AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (9) TMI 2121
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.... 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 Pvt. Ltd. ('1st Informant') against 'Hyundai Motor' ....
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....usion 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 for a period of three years from the date of execution. It is alleged tha....
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.... 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 aftermarket for each brand of repair services. As the issue of tie-in arrangement of the OP with regard to the sale of CNG Kits, ....
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.... 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 Passenger cars in India"; (ii) Resale Price Maintenance (RPM): Market for "Intra Brand Sale of Hyundai Brand of Cars in Delhi and NCR"; (iii) Tie-in arrangement for CNG ki....
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....nbsp; 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 product market would be the market for the dealership and distribution of Hyundai cars." 27. We are not going into the question of violation of principles of natural justice on the ground that the 'Commission' while differed with the ....
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....he 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 included in the exshowroom price, which is also fixed by the OP. However, dealers are permitted to grant discounts to consumers also. Thus, while the maximum price at which a car can be sold is fixed by the OP from time to time, the dealer is permitted to charge a price lesser than the maximum selling price so fixed. 7....
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....een 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 all or any of the following factors, namely- (a) creation of barriers to new entrants in the market; (b) driving existing competitors out of the market; (c) foreclosure of competition by hindering entry into the market; (d) accrual of benefits to consumers; (e) improvements in production or distribution of goods or provision of services;....
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....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 product dimension and a geographic dimension. In this context, the relevant product market comprises all those products which are considered interchangeable or substitutable by buyers because of the products' characteristics, prices and intended use. The relevant geographic market comprises all those regions or areas where buyers would be able or willing to find substitutes for the products in question. The relevant product and geographic market for a particular product may vary depending on the nature of the buyers and suppliers conc....
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.... 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 required to make inquiry in terms of Section 27 to find out whether any agreement referred to in Section 3 or action of an enterprise, is in contravention of the provision. 43. The procedure for inquiry under Section 19 is not a mere formality rather the inquiry by the 'Commission' into an agreement under Section 27 cannot be completed without appreciation of relevant evidence. 44. The 'DG' report is merely an investigation report, in terms of subsection (3) of Section 26 but 'DG's' report alone cannot be relied upon or cited for finding and the 'Commission....