TaxTMI 
TaxTMI 
2018 (9) TMI 2121
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....en preferred by the Appellant- 'Hyundai Motor India Limited' (hereinafter referred to as "Hyundai Motor") against order dated 14th June, 2017 passed by the Competition Commission of India (hereinafter referred to as "Commission") under Section 27 of the Act, 2002. 2. In the impugned order, the 'Commission' held that 'Hyundai Motor' has contravened the provisions of Section 3(4)(e) read with Section 3(1) of the Act, 2002 through arrangements which resulted into Resale Price Maintenance. 3. The 'Commission' further held that 'Hyundai Motor' has contravened the provisions of Section 3(4)(a) read with Section 3(1) of the Act, 2002 in mandating its dealers to use recommended lubricants and oils. 4. The 'Commission' has issued direction of cease and desist on the 'Hyundai Motor' from indulging in conduct that has been found to be in contravention of the provisions of the Act, 2002 and imposed penalty at the rate of 0.3% of its average relevant turnover of the last three financial years which has been rounded off at Rs. 87 Crores with direction to deposit the same within the stipulated period. 5. The Information in Case No. 36 of 2014 was filed by Fx Enterprise Solutions India....
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....t was also alleged that 'Hyundai Motor' is responsible for price collusion amongst competitors through a series of "hub - and - spoke" arrangements. '1st Informant'- 'Fx Enterprise Solutions India Pvt. Ltd.' has alleged that 'Hyundai Motor' perpetuates hub and spokes arrangement, wherein bilateral vertical agreements between supplier and dealers and horizontal agreements between dealers through the role played by a common supplier, results in 'price collusion and unwanted cars' to its dealers and 'Hyundai Motor' designates sources of supply for complementary goods for dealers, which results in a "tie-in" arrangement in violation of Section 3(4)(a) of the Act, 2002. 14. '2nd Informant'- 'St. Antony's Cars Pvt. Ltd.' is a private limited company involved in, inter alia, distribution of passenger cars, having its registered address at XII/268, Mundakkal, S. N. College Junction, Kollam Main Post Office, Kollam, Kerala -69100. Under the terms of the said agreement, '2nd Informant'- 'St. Antony's Cars Pvt. Ltd.' was appointed as a non-exclusive dealer of 'Hyundai Motor' in the territory of Kollam, Trivandrum. The term of the Dealership Agreement (Dealership Agreement) was initially fo....
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....ses of analysing whether the OP imposes a (maximum) resale price, the DG defined the relevant market as "Intra Brand Sale of Hyundai Brand of Cars in Delhi and NCR"; (iii) Tie-in arrangements: (a) In determining whether the OP imposes a tie-in arrangement with respect to the sale of CNG kits, the DG defined the relevant market as "Sale of CNG Kits for Hyundai Brand of Cars in Delhi and NCR"; (b) For determining whether the OP imposes a tie- in arrangement for lubricants, the DG defined the relevant market as "Sale of Lubricants for Hyundai Brand of Cars in India"; and (c) To analyse whether the OP imposes a tie-in arrangement in relation to obtaining car insurance, the DG defined the relevant market as "Insurance for Hyundai Brand of Cars in India". (iv) Finally, relying upon the Commission's decision in Shri Shamsher Kataria v. Honda Siel Cars India Limited & Ors. (Case No. 03 of 2011), the DG stated that the Commission has defined 3 segments of the automobile market, viz.:(a) the primary market consisting of manufacturing and sale of passenger vehicles; (b) the secondary market or aftermarket for each brand of spare parts; and (c) an a....
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....e oils, in contravention of Sections 4(2)(a)(i) and 4(2)(c) of Act, 2002, respectively. 21. Based on the evidences/material/statements of parties the 'DG' held that the 'Hyundai Motor' has violated the provisions of Sections 3(4)(a), 3(4)(b), 3(4)(d) and 3(4)(e) read with Section 3(1) of the Act, 2002 and Sections 4(2)(a)(i), 4(2)(a)(ii) and 4(2)(c) of the Act, 2002. 22. The 'Commission' in its ordinary meeting held on 7th June, 2015 considered the investigation report submitted by the 'DG' and decided to forward copies thereof to the parties for filing their respective replies/ objections thereto and after taking into consideration of the aforesaid facts passed the impugned judgment. 23. Learned Senior Counsel appearing on behalf of the Appellant submitted that the 'Commission' though disagreed with the report of the 'DG' with regard to 'relevant market' but failed to provide a notice of disagreement to the Appellant. 24. The 'DG' in its report noticed different (five sets) of 'relevant market', for contravention of different clauses of Section 3(4) of the Act, 2002, as follows: (i) Exclusive Supply Agreement/ Refusal to Deal: Market for "Inter- Brand Sale of ....
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....p; xxx xxx 60. For the purposes of determining demandside substitutability, if a consumer wishes to purchase a Hyundai car, the consumer would visit a Hyundai dealership. While a customer may consider different brands for one segment of cars as substitutable (for example, a Maruti Swift, Honda Brio or Hyundai i20), a consumer would visit a Hyundai dealer to test drive and purchase only a Hyundai car - as new Hyundai cars can only be purchased at a Hyundai showroom. Further, a majority of Hyundai's dealerships (and majority of all car dealers in India) do not stock or sell vehicles of competing brands (though the same family or company may own dealerships of multiple brands). In India, there are only an insignificant number of multi-brand dealerships. Accordingly, the produ....
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....ny business entity or enter into compromise or arrangements with any business entity". Thus, Clause 5 does not strictly set out an exclusivity obligation or prevent a dealer from dealing with competing dealerships or other businesses; it only requires the prior written permission of the OP in order for the dealers to do so. Thus, Clause 5 does not provide for de jure exclusivity. However, if OP does not, in practice, provide such permission to its dealers to operate competing dealerships or other businesses, Clause 5 may result in imposition of de facto exclusivity." 33. From plain reading of the impugned judgment, we find that the 'Commission' of 'its own has not' discussed any evidence, much less the agreements such as 'Dealership Agreement' including the date of agreement to reach conclusion about violation of one or other provisions of the Act, 2002. 34. For example, with regard to the 'Resale Price Maintenance' (Section 3(4)(e)), the 'Commission' only referred to 'DG' report, as follows: "78. The DG has noted that the ex-showroom price of the cars sold by the OP to its dealers and by the dealers to the consumers, is fixed by the OP. The dealer's margin is includ....
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....d sale of Hyundai brand of cars in Delhi and NCR" as also for "Tie-in Arrangement for lubricants" and "Sale of lubricants for Hyundai brand of cars in India". However, it has not been disputed that the 'relevant market of the relevant product has not been considered though so-called 'upstream market' and 'downstream market' has been taken into consideration by the 'Commission'. 39. In "Competition Commission of India v. Coordination Committee of Artistes and Technicians of West Bengal Film and Television and Ors.─ (2017) 5 SCC 17", the Hon'ble Supreme Court referring to Section 3(4) of the Act, 2002 observed: "32. While inquiring into any alleged contravention, whether by the Commission or by the DG, and determining whether any agreement has an appreciable adverse effect on competition under Section 3, factors which are to be taken into consideration are mentioned in sub-section (3) of Section 19, which are as follows: "19. Inquiry into certain agreements and dominant position of enterprise.-(1)-(2) * * * (3) The Commission shall, while determining whether an agreement has an appreciable adverse effect on competition under Section 3, have due regard to al....
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....n 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 those actual competitors of the undertakings involved that are capable of constraining those undertakings behaviour and of preventing them from behaving independently of effective competitive pressure. 35. Therefore, the purpose of defining the "relevant market" is to assess with identifying in a systematic way the competitive constraints that undertakings face when operating in a market. This is the case in particular for determining if undertakings are competitors or potential competitors and when assessing the anti-competitive effects of conduct in a market. The concept of relevant market implies that there could be an effective competition between the products which form part of it and this presupposes that there is a sufficient degree of interchangeability between all the products forming part of the same market insofar as specific use of such product is concerned. 37. The relevant market within which to analyse market power or assess a given competition concern has both a p....
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....mpetition by hindering entry into the market. It has also failed to consider whether the said agreement accrual of benefits to consumers and improvements in production or distribution of goods or provision of services. The 'relevant geographic market' and the 'relevant product market' having not been taken into consideration, the inquiry is incomplete being violation of sub-section (6) of Section 19. The 'DG' as well as the 'Commission' has not taken into consideration the regulatory trade barriers; local specification requirements and other factors for determining the 'relevant geographic market' nor has taken into consideration the physical characteristics or end use of goods, including price of goods or service; consumer preferences as required to be taken under sub-section (7) of Section 19 for determination of 'relevant product market'. 41. Section 26 of the Act, 2002 prescribes 'procedure for inquiry under Section 19' but in the present case no such inquiry has been made in terms of Section 19 as noticed above. 42. The 'Commission' though directed the 'DG' to cause an investigation but thereafter, the matter having not closed by the 'Commission', the 'Commission' was re....