AI Drafter - (New and Powerful) 
Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter. 
TaxTMI 
TaxTMI 
2015 (11) TMI 1818
X X X X Extracts X X X X
X X X X Extracts X X X X
....o 7 are public sector undertakings of the Government of India. They sell petrol, diesel and allied petroleum products through the retail outlets (petrol pumps), which are run by the dealers after entering into dealership agreement. 3. The appellant filed an information dated 22.11.2013 under Section 19(1)(a) of the Act alleging that they are forced to enter into one-sided agreements by the oil companies and that the latter have issued Marketing Discipline Guidelines, which are amended from time to time without any consultation with the dealers and without giving them an opportunity to question the arbitrary clauses contained therein. Paragraph 10 of the information, which contains various clauses of the agreement indicating the abuse of dominant position by Respondents Nos. 3 to 7 is extracted below: 10. That to elucidate the abuse of the dominant position by the Oil Companies, the following clauses of the said Agreement are extracted hereunder : (i) Clause 3: The Dealer shall, during the continuance of this Agreement confine himself to selling only corporations products at the premises and shall not carry on from the said premises any business other than that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....om the operation of the dealership which is the subject matter of this Agreement. (viii) Clause 29 : The dealer shall not during the currency of this Agreement sell or be in any way be concerned in selling or distributing the products of any other oil company or producer without the previous consent in writing of the Corporation which consent the Corporation may refuse, vary and withdraw in its absolute discretion at any time or from time to time. (ix) Clause 35 : The Dealer shall not sell, assign, sublet, mortgage, charge or part with or otherwise transfer the premises or any part thereof or his interest in the dealership or any right or interest or benefit conferred by this Agreement or grant any license in connection with the said premises and/or outfit or any part thereof to any person, firm or Company to use the premises under the terms of this Agreement and/or specifically permitted in writing by the Corporation. (x) Clause 41(a) : The Dealer shall, whenever called upon by the Corporation to do so, lodge with the Corporation deposits or such sums of money as may be stipulated by the Corporation from time to time as security for the due fulfilment of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ite held by the dealer may be of free hold or lease hold tenure) to the Corporation or its nominee the premises together with all fixed assets thereon and thereupon the Dealer shall sell or assign the premises to the corporation or its nominee within three months next after the receipt of such notice at or for the price which shall be computed as follows, that is to say which shall comprise FIRST a sum equivalent to such capital money as the dealer may have paid by way of premium or price as consideration for the acquisition of the site and SECOND, a sum equivalent to such sum as the dealer may himself have expanded in the erection and installation of the site of the said buildings, structures and fixed assets. The aforesaid element of the price shall be reduced by depreciation as such rates as may have been applicable under the taxing statutes in force on the date on which such notice as aforesaid shall have been given by the Corporation. The costs of the sale or assignment excluding only professional legal costs incurred by the dealer shall be borne by the corporation. In the event of the dealer title to the immovable assets being in any way defective in the opinion of the corpor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....termination of the relevant market, which are reproduced below : 2. Relevant Market (i) The main purpose of market definition, as laid down in the Relevant Market European Commission Notice, is to identify in a systematic way the competitive constraints that the undertakings involved face. The objective of defining a market in both its product and geographic dimension is to identify the actual competitors of the undertakings involved that are capable of constraining their behaviour and preventing them from behaving independently of an effective competitive pressure. It is from this perspective, that the market definition makes it possible, inter alia, to calculate market shares that would convey meaningful information regarding market power for the purpose of assessing dominance or for the purpose of applying Article 102. (Paragraph 2). (ii) The Relevant Market Notice states that the definition of the relevant market in both its product and geographic dimensions often has a decisive influence on the assessment of a competition case (Paragraph 4), and defines the relevant product market as one which comprises all those products and/or services which are re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ths of the issuance of the letter of intent. (viii) Once the applicant is called for interview for appointment of dealership, the applicant is required to produce documents of proof of domicile, availability of land and finance. A sample of interview call letter by IOCL is as Annexure A-7 to the appeal. (ix) On issuance of the letter of intent the applicant is required to procure the land if not already available and seek approval of the Oil Company. A sample of the letter of intent of IOCL is annexed as Annexure A-8 to the appeal. (x) The conditions that restrict the market to the geographical boundaries of Assam are domicile for the applicant for dealership to be within state of Assam, requirement of land holding within State of Assam (regulatory trade barriers, local specification requirement, adequate regional distribution facility as per section 19(6) of the Act) and from the consumers point of view too it shall be state of Assam since the consumers would satisfy their daily requirements from the petrol pumps within the state of Assam and from a dealer who would speak the local language (local language requirement, consumer preference as per section ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....garding the functioning, marketing, retail, pricing etc. and are controlled and governed by the Respondent No. 2 and its departments and divisions in their decision making. The Oil Companies are profit driven economic entities working in tandem with each other like one economic entity. (vi) The pricing was finally deregulated in the year 2010 following the recommendations of the Dr. Kirit Parikh Committee. The government had released a press note through Press Information Bureau of Government of India. A copy of the Press Note is annexed as Annexure A-3 to the appeal. (vii) Despite the deregulation of petrol prices the PSU OMCs fix prices only in consultation with Marketing Division of Respondent No. 2, therefore the three PSUs even after deregulation continue to have uniform prices. The idea of deregulation was to get the prices determined through market forces yet government continues to give a platform to the PSU OMCs for fixing uniform prices in the market. The PSU OMCs do not compete with each other and the market therefore sees no competition between them. Respondent No. 2 and its allied departments and divisions along with three oil companies will not be ex....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dominance in the market by not competing with each other and there is no competition whatsoever from any other quarters. (xiii) Therefor the Respondent No. 2 is liable to be declared a dominant enterprise for the purposes of this case and is liable to be found in violation of section 4 of the Act. (xiv) Alternatively, if the legal theory of the appellant of single economic entity is not accepted as applicable in the present case then going strictly by the market shares of the three OMCs IOCL (Respondent No. 3 herein) would emerge as the leader and hence a dominant enterprise. (xv) The breakup of the number of retail outlet market in Assam including Greater Guwahati region is as follows : IOCL 410 Kisan Sewa Kendra 88 (Retail outlet model of IOL for rural areas) HPCL 75 BPCL 80 Greater Guwahati Region IOCL 52 HPCL 13 NRL 20 BPCL 7 Total Retail outlet break up in Assam IOCL 550 HPCL 98 BPCL 87 NRL 20 Total 755 The % market area of different OMCs is as given below: IOCL 72.84% HPCL 12.98% BPCL 11.52 NRL 2.64 (xvi) It is evident from the data above that IOCL is in a super dominant position in Assam region out of the other PSU OMCs and together they h....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... by the oil companies of the provisions of section 3(4) read with section 3(1) of the Act may also be examined. It is not in dispute that the oil companies and the dealers are at different stages/ levels of the production chain in different markets. As such, the dealer agreements between oil companies and the dealers may be examined within the discipline of section 3(4) of the Act. To examine the contravention of the provisions of section 3(4) read with section 3(1) of the Act, the impugned clauses of the agreement need to fall inter alia in the categories mentioned in section 3(4)(a)(e) of the Act. The informant appears to be aggrieved by clause 62(a) whereby any dispute arising under the agreement is to be referred to the Director (marketing) of IOCL. Such a stipulation does not appear to fall in any of the aforesaid clauses of section 3(4) of the Act. Even otherwise, nothing unfair or anti-competitive can be gathered therefrom. 20. Furthermore, the informant is specifically aggrieved by clause 42 whereby the Guidelines issued by IOCL are to be observed by the dealers. It appears that the Marketing Discipline Guidelines relate to the following aspects: Procedure for hand....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ntral Government or a State Government or a statutory authority or on its own knowledge or information received under section 19, if the Commission is of the opinion that there exists a prima facie case, it shall direct the Director General to cause an investigation to be made into the matter: Provided that if the subject matter of an information received is, in the opinion of the Commission, substantially the same as or has been covered by any previous information received, then the new information may be clubbed with the previous information. (2) Where on receipt of a reference from the Central Government or a State Government or a statutory authority or information received under section 19, the Commission is of the opinion that there exists no prima facie case, it shall close the matter forthwith and pass such orders as it deems fit and send a copy of its order to the Central Government or the State Government or the statutory authority or the parties concerned, as the case may be. 8. A reading of the above-quoted provisions makes it clear that while examining information received under Section 19, the Commission has only to satisfy itself whether or not there exists a prima....