M M Sharma May 24 2018 CCI re-imposes penalty of Rs522.4 million on BCCI for abuse of dominance Vaish Associates Advocates | Competition & Antitrust - India M M Sharma Competition & Antitrust FactsDecisionPenaltiesBy way of a November 29 2017 order, the Competition Commission of India (CCI) re-imposed a penalty of Rs522.4 million on the Board of Control for Cricket in India (BCCI) and reiterated the findings of its February 2 2013 order, which had previously been set aside by way of a February 23 2015 Competition Appellate Tribunal (COMPAT) order.FactsIn 2010 Delhi-based cricket fan Surinder Singh Barmi brought claims of alleged irregularities in the BCCI's grant of franchise, media and sponsorship rights in regard to Indian Premier League (IPL) matches.The CCI imposed a penalty of Rs522.4 million on the BCCI – nearly 4.48% of its average relevant turnover from the organisation of professional domestic Indian cricket leagues during the three preceding financial years – on the grounds that it had abused its dominant position in the market by:restricting competition while conducting IPL tournaments; andgranting exclusive media rights for the broadcasting of IPL matches to one TV channel (Sony TV) for a 10-year period.The BCCI appealed on the grounds of, among other things, violation of the principles of natural justice, and COMPAT remitted the case to the CCI for a fresh investigation to be conducted by the director general and an inquiry post-investigation. By way of a May 5 2015 order, the CCI ordered the director general to conduct further investigation into the matter in accordance with COMPAT's directions. On March 28 2016 the director general filed the supplementary investigation report.DecisionIs the BCCI an enterprise?The BCCI argued that it is a not-for-profit organisation established to promote cricket in India and does not engage in any kind of commercial activity with the aim of profiting; therefore, it cannot be considered to be an enterprise under Section 2(h) of the Competition Act or be held guilty of abuse of a dominant position. The BBCI's defence relied on the Supreme Court decision in Cricket Association of Bengal and the CCI decision in Arun Kumar Tyagi.The CCI held that despite there being no profit motive, the BCCI should be considered an enterprise. It observed that the definition of 'enterprise' was wide enough to include any entity performing an economic activity, and did not require such an entity to have a profit motive. The CCI highlighted various economic activities undertaken by the BCCI, which the International Cricket Council (ICC) also acknowledged. Lastly, the CCI referred to the EU decision in (MOTOE) v Elliniko Dimosio to support its conclusion that the BCCI should be considered an enterprise.Establishing the relevant marketThe director general defined the relevant market as the organisation of professional domestic cricket leagues and events in India. In the 2013 case it had defined the market differently; however, the CCI had criticised the director general's definition and held the relevant market to be the organisation of professional cricket leagues and events in India. Therefore, in the renewed case the director general provided a similar definition with similar reasoning and concluded that professional domestic cricket leagues and events are incomparable to general entertainment programmes, other sports and even other cricket formats.The BCCI argued that the director general had narrowly defined the market and considered only the supply and substitutability of the IPL. According to the BCCI, the director general was wrong to exclude other forms of entertainment programmes or sports from the relevant market. It argued that cricket competed with other sports and entertainment programmes for viewers, and emphasised that other entertainment programmes and sports events had higher television rating points than the IPL. In addition, it argued that the IPL had been promoted and was viewed as an entertainment programme; therefore, it was broadcast on a general entertainment channel, rather than a specific sports channel (the CCI failed to point out that the IPL is also broadcast on a specific sports channel – Sony SIX). The BCCI also argued that a particular cricket format is only a way of conducting competition and does not denote a separate relevant market. In light of these facts, the BCCI argued that consumers view the IPL and other entertainment programmes and sports events (including other forms of cricket) as substitutable; therefore, they form a single relevant market.Differentiating cricket from other sportsThe CCI noted that "each sport has its own fan following" and quoted the Lodha committee report to emphasise the strong consumer preference for cricket. Based on this fact, the CCI concluded that Indian consumers generally would not substitute cricket with any other sport.Differentiating professional T20 leagues from other cricket formatsThe CCI moved on to differentiate international and other domestic cricket from professional leagues, such as the IPL. The CCI noted that in international and domestic cricket, the players represent the nation or concerned state. However, in professional leagues, foreign players are also involved and the main aim of each party is to profit. Further, the CCI found that due to the method of selecting players (by auction) and the amount of commercial considerations involved, the IPL and similar professional leagues differ considerably from international and domestic cricket. Another point of differentiation was the fact that watching a three-hour IPL match is more convenient for consumers than watching international cricket matches, which are generally much longer.Differentiating the IPL from other entertainment programmesLastly, the CCI sought to differentiate the IPL from other entertainment programmes in order to refute the BCCI's argument that "all the entertainment programs form a single relevant market". The CCI opined that the BCCI's argument was based on a mechanical application of the substitutability test. It found that in contrast to other entertainment programmes, the IPL could be followed from different platforms, including radio, the Internet, newspapers and cricket grounds. The CCI used the 'small but significant non-transitory increase in price' test to conclude that consumers are unlikely to substitute the IPL with other forms of entertainment programmes. The CCI also referred to the BCCI's IPL media rights agreement, which indicated that even the BCCI felt that only other professional leagues could compete with the IPL.Is the BCCI dominant in the relevant market?The CCI concluded that the BCCI was dominant in the relevant market based on:its ICC membership;its rules;the pyramid structure of cricket in India; andthe BCCI's financial prowess.The BCCI did not object to this finding.Has the BCCI abused its dominant position?Despite recognising the need to regulate cricket in India in order to maintain the "integrity of the sport", the CCI held that the impugned restrictive representation given by the BCCI constituted abuse of its position as such conduct "resulted in denial of market access" for IPL competitors.The CCI observed that under Rule 28B of the BCCI rules, no affiliated member, player or umpire could participate or support a league unapproved by the BCCI. As such, no party could organise a league without BCCI approval. Since the BCCI had stated that it would approve no other professional league for 10 years, the market was foreclosed and competitors had been denied access. Further, the BCCI provided no reasoning as to why its conduct would help to regulate cricket in India. Therefore, the BCCI had abused its dominant position.PenaltiesAside from re-imposing a penalty of Rs522.4 million, the CCI directed the BCCI to:cease and desist from any future practice which would deny market access to potential competitors, including the inclusion of similar clauses in any agreement;desist from using its regulatory powers when considering and deciding on any matters relating to its commercial activities;establish an effective internal control system to the satisfaction of the CCI, in good faith and after due diligence; andrefrain from placing blanket restrictions on the organisation of professional domestic cricket leagues or events by non-members.Having followed these directions, the BCCI must issue appropriate clarification in regard to the rules applicable for the organisation of professional domestic cricket leagues and events in India, either by BCCI members or by third parties, as well as the parameters within which applications can be made and would be considered. The BCCI must take all possible measures to ensure that competition is unimpeded while preserving the aim of developing cricket in India.The BCCI must file a report to the CCI on its compliance with these directions within 60 days from receipt of the order.For further information on this topic please contact MM Sharma at Vaish Associates by telephone (+91 11 4249 2525) or email ([email protected]). The Vaish Associates website can be accessed at www.vaishlaw.com.