Bar and Bench - Indian Legal news
Bombay HC quashes CCI order to probe Star and Sony TV for price discrimination [Read Judgement]

Bombay HC quashes CCI order to probe Star and Sony TV for price discrimination [Read Judgement]

Omkar Gokhale

In a relief to Sony Pictures Network India and Star India, the Bombay High Court recently quashed an order passed by the Competition Commission of India (CCI) to probe the broadcasters for alleged price discrimination.

A Division Bench of Justices Akil Kureshi and SJ Kathawalla ultimately quashed the CCI order upon noting that it failed the jurisdictional test as detailed in the Supreme Court’s decision in CCI v Bharti Airtel. 

On July 27, last year, the CCI Bench headed by Chairperson Sudhir Mittal had ordered a probe against broadcasters for allegedly indulging in anti-competitive behaviour regarding pricing of television channels.

However, the High Court has set aside this ruling, observing, inter alia, that

In the impugned Order, in order to to hold a prima facie contravention of Section 3(4), CCI ought to have formed a prima facie view that there exists an agreement either between Star/Sony and NSTPL which provides for a refusal to produce, supply, distribute, store or trade in goods or provision of services .. and that such agreement causes AAEC [Appreciable Adverse Effect on Competition].

However, there is no finding that the Petitioners have refused to produce, supply, distribute, store or trade in goods or provision of services with/to NSTPL. CCI was under an obligation to arrive at a prima facie finding that the conduct of the Petitioners causes AAEC. Since there is no prima facie finding by CCI on AAEC, according to us, the mandatory jurisdictional pre-requisite of a prima facie view of contravention of Section 3(4) is absent. Therefore, once again, we are unable to find any reasonable justification justifying CCI’s failure to apply the aforesaid analysis whilst passing the Impugned Order. This being so, the Impugned Order cannot stand the test laid down under the Act…

…The Impugned Order is once again found lacking in the requirement to analyze and apply the factors laid down under Section 19(3) of the Competition Act and therefore cannot be sustained.

The Court was hearing a plea filed by Star and Sony challenging the CCI order that directed a probe on a complaint filed by Noida Software Technology Park Ltd (NSTPL), a satellite communication firm.

The NSTPL had alleged price discrimination on the distribution of Sony and Star TV channels among various distributors. Upholding the claims made by the NSTPL, the CCI had directed the Director General (DG), its investigation arm, to probe whether Star India and Sony Pictures India ‘refused to deal’ with the NSTPL by way of price discrimination.

The CCI, in its order, had stated that the broadcasters appeared prima facie in contravention to Section 3 (4) of the Competition Act, which prohibits anti-competitive agreements. Being aggrieved, the two broadcasters moved the Bombay High Court last year.

Appearing for Star India, Senior Counsel Darius Khambata submitted that the CCI order was passed without jurisdiction as laid down by the Supreme Court verdict in CCI v Bharti Airtel. It was argued that as per the ratio laid down by the Apex Court, the CCI could have exercised its jurisdiction only if and when the Telecom Regulatory Authority of India (TRAI) or Telecom Disputes Settlement and Appellate Tribunal (TDSAT) had found that parties have indulged in anti-competitive practices. In the instant case, it was pointed out, the issue was pending adjudication before the TDSAT.

Khambata went on to submit that for the CCI to have arrived at a prima facie view of a contravention of Section 3(4) of the Competition Act, it ought to have undertaken an analysis in terms of the factors listed under Section 19 (3) of the Competition Act. Section 19 (3) enumerates factors to determine whether any conduct has an appreciable adverse effect competition. In the absence of any such exercise, Star India could not prima facie be found to have contravened Section 3 (4) of the Competition Act, Khambata argued. He also argued that an order directing probe is far-reaching, conclusive and will stain Star India with a stigma.

Appearing for Sony Pictures, Senior Counsel Soli K Cooper submitted that until the TDSAT holds that the broadcaster was in breach of the Interconnection Regulations, there can be no question of the CCI exercising jurisdiction under the Competition Act. Relying on the CCI v Bharti Airtel case, Cooper submitted that said decision prevented the CCI from passing an order since ‘in-personam’ and ‘inter-party’ disputes were not adjudicated under the TRAI Act.

Cooper also argued that, in the present case, the CCI has failed to arrive at prima facie finding as to the existence of an agreement that constituted a refusal to deal and whether the agreement is likely to cause an Appreciable Adverse Effect on Competition (AAEC) in India.

For the CCI, Advocate Somasekhar Sundaresan submitted that the Bharti Airtel case did not lay down a standard that in-personam findings after trial of inter-personal disputes should first be rendered for the CCI to even begin its investigations. It was further submitted by CCI that the telecom regulatory system, earlier in December 2015, had effectively and conclusively ruled that there is anti-competitive behavior in the relevant market in the present case.

Appearing for complainant Noida Software Technology Park Limited (NSTPL), Advocate ZT Andhyarujina submitted that the CCI had the necessary jurisdiction to take cognizance.

To decide the case, the High Court relied on the test laid down in CCI v Bharti Airtel case by the Supreme Court when it comes to jurisdiction of the CCI. In that case, it had been observed.

…The Supreme Court’s decision clearly mandates that unless TRAI finds fault with the conduct of a service provider, CCI cannot order an investigation. The Supreme court has rightly laid down that despite the overlap between TRAI and CCI’s jurisdiction the possibility of conflicting views can be resolved by holding that matters which pertain to issues specifically regulated by TRAI, TRAI has the jurisdiction at the first instance to deal with and render findings on such jurisdictional aspect. Thereafter, once TRAI performs this function viz. returning a finding that leads to a prima facie conclusion that the parties have indulged in anti-competitive practices can CCI investigate a matter.”

This was the law declared as far as individual, in personam disputes were concerned. NSTPL’s dispute also constituted an in personam dispute, the High Court found. It was noted that other general issues affecting all distributors were still pending before the TDSAT.

In our considered opinion, each of the issues raised in CCI vs. Bharti Airtel were in-personam disputes between the RJIL and IDOs. In view of the aforesaid, it is evident that the principles of law laid down by the Apex Court in CCI vs. Bharti Airtel applies to in personam / inter party disputes i.e. after the rights and obligations of the parties have been determined by TRAI the sectoral regulator – TRAI.”

While this was the case, the Bench also found credence in an argument made by Star India that in the second plea before TDSAT in 2015, NSTPL had made various in-personam, specific allegations against Star. Therefore, the Court held that the writ pleas against the CCI order are maintainable and the High Court ought to interfere with it. In doing so, it also rejected arguments made on behalf of the CCI citing European laws on refusal to deal upon finding that,

“…it appears that EU Competition Law on refusal to deal is materially different from Indian law on the subject. Further and in any event, even under EU Law, a refusal to deal will only be unlawful if it can be shown that it will have an anti-competitive effect, with consequent long-lasting consumer harm. However, the Impugned Order did not consider whether the Petitioners’ actions of will have any AAEC. Therefore, according to us, this submission of Mr. Sundaresan’s cannot help sustain the Impugned Order.

Ultimately, allowing writ pleas filed by Star and Sony, the Court ruled,

The Impugned Orders dated 27th July 2018 and 31st July, 2018 passed by the Competition Commission of India under Section 26(1) of the Competition Act, 2002 and all consequent actions/notices of the Director-General are quashed and set aside in exercise of our power under Article 226 of the Constitution of India.”

[Read Judgement dated October 16, 2019]