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The Competition Commission of India (CCI) has imposed a penalty of Rs. 19.2 crore on South Asia LPG Company Ltd (SALPG) for denying market access to East India Petroleum Pvt. Ltd. (EIPL).
The CCI found SALPG guilty of abuse of its dominant position for limiting upstream terminalling services for import of LPG at Visakhapatnam port.
Noting that denial of market access is one of the most severe forms of abuse of dominant position, the Commission imposed a penalty of 10% of SALPG’s average turnover for the last three years, the maximum fine that can be ordered as per Section 27(b) of the Competition Act.
In 2011, EIPL alleged that SALPG has been insisting on the mandatory use of cavern for blended LPG imported and blended at Vizag port. This resulted in oil marketing companies like Indian Oil and Bharat Petroleum paying significantly higher terminalling charges to SALPG. These companies were thus unable to use the services of EIPL and were constrained to avail the terminalling services offered by SALPG itself.
Taking into consideration that SALPG was the only player in the upstream terminalling service at Visakhapatnam Port, the Commission found it to be in a dominant position.
It was also held that SALPG, by restricting bypass and requiring users to necessarily use cavern and pay higher charges, abused its dominant position, in contravention of Section 4 of the Act. The Commission also held,
“Since the bypass restrictions were found to have restricted the business volumes of EIPL, without any reasonable grounds, the same is also found to be a denial of market access, in contravention of Section 4(2)(c) of the Act.”
Having held thus, the CCI directed SALPG to grant EIPL effective access to the terminalling infrastructure by employing one of two methods. It also ordered SALPG to pay compensation at 10% of its average annual turnover for the last three financial years – the maximum that is allowed under the Act. As per the lawyers appearing for the complainant, it is the highest ever percentage of fine imposed by the CCI in a case of abuse of dominant position.
This figure was arrived at considering the seriousness of the contravention. The order states,
“The Commission notes that denial of market access is one of the severe forms of abuse of dominant position. The assessment of the Commission clearly brings out that the abusive conduct of SALPG is primarily with a view to protect its commercial interest at the cost of competition. Such abusive conduct for a prolonged period is an aggravating factor. Further, Commission is of the view that no mitigating factor exists in the facts and circumstances of the present case.”
Thus, SALPG was directed to pay a sum of Rs. 19,20,70,000 within sixty days of receipt of the order.
EIPL was represented by Dua Associates Partner Kunal Mehra along with Senior Associate Danish Khan, with strategic inputs from Shashivansh Bahadur. Dua Associates had briefed Senior Advocate AN Haksar in this matter.
SALPG was represented by J Sagar Associates, through Partners Amitabh Kumar and Vibha Dhawan, along with Associate Diksha Rai.
Read the order: