The Supreme Court vide its judgement dated 24 January 2018 set aside the Competition Appellate Tribunal's ("COMPAT") decision dated 02 May 2014 in a case involving an allegation of dominant position by M/s Fastway Transmission Pvt. Ltd and its group entities ("Respondents").
Brief background of the case
The Informant, M/s Kansan News Pvt. Ltd ('Kansan') is a news channel broadcaster in the name and style of "Day & Night News". The Respondents are multi system operators in the State of Punjab and Chandigarh.
Pursuant to a channel placement agreement executed between Kansan and the Respondents, the Respondents carried the aforesaid channel to persons who watch Cable TV.
Vide notice dated 19 January 2011, the Respondents terminated the aforesaid agreement. Aggrieved by the unilateral termination of the channel placement agreement ("agreement"), Kansan approached the Competition Commission of India ("CCI") alleging violation of Section 3 and Section 4 of the Competition Act, 2002.
The CCI vide order dated 03 July, 2012 held that the Respondents being inter-related, constituted a 'group' in terms of the Act and that as a group it enjoyed a dominant position in the relevant market for provision of cable TV services in Punjab and Chandigarh. Further, it was held that the Respondent's conduct amounted to a denial of market access to Kansan and therefore constituted an abuse of dominant position under Section 4(2)(c) of the Act. Pursuantly, a penalty of INR 8,40,01,141/- was imposed on the Respondents.
On appeal, the Competition Appellate Tribunal set aside the CCI's decision, primarily on the ground that a denial of market access as envisaged under Section 4(2)(c) of the Act can only be occasioned to a competitor. Since Kansan being a broadcaster was not a competitor of the Respondents (MSOs), the finding of violation of Section 4(2)(c ) of the Act was struck down.
It is against this finding that the CCI preferred an appeal before the Supreme Court.
Arguments before the Supreme Court
The CCI argued that the COMPAT has erroneously interpreted the provisions of the Act and that the narrow interpretation is inconsistent with the positive role of the CCI envisaged under the statutory scheme. It was argued that the restricted interpretation would impede the CCI's functioning in future cases.
The Respondents argued that the Telecom Disputes and Settlement Appellate Tribunal (TDSAT) vide order dated 25 April, 2012 has already held the termination to be unlawful and in breach of Regulation 4.2 of the Telecommunication (Broadcasting and Cable Services) Interconnection Regulations, 2004. Therefore, the CCI did not have any occasion to examine the same allegation. Further, the Respondents had sufficient technical and commercial reasons to terminate the agreement including the fact that the target rating point (TRP) of Kansan was lowest among news channel. Thus, it was contented that the termination of the agreement was not on account of the dominant position enjoyed by the Respondents.
Findings by the Supreme Court
The Supreme Court taking into consideration the preamble of the Act and the provisions of the Act, particularly Section 18 and 19 agreed with the CCI's contention that it has a positive duty to eliminate all practices which have an adverse effect on competition.
With respect to the question as to whether there was a denial of market access, the Supreme Court emphasized that the inclusion of the words 'in any manner" in Section 4(2)(c ) of the Act implies a wide import and that the words must be given their natural meaning.
Therefore it was held that once the existence of a dominant position is established, the question as to whether Kansan being a broadcaster is in competition with MSOs is a factor which is irrelevant for the purpose of application of Section 4(2)(c ) of the Act. The Supreme Court held that Kansan is denied market access on account of the unlawful termination of the agreement by the Respondents.
However, the Supreme Court declined to uphold the penalty imposed by the CCI, holding that since Kansan's TRP is lower than that of other broadcasters, the Respondents were justified in terminating the agreement mid-stream. The Hon'ble Court held that the CCI's finding that the TRP rating of Kansan was almost equal to that of other broadcasters is factually incorrect.
Comment
By upholding the CCI's wide interpretation of Section 4(2)(c) of the Act and recognizing the CCI's duty to eliminate practices having an adverse effect on competition, the Hon'ble Supreme Court has adopted the recognized approach of adopting substance over form in the interpretation of the provisions of the Act. The COMPAT's narrow approach towards the interpretation of Section 4(2)(c) had in essence clipped the wings of the CCI and has impeded the CCI's duty to promote and sustain competition in markets and protect the interests of the consumer.
The Supreme Court has removed any shackles that may have been imposed by the COMPAT, and has cleared any impediments to the CCI being an effective regulator.
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