CCI order to investigate Star and Sony TV for price discrimination quashed by Bombay High Court
In 2018, the Competition Commission of India (CCI) had directed an investigation to be conducted against Star India Private Limited (Star) and Sony Pictures Network India Private Ltd. (Sony) on the basis of a complaint filed by Noida Software Technology Park Limited (NSTPL) for price discrimination and alleged violations of Telecommunications (Broadcasting and Cable Services)...
In 2018, the Competition Commission of India (CCI) had directed an investigation to be conducted against Star India Private Limited (Star) and Sony Pictures Network India Private Ltd. (Sony) on the basis of a complaint filed by Noida Software Technology Park Limited (NSTPL) for price discrimination and alleged violations of Telecommunications (Broadcasting and Cable Services) Interconnection Regulations, 2004 (2004 Regulations). These regulations inter alia covered arrangements amongst broadcasters such as the Star and Sony on one side and distributors of TV channels such as NSTPL on the other side.
NSTPL filed an Information against Star, Sony and the Indian Broadcasting Federation (IBF) with the CCI under Section 19 (1) of the Competition Act, 2002 (the Act) alleging that Star and Sony have adopted anti-competitive market practices including price discrimination, owing to their strategic position in the broadcasting sector by imposing unfair terms and limiting their services to less favored Distribution Platform Operators such as NSTPL in clear violation of Section 3 and 4 of the Act.
The CCI passed two orders in 2018 exercising powers under Section 26(1) of the Act inter alia directing the Director General (DG) to initiate and conduct an investigation to ascertain whether or not Star, Sony and IBF have indulged in refusal to deal by way of discrimination with NSTPL in contravention of the provisions of Section 3(4) of the Act.
Aggrieved by the order of the CCI, Star and Sony filed a petition before the Bombay High Court.
The High Court ruled that whilst considering a contravention of Section 3(4) of the Act, CCI ought to render a prima facie finding as to the existence of an agreement refusing to deal and that such agreement causes is likely to cause Appreciable Adverse Effect on Competition (AAEC) in India.
The Court also held that the CCI admitted and accepted that the Impugned Order assessed the conduct of Star and Sony under Section 4 of the Act, and therefore, the Impugned Order has considered the factors set out under Section 19 (4) of the Act. CCI conducts a threshold analysis to ascertain whether the person is in a dominant position before proceeding to analyze whether the agreement amounts to a refusal to deal. This is because, according to CCI, parties who are not in a position of dominance have the freedom to contract and deal with whomsoever they choose. The Court also held that before directing an investigation, the CCI ought to have applied its mind to and scrutinized the Petitioners' conduct based on the factors set out under Section 19(3) of the Competition Act.
Further, in order to hold a prima facie contravention of Section 3(4), CCI ought to have formed a prima facie view that an agreement existed either between Star/Sony and NSTPL which provided for a refusal to produce, supply, distribute, store or trade in goods or provision of services with/to NSTPL and that such agreement caused AAEC.
The High Court observed that the CCI order had not considered the fact that the Petitioners prima facie violated Section 3(4) read with 3(1) of the Act. The order lacked in the requirement to analyze and apply the factors laid down under Section 19(3) of the Act and therefore could not be sustained. The Petitioners as also CCI were ad idem as to the onus cast upon CCI under Section 26 (1) of the Act. This meant that a prima facie finding AAEC would be an essential and mandatory finding before CCI could direct investigation. However, the Order of the CCI lacked this necessary finding.
According to the Bombay High Court, since there was no prima facie finding by CCI on AAEC, the mandatory jurisdictional pre-requisite of a prima facie view of contravention of Section 3(4) is absent. Therefore, the Court found that there was no reason to justify the CCI’s failure to apply the aforesaid analysis whilst passing the Impugned Order. Thus, the order of the CCI was quashed and set aside.
The Writ Petitions filed by Sony and Star were allowed.
A bench of Justices S.J. Kathawalla and Akil Kureshi presided over the case.