictive Trade Practices Act, 1969, the Hon'ble Supreme Court in the case of H. M. M. Limited v. Director General, Monopolies and Restrictive Trade Practices Commission Civil Appeal No. 2939 of 1989, 11 August 1998) observed that for holding a trade practice to be unfair, it must be found that it causes loss or injury to the consumer. 1114. The Supreme Austrian Federal Court while deciding the matter of R. v. Re A Loyalty Bonus Scheme (2001) E.C.C. 19, involving loyalty bonuses and exclusive supply requirements imposed on its customers by an undertaking which dominates a market, observed: Usual methods of competition are permitted and will only become unfair if there are particular circumstances which make competition to provide services obstructive. This is the case if a particular action which may be accounted competition to provide services becomes an obstructive measure directly aimed against the competitor and hindering (If not actually preventing) in offering its services in an appropriate manner in the market, thereby ruling out genuine comparison of services in the future. 115. T....
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.... wherein the objectives in the preamble to protect consumer interests are reinforced. The Hon'ble Supreme Court of India has in the Steel Authority of India case (cited supra), observed as under: ... [T]he Act requires not only protection of trade but also protection of consumer interest. 119. A healthy and a competitive economy is imperative to safeguard consumer interests. Among others free choice, price and quality are central to the consumer interest. A market is said to be competitive if consumers can choose between a range of substitutable products and suppliers face no obstacles to supply products or services. The choice available to the consumers must necessarily be a real and genuine choice and not a notional one. Further in the present case, the consumer also has a right under the sectoral Jaws to be informed about the makes and models of Consumer Meters. Depriving the consumers of making an informed choice or misguiding them to make an ill-informed decision jeopardizes the interest of the consumers. 120. The hypothesis that a consumer may prefer to procure Consumer Meters from the opposite parties over other suppliers despite having complete and correct info....
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....s no doubt that the opposite parties are in a dominant position not only in the relevant market of distribution/supply of electricity but also in the relevant market of distribution/ supply of Consumer meters. 123. While Section 4 of the Act does not prohibit an enterprise from holding a dominant position in a market, it does place a special responsibility on such enterprises, in requiring them not to abuse their dominant position. As per Section 4(2) of the Act, there shall be an abuse of dominant position, if an enterprise inter alia directly or indirectly, imposes unfair or discriminatory conditions in purchase or sale of goods or services or indulges in practice or practices resulting in denial of market access in any manner. However, the said section does not contain an exhaustive list of the activities that would amount to a contravention of its provisions. The actions, practices and conduct of an enterprise in a dominant position have to be examined in view of the facts and circumstances of each case to determine whether or not the same constitutes an abuse of dominance in terms of Section 4 of the Act. In this regard, it is relevant to quote the decision in the case of K....
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....ed market access to the other distributors/ suppliers of the Consumer Meters in the relevant market of distribution/ supply of Consumer Meters 128. The conduct of the opposite parties of publishing a list of only the approved vendors on the websites and misguiding the consumers that the meters may be procured either from the opposite parties or their approved vendors has already been discussed in detail. 129. As mentioned earlier, Section 55 of Electricity Act read with Regulation 6 of CEA Regulations prescribe that if any consumer elects to purchase a meter, the same may be purchased by him stipulating only that the meters shall bear BIS mark, meet the requirements of the CEA regulations and have additional features as approved by the appropriate authority. It is noted from the report of the DG that as on 10.02.2010 there were ten manufacturers in Delhi and eighty two all over India including some foreign firms as per the BIS website. However, the opposite party No. 1 placed a list of only five vendors and five dealers of the listed vendors on their site and the opposite parties Nos. 2 and 3 provided a list of only four vendors and seven dealers of the listed vendors. It has....
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....d discriminatory conditions in purchase of electricity through allegedly fast running meters is established. 133. The informant has also alleged that the meters provided by the opposite parties record higher readings than the actual consumption by the consumers. Hence, the issue that the opposite parties are abusing their dominant position by imposing unfair and discriminatory conditions in purchase of electricity through allegedly fast running meters is to be examined separately. 134. It has been established that the opposite parties have hindered with the consumers' option to procure a meter of their own choice. The DG, in the course of investigation, has also found that there is substance in the allegations that the meters provided by the opposite parties do not give the correct measurement of electricity. In this regard, the DG has relied on the reports in the press relating to claims that the meters were moving fast and the report of the testing drive undertaken by the PGC through the CPRI. 135. According to the applicable specifications published by the BIS, the permissible error limit under on-site conditions for Class 1.0 meters is +/- 2.5%. Further, as per the....
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....nspected only thirty two meters as a representative sample. Extending the above logic, it seems that the CPRI inspected only 1056 (approx) as representative meters in the 33 lots inspected by the CPRI and not all the 655,544 meters as argued by the opposite party No. 2. It appears that the representative sample of 2014 tested by the PGC is larger than the representative sample inspected by CPRI. Further, it seems that CPRI conducted the tests of the six lakh meters of the opposite parties Nos. 2 and 3 at the instance of its client BSES viz., opposite parties Nos. 2 and 3. Hence, the findings in CPRI's report also cannot be considered independent and impartial. For the reasons stated above, this argument of the opposite party No. 2 is not acceptable. 139. However, after perusing the material on record, it is found that the findings of the DG in relation to fastness of the meters are primarily based on tests of 2014 meters conducted by the PGC through the CPRI. This sample seems too small and consists of meters under complaint. Hence, the sample taken in the above test cannot be said to be a representative sample of all the consumer meters. It is found that the result of the P....