By way of a July 1 2016 order, the Competition Appellate Tribunal (COMPAT) set aside the penalty imposed by the Competition Commission of India (CCI) on the India Trade Promotion Organisation (ITPO) for allegedly:
- adopting a discriminatory policy in relation to the gaps between exhibitions and fairs at Pragati Maidan, New Delhi; and
- maintaining discriminatory practises against the allotment of spaces to private organisers.
The ITPO is a government-owned non-profit company meant to promote, organise and participate in industrial trade and other fairs and exhibition showrooms in India and abroad. Pragati Maidan is one of the assets placed at the ITPO's disposal by the government. The ITPO also manages and rents out spaces in Pragati Maidan, in consonance with guidelines, instructions and circulars issued by the government.
It was alleged that the ITPO established a 15-day period before and after a third-party event during which no other events of a similar nature could take place. However, for its own events and exhibitions, the IPTO introduced a policy which prevented other events of a similar nature from taking place 90 days before and 45 days after an IPTO event. In 2011 this was amended to a restriction of 90 days before and 90 days after an event.
During the detailed investigation by the director general, it was opined that the IPTO's policy was not per se unfair; however, the difference in the time restriction between ITPO and third-party events was found to be abusive.
The CCI, agreeing with the director general, held that by stipulating favourable time restrictions for its own events, as compared to third-party events, the ITPO imposed unfair and discriminatory conditions on the third-party event organisers at Pragati Maidan, in violation of Section 4(2)(a)(i) of the Competition Act 2002. Further, increases in the restrictions for holding third-party events before and after the ITPO's own similar events amounted to a denial of market access to the third parties competing with the ITPO to organise events at Pragati Maidan, in violation of Section 4(2)(c) of the act. The CCI also held that the ITPO used its dominant position in the Delhi event planning market to protect and enhance its position and thereby contravened Section 4(2)(e) of the act. The CCI imposed a penalty of Rs67.5 million on the ITPO at the rate of 2% of its average turnover for the preceding three years.
On appeal, COMPAT noted that although the ITPO had informed the CCI during the preliminary hearing that it had drafted a competition-friendly policy, which it planned to communicate to its stakeholders and the CCI in due course, the CCI nonetheless issued an investigation order.(1)
COMPAT stated that the director general was fixated on using Pragati Maidan as a benchmark for determining the relevant market. The director general made no attempt to compare Pragati Maidan with other venues available not only in the national capital region, but also in places such as Bangalore, Chennai, Mumbai and Hyderabad. According to COMPAT, the director general proceeded under the assumption that as the largest complex in Delhi, Pragati Maidan was the only venue which could define the relevant market.
COMPAT accepted the economic rationale provided by the ITPO – in particular, that its policy was meant to ensure that there was no overlap between similar exhibitions and events, as this could cause confusion. Holding similar events concurrently could lead to unhealthy competition and practices, such as poaching exhibitors and visitors, as well as taking advantage of the publicity efforts of one organiser. The ITPO's policy is one followed by leading venue owners worldwide.
COMPAT held that both the director general and the CCI had committed a significant offence by failing to consider ITPO's economic rationale – in particular, as the ITPO had the right to use its assets to its advantage with regard to third parties – despite the fact that the director general had permitted the ITPO's rationale. Relying on a landmark European Court of Justice decision,(2) COMPAT agreed that a person or entity cannot be compelled to part with its assets, permanently or temporarily, for the benefit of others where to do so might be detrimental to its interests, provided that it can objectively justify its refusal. According to COMPAT, the ITPO's economic rationale justified the difference in its policy.
COMPAT also held that the penalty imposed on ITPO was disproportionate and not based on any cogent reasoning. COMPAT thus set aside the CCI's order and the penalty.
For further information on this topic please contact MM Sharma at Vaish Associates by telephone (+91 11 4929 2525) or email ([email protected]). The Vaish Associates website can be accessed at www.vaishlaw.com.
Endnotes
(1) COMPAT order dated July 1 2016.
(2) Oscar Bronner GmbH Co KG v Mediaprint, ECJ [1998] ECR I-7791.
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