Competition Commission of India v. M/S Fast Way Transmission Pvt. Ltd.
R. F. NARIMAN, J. 1. The present appeal by the Competition
Commission of India raises several interesting questions relating to its
functions under the Competition Act, 2002. The brief facts necessary to
appreciate the controversy which arises in the present case are as follows:
An agreement dated 1 stAugust, 2010 was entered into between
respondent no.5, who was the broadcaster of a News Channel cal led
“Day & Night News”, and respondent No.1 to 4 who are Multi System
Operators (hereinafter referred to as “MSOs”) who carried the aforesaid
channel to persons who watch Cable T.V. A channel placement
agreement was entered into, on the same day, between the broadcaster
and the MSOs, all of which are stated to belong to the Fast Away Group.
By notices of termination dated 19 th January, 2011, the aforesaid
agreements were terminated by relying on a clause o f the said
agreements which entitled them to do so on the mere giving of a thirty
day notice. This being the case, respondent no.5 complained about the
aforesaid termination. The Director General of Investigati on looked
into the complaint of the broadcaster, investigated the matter, and ultimately
delivered its report to the Competition Commission, in which it found
that the said MSOs indulged in practices which were violative of Sections
3 and 4 of the Competition Commission Act, 2002. Going by this report,
and after hearing the parties to the dispute, the Competition Commission,
by its detailed order dated 3 rd July, 2012, first held that according to it, the
relevant market to be looked at for the purpose of Sections 3 and 4
would be the State of Punjab and Chandigarh. Having regard to this
market, so far as Cable TV was concerned, a finding was entered stating
that the MSO group had 85% of the subscriber share in that market, and
was therefore, in a dominant position which could be misused. Ultimately,
it found on facts that the group had never terminated any such s imilar
agreement before the due date except in the instant case, and also found
that this could not be said to be due to low TRP ratings, inasmuch as the
complainant’s TRP rating was almost equal to that of some other channels.
The Commission then went on to find as follows:
“6.4.9 The evidences as above confirm that there were disruptions
in the telecast of the channel. The Commission further observes
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that the OP has argued that as per TRAI regulations it is not
bound by “must carry”, as against the informant who is bound by
a “must provide” provision. However, the argument of the OP
group does not take away the fact that the informant is dependent
on it for transmission of its channel and if it is denied that, it cannot
get access to the market. It is not that the informant wa s not
paying the placement fee charged by the OP group. There was
no dispute on non-payment of placement or carriage charges. An
agreement was duly executed between the informant and the OP
group for transmission of the channels of the former.
6.4.10 However, due to the fact that the subscriber base of the
OPs is in excess of 40 lacs, every broadcaster including t he
informant dependent upon their network. In such a situation, the
Commission observes that the OP is in position to affect the market
in its favour. Due to its market power, the OP group has denied
the opportunity for transmission of channel of the informant. The
group has no justification for termination of the agreement and its
argument for justifying its conduct is not based on any sound
footings. Its argument regarding shortage of spectrum for non-
transmission of the informant’s channel in face of the fact th at
the spectrum constraint might have been considered at the tim e
of entering into agreement with the informant upon charge of
premium from the broadcaster. Once that was considered, the
question of shortage of spectrum during the period of the agreement
does not arise. Similarly, the argument of low TRP is also n ot
justified since in past there has been no practice of review of any
agreement on the basis of TRP ratings in the middle of an
agreement. The Commission observes that the argument of
spectrum shortage and low TRP is merely an afterthought to justify
its conduct.
6.4.11 The conduct of OP has resulted in loss to the informant-
broadcaster as well as denial of services to the consume rs who
want to watch the channel of the informant. As on date th e
Informant has access to only 56,000 households on the cable TV
in the state of Punjab & Chandigarh, where about 45 lacs
households are connected on cable network. Thus, the informant
has been effectively wiped out from the entire relevant market by
the conduct of OPs.
COMPETITION COMMISSION OF INDIA v. M/S FAST WAY
TRANSMISSION PVT. LTD. [R. F. NARIMAN, J.]
6.4.12 In the light of the facts and circumstances of this case the
Commission observes that due to the acts of the OP group the
informant has been denied the market access and opportunity to
compete and holds that violation of the provisions of section 4(2)
(c) of the Act gets established.”
2. Given the aforesaid finding, the Commission thereafter imposed
a penalty in exercise of its power under Section 27 of the Act of
Rs.8,40,01,141/-.
3. The appeal by the MSOs group to the Appellate Tribunal found
favour with the aforesaid Tribunal. Essentially, the Tribunal’s finding
was that the denial of market access under Section 4(2)(c) can only be
by one competitor against another, and that as a broadcaster cannot be
said to compete with MSOs, there would be no violation of either Section
3 or Section 4 of the Act. On this short ground the appeal stood allowed.
4. Shri P.S. Narsimha, learned Additional Solicitor General,
appearing on behalf of the Competition Commission, who is the sole
appellant before us, has argued that the role of th e Competition
Commission is delineated in the preamble read with certain provisions of
the Act, as a positive one. The Commission has to prevent p ractices
having an adverse effect on competition, to promote and sustain
competition in markets, as also to protect the interest of consumers, so
that freedom of trade is ensured which in turn leads to healthy economic
development of the nation as a whole. Viewed in this light, and after
referring to certain other provisions of the Act, the learned Additional
Solicitor General argued that the Appellate Tribunal has construed the
Act in a constricted manner which would impede the Commissions ’
functioning in future cases. With his usual fairness, he has left it to the
court to decide the amount of penalty that ought to be imposed on the
facts of the case.
5. Learned senior counsel appearing on behalf of the respondent
MSOs has been equally fair to the Court, and has brought to our notice
the judgment of the Telecom Disputes and Settlement Appellate Tribunal
(TDSAT) dated 25 th April, 2012 in which this very termination by the
MSOs in the present case was held to be unlawful, in that Regulation
4.2 of the Telecommunication (Broadcasting and Cabl e Services)
Interconnection Regulations, 2004 was breached. Clause 4.2 of the
aforesaid Regulation, which overrides agreements between the parties,
239
specifically speaks about a three weeknotice to the broadcaster clearly
giving reasons for the proposed action of effacing transmission of a TV
channel by the aforesaid MSOs. The notice of termina tion dated
19 th January, 2011 do not conform to the aforesaid Regulation as reasons
for the proposed termination have not been given. He further argues
that no case for penalty has been made out against his clien ts for the
reason that at the relevant time, the analogue platform w as used, and
the operational capacity of such platform was only for 80 channels as
against the existing channels of about 550. He went on to add that the
TRP ratings of the broadcaster, namely, respondent No. 5, was the lowest
by far among all other news channels, getting a rating of only 3.8 as
against the lowest rated news channel, which was MH Channel, of 7.
This, according to him, was because of an experiment conducted by
respondent No. 5 which failed, because it broadcast news in three
different languages, and since most of the viewers were not fam iliar
with each of these languages, the channel failed and respondent No. 5
was no longer in business. Therefore, according to him, even though
technically speaking, Regulation 4.2 was breached, yet a n otice of
termination could have been given stating the aforesaid reaso ns as to
why the agreement between the MSOs and the broadcas ter was
terminated. This being the case it is clear that the ter mination of the
agreement did not take place because of the MSOs dominant position in
the market, but because of the factors aforestated. In his view, therefore,
this is not a case in which penalty should have been imposed.
We have heard learned counsel for the parties.
6. It is important to advert first to the provisions of the Act. The
Preamble to the Act reads as under:
“An Act to provide, keeping in view of the economic development
of the country, for the establishment of a Commission to prevent
practices having adverse effect on competition, to promote and
sustain competition in markets, to protect the inte rests of
consumers and to ensure freedom of trade carried on by other
participants in markets, in India, and for matters c onnected
therewith or incidental thereto.
Section 2 Definitions-
In this Act, unless the context otherwise requires,-
COMPETITION COMMISSION OF INDIA v. M/S FAST WAY
TRANSMISSION PVT. LTD. [R. F. NARIMAN, J.]
(b) “agreement” includes any arrangement or understanding or
action in concert,-
(i) whether or not, such arrangement, understanding or action is
formal or in writing; or
(ii) whether or not such arrangement, understanding or action is
intended to be enforceable by legal proceedings;
(f) “consumer” means any person who-
(i) buys any goods for a consideration which has been paid or
promised or partly paid and partly promised, or under any system
of deferred payment and includes any user of such goods other
than the person who buys such goods for consideration paid or
promised or partly paid or partly promised, or under any system
of deferred payment when such use is made with the approval of
such person, whether such purchase of goods is for resale or for
any commercial purpose or for personal use;
(ii) hires or avails of any services for a consideration which has
been paid or promised or partly paid and partly promised, or under
any system of deferred payment and includes any beneficiary of
such services other than the person who hires or avails of the
services for consideration paid or promised, or partly paid a nd
partly promised, or under any system of deferred payment, when
such services are availed of with the approval of the first-mentioned
person whether such hiring or availing of services is for any
commercial purpose or for personal use;
(m) “practice” includes any practice relating to the carrying on of
any trade by a person or an enterprise;
(r) “relevant market” means the market which may be determined
by the Commission with reference to the relevant product market
or the relevant geographic market or with reference to bo th the
markets;
Section 4 Abuse of dominant position-
(1) No enterprise or group shall abuse its dominant position.
(2) There shall be an abuse of dominant position under sub-section
(1), if an enterprise or a group-
241
(a) directly or indirectly, imposes unfair or discriminatory-
(i) condition in purchase or sale of goods or service; or
(ii) price in purchase or sale (including predatory price) of goods
or service.
Explanation- For the purposes of this clause, the u nfair or
discriminatory condition in purchase or sale of goods or services
referred to in sub-clause (i) and unfair or discriminatory price in
purchase or sale of goods (including predatory price) or service
referred to in sub-clause (ii) shall not include such discriminatory
conditions or prices which may be adopted to meet the competition;
or
(b) limits or restricts-
(i) production of goods or provision of services or market therefor;
or
(ii) technical or scientific development relating to goods or services
to the prejudice of consumers; or
(c) indulges in practice or practices resulting in denial of market
access in any manner; or
(d) makes conclusion of contracts subject to acceptance by other
parties of supplementary obligations which, by their natur e or
according to commercial usage, have no connection with the subject
of such contracts; or
(e) uses its dominant position in one relevant market to enter into,
or protect, other relevant market.
Explanation- For the purposes of this section, the expression-
(a) “dominant position” means a position of strength, enjoyed by
an enterprise, in the relevant market, in India, which enable s it
to—
(i) operate independently of competitive forces prevailing in the
relevant market; or
(ii) affect its competitors or consumers or the relevant market in
its favour;
COMPETITION COMMISSION OF INDIA v. M/S FAST WAY
TRANSMISSION PVT. LTD. [R. F. NARIMAN, J.]
(b) “predatory price” means the sale of goods or provision of
services, at a price which is below the cost, as may be determined
by regulations, of production of the goods or provision of services,
with a view to reduce competition or eliminate the competitors.
(c) “group” shall have the same meaning as assigned to it in clause
(b) of the Explanation to section 5.
Section 18 Duties of Commission-
Subject to the provisions of this Act, it shall be the d uty of the
Commission to eliminate practices having adverse effe ct on
competition, promote and sustain competition, protect the interests
of consumers and ensure freedom of trade carried on by other
participants, in markets in India:
Provided that the Commission may, for the purpose of discharging
its duties or performing its functions under this Act, enter into any
memorandum or arrangement with the prior approval of the Central
Government, with any agency of any foreign country.
Section 19 Inquiry into certain agreements and dominant
position of enterprise -
(1) The Commission may inquire into any alleged contravention
of the provisions contained in sub-section (1) of section 3 or sub-
section (1) of section 4 either on its own motion or on—
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(4) The Commission shall, while inquiring whether an enterprise
enjoys a dominant position or not under section 4, have due regard
to all or any of the following factors, namely:-
(a) market share of the enterprise;
(b) size and resources of the enterprise;
(c) size and importance of the competitors;
(d) economic power of the enterprise including commercia l
advantages over competitors;
(e) vertical integration of the enterprises or sale or service network
of such enterprises;
(f) dependence of consumers on the enterprise;
243
(g) monopoly or dominant position whether acquired as a result of
any statute or by virtue of being a Government company or a
public sector undertaking or otherwise;
(h) entry barriers including barriers such as regulatory bar riers,
financial risk, high capital cost of entry, marketing entry barriers,
technical entry barriers, economies of scale, high cost of
substitutable goods or service for consumers;
(i) countervailing buying power;
(j) market structure and size of market;
(k) social obligations and social costs;
(l) relative advantage, by way of the contribution to the economic
development, by the enterprise enjoying a dominant position having
or likely to have an appreciable adverse effect on competition;
(m) any other factor which the Commission may consider relevant
for the inquiry.
Section 27 Orders by Commission after inquiry into
agreements or abuse of dominant position-
Where after inquiry the Commission finds that any agreement
referred to in section 3 or action of an enterprise in a dominant
position, is in contravention of section 3 or section 4, as the case
may be, it may pass all or any of the following orders, namely:-
(a) direct any enterprise or association of enterprises or person or
association of persons, as the case may be, involved in su ch
agreement, or abuse of dominant position, to discontinue and not
to re-enter such agreement or discontinue such abuse of dominant
position, as the case may be;
(b) impose such penalty, as it may deem fit which shall b e not
more than ten per cent of the average of the turnover for the last
three preceding financial years, upon each of such perso n or
enterprises which are parties to such agreements or abuse:
Provided that in case any agreement referred to in section 3 has
been entered into by a cartel, the Commission may impose upon
each producer, seller, distributor, trader or service provider included
in that cartel, a penalty of up to three times of its profit for each
COMPETITION COMMISSION OF INDIA v. M/S FAST WAY
TRANSMISSION PVT. LTD. [R. F. NARIMAN, J.]
year of the continuance of such agreement or ten per cent of its
turnover for each year of the continuance of such agreement,
whichever is higher.
(d) direct that the agreements shall stand modified to the ext ent
and in the manner as may be specified in the order by the
Commission;
(e) direct the enterprises concerned to abide by such other orders
as the Commission may pass and comply with the directions ,
including payment of costs, if any;
(g) pass such other order or issue such directions as it may deem
fit:
Provided that while passing orders under this section, if the
Commission comes to a finding, that an enterprise in contravention
to section 3 or section 4 of the Act is a member of a g roup as
defined in clause (b) of the Explanation to section 5 of the Act,
and other members of such a group are also responsible for, or
have contributed to, such a contravention, then it may pass orders,
under this section, against such members of the group.
Section 41 Director General to investigate contraventi on-
(1) The Director General shall, when so directed by the
Commission, assist the Commission in investigating into an y
contravention of the provisions of this Act or any rules or regulations
made thereunder.
(2) The Director General shall have all the powers as are conferred
upon the Commission under sub-section (2) of section 36.
(3) Without prejudice to the provisions of sub-section (2), sections
240 and 240A of the Companies Act, 1956 (1 of 1956), so far as
may be, shall apply to an investigation made by the Director
General or any other person investigating under his authority, as
they apply to an inspector appointed under that Act.
Explanation- For the purposes of this section,-
(a) the words “the Central Government” under section 240 of the
Companies Act, 1956 (1 of 1956) shall be construed as “the
Commission”;
245
(b) the word “Magistrate” under section 240A of the Companies
Act, 1956 (1 of 1956) shall be construed as “the Chief Metropolitan
Magistrate, Delhi”.
Section 53B Appeal to Appellate Tribunal-
(1) The Central Government or the State Government or a local
authority or enterprise or any person, aggrieved by any direction,
decision or order referred to in clause (a) of section 53A ma y
prefer an appeal to the Appellate Tribunal.
(2) Every appeal under sub-section (1) shall be filed within a period
of sixty days from the date on which a copy of the direction or
decision or order made by the Commission is received by the
Central Government or the State Government or a local authority
or enterprise or any person referred to in that sub-section a nd it
shall be in such form and be accompanied by such fee as may be
prescribed:
Provided that the Appellate Tribunal may entertain an appeal after
the expiry of the said period of sixty days if it is satis fied that
there was sufficient cause for not filing it within that period.
(3) On receipt of an appeal under sub-section (1), the Appellate
Tribunal may, after giving the parties to the appeal, an opportunity
of being heard, pass such orders thereon as it thinks fit, confirming,
modifying or setting aside the direction, decision or order appealed
against.
(4) The Appellate Tribunal shall send a copy of every order made
by it to the Commission and the parties to the appeal.
(5) The appeal filed before the Appellate Tribunal under sub-section
(1) shall be dealt with by it as expeditiously as possible and endeavor
shall be made by it to dispose of the appeal within six m onths
from the date of receipt of the appeal.
Section 53T Appeal to Supreme Court-
The Central Government or any State Government or t he
Commission or any statutory authority or any local authority or
any enterprise or any person aggrieved by any decision or order
of the Appellate Tribunal may file an appeal to the Supreme Court
within sixty days from the date of communication of the decision
or order of the Appellate Tribunal to them:
COMPETITION COMMISSION OF INDIA v. M/S FAST WAY
TRANSMISSION PVT. LTD. [R. F. NARIMAN, J.]
Provided that the Supreme Court may, if it is satisfied that the
applicant was prevented by sufficient cause from filing the appeal
within the said period, allow it to be filed after the expiry of the
said period of sixty days.
Section 60 Act to have overriding effect-
The provisions of this Act shall have effect notwithsta nding
anything inconsistent therewith contained in any other law for the
time being in force.”
7. The Preamble of the Act, read with the aforesaid provis ions,
would show that the Commission set up by the Competition Act certainly
has a positive role to play. A perusal of Sections18 and 19 would show
that it is a positive duty of the Commission to elimin ate all practices
which have an adverse effect on competition. Further the Commission
should promote and sustain competition, apart from protecting the interest
of consumers, so as to ensure freedom of trade carr ied on by all
participants in markets all over India. Also, a positive role is given to the
Commission to inquire, suo motu , into the dominant position of enterprises,
and to prohibit anti competitive agreements. Section 60 then gives the
Act overriding effect over other statutes in case of a clash between the
Act and such statues to effectuate the policy of the Act, keeping in view
the economic development of the country as a whole.
8. On the facts of the present case, it is clear that as “dominant
position” is clearly made out. The Explanation to Section 4 specifically
refers to a position of strength that is enjoyed by an enterprise or group
thereof in the relevant market, which, as is stated hereinbefore, is Punjab
and Chandigarh, in the Cable TV market, which enables respo ndents
no. 1-4 to operate independently of competitive forces prevailing in the
relevant market. The Commission has found, on facts, that since the
aforesaid MSOs group has 85% of the subscribers share in the aforesaid
cable TV market in the State of Punjab and Chandigarh, and that they
are able to operate independently of competitive forces prevailing in the
aforesaid market. This finding has notbeen set aside by the Appellate
Tribunal. Also, the respondent would fall within Explanation (a)(ii) as
well, though it is enough that it would fall within sub-section a(i) of the
Explanation. Sub-section (ii) refers to a position of strength as enjoyed
by the respondents which enables them to affect consumers in its favour.
247
9. Replying upon the definition in Section 2(f)(ii), ShriNarsimha,
learned ASG has, in our view, correctly argued that a broadcaster would
certainly fall within the wide language contained in the aforesaid sub-
section. We may also add that in all fairness the learned counsel for the
respondent has agreed with the same. This being the case, it i s clear
that as both sub-sections (i) and (ii) of clause (a) of the Explanation
apply, the respondent could be said to be in a “dominant position”, for the
purpose of Section 4, in the facts of the present case.
10. The question which now arises is whether there is an abuse
of such dominant position under Section 4(2)(c) where the respondent
could be stated to have indulged in a practice resulting in denial of market
access in any manner.
11. It can be seen that in the facts of the case, the broadca ster,
namely respondent No. 5, had a broadcast agreement which was entered
into for a period of one year from 1 stAugust, 2010. This was sought to
be terminated within the aforesaid period by the respondent by notices
dated 19 th January, 2011. The TDSAT has, by its order dated 25 th April,
2012, adverted to Regulation 4.2 of the relevant Telecom Regulations,
and has found that the respondents have not followed the aforesai d
regulations, inasmuch as no reasons for termination have been given in
the notices of termination. This being the case, it is clear that, on the
present facts, there is an abuse of the dominant position enjoyed by the
respondents 1-4 only for the reason that the broadcaster wa s denied
market access on and after 19 th February, 2011 until 1 st August, 2011.
The words “in any manner” one of wide import and must be given their
natural meaning. This being the case, it is difficult to appreciate the
reasoning of the Appellate Tribunal that, as the broadcaster and MSOs
are not in competition with one another, the provisions of Sections 3 and
4 do not get attracted. As has been held by us, the “dominant position”
held by the respondent MSOs is clearly established for the purpose of
Section 4 in the present case, and the Commission finding in that behalf
is also not set aside by the Appellate Tribunal. If this be so, then once a
dominant position is made out on facts, whether a broadcast er is in
competition with MSOs is a factor that is irrelevant for the purpose of
application of Section 4(2)(c) which, as has been found by us, becomes
applicable for the simple reason that the broadcaster is denied market
access due to an unlawful termination of the agreement betwee n the
said broadcaster and the respondents 1-4.
COMPETITION COMMISSION OF INDIA v. M/S FAST WAY
TRANSMISSION PVT. LTD. [R. F. NARIMAN, J.]
12. Having said this, however, we are of the view that no penalty
ought to have been imposed on the facts of the present c ase. The
finding of the Competition Commission that TRP rating of the broadcaster
was not so low as it was almost equal to that of other c hannels, is not
correct. In the counter affidavit filed before us by the respondent, they
have specifically stated the TAM ratings of the respondent channel, as
opposed to other news channels, from the month of September 2010 to
January 2011, were as follows:
13. A perusal of the aforesaid chart would show that the GRP
given to the news channel ‘Day and Night’ is much lower tha n that
given to any other channel, and that learned senior counsel for the
respondent was correct in stating that this was the reason for terminating
the agreement with the broadcaster in mid-stream. Though we find
that, on the facts of this case, Section 4(2)(c) has been breached, yet the
reason given by respondents 1 to 4 for termination being other wise
justifiable, we feel that no penalty should be levied on the facts of the
present case.
S.No. Name of the Channel Average GRP of
the Channel during
five month period
(Sept.’10 – Jan.’11)
1. AAJ TAK 33.6
2. Day and Night News 3.8
3. IBN7 24.7
4. MH1 News 7.0
5. NDTV India 22.5
6. PTC News 35.6
7. Star News 27.9
8. Zee News 21.5
249
the Channel during
Jan.’11)
14. The appeal is accordingly allowed, and the judgment of the
Appellate Tribunal, as well as the penalty imposed by the Competition
Commission, both stand set aside.
Ankit Gyan Appeal allowed.
COMPETITION COMMISSION OF INDIA v. M/S FAST WAY
TRANSMISSION PVT. LTD. [R. F. NARIMAN, J.]