Mr. P.V. Basheer Ahamed (hereinafter, the Informant) has filed the instant information under Section 19(1)(a) of the Competition Act, 2002 (hereinafter referred to as the Act) against M section Film Distributors Association (Kerala) (hereinafter, OP- 1) and M section Kerala Film Producers Association (hereinafter, OP-2) (OP-1 and OP-2 together referred to as Opposite Parties) alleging contravention of Sections 3 and 4 of the Act.

Brief details of the facts presented in the information are as follows: 2.1.

The Informant exhibits movies in his theatres viz. Liberty Paradise, Liberty Movie House, Liberty Little Paradise and Liberty Suite, all located at Thalassery, Kannur District, Kerala.

The Informant is also an office bearer of Kerala Film Exhibitors Federation (hereinafter, KFEF), which is one of the associations of exhibitors in Kerala.

There was a pending dispute between OP-1 and KFEF with respect to revenue- sharing between distributors and exhibitors of Malayalam movies.

In relation to the said dispute, a special meeting was convened by the Kerala Film Development Corporation with different organisations in the Malayalam film Industry on 7th March, 2003.

In the said meeting, it was resolved that during the first week of movie releases in air-conditioned theatres, the share of distributors and exhibitors would be 60 and 40 respectively.

Contrary to the above understanding arrived at on 7th March, 2003, OP-1 unilaterally changed the revenue-sharing arrangement for air-conditioned theatres and multiplexes operating in shopping malls in the State of Kerala.

The revenue share of such theatres was increased to 50 during the first week of release of a movie.

The Informant, being an office bearer of KFEF, took up the issue with the Kerala State Film Development Corporation on 7th October, 2015 and sought parity between air- conditioned theatres operating in shopping malls and others.

However, this demand was not acceded to due to the clout enjoyed by the Opposite Parties in the Malayalam Film Industry.

As a result, KFEF was forced to call for a strike in the State of Kerala which was later called off due to the intervention by the Chief Minister.

Subsequently, several distributors who had initially agreed to release movies in the theatres of the Informant refused to do the same on account of an unofficial ban imposed by the Opposite Parties.

In support of such contention, two letters dated 24th October, 2016 and 22nd November, 2011 from L J films Private Limited and M section Friday Tickets, respectively, were enclosed with the information.

The Informant was hence, compelled to close down his theatres as he was not getting movies on account of the unofficial ban imposed by the Opposite Parties.

The Informant has contended that such unofficial ban imposed by the Opposite Parties on the theatres of the Informant, for collective decision taken by KFEF, shows a conspiracy to exterminate the Informant financially and oust him from the Malayalam film industry.

The Informant has alleged that such ban amounts to a cartel and abuse of dominant position, in contravention of the provisions of Sections 3 and 4 of the Act.

The Commission considered the information on 27th June, 2017 and had a preliminary conference with the parties on 9th August, 2017.

During the preliminary conference held on 9th August, 2017, the Informant reiterated the allegations contained in the information.

On the other hand, the Opposite Parties contended that they did not impose any ban on the Informant and they have no role in the disputes between individual distributors and the Informant.

OP-1 alluded that individual distributors had refused to give movies to the Informant due to his demand for higher revenue share.

OP-1 also averred that KFEF, in which the Informant had been an office bearer, had forced its members not to screen movies scheduled for Christmas, as a result of which producers and the Government had to incur loss to the extent INR 20 Crore.

OP-1 further contended that the Informant had closed down his theatres on his own accord to renovate them on par with multiplexes and movies are being released in the theatres of the Informant since April, 2017.

In response, the Informant contended that refusal of movies between January and April, 2017 was a result of a ban imposed by the Opposite Parties.

The Informant also suggested that he could produce his bank statement evidencing refund of money by a few distributors who had initially agreed to give him movies.

Upon hearing the parties, the Commission allowed them to file their written submissions and evidence relating to the allegations on Affidavit.

Accordingly, the Informant and OP-1 filed their Affidavits on 21st August, 2017 and 24th August, 2017, respectively.

In his Affidavit, the Informant has submitted that OP-2 issued a notice dated 22nd February, 2017 to him purportedly making wrong allegations.

He responded to the said notice on 25th February, 2017.

The Informant also wrote letters dated 2nd March, 2017 and 28th March, 2017 to OP-1 and Kerala Film Chamber of Commerce, respectively, seeking revocation of the ban imposed on the theatres of the Informant.

To support the allegations levelled, the Informant has also enclosed his bank statement to suggest that two distributors returned the advance paid to them for exhibition of their movies in the theatres of the Informant.

In its reply dated 24th August, 2017, OP-1 has contended that the purported confirmation letters of distributors viz. L J Films Private Limited and M section Friday Tickets have neither been signed by the said distributors nor by the Informant and amounted to no agreement between them.

OP-1 has submitted that strike has been a normal phenomenon of KFEF for the past four to five years, particularly during festival periods, driving the producers and distributors into losses.

In order to show the anti-competitive behavior of KFEF, OP-1 has enclosed a letter dated 1st November, 2016 of KFEF whereby it informed OP-1 that revenue-sharing arrangement between exhibitors and distributors would be 50:50.

A copy of a circular dated 18th August, 2016 of KFEF to its members has also been enclosed with the reply.

In the said circular, KFEF had asked its members not to increase the ticket rates so that the distributors and producers incur losses.

The Commission has carefully perused the information and the materials available on record and given careful consideration to the submissions made by the respective learned counsel for the parties during the preliminary conference as well as the Affidavits given by them.

The primary allegation in the instant matter is that the Opposite Parties have imposed a ban upon the Informant due to which no distributor is ready to give movies for exhibition at the Informants theatres which has led to their shutdown.

The reason behind the same has been alleged to be that the Informant, being a member of KFEF, had been a part of the strike convened to demand a higher revenue share (50:50) for the member exhibitors of KFEF, at par with the multiplexes and air- conditioned theatres in shopping malls, rather than the initially agreed share of 60:40.

Such conduct of the Opposite Parties in imposing an unofficial ban has been alleged to be amounting to both an anti-competitive agreement as well as abuse of dominant position in contravention of the provisions of Section 3 and Section 4, respectively, of the Act.

At the outset, the Commission notes that the facts as alleged by the Informant, do not suggest any unilateral conduct on part of any enterprise or group, that merits an examination under Section 4 of the Act.

The impugned conduct primarily alleges anti-competitive behavior by the Opposite Parties, who are associations of persons and or enterprises.

Hence, the conduct of such Opposite Parties can only be examined under Section 3 of the Act, which covers enterprises, associations of enterprises, persons and or associations of persons.

Since the Opposite Parties here are Distributors and Producers Associations, who are engaged in identical or similar trade of goods, the present case merits examination under Section 3(3) of the Act.

The Informant has alleged that there is an unofficial ban imposed by the Opposite Parties upon him, which has led to the Producers and Distributors not giving movies to the theatres of the Informant for exhibition.

In support of his such contention, the Informant has, inter alia, submitted unsigned confirmation letters dated 24th October, 2016 and 22nd November, 2016 from two distributors namely L J Films Private Limited and Friday Tickets, respectively, and his own bank statement evidencing return of money given by the Informant for purchasing exhibition rights, by two other distributors namely M section Ever Green Films and August Cinema.

The Commission observes that either of such documents do not suggest that exhibition rights were denied to him due to any ban imposed, or that such alleged ban was imposed by the Opposite Parties.

The confirmation letters simply show that the two distributors agreed to screen their movies in the theatres of the Informant while the bank statement merely proves that certain amount was credited in the Informants bank account from the two distributors.

Besides the same, the Informant has also relied upon certain news publications and letter dated 7th October, 2015 issued by KFEF as well as Show Cause Notice dated 22.02.2017 issued by OP-2 to him.

While these highlight the difference in revenue shares of multiplexes and other theatres, the same also do not give any indication of the purported ban or involvement of the Opposite Parties in the same.

The Informant has also relied upon letters dated 15th January, 2017, 25th February, 2017, 2nd March, 2017 and 28th March, 2017 written by him to the Opposite Parties and others wherein he has alleged imposition of such unofficial ban by them.

However, the Informant cannot use the same to his advantage as the same are nothing more than self-serving admissions.

The Commission also takes note of the contention of OP-1 that the producers and the Government had to incur losses due to the strike called by KFEF at the behest of the Informant, during Christmas season 2016.

As a result of such purported strike, the Informant also being a member of OP-2 was asked to give an explanation for indulging in activities that resulted in losses to the producers as well as restricted movies releases.

The strike being launched by the Informant is also evident from the news article dated 13th February, 2017 titled Liberty Basheer winds up theatre business, enclosed with the information.

Relevant extract of the news item is reproduced as under: Im left with no other option than to shut down theatres.

My theatres are not getting Malayalam movies.

At present, nearly 50 employees are serving in these firms and there is no point in operating the theatres without collection.

Certain persons are adamant that even other language films or second grade movies should not be screened at my theatres.

I am not willing to bow down before them to run my theatres, he said.

In fact, I launched the protest for the benefit of over 350 theatre owners.

As Dileep intervened, everyone followed him.

Dileep could down shutter of my theatres.

However, nobody can defeat me Basheer added.

Liberty Basheer, who was active in film production, has not produced any movie in recent years.

(Emphasis supplied) It is evident that KFEF, in which the Informant has been an office bearer, called for strike during Christmas 2016 demanding higher revenue share for its members.

Most of the members of KFEF withdrew from the strike and started taking movies as per the prevailing revenue-sharing terms.

However, the Informant refused to agree with the prevailing terms, which may have likely resulted in movies not being given to him.

It is also relevant to note that movies are being given and exhibited in the theatres of the Informant since April, 2017.

This was also confirmed by the learned counsel for the Informant during the preliminary conference.

In view of the foregoing, the Commission is of the prima facie opinion that there is no sufficient material on record to suggest that the Opposite Parties have put a ban upon the Informant which led to movies not being given to him for exhibition in his theatres.

Thus, prima facie, there is no case of contravention of Section 3(3) of the Act or any other provision of the Act made out against the Opposite Parties.

The matter is ordered to be closed forthwith in terms of Section 26(2) of the Act.

The Secretary is directed to forward a copy of this order to all the parties.

Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact ArgumentPetitioner ArgumentPetitioner Fact Fact ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentPetitioner ArgumentPetitioner Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RulingByPresentCourt RulingByPresentCourt

Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact ArgumentPetitioner ArgumentPetitioner Fact Fact ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentPetitioner ArgumentPetitioner Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact ArgumentPetitioner ArgumentPetitioner RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RulingByPresentCourt RulingByPresentCourt RulingByPresentCourt

Fact None Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentPetitioner ArgumentPetitioner None None Fact Fact Fact Fact ArgumentRespondent ArgumentRespondent ArgumentRespondent Fact Fact RatioOfTheDecision ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RulingByPresentCourt RulingByPresentCourt None

Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact ArgumentPetitioner ArgumentPetitioner Fact Fact ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentPetitioner ArgumentPetitioner Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RulingByPresentCourt RulingByPresentCourt RulingByPresentCourt


The instant information has been filed by M s Singhania Partners LLP, (hereinafter referred to as the Informant) on 3rd August, 2010 under Section 19 of the Competition Act, 2002 (hereinafter referred to as the Act), against M s Microsoft Corporation (I) Pvt.

Limited (hereinafter referred to as Opposite Party Number 1) and M section Embee Software Pvt.

Limited (hereinafter referred to as the Opposite Party Number 2), inter alia, alleging anti competitive conduct and abuse of dominant position by the Opposite Party Number 1 in the sale of Operating System and Office Suite Software.

The facts and the allegations as stated in the information, in brief, are as under: 2.1 As per the Informant, the Opposite Party Number 1 is one of the worlds leading multinational computer technology Corporation that develops, manufactures, licenses and supports a wide range of computer Operating Systems and other software products for computing devices.

2 The Informant has submitted that it required Microsoft products Microsoft Operating System and Microsoft Office 2007 for the computers at its office.

During the marketing calls with Microsoft, one of the executives forwarded the name of Opposite Party Number 2, who is one of the dealers of the Microsoft.

Pursuant to discussion as to the requirement for the various licensed software and after understanding the requirement of the Informant, the Opposite Party Number 2 official vide e-mail dated, 20th November, 2008 sent a proposal to the Informant for Microsoft Vista Business and MS Office 2007 software for consideration.

After considering the said proposal received from Opposite Party Number 2, the Informant vide letter dated, 21st November, 2008 placed an order Informant also sent a cheque for Rs. 1,97,250 on 24th November, 2008 towards 50 per cent of the advance payment against the said order as requested by Opposite Party Number 2.

3 As per the Informant, subsequent to the placing of the Order, the Informant was informed by one of the executives of the Opposite Party Number 1 that only the Volume licenses of the Ordered products can be purchased and not the Original Equipment Manufacturer (OEM) Licenses, which are available only when a new machine is purchased.

2.4 As per the Informant, the above executive of the Opposite Party Number 1 pressurized the Opposite Party Number 2 to cancel the purchase order placed by the Informant.

The above executive further directed the Informant to place an order for the volume licenses instead of OEM license.

The Informant was also informed that the price for the volume licenses was almost double to the prices quoted for the OEM license in spite of the fact that the products were same.

2 .5 The Opposite Party Number 2 vide its email dated, 27th November, 2008 cancelled the Order of the Informant and insisted to place another Purchase Order for the required software at the prices quoted for volume license.

As per the Informant, due to the urgency of the software, the Informant placed the revised order with the Opposite Party Number 2 at the quoted higher rates of volume license amounting to Rs. 5,71,816 excluding of taxes.

2.6 As per the Informant, if the same software is licensed to new computer, i.e., OEM license then the same is cheaper and if it is licensed to existing computers, i.e., Volume License, then the same shall cost more.

7 It is also submitted by the Informant that in another instance, the Informant on 20th January, 2009 placed an online order for the purchase of Microsoft Office Professional 2007 Software after enquiring on the alleged web site of the Opposite Party Number 1.

On receipt of the software, it was found by the Informant that the above software was labeled as for use only with a new PC with 2007 Microsoft Office Suite or component application software pre installed.

As per the Informant, at the time of the placing the Order on the alleged web site of the Opposite Party Number 1, there was no mention of such a condition.

It has been alleged by the Informant that as per the aforesaid website of the Opposite Party Number 1, different dealers of the Opposite Party Number 1 are selling the same product at different prices and a small percentage of them offers the same at the lowest price which appears to be artificially controlling the prices by the Opposite Party Number 1.

2.8 As per the Informant, it was noticed by him that on different dates, one dealer of the Opposite Party Number 1 quoted the lower prices and the other quoted higher prices giving an impression to the buyer customer that he is getting the lowest price available in the market.

2.9 It has also been alleged by the Informant, that Opposite Party Number 1 is having a market share of 90 per cent and a dominant firm in the market, its over pricing in the name of volume license and coercing the Informant to buy volume license rather than OEM license, which was offered at double the price, in spite of the fact the product were same, is a violation of Section 4(2)(a)(ii) of the Act, as there was a discriminatory pricing by the Opposite Party Number 1.

2 .1 0 The Informant has also alleged that the Opposite Party Number 1 has violated the provisions of Section 3 of the Act by imposing restriction on the consumer in acquiring license of Windows Operating System and thereby artificially controlling the supply and pricing of its products.

It has been further alleged that the Opposite Party Number 1 has entered into agreement with the original equipment manufacturers and offers them operating system at a rebate, this leaves an adverse impact on the market whereby all the other manufacturers of the Operating System will be eventually dragged out of the market because most of the computer shipped by the OE Ms will be having pre installed Windows Operating System as per the agreement between the Opposite Party Number 1 and OE Ms. 3 .

On 18th August, 2010, Amarchand Mangal Das Shroff, Advocates on behalf of the Opposite Party Number 2 filed an application before the Commission and requested for an opportunity to inspect the case file and appear before the Commission before framing any opinion by the Commission.

The above said request was considered by the Commission in its meeting held on 19th August, 2010 and the permission as requested was granted to the Opposite Party Number 1.

On 20th September, 2010.

the Informant filed certain additional document which were the transcripts of conversation between the Informant and the Official of the Opposite Party Number 1.

On 1st October, 2010, the Opposite Party Number 1 through its Advocate, Amarchand Mangal Das, filed written submissions.

The Informant on 8th November, 2010 filed the rejoinder to the written submission filed by the Opposite Party Number 1 and also filed additional Affidavit on 19th November, 2010.

Thereafter the Opposite Party Number 1 has filed its reply to the rejoinder filed by the Informant.

The informant has also filed the written synopsis of the argument advanced by him on 14th December, 2010.

The Commission has carefully considered all the relevant material filed by the parties and the oral arguments advanced by the parties.

The brief of the written submissions filed by the Opposite Party Number 1 is dealt with in the ongoing paragraphs.

It is submitted by the Opposite Party Number 1 that the Informant has failed to raise a competition law concern in this case.

As per the Opposite Party Number 1, it licenses its products through three main channels of distribution namely OEM, Volume License and Retail chain.

Further, it has to protect its Intellectual Property Rights and prevent piracy of its products.

Software is a form of an IP Right and Software licenses govern the usage and re-distribution of that property.

As per the Opposite Party Number 1 its relationship with its distributors and resellers is independent and does not create any principal agent relationship.

It sells its products licenses to its distributors and resellers on a principal to principal basis.

As per the submissions of the Opposite Party Number 1, it does not sell its products rather license them to its customers for specific uses on specific licensing terms.

Further, it is the license itself which determines the nature of the product that is being granted to the customer.

The licensing policy followed by it is its global policy, which is similar to the practices utilized by most IT firms, across the globe.

The Opposite Party Number 1 has submitted that the three aforesaid distribution channels are distinct with different licensing rights to maximize distribution efficiency.

OEM distribution is the highest volume channels of Microsoft, It involves sales and distribution to branded PC manufactures and because of the size of its distribution channel, it offered the lowest royalty rates for Windows and Office software.

As per the Opposite Party Number 1, OEM license are different in the nature than those purchased through other channels.

OEM version of the Operating System may not be resold unless it is installed on a PC.

OEM channel provides efficiencies such as installation, testing, support, warrantee, activation and updates and stability.

It is also submitted by the Opposite Party Number 1 that Microsofts agreement with the OE Ms does not require that OE Ms can install Windows or Office exclusively on the P Cs.

OE Ms are free to distribute P Cs with non Microsoft Software or without software at all.

As per the Opposite Party Number 1, approximately 30 per cent of the P Cs sold by OE Ms in India have Windows preinstalled and less than 1 per cent of P Cs have licensed Microsoft Office software pre installed.

As per the Opposite Party Number 1, Volume License channel is the most significant channel for businesses and other organizations.

These are sold in larger volume and the customers can upgrade from older OEM or retail version to the most recent version of the Operating System.

Volume Licensing customers do not provide with many of the benefits and services as compared with the OE Ms, including the benefit of testing.

In addition, Microsoft has to consider the cost of support for volume license customers, coupled with higher packaging costs.

As per the Opposite Party Number 1, in its third distribution channel, i.e., retail distribution it offers Windows and Office for sale through retailers, this is the lowest volume channel however, with highest cost.

The Opposite Party Number 1 denied each and every allegation leveled against it by the Informant and stated that the Informant and the Opposite Party Number 2 were informed by it that the Software licenses being purchased by the Informant were inappropriate for the intended use and requested the Informant to purchase the appropriate software licenses.

Further, discounts for OEM channels are not unique to the software industry, the difference between the wholesale price and the retail price is common in every industry and offers greater benefits to the consumers.

In response to the written submissions filed by the Opposite Party Number 1, the Informant filed rejoinder dated, 8th November, 2010 and reiterated all the facts stated earlier in the information.

The Informant further submitted that the Opposite Party Number 1 is attempting to divert the Commissions attention to an irrelevant issue by raising the issue of protection of IP Rights and Piracy.

As per written submissions of Informant, the network of distributors and resellers engaged by Opposite Party Number 1 are not independent and it exercises tight control over the network and pursues a highly interventionist policy in steering the so called independent distributors to act as per it.

The Informant further submitted that different royalty rates being charged by the Opposite Party Number 1 for different licenses is a strategy adopted by Microsoft to maintain its monopoly in the market under the garb of its licensing policy.

The Informant has also alleged that the licensing policy of the Opposite Party Number 1 is nothing but an artificial device for controlling the downstream distribution chain and a pretext for imposing unfair prices and conditions on consumers at the next level in the chain which is prohibited under the Act.

The Informant has further alleged that the coordination between the Opposite Party Number 1 and Opposite Party Number 2 would qualify as a practice action to maintain resale price in the distribution chain and is therefore, violative of Section 3(4)(e) of the Act.

The Informant has also submitted that the global licensing policy is not uniform as claimed by the Opposite Party Number 1. 1 6 .

The Commission has carefully gone through all the above submissions, documents and the other material filed by the parties.

It is noted that the information is centered on the fact that the Opposite Party Number 1 is selling the same product, i.e., Operating System and Office Program at different prices in the garb of its various licensing policies.

It is observed by the Commission that the Opposite Party Number 1 is selling its various Software Licenses throughout the world and as per the submissions of Opposite Party Number 1 the policy of selling these licenses is followed across the World by it.

The Opposite Party Number 1 has also submitted that it is licensing its products through three channels which are different in pricing, royalty, intended use of the user and efficiency etc.

The Commission has carefully considered the various arguments advanced by the parties and observed that there is nothing adverse which can contradict the above submissions of the Opposite Party Number 1.

The Commission, prima facie, has not found any substantial material which can establish that the different pricing policy adopted by the Opposite Party Number 1 in respect of different types of licenses raises any competition issue.

There is nothing on record which could prima facie indicate that the three types of licenses which are being sold by the Opposite Party Number 1 through its dealers retailers are actually similar to each other and there is no difference between these licenses.

Further, the Informant has also not placed on record any material which can suggest that the aforesaid three licenses are similar on the basis of intended use of the customer, or all are equal in terms of efficiency, royalty and on technical aspects.

The Commission also does not find any material which could indicate that because of the dominant position of the Opposite Party Number 1 in the Operating System and its agreement with the OEM manufacturers, it has driven any competitor out of the market.

Further, the Informant has himself admitted in his information that all the dealers are quoting different rates of the same product of the Opposite Party Number 1 therefore, prima facie, there cannot be any resale price maintenance restraint existing.

It is important to note that the Informant has not been able to bring any cogent evidence on record to show that the Opposite Party is abusing its dominant position in the relevant market and the conditions imposed by it are violative of the provisions of Section 4 of Act.

The allegations and averments made by the Informant have not been supported and corroborated in material particulars by any reliable evidence.

In this respect in the absence of any material to the contrary, the Commission sees no reason to disagree with the explanation offered by the Opposite Party Number 1 on its policy relating to different distribution channels.

The Commission, therefore, is of the opinion that the Informant has failed to make out a prima facie case for making a reference to the Director General for conducting investigation into the matter under Section 26(1) of the Act and the proceeding related to the instant case deserve to be closed forthwith.

In view of the above discussion, the matter relating to the information is hereby closed under Section 26(2) of the Act.

Secretary is directed to inform the Informant accordingly.

Prasad, Member (Dissenting) The present information has been filed under Section 19(1)(a) of the Competition Act, 2002 (hereinafter referred to as the Act) on 30th August, 2010 by the informant for instituting an investigation into alleged abuse of dominant position and anti competitive agreements indulged into by the opposite parties named hereinabove.

The informant is a limited liability partnership of advocates and solicitors which placed orders for Microsoft Vista Business under original equipment manufacturers (OEM) category through a dealer of the Microsoft, i.e., Opposite Party Number 2.

For this, the informant paid 50 per cent of the price as an advance to the dealer.

However, the informant was later told by the Opposite Party Number 1 that the informant has wrongly placed an order under the OEM category for which the informant firm was not eligible and instead it was eligible for the Volume license category.

The price difference in the two categories was quite substantial and it costs around double of the OEM price, though the products are same According to the Informant no reasonable justification for this differential pricing was ever provided to them by the opposite parties.

Left with no other choice, informant cancelled its earlier purchase order and placed a fresh order under Volume license category informing the opposite parties of its right to a legal recourse.

Another allegation leveled against the opposite parties is that the informant purchased the Microsoft Office Professional 2007 from a website alleged to be launched by Opposite Party Number 1 www.buyoriginalms.com.

The Microsoft, however, has denied the ownership of this website.

When the informant tried to install the above software, it was noticed that it could be used only with a new PC having 2007 MS Office Suite or component application software pre installed.

As per the informant no such condition was ever mentioned while purchasing the product.

The informant, therefore, has alleged that: The Opposite Party Number 1 has abused its dominant position by directly imposing unfair, excessive and discriminatory prices on the consumers in the sale of the above two softwares and thereby contravened the provisions of Section 4(2)(a)(ii) of the Act.

The agreements between Microsoft and the Original Equipment Manufacturers infringe provisions of the Act by-(a) directly determining the sales price violating Section 3(3)(a) (b) controlling the supply of software under Section 3(3)(b) Though the information provided by the information providers is limited, it is the duty of the Competition authorities to take into account all the factors which are anti competitive even if they are not part of the information.

I have carefully considered the facts of the case, the averments made in the information as well as information available in public domain.

It is found that Microsoft on the basis of its annual reports has around 80 per cent of market share in the operating systems (Windows Systems).

Though there are other competitors in the operating systems market e.g. Apple, Google, and Linux but there appears to be marginal competition as their combined market share is only 10 per cent.

Thus, there is strong possibility that Microsoft is a dominant player in that market.

The Microsoft is selling its software packages under two different categories, i.e., OEM category and Volume License Category having two different price structure.

The price under Volume License Category is almost double that under the OEM category.

The conditions laid down in selling the products under different categories, i.e., through Original Equipment Manufacturer (OE Ms), Volume Licensing or Full Packaged Product (FPP), even though the products are by and large same, with different price structure for the same product.

Microsoft charges much lower price for software bundled into a new PC, but charges upto thrice of that for software purchased separately for an old PC.

The difference is not enough to suffice as bulk discount and appears an attempt to exploit its monopoly in the software market, by exploiting one segment of buyers.

This practice can be seen as unfair and discriminatory in view of the Act.

On the second issue that the desktop software packages of Microsoft which has 90 per cent market share do not run smoothly on other operating systems and it can run only on windows Operating system of Microsoft.

In order to mitigate competition in the operating system segment Microsoft is trying to protect its operating system (OS) market by making the software packages compatible only with windows Operating system of Microsoft.

The blocking of interoperability with other OS can be considered as abuse of its dominance as prohibited under the Act.

This also came to our knowledge that the Volume license of the Microsoft can only be used as an upgrade for older version of Windows to incorporate the features of a new version of Windows.

The Microsoft offered an upgrade version of Windows at price higher than the Full version of new Windows.

The Consumer already having the older version will be bound to purchase full new version.

This is the abuse of dominance by discriminating in terms of price and attracting likely infringement of the Act 33.

Another possible practice as per the licensing policy as stated by Microsoft does not allow the OEM licensee to transfer the license from one machine to another even if the person is abandoning the use of old machine.

This way it restricts the right of consumers which apparently violates provision under the Act.

In accordance with the information available in the Public domain, a search was made for the price of Windows Vista Home Basic Version Full.

In China the price of this product was USD 72.53 in 2008 and same product is available at prices ranging between the 100 - 190 at various websites.

Through this model Microsoft discriminates among the consumers which are seemingly against the spirit of the Act, which can only be substantiated through investigation under the Act.

Further, the OEM license is available only through the manufacturers, FPP for individual intending to buy for 5 or less P Cs and Volume license only for upgradation.

It creates a baffling situation for a customer who intends to buy more than 5 P Cs.

The only option left to him is to go for OEM.

This in a way supports the sale of OEM and contributes in maintaining the monopoly of the Microsoft in the Operating system segment.

Microsoft sells its office package to retail purchasers at a much higher price than what it charges to OE Ms (i.e. new machines).

To have cheaper version of office package one has to buy a new PC.

Thus, Microsoft is able to maintain retail price of its office package.

Therefore, the vertical agreement between Microsoft and the OE Ms is a mutually beneficial deal, whereby they support each other to expand business and hinders competition in the relevant market.

Microsoft once has sold the softwares to the intermediaries (resellers) like Embee, even though it maintains full control on the prices of various software at which the resellers further sell to end users in the garb of licensing policy.

This practice has every chance to restrict the competition in the market.

It also came to knowledge that In the State of Iowa and California at United States Microsoft was sued on behalf of consumers alleging that the Microsoft abused its monopoly position in the desktop computing market through price discrimination, overcharging and unfair competition for products such as Windows and Office thereby violating the respective states Antitrust Law.

In 2007, Microsoft was ordered to refund the difference to volume licensees for abusing its monopoly position.

Further more it was also seen that Microsoft packages do not run smoothly on other operating systems.

Since, MS packages comprise of 90 per cent of the market such situation stunts the growth of other operating systems and also chokes development of other software.

The practices adopted by the Microsoft appears to be limiting or controlling production, supply, markets and technical development.

Therefore, its agreement with OE Ms appears to attract infringement of the Act, 2002.

On through perusal of the information provided by the informant, material on record and submissions by the opposite parties, and also the information available in the public domain, I find substance to opine that there exists a prima facie violation of the Act related to abuse of dominance and anti competitive agreements and I am inclined to direct DG to investigate the matter under Section 26(1) of the Act However, this is a minority (dissenting) order no further compliance is required for the same.

Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentRespondent Fact ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner Fact RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RulingByPresentCourt RulingByPresentCourt Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent

Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner None None None None None None None None RatioOfTheDecision RatioOfTheDecision ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentRespondent ArgumentRespondent RatioOfTheDecision ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner None RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RulingByPresentCourt RulingByPresentCourt None Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact ArgumentPetitioner ArgumentPetitioner None Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent Dissent


Order under section 26(2) of the Competition Act, 2002 The present information has been filed under section 19(1)(a) of the Competition Act, (hereinafter referred to as the Act) by Shri Udit Gupta (hereinafter referred to as the Informant) against M section Interglobe Aviation Limited (hereinafter referred to as OP 1) and Director General for Civil Aviation (hereinafter referred to as OP 2) alleging contravention of the provisions of section 4 of the Act.

Facts of the case may be briefly noted: As per the information, OP 1 operates an airline under the name of IndiGo.

The Informant is stated to have booked online a return ticket on 27.08.2014 for his travel from Delhi to Mumbai and back on 30.11.2014 and 06.12.2014, respectively.

OP 1 is a leading domestic airline in the country with highest market share of 32.8 of the total aviation sector and enjoys a dominant position.

OP 1 also claims to be committed to an on-time performance for its flights, and has the maximum number of connections on the route sector Delhi -Mumbai - Delhi, with a total number of 28 flights on the said route.

The Informant has alleged that being a dominant, OP 1 has devised a standard form of terms and conditions for the public to book their flights.

Any person desirous of travelling by an Indigo flight is required to accept those conditions in totality, irrespective of how onerous and one-sided the terms and conditions may be.

It is alleged that a passenger has no choice to negotiate but to accept the said terms and conditions.

The Informant is primarily aggrieved by the terms under the head Flight Delays Cancellation which reads as under: Flight Delays or Cancellations If an IndiGo flight is cancelled, rescheduled or delayed for more than three hours (depending on the length of the journey), a Customer shall have the right to choose a refund or a credit for future travel on IndiGo or re- booking onto an alternative IndiGo flight at no additional cost (subject to availability) subject to the requirements under the local laws of the country in which the flight has been cancelled, rescheduled or delayed 6 .

The Informants return flight on 06.12.2014, scheduled to depart at 16.40 hours from Mumbai and arrive at Delhi at 18.40 hours was delayed to depart at 18:00 hours from Mumbai.

The Informant has stated that he requested the customer care of OP 1 to reschedule his flight either with OP 1 or any other flight.

The Informant was informed that the change would be at a significant cost, which had to be borne by him.

The Informant has alleged that he made several calls to the customer care as well as supervisory staff of OP 1 but they refused to assist him.

The Informant is alleged to have been informed that it will not be possible for OP 1 to process his said request since the delay was less than the duration of the flight from Mumbai to Delhi.

The Informant sent many emails seeking explanation for rejecting his said request to which OP 1clarified that depending on the length of journey means, in case where the delay in the flight is more than the duration of the flightFurther, when you contacted our call centre for rescheduling as the flight was delayed by one hour and 30 minutes at that time and thus our call centre team had to decline your request for rescheduling to an alternate flight.

The Informant has alleged that the above justification of the OP 1 is clearly an afterthought.

Indigo has, under the general provisions for booking, specifically mentioned to check and verify the itinerary atleast 12 hours before the departure time.

However, OP 1 made changes in the flight schedule within 5 hours of its departure and allegedly refused to assist the Informant as per his convenience and adhered to unfair terms.

Due to disparity between the bargaining power, OP 1 alleged to have imposed such unfair terms and conditions.

The Informant has placed reliance on some court judgments also.

He has pointed out that OP 1 has reserved unbridled discretion to change the schedules and or cancel, terminate, divert, postpone, reschedule or delay any flight where they reasonably consider this to be justified for commercial reasons.

However, in case of a passenger, his legitimate right to choose an alternate flight in case of unreasonable delay by the airline, is restricted and controlled by the airlines as per their whims and fancies.

The Informant has also stated in the information that all airlines have imposed such arbitrary conditions on the passengers.

The second largest player Jet Airways has imposed similar condition in case of delay of one hour.

Air India has not mentioned any such time, however, when a call was made by the Informant to their call centre, an executive confirmed that the passenger shall have a right to choose a flight of his convenience in case of delay of more than 60 minutes but the same is not written as part of its terms and conditions.

Based on the above allegations, the Informant has alleged that the conduct of OP 1 is in contravention of the provisions of section 4 of the Act.

Thus, the Informant has prayed, inter alia, for initiation of an inquiry under the Act.

The Commission has perused the material available on record.

The arguments made by the counsel on 21.05.2015 on behalf of the Informant were also considered by the Commission.

The Commission notes that the Informant has not sought any relief against OP 2 in the instant case.

It is further observed from the information available on the website of OP 2 that it endeavours to promote safe and efficient air transportation through regulation and proactive safety oversight system.

The facts of the present case indicate that the Informant is aggrieved primarily by the alleged conduct of OP 1 imposing arbitrary, unfair and unreasonable conditions on the passengers.

Thus, the relevant product market for OP 1 would be the market of air transport services for passengers.

As regards relevant geographic market is concerned, the Commission observes that the alleged conduct of OP 1 regarding flight delays and cancellation of flights is emanating from the regulations laid down by Director General of Civil Aviation (DGCA) entitled Civil Aviation Requirements Section 3 - Air Transport Series M Part IV Issue I, dated 6th August, 2010.

As the said regulations are applicable throughout the territory of India, the relevant market in the present case would be the market of air transport services for passengers in India.

The Commission notes from the information available in public domain that seven companies were engaged in 2014 in the air transport service in India - Air India (includes both Air India Express and Alliance Air), Go Air, Indigo (Interglobe Aviation Limited), Jet Airways (including JetLite), Spice Jet, Air Costa and Air Asia.

In terms of domestic passengers who availed the services of these airlines, OP 1 (31.8 market share) leads the market followed by Jet Airways (21.7 market share).

Air India (18.4 market share) and Spice Jet (17.4 market share) are placed at third and fourth position, respectively.

Go Air is at fifth position with 9.2 market share.

Air Costa and Air Asia are at sixth and seventh positions with 0.9 and 0.5 market share, respectively.

(Source: http: dgca.nic.in reports Traffic-ind.htm).

In view of the above, OP 1 appears to be a leading player in terms of domestic passengers availing the airline services.

However, since the Act provides that an enterprise is dominant if it can operate independently of competitive forces prevailing in the relevant market, the Commission took into consideration other aspects as well such as the value of total assets (in balance sheet) of a company.

Since the data of the value of total assets for 2013-14 of few companies is not available in public domain, the Commission finds it appropriate to take into account and consider the figures of the total assets of the preceding years.

The Commission observes from the data of the value of total assets of the preceding years that Air India has an asset value of Rs. 53,000 crores (as on 31.03.2012) and Jet Airways has an asset value of Rs. 20,000 crores (as on 31.03.2014), which is 8.4 and 3.1 times of the asset value of OP 1 (Rs. 6,400 crore as on 31.03.2013).

The figures clearly indicate that the size of the asset value of OP 1 is lesser than Air India and Jet Airways.

(Source: Industrial Outlook, CMIE).

Another factor for determination of dominance is the dependence of consumers on the enterprise.

Presence of other players in a significant way in the relevant market indicates that the consumers have option to avail service from other players in the relevant market.

The consumer does not seem to be dependent on OP1.

Further, it has been noted that most of the flight tickets are either booked online or through agents.

The cost of information (about flights, fare, timing and availability etc.) is negligible.

The consumer can easily compare fare, timing and availability of seats across various airline companies.

It helps passenger to take well informed decision and pick the best available option.

The Commission observes that no information is available in the public domain indicating the position of strength of OP 1, which enables it to operate independently of competitive forces prevailing in the relevant market.

Further, the Informant has also not produced any cogent material to show the dominance of OP 1 in the market.

Thus, prima facie, OP 1 does not appear to be in a dominant position in the relevant market.

In the absence of dominance of OP 1 in the relevant market, its conduct need not be examined under the provisions of section 4 of the Act.

In light of the above analysis, the Commission finds that no prima facie case of contravention of the provisions of section 4 of the Act is made out against OP 1 in the instant matter.

Accordingly, the matter is closed under the provisions of section 26(2) of the Act.

The Secretary is directed to inform the parties accordingly.

Fact Fact Fact Fact Fact ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner Fact Fact RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RulingByPresentCourt RulingByPresentCourt

Fact Fact Fact Fact Fact ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner Fact Fact Fact Fact ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner None ArgumentPetitioner ArgumentPetitioner Fact Fact Fact ArgumentPetitioner ArgumentPetitioner None None RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision None RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision None RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RulingByPresentCourt RulingByPresentCourt None


This common order shall dispose of the information filed in Case Number 39 of 2015 and Case Number 40 of 2015 as the Informants have raised similar issues against Milestone Capital Advisors Limited (hereinafter referred to as OP).

The present information have been filed by Shri Vijay Malhotra and Shri Vijay Tejpal (hereinafter referred to as the Informants) against OP under section 19(1)(a) of the Competition Act, 2002 (hereinafter referred to as the Act) alleging, inter alia, contravention of the provisions of section 4 of the Act.

Shorn of details, the Informants are stated to have invested a sum of Rs. 10 lakhs each in Milestone Domestic Fund Scheme II (hereinafter referred to as the Scheme), in the year 2008.

In this regard the two Informants, Shri Vijay Malhotra and Shri Vijay Tejpal had executed their contribution agreements (hereinafter referred to as the agreement) on 06.05.2008 and 28.04.2008, respectively.

It is stated that at the time of investment, the brokers of OP, Royal Bank of Scotland N.V., had assured an interest on the capital contribution 12 p.a., listing of the scheme and availability of easy exit option through need-based liquidation of investment.

However, none of these assurances were fulfilled.

It has been stated that as per the agreement, the scheme which was for a tenure of 4 years with two extensions of one year each (i.e., 411), should have matured on 30.11.2014.

The Informants have averred that OP, vide email dated 17.11.2014, had sought the consent of the Informants to extend the scheme by one year but in reply the Informants had declined the request of OP and had requested OP to pay back their money along with the interest and profit.

The Informants have alleged that OP not only refused to pay the interest that was due on the capital contribution made by the Informants but unilaterally extended the tenure of the scheme by one more year in breach of the terms of the agreement.

It has further been alleged that OP has failed to divest the investments to the tune of Rs. 150 crores (approx.) before the maturity date and have not handed over the money back to the Informants which amounts to abuse of its dominant position in the market.

It has been submitted by the Informants that in response to their intentions to file a complaint against OP before the Commission, OP offered to pay Rs. 3,26,000/- to each of them which was their balance capital contribution in the scheme.

The Informants are stated to have accepted the said offer of OP.

It has been alleged that OP has refused to share with the Informants the profits emanating from the sale of un-realized investments.

The Informants have alleged that OP has imposed one-sided clauses in the agreement.

The Informants have highlighted the following clauses to be in contravention of the provisions of section 4 of the Act: - Clause 3 of the agreement relating to the return of contribution and liability which restricted the liquidation of investments by the investors.

It has been alleged that OP was in a position to impose such a condition due to its dominant position in the market.

- Clause 6 of the agreement which pertains to the term and termination of the investment fund.

The Informants have alleged that OP unilaterally extended the tenure of the scheme by another one year in breach of the clause 6 of the agreement.

- OP closed the scheme on 30.11.2014 which was in violation of the provision of Initial closing date (i.e., 31.05.2008) in the agreement.

It has been alleged that due to extension of the maturity period of the scheme, the Informants were made to invest for more than six years in violation of the stipulated six years in the agreement.

Based on the above averments, the Informants have alleged that the conduct of OP is violative of the provisions of section 4 of the Act and have prayed, inter alia, for directing OP to treat the Informants as investors and pay their proportionate share of the unrealized investments of Rs. 150 crores (approx.).

After perusal of the information, the Commission directed the Informant to appear for hearing on 25.06.2015.

Shri Vijay Tejpal appeared in person to present his case.

The Commission perused the Information and also considered the arguments made by Shri Vijay Tejpal.

Facts of the case reveal that the grievance of the Informants essentially relate to the alleged conduct of OP in contravention of the provisions of section 4 of the Act.

As per the information available on the website of OP, it is a privately held alternative investment advisory firm in India which manages alternative investment funds linked to the realty sector and bullion products.

It also appears that OP has a wide investor base, including, institutions, family offices, government organizations and high net worth individuals.

The present case relate to investments made by the Informants in a scheme which is a realty linked registered venture capital fund.

Traditionally, venture capital funds entail high risk investments and accept contributions from institutional investors, banks, government organizations, high net worth individuals, etc.

It is noted that Securities and Exchange Board of India (SEBI), the securities market regulator, prescribes a minimum investment value for investors investing in venture capital funds through its regulations.

The said scheme was registered with SEBI in 2005 in accordance with the provisions of SEBI (Venture Capital Funds) Regulations, 1996 which proscribed individual investments of less than Rs. 5 lakh with a few exceptions.

In this regard, reference may be made to the definition of Contributors as provided in schedule I of the agreement executed by the Informants.

The definition stipulates a minimum investment value of Rs. 20 lakh in cases involving joint investments by more than one investor.

From the demand-side substitutability of the scheme, the Commission observes that the investment scheme under examination is linked to the realty sector, therefore, it would be appropriate to examine those schemes with similar profile of risks and returns, specifically designed for institutional investors and high net worth individuals.

Further, the Commission observes that from the consumers perspective, realty linked venture capital funds offering higher returns on large scale investments based on a diversified portfolio comprising of residential, commercial and industrial real estate properties, including rental yielding properties would in itself constitute a distinct category.

Thus, private equity investments meant for institutional investors and high net worth individuals with similar risk and offering high returns on investments from real estate projects could be considered as substitutes.

It is observed that while there are marginal differences between realty linked private equity and reality linked venture capital funds, the two are substitutable from the point of view of consumers looking for high returns from investments in the real estate sector.

Both, real estate linked venture capital funds and realty linked private equity funds are governed by SEBI (Alternative Investment Funds) Regulations, 2012.

The said regulations prescribe a minimum investment of Rs. 1 crore and also limit the total number of investors to one thousand with respect to such funds.

In view of the foregoing, the Commission is of the view that investors consider realty linked private equity funds as interchangeable with realty linked venture capital funds by reason of characteristics of the products, prices and their intended use.

Further, these funds are launched developed by investment firms which also manage the investments in such schemes.

Accordingly, the Commission is of the view that the relevant product market appears to be the market for provision of services relating to management of investment in realty linked venture capital funds and reality linked private equity funds.

With regard to the relevant geographic market, the Commission notes that an investor who is based in any part of India may easily invest in any real estate related private equity fund or venture capital fund since these funds could be obtained on private placement basis either directly or through brokers.

Further, most subscriptions could be obtained online also.

Thus, the relevant geographic market would be pan-India.

Accordingly, the Commission delineates the relevant market as the market for provision of services relating to management of investment in realty linked venture capital funds and reality linked private equity funds in India.

Having identified the relevant market, the Commission proceeds to examine the dominance of OP in the relevant market.

Assessment of dominance of an enterprise is intricately connected with the concept of market power of the enterprise (being examined) which allows the enterprise to act independently of competitive constraints.

On the basis of the information available in the public domain, the Commission notes that there are a substantial number of realty linked private equity venture capital firms such as Kotak group, IL FS, Aditya Birla group, HDFC, Unitech, ASK group, Anand Rathi group, Landmark Capital, Peninsula, Mirah Group, etc., in the relevant market.

Further, many of these firms offer multiple investment funds.

For example, Kotak alone offers four realty linked investment funds while IL FS, HDFC, Anand Rathi group and ASK group offer two such funds.

Further, as per information available in the public domain, the size of the investment funds managed by the various players are of comparable size.

Therefore, it is amply clear that the relevant market is highly fragmented with the presence of a large number of players, thereby indicating that the consumers have a wide variety of investment options.

The Commission observes that no information is available in the public domain that indicates the position of strength of OP, which enables it to operate independently of competitive forces prevailing in the relevant market.

Further, the Informant has also not produced any cogent material to show the dominance of OP in the relevant market.

Thus, prima facie, OP does not appear to be in a dominant position in the relevant market.

In the absence of dominance of OP in the relevant market, its conduct need not be examined under the provisions of section 4 of the Act.

In light of the above analysis, the Commission finds that no prima facie case of contravention of the provisions of section 4 of the Act is made out against OP in the instant matter.

Accordingly, the matter is closed under the provisions of section 26(2) of the Act.

The Secretary is directed to inform the parties accordingly.

Fact Fact Fact Fact Fact Fact Fact Fact ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner Fact Fact Fact Fact Fact Fact Fact RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RulingByPresentCourt RulingByPresentCourt

Fact Fact Fact Fact Fact Fact Fact ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner Fact Fact Fact Fact Fact Fact RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RulingByPresentCourt RulingByPresentCourt

Fact Fact Fact Fact Fact Fact Fact Fact ArgumentPetitioner ArgumentPetitioner Fact Fact ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner None None None RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RulingByPresentCourt None

Fact Fact Fact Fact Fact Fact Fact Fact ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner ArgumentPetitioner Fact Fact Fact Fact Fact Fact RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RatioOfTheDecision RulingByPresentCourt RulingByPresentCourt