TMI Blog2011 (5) TMI 1124X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon ble Delhi High Court in Writ Petition (Civil) No.5770 of 2011, contesting certain conduct and practices of AICF. Looking into the nature of allegations and the issues involved, the Hon ble Delhi High Court disposed of the Writ Petition with the direction to file an information before the Commission under Section 19 (1)(a) of the Act. 3. AICF is a society registered under the Tamil Nadu Societies Registration Act, 1975 as the National Sports Federation ( NSF ) for the sport of chess. AICF is also recognised by and affiliated to, Federation Internationale des Echecs ( FIDE ), which is the apex International body governing the sport of chess. 4. The Informants are chess players registered with AICF on an annual basis. The Informants have contended that the registration form, inter-alia, contains a declaration which states that the player will not participate in any tournament / championship that is not authorised by AICF. It has been further contended that such registration is necessary if the players want to be selected for National or International events. The Informants have alleged that if any player participates in any tournament not authorised by AICF, he/she will be b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating in such tournaments. AICF also provides technical support for conduct of chess tournaments. This clearly brings out the fact that AICF provides services to the Informants, other chess players and those who are interested in conducting chess tournaments/events. All these economic activities fall within the ambit of Section 2(h) of the Act and thus, AICF has been found to be an enterprise. 8.2 Relevant market: From the demand side, chess players cannot shift to any other sports body conducting any other sport in response to a change in the supply conditions of the sport of chess. From the supply side, conducting and governing chess events in India constitute a separate and unique service market as the supply of such service cannot be considered substitutable or interchangeable with any other sport like hockey, etc. Accordingly, the relevant market has been found to be the market for conducting and governing domestic and international chess activities for both men and women and the underlying economic activities in India . 8.3 Dominance: Ministry of Youth Affairs and Sports ( MYAS ) has granted status of NSF to AICF. Further, AICF is the only national level chess federati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g them to get the best resources and players for organising/participating in their events. This was found to be in contravention of the provisions of Section 4(2)(c) of the Act. (c) Removal of ELO/FIDE rating of players by AICF: ELO ratings being the benchmark of standard performance, is the most important rating for chess players. AICF imposes unfair or discriminatory conditions on players by debarring them from its roll and also by removing their ELO rating on their participation in chess events not approved by it. (d) Sharing of non-refundable Earnest Money Deposit (EMD) by AICF: The investigation has revealed that the practice of collecting EMD out of grants provided to AICF amounts to misutilisation of funds as it deprives the organisers to utilise this amount for meeting the expenses of tournaments. This practice of AICF was found to be in contravention of Section 4(2)(a)(i) of the Act. (e) Sharing of entry fee for various categories: In terms of the norms of AICF regarding National Championships, any chess player can participate in the competition under the category special/ donor entry and there is no restriction on the number of such entries. AICF collects fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew of these, it was concluded that AICF s conduct is in contravention of Section 4(2)(a)(i) of the Act. 8.5 Violation of Section 3 of the Act: With regards to violation of Section 3 of the Act, it has been concluded by the DG that practices and various clauses in the Constitution and Bye Laws of AICF have caused appreciable adverse effect on competition in the country because they have harmed competition, in terms of various factors enumerated under Section 19(3) of the Act, such as creation of entry barriers, driving existing competitors out of the market and foreclosure of competition. These have the effect of limiting and/or controlling supply, market, technical development and provisions of services, in contravention of the provisions of Section 3(3)(b) of the Act. As regards violation of Section 3(4), DG found that vertical relationship does not exist between AICF and its players and thus, would not attract the provisions of Section 3(4) of the Act. D. Consideration of Investigation Report by the Commission 9 The Commission considered the Investigation Report submitted by the DG, in its ordinary meeting, held on 08th November, 2012 and decided to forward copies of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of AICF as an enterprise, the Commission relied on additional material, including excerpts from the website of FIDE and financials of AICF, to infer AICF as an enterprise. Given the nature of allegations and characteristics of the services involved, the Commission defined two relevant markets: (a) market for organization of professional chess tournaments/events ; and (b) market for services of chess players . It was observed that AICF enjoys dominant position on account of the regulatory powers enjoyed by AICF (under the pyramid structure of sports governance) in the market for organization of professional chess tournaments/events in India. AICF was also stated to be dominant in the market for services of chess players due to its regulatory power including its abilities to restrict movement by imposing conditions on professional players who do not possess any bargaining power. 11.2 The abusive conduct, as identified by the DG, relating to the process of bidding and sharing of non-refundable earnest money deposit by AICF; sharing of entry fee for various categories; and making organisation of events commercially unviable for competing organisers were observed by the Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mants, latest by 13th March, 2018. Submissions were filed by Informants and AICF on 6th March, 2018 and 13th March, 2018, respectively. These would be dealt with in detail, while analysing the matter on merits. G. Analysis and findings of the Commission 13 The Commission has perused the information, the Investigation Report, the suggestions/ objections to the Investigation Report filed by the parties, submissions of parties to the order dated 11th December, 2018 of the Commission and other material available on record as well as the contentions raised by the parties in the hearing on 21st February, 2018. Upon consideration of the aforesaid, the following issues arise for determination in the present matter: (i) What is/are the relevant market(s)? (ii) Whether AICF enjoys dominant position in the relevant market(s)? (iii) If the answer to Issue No. (ii) is in affirmative, whether AICF has abused its dominant position in the relevant market(s)? (iv) Whether the declaration, which the players are made to sign by undertaking not to play any open tournament, is anti-competitive agreement as per the Act and it causes appreciable adverse effect on competition as per Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnaments/ events and also undertakes incidental/ related activities that generate income. 18 AICF vehemently objected to the conclusion of DG as well as observations of the Commission, in its order dated 11th December, 2017, that AICF is an enterprise under Section 2(h) of the Act. AICF has claimed that, being a regulator of the game of chess, it performs its functions without any profit motive and is thus not an enterprise under Section 2(h) of the Act. As per AICF, the sport of chess does not generate interest of viewers and there is no income earned through sale of tickets, television rights or advertisements. It was submitted that mere collection of registration fee is not an economic activity and does not generate income for AICF either. This fee collected is utilised towards maintenance of the database and preparation of the rank list etc. 19 It has been further contended that none of the tournaments referred to in Commission s order dated 11th December, 2017, were organised by AICF and they were instead organised by respective State Associations or clubs. AICF only monitors and regulates these tournaments and strictly keeps itself out of the economic activities ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aments under its Constitution, makes it an enterprise as per the Act. 22 Moreover, a perusal of the material available on record shows that AICF, inter- alia, has been engaged in organisation of chess events. For instance, the Annual Report of AICF for the Financial Year 2015-16 states that the Central Council of AICF decided to honour the above medal winning Olympiad team members by organising an India-China summit clash chess match with the prize fund of ₹ 10 lakhs sponsored by AICF. (emphasis added) The extracts from the website of FIDE also confirm that to celebrate the historic bronze medal winning performance of India in the Tromso Olympiad 2014, All India Chess Federation organises India China Chess summit 2015, supported by Telangna State Chess Association at Marriot Hotel, Hyderabad from 2nd to 10th March . The same website, at another place, states that The All India Chess Federation (AICF) will organise the World Youth U-16 Chess Olympiad in Ahmedabad, India from 10th December (Arrival) to 20th December (Departure), 2017 conducted under the auspices of Federation Internationale Des Echecs (FIDE) . The Annual Report of AICF for the financial year 2011-12 st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... demonstrated as to how the contents of audited accounts are different from the unaudited accounts. The minutes of the Annual General Body meeting of AICF dated 20th June, 2008, inter-alia, state that As recommended by the Central Council it was resolved to share the remuneration from Doordarshan for telecast of our chess programmes with LIVE Tele Shows in the ratio of 40:60 (60% for LTS) . The Informant has also submitted that AICF generates income from registration fee, recognition fees (i.e. share of prize money) entry fee, non-refundable earnest money deposits, donor entry fees, etc., which is evident from chart on money received by AICF in the Financial Year 2011-12, 2012-13 and 2013-14. These aspects clearly establish the revenue generating nature of the activity. 25 AICF has also asserted that all fees collected by AICF including the registration fees, earnest money deposit is based on its financial regulations and the intention behind collection of fees is to regulate the game and collect funds to plough it back to sport in the form of prize money to players, expenses for training of coaches, arbiters, etc. It has further submitted that the money received from Doordarsh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Performance of these activities by AICF is found to be sufficient to hold it as an enterprise as defined under Section 2(h) of the Act. 29 AICF has raised another preliminary issue concerning non-service of the order dated 09th February, 2012 under Section 26(1) of the Act, which according to it amounts to violation of principles of natural justice. It has contended that the said order came to its knowledge only when it received the Investigation Report dated 11th October, 2012. AICF as such was unable to challenge the proceedings before the Commission including the order passed under Section 26(1) of the Act due to non-service of the said order. However, at a later stage, AICF challenged the order dated 09th February, 2012 before the Hon ble Madras High Court by filing a writ petition [Writ Petition (C) No. 34039 of 2012] and the same is pending. 30 The Commission notes that a preliminary conference was held with the parties on 15th December, 2012 before forming its prima facie opinion. It was only after holding such conference, that the order dated 09th February, 2012 was passed by the Commission. The Hon ble Supreme Court in Competition Commission of India v. Steel Author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t geographic market or with reference to both the markets. Section 2(s) of the Act defines relevant geographic market as a market comprising of the area in which the conditions of competition for supply of goods or provision of services or demand of goods or services are distinctly homogeneous and can be distinguished from the conditions prevailing in the neighbouring areas. Section 2(t) of the Act defines relevant product market as a market comprising of all those product or services which are regarded as interchangeable or substitutable by the consumer by reason of characteristics of the products or services, their prices and intended use. 33 In the instant case, the DG has found the relevant market to be the market for conducting and governing domestic and international chess activities for both men and women and the underlying economic activities in India . While differing with the definition of DG, the Commission, in its order dated 11th December, 2017 observed that there are two relevant markets in the instant case, namely, market for organization of professional chess tournaments/events and market for services of chess players , keeping in mind the impugned restri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tainment do not constrain chess in any manner. On a perusal of the materials available on record, including the Investigation Report and the written submission of the parties, it emerges that chess tournaments are conducted at National, State and District level. Chess tournaments are also conducted by universities, clubs and other organisations. However, the Commission does not find it necessary to segment or sub-segment the market based on different levels as the impugned restrictions of AICF apply to all types of professional chess tournaments/ events organised in India. Accordingly, the relevant product market to assess restrictions on organisations of the chess events will be the market for organisation of professional chess tournaments/events . In this regard AICF has stated that it does not organise any event and as such is not a constituent of the said relevant market for organisation of professional chess tournaments in India. The Commission has already dealt with the aspect of AICF being an enterprise involved in organisation of professional chess tournament, hence their argument is not tenable. 37 As regards the assessment of the impugned conduct relating to special/d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rn the game of chess in India, which includes selection of Indian chess players, conducting national, open and international tournaments, approving tournaments, placing restrictions on participation of players, etc. Based on these factors, DG concluded that AICF enjoys dominant position in the market for conducting and governing domestic and international chess activities for both men and women and the underlying economic activities in India. 42 In its order dated 11th December, 2017, the Commission also observed that AICF enjoys dominant position in both the relevant markets delineated therein, i.e., market for organisation of professional chess tournaments and market for services of chess players . It was observed that AICF enjoys dominant position in both the relevant markets on account of the regulatory powers enjoyed by it under the pyramid structure of sports governance. In response, AICF has contended that it is governed by National Sports Code that has a policy of One Sport One Body . As a result, AICF enjoys dominant position for controlling and managing the game of chess. However, its activities cannot be subjected under Section 4 of the Act as it performs only reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... layers registered with AICF alone will be eligible to participate in the Championships. 47 These rules undoubtedly confer AICF with control over professional chess players in India, who have no bargaining power. As per the rules, the players desirous of participating in FIDE/Asian/Commonwealth Championships are mandatorily required to participate in National Championships organised by AICF. Further, players registered with AICF alone can participate in State, National and International Championships recognised by FIDE and AICF. By controlling the participation of professional chess players in chess events organised by other entities, AICF enjoys control over organisation of chess events. The Commission notes that sports federation like AICF engaged/ involved in organisation of sports events and economic exploitation of such events are put to advantage if they are vested with the authority to approve/sanction organisation of similar events by other. Undoubtedly, such advantage is a significant source of market power. Further, AICF s regulatory role empowers it to create entry barriers for other chess events other than those recognised by it, in form of requiring recognition. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss tournaments/events in India and market for services of chess players. Issue 3: Whether AICF has abused its dominant position in the said relevant market(s)? 51 Having established the dominance of AICF in both the relevant markets, Commission would now deal with the alleged abuses. (i) Restriction on chess players and organisation of chess tournaments 52 The Commission notes that the impugned restrictions on chess players to participate in tournaments, such as those organised by CAI, not authorised by AICF, actions taken thereof are relatable to both the relevant markets. Accordingly, they are being dealt with together. 53 At the outset, the Commission notes that competition cases relating to sports associations/federations usually arise due to conflict between their regulatory functions and economic activities undertaken by them. The Commission is of the view that system of approval under the pyramid structure of sports governance is a normal phenomenon of sports administration. However, rules governing the players and the organisation of sport events/ tournaments often create a restrictive environment for the economic activities that are incidental to sport. Un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt the individual features of each case. It does not allow for the formulation of general guidelines on the application of competition law to the sport sector. (emphasis added) 55 Commission notes that DG has relied upon several evidences to arrive at its finding of abusive conduct on account of restrictions imposed. These are discussed hereunder: (a) In the present case, while registering with AICF, chess players are made to sign a registration form, which amongst other declarations also contain a declaration to the effect that they will not participate in any unauthorised tournament/ championship. Relevant portion of the Registration Form reads as follows: I also declare that I will not participate in any un-authorised tournament/ championship . It is noted that the restriction is absolute and does not leave any scope for players to participate in any tournament not authorised by AICF. Further, neither the Bye laws nor the constitution of AICF define what is an unauthorised tournament. (b) Clause Z of the Code of Conduct for the Players further stipulates that players participating in unauthorised chess tournaments may be subjected to disciplinary action includ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess Association of India in future as their events are not organized by All India Chess Federation and as such not authorized by AICF. This is to further remind all AICF registered players that you have signed a declaration in the players registration form, which we quote for your ready reference. I also declare that I will not participate in any unauthorized tournament/ championship . By playing in the tournaments or conducted by Chess Association of India, the registered players of AICF will attract disciplinary action and hence are cautioned against playing in the tournaments to be organized by the rival body. Published on 09 December, 2009 . The aforesaid brings out that AICF used the power it possessed to deny other organisers like CAI to access the relevant markets. It is pertinent to mention that AICF has referred to CAI as a rival body. (d) The investigation has revealed that there were other instances of AICF restricting players who had participated in events not recognised by AICF, from participating in other chess events. The relevant extracts of the Investigation Report are reproduced as under: (i) E-mail dated 4th April, 2011 of Bangkok Chess Club Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h unauthorized tournaments may be permitted to play in all tournaments of AICF and its affiliates after one year of their apology letter if recommended by respective State Associations. For those players who have won cash prizes, a penalty equal to won cash prizes is imposed before permitting them to play in all tournaments of AICF and its affiliates after one year of their apology letter. AICF has further conveyed that if such players repeat the mistake after giving apology letter, a life ban will be imposed upon them. The Commission notes that AICF wrote letters to Bangkok Chess Club and Railways Sports Promotion Board informing CAI s initiatives to be unauthorised and advised that players associated with it should not be allowed to participate in chess tournaments/events. Pursuant to these communications RSPB also issued a circular inter alia conveying its decision that any player who participates in any chess tournament which is not recognised by AICF, will not be allowed to participate in All India Railway Chess Championships and will also not be selected for Indian Railways Chess Team. The aforesaid brings out the great length to which AICF went against the rival organisat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18 on this aspect. The Informants have highlighted that declaration requiring the players not to participate in unauthorised tournaments which is contained in the registration form was introduced in the year 2011, with the amendment in byelaws. However, AICF has been enforcing this undertaking even prior to amendment of bye laws. According to them such a clause is not in consonance with the spirit of free and fair competition. Such undertakings are not a part of the player s registration forms by other NSFs in games such as Kabbaddi, Badminton, Boxing and many more. The Informants have contended that AICF, by imposing restrictions has spoiled career of more than 2500 chess players in India. AICF has taken punitive action of removal of International ratings and thus, denied them from participation in national and international events. Further, their ELO ratings were also removed and they were asked to surrender fifty (50) percent of the prize money won. Informants have stated that the action was taken by AICF based on a caution notice issued on its website without serving any show cause notice on them. Further, as submitted by the Informant no. 3 , the ban continues and pursuant to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... events not recognised by AICF may not be considered for ELO ratings, complete prohibition from being part of such events denies them professional opportunities for career growth. Usually the calendar for National and International events is known well in advance. Hence, it is not understandable why there should be complete restriction in participating in events that are not clashing with major National and International events or conflict with the training schedule. Normally, participating in other chess tournaments may not entail risks in terms of safety and health of the players, which could be true for other sports, as it does not involve rigorous physical activity. Thus, AICF has not been able to demonstrate how such a blanket ban is necessary to preserve the integrity of sport and towards promoting the game. 59 Being the de-facto regulator of the game of chess, it is understandable that AICF would have to put in place certain restrictions or some regulatory mechanism that are indispensable to preserve the interest of the game. Such stipulations however have to be proportionate and inherent to preserving the integrity of the sport. Due regard needs to be given to the specifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided to AICF. Investigation also brought out that AICF has been sharing the entry fee in respect of all types of entries (normal / seeded entry / special or donor) as a pre-condition in the process of awarding the task of organising the chess championships to its affiliates. The use of this amount by the AICF deprives the organisers to utilise this amount for meeting the expenses of tournaments and promoting the welfare of the game of chess. This conduct of AICF was found to be in contravention of Section 4(2)(a)(i) of the Act. 64 In response, AICF contended that the money collected from Government (MYAS) directly goes to State Associations. Further, the money given by Government is spent on boarding and lodging for players and coaches. Money received as entry fees and EMD is used for various expenses like prize money and other promotional events for which grants are not given by the Government. Therefore, there is no question of misutilisation of funds. 65 In this regard, the Commission notes that though the sharing of non-refundable EMD and entry fee reduces the money available with the organizers, it may not be regarded as anti-competitive. Considering the low popularity o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in contravention of Section 4(2)(a)(i) of the Act. 67 AICF, on the other hand, has submitted that AICF has not violated LTDP by permitting special/wild card entries. Special/Wild card/Donor entries help to discover hidden talents and the rationale for charging a higher fee charged for such entries is to restrict the number of entries. It has been further contended that allowing such donor entries is an international practice and cannot be regarded as unfair. Selection of players is AICF s sole discretion and is purely based on performance and merit. AICF has stated that award of certificates has been done properly. 68 In this connection, the Commission finds merit in the submissions of AICF that such entries may help in discovering hidden talent. Such practices are internationally accepted and Commission has no reason, whatsoever, to consider the practices of allowing donor entries/special entries/wild card entries as abusive under Section 4 of the Act. 69 With regard to issuance of the certificates, the Commission is of the view that the irregularities pointed out do not have any exclusionary or exploitative effect either on players or competition. Thus, such conduct doe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts. These consequences create entry barriers, foreclose competition and restrict opportunities available to chess players. The said restrictions are likely to have appreciable adverse effect on competition in terms of factors contained in Section 19 (3) of the Act. The Commission is thus, of the view that AICF has contravened Sections 3(4)(c) and 3(4)(d) of the Act read with Section 3(1) of the Act. ORDER 74 Having found the conduct of AICF to be in contravention of Section 4, the Commission orders the following remedies, which are necessary, sufficient and proportionate to address the harm to competition flowing from the impugned abuses: (a) AICF shall cease and desist from indulging into the aforesaid conduct, which is found to be in contravention of the provisions of Sections 4(2)(b)(i) and 4(2)(c) read with Section 4(1) of the Act; (b) AICF shall lay down the process and parameters governing authorisation/ sanctioning of chess tournaments. In doing so, AICF will ensure that they are necessary to serve the interest of the sport and shall be applied in a fair, transparent and equitable manner. Besides, AICF shall take all possible measure(s) to ensure that competitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e proper yardstick, it brings home the concept of relevant turnover . 78 Thus, the starting point of determination of appropriate penalty should be to determine the relevant turnover and then, to calculate the appropriate percentage of penalty based on facts and circumstances of the case. The Commission has held that the contravening anti-competitive conduct of AICF amounts to denial of market access in the market for organisation of professional chess tournaments and imposition of unfair conditions as a consumer in the market for services of chess players. The relevant turnover for this contravention would be the revenue of AICF from the market for organisation of professional chess tournaments. 79 Accordingly, Income reported under the sub- head Tournament and Fees Receipts , in the audited financial statements of the AICF, available on its own website http://aicf.in/ has been taken as relevant turnover. Further, the Commission notes that the conduct has continued till date and thus, it can impose penalty based on financials of AICF during the preceding three (3) years. Accordingly, the average of relevant turnover during the financial years 2014-15, 2015-16 and 2016-17, ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
