CASE ANALYSIS

BEFORE THE HON’BLE COMPETITION COMMISSION OF INDIA

[CASE NO. 38/2012]

IN THE MATTER OF:-

All India Genset Manufacturer Association, 71

Shradhanand Marg, Delhi – 110006, through President
Sh. Yogesh Narain Gupta Informant
VS
Chief Secretary, Government of Haryana
Civil Sectt. Chandigarh, Haryana Respondent No. 1

Financial Commissioner & Principal Secretary,

Industries Department
Haryana Civil Sectt. Chandigarh Respondent No. 2

Director Supplies and Disposals, Haryana

SCO No.1032-33, Sector-22-B,
Chandigarh, Haryana Respondent No. 3

Submitted by: -
Shubham Singh Rawat
B.A.LLB (Hons.), 4th Year
RMLNLU, Lucknow
1|Page
INTRODUCTION:-

The present information has been filed by Sh. Yogesh Narain Gupta
(hereinafter referred to as the ‘Informant’) before the Competition Commission of India, under
section 19(1)(a) of the Competition Act, 2002 (hereinafter referred to as ‘the Act’), seeking
necessary inquiry under section 19 of the Act into the alleged anti-competitive practices and
abuse of dominance by Director Supplies and Disposals, Haryana
(hereinafter referred to as ‘Respondent No. 3’) and Financial Commissioner & Principal
Secretary, Industries Department, Haryana Civil Sectt., Chandigarh (hereinafter referred to as
‘Respondent No. 2’) under the supervision of Chief Secretary, Government of Haryana
Civil Sectt. Chandigarh, Haryana (hereinafter referred to as ‘Respondent No. 1’)

The informant alleges unfair trade practices and abuse of dominant position in contravention of
the provisions of section 3(4)(a), section 19(3), section 19(4), section 4(2)(a)(i), section 4(2)(b),
section 4(2)(c), and section 4(2)(e) of the Act by the respondents.

FACTS OF THE ISSUE:-

 The Government of Haryana (Respondent No. 1) through the Joint Director, Director of
Supplies & Disposals (Respondent No. 3), invited tenders for purchase of Diesel
Generating sets (hereinafter referred to as ‘DG Sets’) on annual rate contract of various
capacities for the financial year 2011-12. The Respondent No. 3 issued a manipulated
tender notice with terms and conditions of eligibility(hereinafter referred to as
‘Impugned Condition’):
“The tendering firm should be an Original Equipment Manufacturer (OEM)/ Original
Equipment Assembler (OEA) of DG Sets. OEA must submit a certificate from the engine
manufacturer regarding their OEA along with the offer. Authorised Dealers are allowed
provided they submit a certificate from the OEM/OEA that they do not supply to end
customers directly.”
 The tender published by Respondent No. 3 on behalf of both Respondent No. 2 and
Respondent No. 1 is available to three categories of people by bidding process: OEM,
OEA, and Authorised Dealer’s. The informant comes under the purview of Authorised
Dealer’s and has filed complaint against the Respondent for imposing unfair,
discriminatory condition which results to restriction of market and denying market access
2|Page
 to Authorised Dealer’s only and not to OEM/OEA’s by implying some “Impugned
Condition”.
 The “Impugned Condition” put forthwith against Authorized Dealer’s is an impossible
condition to fulfill in order to participate in the bidding process, since it resulted to
restriction of market and such market would get limited only to OEM/OEA’s due to their
lower cost of production; hence hampering the fair competition in the market to
Authorized Dealer’s. Hence the Informant; who being one of the Authorized Dealer
failed to fulfill the eligibility criteria of “Impugned Condition” to participate in the
tender process put forthwith by Respondent No.3 and such appropriate relief is demanded
by the informant against such arbitrary powers used by the government in form of
Respondent No. 3 at this Hon’ble forum of CCI.

ALLEGATIONS MADE BY THE INFORMANT:-

The Informant has alleged that the Respondent’s (State Government of Haryana) being on a
dominant position on releasing the tender of purchasing DG Sets and attaching such arbitrary &
impugned condition only to Authorized Dealers will result to hampering of the market
opportunities provided to the Authorized Dealer’s as a whole. Hence the informant has submitted
that because of the said act of Respondent No. 3, it has abused its dominant position to influence
the market and ultimately denying the informant any market access and fair competition.

PROVISIONS OF THE ACT INVOLVED:-

1. Section 4(1), 4(2) (a), 4(2) (b), 4(2) (c) of The Competition Act, 2002.
2. Section 19(1) (a), 19(3), 19(4) of The Competition Act, 2002.
3. Section 3(4) (a) of The Competition Act, 2002.
4. Section 2(c), 2(h), 2(r) of The Competition Act, 2002.
5. Section 26(2) of The Competition Act, 2002.

STATEMENT OF THE ISSUE:-

1. Whether the “Impugned Condition” attached by Respondent No. 3 in the tender process
is violative of Sec. 4 of The Competition Act, 2002 (Abuse of Dominant Power/
Limitation & Restriction of Market/ Unfair & Discriminatory Condition)?

3|Page
 2. Whether attaching of “Impugned Condition” by Respondent No. 3 to the Authorized
Dealer’s only and not to OEM/OEA’s would amount to anti-competitive agreement: (tie-
in arrangement) and does it have an appreciable adverse effect on competition as per
defined under section 3(4)(a) of The Competition Act, 2002?
3. Whether such prior meeting of minds between all the Respondent’s qualify as a (Cartel)
to attach such arbitrary “Impugned Condition” in the tender process favoring only the
OEM/OEA’s and going against the Authorized Dealer’s as a whole and hence whether it
resulted in violation of Sec. 3(1) of The Competition Act, 2002 (Cartelization)?

OBSERVATION & DECISION OF CCI:-

The Hon’ble Competition Commission of India observed that the crux of the matter revolves
around the arbitrary “Impugned Condition” attached by Respondent No. 3 in its tender process
which was discriminatory for the Informant who is representing the Authorized Dealer’s as a
whole.

 Section 4 of the Act (Abuse of Dominant Power/ Limitation & Restriction of Market/
Unfair & Discriminatory Condition).
1. The “Impugned Condition” says that the Authorized Dealers are allowed to
purchase DG Sets provided that they submit a certificate from OEM/OEA’s
stating that they do not supply to end consumers directly.
2. The “Impugned Condition” appears to have been specified with a view to ensure
that makers of all eligible OEM/OEA’s are included in the tender process and
those OEM/OEA’s who do not supply directly to end consumers would supply
through Authorised Dealer’s would also be included in the bidding process.
Therefore no such Authorized Dealers are excluded from the tender process.
3. The participating OEA’s have also been asked by Respondent No. 3 to produce a
certificate from the engine manufacturers regarding their OEA status. Hence the
“Impugned Condition” are not discriminatory or arbitrary to the informant only.
4. Decision: Hence CCI was of the view that there was no such act violative to Sec.
4 of the Act by the Respondents since they are not in a dominant position in the
relevant market and hence the question of abuse does not arise. Hence no prima
facie case can be made out for Sec 4 of the Act.

4|Page
  Section 3 of the Act (tie-in arrangement/ cartelization)
1. The Govt. purchase and the private purchase are substitutable and
interchangeable and the two markets cannot be considered as separate. Hence no
question arises for tie-in arrangement or cartelization since both of them are
applicable only on two different relevant markets as per Sec 2(r), 2(s), 2(t) of the
Act.
2. Decision: Hence CCI was of the view that there was no such act violative to Sec.
3 of the Act by the Respondents and hence no prima facie case was to be found
regarding cartelization or tie-in arrangement.

Since there was no prima facie case found against the Respondents, the matter was closed under
Sec 26(2) of the Act.

CASE ANALYSIS:-

The Hon’ble Commission has taken a correct view with respect to Section 4 of the Act.

It has been held that Respondent No. 3 was only one of the enterprises which was purchasing
Gensets and that there would be hundreds of other enterprises who also were purchasing Gensets
and that the Commission has to keep in mind the entire relevant market. It was held that
Government purchase and private purchase of Gensets are substitutable and interchangeable and
the two cannot be considered as two separate markets. The dominance of Respondent No. 3 was
stated to be not established in the relevant market. Hence the Impugned Conditions were not
discriminatory and violative to Sec. 4 of the Act.

As regards to the existence of a tie in arrangement as alleged by the complainant under Sec.3 (4)
(a) of the Act, the Hon’ble Commission has not regarded such agreement as anti-competitive as
it had No Appreciable Adverse Effect on the Competition. I concur to the view of the Hon’ble
Commission basing reliance on abstracts of an order dated 18th October, 2012 which explains the
essentials for a tie in agreement to have appreciable adverse effect on Competition as follows:

“Generally, the following conditions are necessary and essential in respect of anti-competitive
tying:

1. Presence of two separate products or services capable of being tied:

5|Page
2. The seller must have sufficient economic power with respect to the tying product to
appreciably restrain free competition in the market for the tied product:

3. The tying arrangement must affect a ‘not insubstantial’ amount of commerce”

Respondent No. 1, Respondent No. 2 and Respondent No. 3 cannot operate independently of the
competitive forces in the market and cannot deny market access, or drive out competitors, or
foreclose competitions which are mandates under Sec. 19(3) to give foundation to ‘Appreciable
Adverse Effect” and Sec. 19(4) to give foundation to ‘Dominant Position’. Therefore, the
Commission is correct in not holding Respondent No. 1, Respondent No. 2 and Respondent No.
3 liable under Sec. 3 of the Act.

In order to attract liability under Section 4 of the Act, firstly there should be an ‘enterprise’ as
defined under Sec. 2(h) of the Act, secondly the enterprise should be in a Dominant position in
the relevant market, and finally there has to be some kind of ‘abuse’ in the dominant position.
There is no material evidence produced by the informant to consider Respondent No. 3 so as to
abuse its dominant position. Since in the present case, there was no prima facie case found for
Respondent No. 3 abusing its Dominant position, the question of limiting/ controlling the trade
of goods/ services in relevant market place does not arise at all at the first place. Therefore, the
Commission is correct in not holding Respondent No. 1, Respondent No. 2 and Respondent No.
3 liable under Sec. 4 of the Act.

CONCLUSION

Based on my understanding and the explanations given above, I am of the view that the Hon’ble
Commission has taken the correct view by not referring the matter to the Director General for
further investigations as there is no prima facie case found against the Respondents. The matter
was rightly closed under Section 26(2) of the Competition Act, 2002.

6|Page