India: Lost In Translation – The Supreme Court Weighs In On Anti-Competitive Practices In The Broadcasting Of ‘Mahabharat'

The Supreme Court's ruling in Competition Commission of India v. Co-ordination Committee of Artists and Technicians of West Bengal Film and Television and Ors. on the 10th of March 2017,¹ is the first of its kind in the competition law sphere,² where the Apex Court has opined on substantive issues such as 'relevant market' and the scope of the term 'enterprise' under the Competition Act, 2002 (Act).

Facts

Before delving into the findings of the Supreme Court, it would be useful to get a brief insight into the facts of this case. The matter was instituted before the Competition Commission of India (CCI) at the behest of a distributor of video cinematographic TV serials. The issue raised related to the telecast of the serial 'Mahabharat' in Bengali after dubbing it from the original, produced in Hindi language. This telecast was not acceptable to the Eastern India Motion Pictures Association (EIMPA) and the Committee of Artists and Technicians of West Bengal Film and Television Investors (Coordination Committee) as they believed it would affect producers, artists and technicians working in West Bengal. To ensure that this dubbed serial was not telecast, EIMPA and the Coordination Committee wrote letters to the channels to stop the telecast under threat of agitations and demonstrations. Since one of these channels could not resist these threats, it decided to stop the telecast, which gave rise to the complaint being made to the CCI. 

Case History

During its investigation, the Director General, CCI (DG), had considered the relevant market in the case to be that of the 'Film and TV industry in West Bengal' and found that EIMPA and the Coordination Committee had violated the provisions of the Act. EIMPA and the Coordination Committee argued that the DG's report was not sustainable as (a) the relevant market had been improperly defined – as a result the 'agreement' was not between horizontal players, and (b) that in any case, neither body was an economic actor in the marketplace and were rather in the nature of trade unions, and thus did not fall under the purview of the Act.

The CCI verdict was split 6-1,³ the majority holding that the EIMPA and Coordination Committee acted in violation of Section 3(3)(b) read with Section 3(1) of the Act⁴ since their actions led to limiting and controlling the supply of dubbed TV serials in Bengali. Interestingly, the CCI does not aver to a 'relevant market' in its order, but rather refers only to competition being hindered in the 'market' generally. It does address the question of whether the bodies in question are carrying on an economic activity, holding that both the EIMPA and Coordination Committee do not by themselves carry on any economic activity and hence do not constitute 'enterprises'. However, the bodies would still come under the purview of Section 3(3) of the Act which covers associations and other persons, and on facts the constituent members of these bodies were in fact engaged in economic activities.

The minority order, however, observed that the market delineated by the DG was too vague and since the case was against a broadcaster of a TV serial, the market should have a correlation with the case at hand. Accordingly, the correct market ought to have been 'Broadcasting of TV serials dubbed in Bangla language'. Since EIMPA and the Coordination Committee were not active in this relevant market, the question of a horizontal agreement violating Section 3(3) did not arise. It further observed that even though EIMPA and the Coordination Committee protested against the broadcasting of the serial, this could not amount to an agreement or be termed as economic pressure, and the channels were free to ignore the threats and continue broadcasting.⁵

Upon appeal by the Coordination Committee, the Competition Appellate Tribunal (COMPAT) set aside the majority order of the Commission and agreed with the minority opinion, holding that as the parties in question were not in same relevant market, the question of cartelization did not arise.⁶

Judgment of the Supreme Court

The CCI appealed the order of the COMPAT before the Supreme Court of India. Two key issues were formulated by the Court:

1. What is the relevant market for the purposes of inquiry into the impugned activity of the Coordination Committee? and
2. Whether the action and conduct of the Coordination Committee is covered by the provisions of Section 3 of the Act?

Relevant Market: The Supreme Court held that the Tribunal took a myopic view of the relevant market divorced from vital aspects of the case. The Court referred to the letters written by the Coordination Committee, which themselves stated that the proposed broadcast of the dubbed serial would adversely affect the 'TV and Film Industry of West Bengal', and held this would be the relevant market in which an assessment would need to be made on the question of whether competition was affected.

Applicability of the Competition Act to the Coordination Committee: Having disposed of the question of relevant market, the Supreme Court labored over the whether the Coordination Committee was an 'enterprise'. It noted that the question is a 'relative one' and that "any entity, regardless of form, constitutes an 'enterprise' within the meaning of Section 3 of the Act when it engages in [an] economic activity". The rationale behind this stems from the understanding that if the agreement or activity in question was not an economic activity, it would not have the potential to restrict or affect competition. "Economic activity, as is generally understood, refers to any activity consisting of offering products in a market regardless of whether the activities are intended to earn a profit."

Ultimately, the Court did not answer the question of whether, in its opinion, the Coordination Committee constituted an 'enterprise' but referred to the constituent members of the Committee, which were certainly enterprises, engaged in economic activities. The decision of the body reflected the collective intent of its members; and this could not be cloaked under the protection of trade unionism. The Court thus affirmed the CCI's order setting aside the COMPAT's judgment.

Implications

The Supreme Court has gone to some length to appreciate the philosophy of the Competition Act and accept its economic bedrock with concepts such as relevant market, market power, appreciable adverse effect on competition, and so on. Rather than the question of whether the relevant market was defined correctly, the more important question (which surprisingly does not appear to have been argued) is whether a 'relevant market' is required to be defined at all for a Section 3 analysis, and more specifically a Section 3(3) analysis.

What is taken for granted in the Court's judgment (as it is in the COMPAT's judgment before it), is that a 'relevant market' must be defined for a proper assessment of an alleged violation of Section 3 of the Act. While analyzing the scheme of the Act, the Court notes that "Since the appreciable adverse effect on competition has to be seen in the context of 'relevant market' as defined under Section 2(r) of the Act....the first aspect was to determine as to what would be the relevant market". This is essential as "market definition is a tool to identify and define the boundaries of competition between firms" and to consequently identify the competitive constraints faced by the undertaking within such boundaries. This is the "framework within which competition policy is applied by the Commission".

These observations are significant as the Commission has consistently and explicitly held over the years that a relevant market need not be defined for the purposes of Section 3 of the Act. Section 3 does not use the term 'relevant market' but rather simply 'market'. In contrast, Sections 4⁷ and 6⁸ specifically use the term 'relevant market'. In fact, Section 3(1) and 6(1) are comparable umbrella sub-sections that cast a blanket prohibition on enterprises, however, Section 3(1) states "...which causes or is likely to cause an appreciable adverse effect on competition in India" and Section 6 (1) states "...which causes or is likely to cause an appreciable adverse effect on competition within the relevant market in India...". The decisional practice of the CCI makes it more than clear that there is no requirement to define a relevant market in Section 3(3) proceedings and has explicitly stated this view in several orders.⁹

It is surprising therefore that the Commission did not resist this but rather supported the DG's definition of the relevant market. The Supreme Court now appears to have made the requirement of defining a relevant market absolute in all cases, including Section 3(3) proceedings, leaving the many decisions of the Commission where this has not been done questionable.

Moreover, the manner of defining the market has also been elaborated upon – it "starts by looking into a relatively narrow potential product market definition. The potential product market is then expanded to include those substituted products to which buyers would turn in the face of a price increase above the competitive price."¹⁰ The CCI must defined the "boundaries of the relevant market as precisely as required by the circumstances of the case" and may include alternative market definitions. However, "where it is apparent that the investigated conduct is unlikely to have an adverse effect on competition or that the undertaking under investigation does not possess a substantial degree of market power on the basis of any reasonable market definition, the question of the most appropriate market definition can even be left open."

The Court's observations with respect to 'economic activity' and 'enterprise', even if not entirely necessary for the adjudication of the issue, appear to set out a cogent and accurate position of law.

There is no doubt that these findings, along with the many passing observations of the Court are going to have a significant effect on current and future cases decided by the CCI and the COMPAT. And this is only a first of many judgments expected to be passed by the Supreme Court over the next couple of years as several competition matters find their way to the apex court.¹¹

Footnotes

* Abdullah Hussain is a Partner and Kanika Chaudhary Nayar is a Partner Designate in the Competition Law Practice Group at Luthra & Luthra Law Offices, New Delhi, India. The views of the authors expressed in this article are personal. 

1 Judgment in Civil Appeal No. 6691 of 2014, can be found at http://supremecourtofindia.nic.in/FileServer/2017-03-11_1489223714.pdf

2 The only other judgment passed by the Supreme Court post enforcement of the Competition Act was in the matter of Competition Commission of India v. Steel Authority of India Limited, (2010) 10 SCC 744, which arose in the context of a dispute over whether prima facie orders of investigation passed by the CCI were appealable.

3 Order of the CCI dated 09.08.2012 in Case No. 16 of 2011, can be found at http://www.cci.gov.in/sites/default/files/162011_0.pdf

4 Section 3(1) deals with anti-competitive agreements generally whereas Section 3(3) deals with agreement between competitors, or horizontal agreements.

5 Minority Order of the CCI dated 09.08.2012 in Case No. 16 of 2011, can be found at http://cci.gov.in/sites/default/files/162011D_0.pdf

6 Order dated 03.04.2014 in Appeal No. 131/2012, can be found at http://compat.nic.in/Attachments/JudgementList/4244_03.04.14%20Appeal%20No.131%20of%202012.pdf

7 Explanation (a) to  Section 4 of the Act states:

"dominant position" means a position of strength, enjoyed by an enterprise, in the relevant market, in India, which enables it to –

(i) operate independently of competitive forces prevailing in the relevant market;

(ii) affect its competitors or consumers or the relevant market in its favour.

8 Section 6 (1) of the Act states "No person or enterprise shall enter into a combination which causes or is likely to cause an appreciable adverse effect on competition within the relevant market in India and such a combination shall be void."

9 FICCI – Multiplex Association of India v. United Producers/ Distributors Forum, Case No. 01 of 2009, Order dated 25.05.2011; Builder Association of India v. Cement Manufacturers Association & Ors., Case No. 29 of 2010, Order dated 20.06.2012.

10 The same general process is to be followed for the geographic market.

11 DLF Limited v. Competition Commission of India & Ors.; Excel Crop Care Limited v. Competition Commission of India; Competition Commission of India v. Gulf Oil Corporation etc.

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