Supreme Court of India issues first substantive ruling on Competition Act
The Supreme Court of India (Supreme Court) has recently issued its first substantive ruling on the provisions of the Indian Competition Act, 2002 (Competition Act) in Competition Commission of India v. Coordination Committee of Artists and Technicians of West Bengal Film and Television and Ors. This judgment is important as it constitutes binding precedent which the Competition Commission of India (CCI) and the Competition Appellate Tribunal (COMPAT) will have to follow in future cases.
The judgment arose out of an appeal filed by the CCI against an order of the COMPAT setting aside a CCI finding of cartelization. The brief facts of the case were that the Coordination Committee of Artists and Technicians of West Bengal Film and Television (Coordination Committee) and the East India Motion Pictures Association (EIMPA) (two associations representing the film and TV industry in the state of West Bengal) had issued letters and boycott threats to two Bengali language TV channels demanding that they stop broadcasting a dubbed version of a Hindi language TV serial. The reason for issuing these letters and threats was stated to be that broadcasting of dubbed content adversely affected producers, artists and technicians of the Bengali language. The Supreme Court’s judgment only deals with the Coordination Committee as only the Coordination Committee appealed the CCI’s decision.
The Supreme Court framed two issues for consideration: a) what would be the relevant market in the instant case; and b) whether the actions of the Coordination Committee were covered by Section 3 of the Competition Act dealing with anti-competitive agreements.
On the first issue, the CCI had delineated a broad market for ‘film and TV industry in West Bengal’. The COMPAT had disagreed with this broad delineation as the allegation pertained only to dubbed serials on TV and had no relation whatsoever to production, distribution etc. of films or other material on TV channels. The Supreme Court found that the view taken by the COMPAT was myopic and the effect of the conduct of the Coordination Committee was not limited to broadcast of TV serials. Further, while commenting on the scheme of the Act, the Supreme Court made certain important observations on the concept of relevant market. The Supreme Court observed that the term ‘market’ used in Section 19(3) of the Competition Act (which lists out the factors that the CCI should consider while assessing whether an agreement under Section 3 causes an appreciable adverse effect on competition in India) should be construed as referring to the ‘relevant market.’ Further, the Supreme Court recognised that the relevant market is an economic concept and in defining the relevant market, the CCI should look at the evidence that is available and relevant to the case at hand. The Supreme Court also recognised that the CCI may conduct its assessment on the basis of alternative market definitions and where the CCI found no competition concerns, the question of the most appropriate market definition can be left open. While these principles are well accepted in competition law and have usually been adopted by the CCI in previous cases, their recognition by the highest court of the land gives them the force of law. Furthermore, at first blush, the Supreme Court’s observation on Section 19(3) appears to impose an unreasonable burden on the CCI to define the relevant market in every case relating to anti-competitive agreements including straightforward cartel cases where the need for a detailed substantive competition analysis does not arise. However, in my view, the judgment when read in context and holistically, does not appear to impose such a burden on the CCI. The primary reason for discussion on the relevant market in this case was to determine whether the conduct of the Coordination Committee arose from a horizontal agreement. The Coordination Committee had argued that its conduct could not be considered as arising from a horizontal agreement since its members consisted of producers, artists and technicians all of whom fell at different levels of the film and TV industry. In this context, it is foreseeable that in some cases where this is not very straightforward, the CCI may need to broadly discuss the market in which the parties accused of cartelization operate to determine if the arrangement among them constitutes a horizontal agreement.
On the second issue, the Coordination Committee had argued that it’s actions fell outside the scope of Section 3 of the Competition Act as it was not an ‘enterprise’ (the Indian law equivalent of the EU concept of ‘undertaking’) and it was only acting as a trade union to protect the interests of its members. The Supreme Court observed that the concept of ‘enterprise’ under the Competition Act was a functional one and any entity carrying on economic activity (i.e. “any activity, whether or not profit making, that involved economic trade”) would constitute an ‘enterprise’ while carrying out such activity. In the present case, the Supreme Court found that while a trade union carrying out its functions in the form of collective bargaining for its members cannot be considered to be ‘economic activity,’ the Coordination Committee was in fact an association of enterprises espousing the economic interests of its members who were engaged in the production, distribution and exhibition of films and TV serials. Therefore, it’s conduct was covered under Section 3 of the Competition Act. In finding so, the Supreme Court has usefully adopted two well recognized principles of EU competition law i.e. the interpretation of ‘undertaking’ as a functional concept and the recognition of a ‘collective bargaining’ exemption from the application of competition law.
On the above basis, the Supreme Court set aside the COMPAT’s order and affirmed the original findings of the CCI.
The full judgment of the Supreme Court can be accessed here: http://supremecourtofindia.nic.in/FileServer/2017-03-11_1489223714.pdf