Vessel-sharing agreements exempt from Competition Commission's purview
By its February 5 2015 notification the Ministry of Corporate Affairs exempted vessel-sharing agreements in the liner shipping industry from Section 3 of the Competition Act 2002 for one year, starting from the date of publication of the notification in the Official Gazette. This exemption was created in the public interest. Vessel-sharing agreements were initially exempted from Section 3 of the act for one year with effect from December 11 2013 to December 10 2014, subject to the monitoring of agreements, which were to be filed, with the Directorate General of Shipping. After a joint review between the Competition Commission and the Directorate General of Shipping, an extended exemption was granted until February 4 2016. Vessel-sharing agreements are meant to make it easier to do business in the liner shipping industry. Best practices include not indulging in anti-competitive practices (eg, fixing prices, limiting capacity or sale and allocating markets or customers). On April 23 2015 the shipping minister of state provided information in this regard in a written reply in Lok Sabha.(1)
By its February 23 2015 order the Competition Appellate Tribunal set aside a Competition Commission order dated February 8 2013, in which the commission imposed a penalty of Rs522.4 million on the Board of Control for Cricket in India (BCCI) for alleged abuse of dominance under Section 4 of the Competition Act. While allowing for an appeal, the tribunal observed as follows:
"the issue of abuse of dominance is legally unsustainable and is liable to be set-aside because the information downloaded from the net and similar other material do not have any evidentiary value and, in any case, the same could not have been relied upon by the Commission without giving an effective opportunity to the appellant/BCCI to controvert the same."
In two separate orders dated April 10 2015, the Competition Commission held VeriFone India Sales Pvt Ltd guilty of abusing its dominant position in contravention of Section 4(2)(a)(i) of the Competition Act.
In the first case M/s Atos Worldline India Pvt Ltd filed information with the commission alleging that VeriFone had imposed restrictions on the use of licenced software for the development of payment software which directly or indirectly interacted with any acquiring bank by limiting and controlling the provision of value-added services (VAS) and the technical and scientific development of VAS used in point-of-sale terminals in India. While finding VeriFone guilty of abuse of its dominant position in the relevant market (ie, point-of-sale terminals in India), the commission observed that the "restriction placed on the Informant limits/restricts the technical and scientific development of VAS used in point of sale terminals in India". Further, the commission held that the aforementioned restrictive clause discouraged the informant from investing in the development and innovation of VAS, as its business was adversely affected by the clause. The commission found VeriFone to be in violation of Sections 4(2)(a)(i), 4(2)(b)(i), 4(2)(b)(ii) and 4(2)(e) of the act and imposed a penalty of Rs44.8 million (5% of the average turnover for the last three years).
In the second case M/s Three D Integrated Solutions Ltd filed information with the commission alleging that VeriFone had abused its dominant position by restricting the provision of VAS and limiting technical and scientific development of VAS used in point-of-sale terminals in India. The commission observed that the "intent of VeriFone seems to be to exploiting for the VAS players by either restricting them or sharing their revenue because VAS market is highly profitable". As VeriFone was in a dominant position in the relevant market, the commission held that it was enhancing its position in the downstream market by including a restrictive clause in its software development kit agreements and preventing VAS providers from using development tools (eg, the software development kit) on reasonable terms and conditions. Further, the commission held that the clause which restricted the use of "the licensed software to develop any payment software that directly or indirectly interacts with any acquiring bank" was unfair and restrictive. The commission also noted that VeriFone's software development kit licence agreements prevented third parties from writing a payment application in India – something which was contrary to VeriFone's worldwide practice, as was evidenced from a statement on its website (ie, "VeriFone offers a selection of developer tools and drivers to help programmers design and develop efficient, professional payment applications that complement our payment systems"). The commission thus ordered VeriFone to cease and desist its anti-competitive activities.(2)
For further information on this topic please contact MM Sharma at Vaish Associates by telephone (+91 11 4929 2525) or email (firstname.lastname@example.org). The Vaish Associates website can be accessed at www.vaishlaw.com.
(2) Competition Commission order dated April 10 2015, available at www.cci.gov.in.
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