TMI Blog2015 (11) TMI 1818X X X X Extracts X X X X X X X X Extracts X X X X ..... ETITION COMMISSION OF INDIA VERSUS STEEL AUTHORITY OF INDIA LTD. [ 2010 (9) TMI 215 - SUPREME COURT ], an order passed by the Commission under Section 26(1) cannot be made subject- matter of appeal under Section 53-B but legality and propriety of an order passed under Section 26(2) can certainly be subjected to judicial scrutiny by the Tribunal. In other words, if in exercise of the appellate power vested in it under Section 53-B the Tribunal is satisfied that the negative opinion formed by the Commission on the issue of existence of a prima facie case is vitiated by an error of law, then it can set aside the impugned order and direct an investigation under Section 26(1) of the Act. Unfortunately, in the present case, the Commission has not undertaken an exercise to find out whether the information and written submissions filed by the appellant along with documents disclose a prima facie case. Instead, it went on to examine the merits of the allegations, relied on the information available on the website of the Ministry of Petroleum and Natural Gas, took into consideration the installed refining capacity of the industry as a whole and held that none of the players in the relev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om time to time without any consultation with the dealers and without giving them an opportunity to question the arbitrary clauses contained therein. Paragraph 10 of the information, which contains various clauses of the agreement indicating the abuse of dominant position by Respondents Nos. 3 to 7 is extracted below: 10. That to elucidate the abuse of the dominant position by the Oil Companies, the following clauses of the said Agreement are extracted hereunder : (i) Clause 3: The Dealer shall, during the continuance of this Agreement confine himself to selling only corporations products at the premises and shall not carry on from the said premises any business other than that of the sale of the products save and except and only to the extent, if any, to which the Dealer may be permitted in writing by the corporation at its sole discretion to carry on such other business at or from premises. (ii) Clause 4 : The Corporation reserves the right without reference to or consent of the Dealer to appoint one or more additional Dealer/s in the same town/ area or location and such and such additional Dealer/s shall be entitled to make sales of the products without any objection fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part with or otherwise transfer the premises or any part thereof or his interest in the dealership or any right or interest or benefit conferred by this Agreement or grant any license in connection with the said premises and/or outfit or any part thereof to any person, firm or Company to use the premises under the terms of this Agreement and/or specifically permitted in writing by the Corporation. (x) Clause 41(a) : The Dealer shall, whenever called upon by the Corporation to do so, lodge with the Corporation deposits or such sums of money as may be stipulated by the Corporation from time to time as security for the due fulfilment of his obligations and undertaking hereunder and for securing security payments of all sums due from him to the Corporation. The Corporation will not allow interest to the Dealer on cash deposits but in the case of securities yielding interests, the Corporation may without being bound to do so, collect the interest thereon and pay the amount thereof to the Dealer. The deposit shall be held by the Corporation subject to such further terms and conditions as may be stipulated by the Corporation from time to time. The Dealer agrees that the Corporation sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o such sum as the dealer may himself have expanded in the erection and installation of the site of the said buildings, structures and fixed assets. The aforesaid element of the price shall be reduced by depreciation as such rates as may have been applicable under the taxing statutes in force on the date on which such notice as aforesaid shall have been given by the Corporation. The costs of the sale or assignment excluding only professional legal costs incurred by the dealer shall be borne by the corporation. In the event of the dealer title to the immovable assets being in any way defective in the opinion of the corporation or its lawyers require him to take (but at the corporations expenses) to cure such defects. If such defects cannot, however, be cured the corporation shall have the right to rescind the contract for sale or assignment without liability to pay costs or damages. The corporation shall also have the right exercisable in the time and in manner aforesaid to require the dealer to sell to the corporation or its nominee the goodwill attributable to the dealers business and the stock in trade and assets thereof at a price which shall be determined jointly by two valuers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sure. It is from this perspective, that the market definition makes it possible, inter alia, to calculate market shares that would convey meaningful information regarding market power for the purpose of assessing dominance or for the purpose of applying Article 102. (Paragraph 2). (ii) The Relevant Market Notice states that the definition of the relevant market in both its product and geographic dimensions often has a decisive influence on the assessment of a competition case (Paragraph 4), and defines the relevant product market as one which comprises all those products and/or services which are regarded as interchangeable or substitutable by the consumer, by reason of the products; characteristics, their prices and their intended use (Paragraph 7). The relevant geographic market is defined as one which comprises the area in which the undertakings concerned are involved in the supply and demand of products or services, in which the conditions of competition are sufficiently homogenous and which can be distinguished from the neighbouring areas because the conditions of competition are appreciably different in those areas. (Paragraph 8). The European Commission Market Notice is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Assam are domicile for the applicant for dealership to be within state of Assam, requirement of land holding within State of Assam (regulatory trade barriers, local specification requirement, adequate regional distribution facility as per section 19(6) of the Act) and from the consumers point of view too it shall be state of Assam since the consumers would satisfy their daily requirements from the petrol pumps within the state of Assam and from a dealer who would speak the local language (local language requirement, consumer preference as per section 19(6) of the Act). (xi) Therefore when the parameters laid out in sections 2(r), (s), (t), 19(5), (6) and (7) are applied then it becomes even more clear that definition of relevant market liable to be applied in the present case is oil marketing and distribution within the state of Assam. 3. Dominance (i) The holding of the Government of India in the PSU OMCs is as follows: IOCL 78.92% BPCL 54.93% HPCL 51.11% (figures available on the website) Government has its nominee directors on the board of all three PSU OMCs. (i) The Government of India in terms of Article 77 of The Constitution of India conducts business of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Division of Respondent No. 2, therefore the three PSUs even after deregulation continue to have uniform prices. The idea of deregulation was to get the prices determined through market forces yet government continues to give a platform to the PSU OMCs for fixing uniform prices in the market. The PSU OMCs do not compete with each other and the market therefore sees no competition between them. Respondent No. 2 and its allied departments and divisions along with three oil companies will not be exempt from the provisions of this Act and are liable to be held accountable for the violation of this Act. (viii) The retail operations are also conducted by the three PSUs in consultation with each other and under a common strategy. The details of the working, which clearly reflect common control of all three PSUs is reflected in ensuing paragraphs. (ix) The appellant herein had approached the Respondent No. 1 with an information against the Oil Marketing Companies, namely IOCL, HPCL and BPCL who together have a super dominant position in the market for oil distribution and marketing in India. The three PSU OMCs work in co- ordination with each other and take their directions from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dra 88 (Retail outlet model of IOL for rural areas) HPCL 75 BPCL 80 Greater Guwahati Region IOCL 52 HPCL 13 NRL 20 BPCL 7 Total Retail outlet break up in Assam IOCL 550 HPCL 98 BPCL 87 NRL 20 Total 755 The % market area of different OMCs is as given below: IOCL 72.84% HPCL 12.98% BPCL 11.52 NRL 2.64 (xvi) It is evident from the data above that IOCL is in a super dominant position in Assam region out of the other PSU OMCs and together they hold 100% of the market share. (xvii) On a demurrer even if entire India is the relevant market IOCL would still emerge as a dominant enterprise. 5. The Commission considered the allegations contained in the information, but refused to order an investigation under Section 26(1) by recording following observations : 13. From the Agreement For Dealer Control Outlets, it appears that the oil companies are engaged in the business of refining and sale of petroleum products (Petrol/ HSD/ Motor Oil/ Grease etc.). Thus, to examine the allegations made by the informant, the relevant market in the present case may be considered as the market for refining and sale of petroleum products (Petrol/ HSD/ Motor Oil/ Grease etc.) in India. 14. To ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fall in any of the aforesaid clauses of section 3(4) of the Act. Even otherwise, nothing unfair or anti-competitive can be gathered therefrom. 20. Furthermore, the informant is specifically aggrieved by clause 42 whereby the Guidelines issued by IOCL are to be observed by the dealers. It appears that the Marketing Discipline Guidelines relate to the following aspects: Procedure for handling of products at Retail Outlets by dealers; Receipt of product; Decanting of product; Stock/ price controls; Quality/ Quantity control measures; Observance of statutory other regulations; Customer service general amenities; Industry Guidelines for Sample collection and Testing; Handling of MS/ HSD/ SKO at Companys storage points and Duties of Oil Companies; Quality/ Quantity checks; Sealing/ GPS; Training of dealer/ dealers staff; Maintenance of Companys equipments at Retail Outlets; Dispensing units Standardizations of report; Maintenance of pumps other equipments; Rectification of defects in Dispensing units/ pipeline/ tanks; Detection of presence of water in tanks; Type of Irregularities at Retail Outlets; Adulteration of product and; Short delivery of products etc. etc. 21. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s such orders as it deems fit and send a copy of its order to the Central Government or the State Government or the statutory authority or the parties concerned, as the case may be. 8. A reading of the above-quoted provisions makes it clear that while examining information received under Section 19, the Commission has only to satisfy itself whether or not there exists a prima facie case requiring an investigation. If the Commission finds that the averments contained in the information do not disclose any prima facie case, then only it can order closure of the matter. However, for that purpose the Commission cannot delve deep into the merits of the allegations, rely upon undisclosed material and record a finding on the tenability or otherwise of the allegations.What we wish to emphasise is that while scrutinising the allegations contained in the information, the Commission should not confuse the formation of prima facie opinion with the final determination of the issues raised by the informant. 9. In view of the judgement of the Supreme Court in Competition Commission of India Vs. Steel Authority of India Limited and Another [(2010) 10 SCC 744], an order passed by the Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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