11-Year Wait Ends: Supreme Court Affirms Volume-Based Discounts Are Not Discriminatory

11-Year Wait Ends: Supreme Court Affirms Volume-Based Discounts Are Not Discriminatory

Introduction

The Supreme Court of India 11 years later affirms that volume-based discounts do not amount to discriminatory pricing under the Competition Act, 2002 unless such discounts are applied in a different manner to equivalent transactions.

Factual Background

Kapoor Glass, a glass ampoule and vial producer, filed a complaint alleging that Schott Glass, a leading supplier of neutral borosilicate glass tubes was engaging in discriminatory pricing. The plaintiff claimed that the supplier gave preferential discounts and commercial terms to its joint venture business, which impacted other customers in the market. The Competition Commission of India (CCI) found Schott Glass guilty of abusing its dominant position and imposed a fine of ₹5.66 crore.

Procedural Background

The defendant appealed the CCI's decision to the COMPAT, which reversed the findings in 2014. The COMPAT held that volume-based discounts do not automatically qualify as discriminatory unless they are applied unequally to similarly situated buyers in comparable transactions. The CCI appealed the COMPAT's decision to the Supreme Court. However, the Supreme Court has finally after 11 years held that volume-based discounts do not amount to discriminatory pricing.

Issues Involved

1. Discriminatory Pricing: Whether volume-based discounts amount to discriminatory pricing under the Competition Act, 2002.

2. Abuse of Dominant Position: Whether Schott Glass abused its dominant position by imposing unfair or discriminatory pricing.

Submissions of the Parties

CCI's Contentions: The CCI argued that the defendant was found guilty of misusing its dominant position under the Competition Act, 2002. As a result a fine of ₹5.66 crore was levied and a cease-and-desist order was passed.

Plaintiff’s Contentions (Kapoor Glass): The plaintiff filed a complaint alleging that a prominent supplier of neutral borosilicate glass tubes was charging discriminatory prices. It claimed that the supplier gave its joint venture firm preferential discounts and commercial terms, which were unfair to other customers in the marketplace.

Defendant’s Contentions (Schott Glass): The defendant filed an appeal with COMPAT and contended that volume-based discounts are not automatically discriminatory unless they are used unequally to similarly situated customers in comparable transactions..

Reasoning and Analysis

A division bench comprising Justices Vikram Nath and Prasanna B Varale upheld a decision of the now-defunct Competition Appellate Tribunal (Compat). The Court stated that, “The order of the Compat is affirmed. A cost of ₹5 lakh is imposed on Kapoor Glass for prolonged litigation.”

Final Decision

The Supreme Court after 11 years upheld the COMPAT's decision, affirming that volume-based discounts do not, by themselves, amount to discriminatory pricing. The court imposed a cost of ₹5 lakh on Kapoor Glass for prolonged litigation.

Law Settled

This judgment clearly states that volume based discounts are allowed under competition law, provided they are applied equally to similarly situated buyers in comparable transactions. The court's decision emphasizes the importance of considering commercial justifications and equivalent transactions when evaluating allegations of discriminatory pricing.

In this case the plaintiff, Kapoor Glass was represented by Mr.A N Haksar, Senior Advocate along with Mr. Saurabh Sinha, Ms. Chitra Y Parande, Mr. Gautam Prabhakar and Mr. Mrigank Prabhakar, Advocates.

The defendant, Schott Glass was represented by Mr. Percival Billimoria, Senior Advocate and Mr. Mahesh Agarwal, Advocate along with team AnantLaw led by Mr. Rahul Goel, Ms. Anu Monga, Mr. Rishi Agrawala, Mr. Ankur Saigal, Mr. Victor Das, Mr. Himanshu Saraswat, Mr. Yash Jain, Ms. Aditi Sharma, Ms. Kriti Khatri, Ms. Rachita Sood, Mr. Tushar Bathija and Mr. EC Agrawala, Advocates.