Mr. Ashok Suchde vs Competition Commission Of India & Anr.

SUBMISSION OF RESPONDENT NO. 2

ANALYSIS & OBSERVATIONS:

“Introduction/brief of the facts giving rise to filing of the information:

Ashok Suchde, the proprietor of Vyn Marketing had entered into an Agreement dated 19 December 2016(“Agreement”) with Pernod Ricard India Private Limited (“PRIPL”), who was inter alia engaged in manufacture, sale and distribution of various alcoholic products. Hereto annexed and marked as Exhibit A is the Agreement.

Vyn Marketing has been a service provider in the Union Territory of Silvassa (Dadara and Nagar Haveli and Gujarat) in India since 10 years for PRIPL and has knowledge in this field for more than 37 years.

Vyn Marketing was only complying with all its obligations under the Agreement, however, PRIPL arbitrarily terminated the Agreement on 3 November 2017 without providing the 90 days’ notice as required under Clause 21 of the Agreement.

Post the abrupt termination, Mr. Suchde inquired with Mr. Sunish Cherian, Zonal Manager at goa, Mr. Rupesh Jagavkar, the area manager and Mr. Ashish Mishra, the local representative as to the reason for the termination. No clear response was forthcoming save and except that it was ‘due to change in the company’s policies”.

Thereafter, PRIPL appointed ZK Marketing. The sole proprietor being Mr. Zoheb Khutliwala, the son of Mr. Altaf Khutliwala, both being local politicians in the area wherein Mr. Suchde was providing services. ZK Marketing immediately started providing services on 5 November 2017. Although the ‘Khutliwalas’ had no knowledge of the area of the services provided by Mr. Suchde, he was appointed. Thus, it is clear and apparent that M. Khutliwala was appointed due to the political contribution or on account of receiving kickbacks in lieu of the dealership.

Hereto annexed and marked as Exhibit A1 is a notification dated 29 November 2017 wherein Zoheb Khutliwala was appointed as Vice President – Yuba Morcha and Exhibit A2 is the press note 17^th May 2016 issued by Mr. Altaf Khutliwala.

Such appointment of the political party who has no experience is simply done with an intention to gain unfair advantage which is likely to have an adverse effect on the competition, which is explained below in detail. In the light of the above facts, the present application is filed.”

d)

This reflects that Mr. Ashok Suchde is proprietor of VYN Marketing. This means that either the Agreement appearing at page no. 73 to 81 is defective as VYN Marketing, in the Agreement dated 19.12.2016, entered into Agreement with Respondent No. 2, is incorrect or here the information reported at page no. 39 is wrong.

e)

In the entire information as provided to CCI from page 37 to page 70, the grudge seems to be hoving around annulment of the Agreement by the Respondent No. 2. It is also astonishing to see that the Appellant had entered into a settlement, full and final settlement of claim, which Respondent No. 2 has already paid, as per the Agreement appearing at page nos. 34 -36 of the Reply of Respondent No. 2 amounting to Rs. 1,30,30,860/-.

f)

The complaint filed before CCI is vindictive litigation and an abuse of the process of law. The sole point of filing of the case is that the termination of Agreement dated 19.12.2016.

g)

The Appellant using the malafide intention in levelling a charge that Respondent No. 2 has appointed ZK Marketing, who had no domain ex parte, resulting into a financial loss to the Appellant, seems to be prima facie wrong when it has entered into full and final settlement.

h)

The contention of the Appellant that it has violated the provisions of Section 3(4) & Section 4 of the Competition Act 2002. For brevity and clarity, all these Sections are reproduced below:

Section 3(4) in the Competition Act, 2002

….

“(4)

Any agreement amongst enterprises or persons at different stages or levels of the production chain in different markets, in respect of production, supply, distribution, storage, sale or price of, or trade in goods or provision of services, including—

(a)

tie-in arrangement;

(b)

exclusive supply agreement;

(c)

exclusive distribution agreement;

(d)

refusal to deal;

(e)

resale price maintenance, shall be an agreement in contravention of sub-section (1) if such agreement causes or is likely to cause an appreciable adverse effect on competition in India.

Explanation —For the purposes of this sub-section —

(a)

“tie-in arrangements” includes any agreement requiring a purchaser of goods, as a condition of such purchase, to purchase some other goods;

(b)

“exclusive supply agreement” includes any agreement restricting in any manner the purchaser in the course of his trade from acquiring or otherwise dealing in any goods other than those of the seller or any other person;

(c)

“exclusive distribution agreement” includes any agreement to limit, restrict or withhold the output or supply of any goods or allocate any area or market for the disposal or sale of the goods;

(d)

“refusal to deal” includes any agreement which restricts, or is likely to restrict, by any method the persons or classes of persons to whom goods are sold or from whom goods are bought;

(e)

“resale price maintenance” includes any agreement to sell goods on condition that the prices to be charged on the resale by the purchaser shall be the prices stipulated by the seller unless it is clearly stated that prices lower than those prices may be charged.”

(5)

Nothing contained-in this section shall restrict –

(i)

the right of any person to retrain any infringement of, or to impose reasonable conditions, as may be necessary for protecting any of his rights which have been or may be conferred upon him under –

(a)

the Copy right Act, 1957 (14 of 1957);

(b)

the Patents Act, 1970 (39 of 1970);

(c)

the Trade and Merchandise Mrks Act, 1958 (43 of 1958) or the Trade Marks Act, 1999 (47 of 1999);

(d)

the Geographical Indications of Goods (Registration and Protection) Act, 1999 (48 of 1999);

(e)

the Designs Act, 2000 (16 of 2000);

(f)

the Simi-Conductor Integrated Circuits Layout-Designs Act, 2000

(ii)

the right of any person to export goods from India to the extent to which the agreement relates exclusively to the production, supply, distribution or control of goods or provision of services for such export.

Section 4 in the Competition Act, 2002

4. Abuse of dominant position —

(1)

No enterprise shall abuse its dominant position.

(2)

There shall be an abuse of dominant position under sub-section (1), if an enterprise,—

(a)

directly or indirectly, imposes unfair or discriminatory—

(i)

condition in purchase or sale of goods or services; or

(ii)

price in purchase or sale (including predatory price) of goods or service;

Explanation —For the purposes of this clause, the unfair or discriminatory condition in purchase or sale of goods or services referred to in sub-clause (i) and unfair or discriminatory price in purchase or sale of goods (including predatory price) or service referred to in sub-clause (ii) shall not include such discriminatory conditions or prices which may be adopted to meet the competition; or

(b)

limits or restricts—

(i)

production of goods or provision of services or market therefor; or

(ii)

technical or scientific development relating to goods or services to the prejudice of consumers; or

(c)

indulges in practice or practices resulting in denial of market access; or

(d)

makes conclusion of contracts subject to acceptance by other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts; or

(e)

uses its dominant position in one relevant market to enter into, or protect, other relevant market.

Explanation. —For the purposes of this section, the expression—

(a)

“dominant position” means a position of strength, enjoyed by an enterprise, in the relevant market, in India, which enables it to—

(i)

operate independently of competitive forces prevailing in the relevant market; or

(ii)

affect its competitors or consumers or the relevant market in its favour;

(b)

“predatory price” means the sale of goods or provision of services, at a price which is below the cost, as may be determined by regulations, of production of the goods or provision of services, with a view to reduce competition or eliminate the competitors.

[(c) “group” shall have the same meaning as assigned to it in clause (b) of the Explanation to section 5.]

i)

The Appellant has not made any case against Respondent No. 2 for violation of Section 3(4) & Section 4 of the Competition Act, 2002. Raising the issue of political influence of Mr. Zoheb Khutliwala proprietor of ZK Marketing is a politician and this politician can influence Excise Inspector to issue more import permit while continuing the same to common Service Provider. This ground has been taken by the Appellant to prove adverse effect on competition. This seems to be wild, baseless remark speculative and without even a shred of evidence.

j)

This itself is amply clear wherein the Appellant himself has stated at page-15 of the Appeal Paper Book that the market share of the Respondent No. 2 has reduced from 55% to 20% due to termination of his Agreement. If this be the case, there is no question of appreciable adverse effect on competition being caused due to appointment of ZK Marketing.

k)

The contention of the Appellant that the Agreement made between the Respondent No. 2 and ZK Marketing is an exclusive for supply and distribution Agreement dated 01.12.2017does not seem to be correct. The stores in the Union Territory of Dadra and Nagar Haveli stock and sale of all brands and the choice customer is not reflected among the competing brands. No Stores has exclusive Agreement to supply only the product of Respondent No. 2.

l)

It is also very much clear that the termination of the Agreement dated 19.12.2016 between the Appellant and the Respondent No. 2 does not constitute imposition of any condition on the Appellant which tantamount to unfair and discriminatory condition in purchase or sale of any goods or services. The consumer has an option to purchase the product of their choice from the outlet of Stores. All these reflect that the Appellant has not made any case for violation of Section 4(2) of the Competition Act, 2002.

m)

For forming a prima facie opinion under Section 26(1) of the Competition Act, 2002, it does not require to call the Informant. For brevity and clarity, paragraphs 37 and 38 of the Judgment titled “Competition Commission of India Vs. Steel Authority of India,” (2010) 10 SCC 744 are reproduced below:

…

“37.

As already noticed, in exercise of its powers, the Commission is expected to form its opinion as to the existence of a prima facie case for 27 contravention of certain provisions of the Act and then pass a direction to the Director General to cause an investigation into the matter. These proceedings are initiated by the intimation or reference received by the Commission in any of the manners specified under Section 19 of the Act. At the very threshold, the Commission is to exercise its powers in passing the direction for investigation; or where it finds that there exists no prima facie case justifying passing of such a direction to the Director General, it can close the matter and/or pass such orders as it may deem fit and proper. In other words, the order passed by the Commission under Section 26(2) is a final order as it puts an end to the proceedings initiated upon receiving the information in one of the specified modes. This order has been specifically made appealable under Section 53A of the Act.

38.

In contradistinction, the direction under Section 26(1) after formation of a prima facie opinion is a direction simpliciter to cause an investigation into the matter. Issuance of such a direction, at the face of it, is an administrative direction to one of its own wings departmentally and is without entering upon any adjudicatory process. It does not effectively determine any right or obligation of the parties to the lis. Closure of the case causes determination of rights and affects a party, i.e. the informant; resultantly, the said party has a right to appeal against such closure of case under Section 26(2) of the Act. On the other hand, mere direction for investigation to one of the wings of the Commission is akin to a departmental proceeding which does not entail civil 28 consequences for any person, particularly, in light of the strict confidentiality that is expected to be maintained by the Commission in terms of Section 57 of the Act and Regulation 35 of the Regulations.”

“5.

Heard learned counsel for the parties. It is not in dispute that the Informant was a dealer for BMW vehicles for the Gujarat State under a Dealership Agreement and it enjoyed such position since 2001 in terms of an agreement executed inter-se the relevant parties. The dealership was to last till 31st December, 2017. However, OP-1 shot letter dated 7th December, 2017 intimating the Informant that the existing dealership would not be renewed and would expire on 31st December, 2017. The contention put forward on behalf of the Informant that while it was not given sufficient time to exit from the business and the effect of termination of its dealership had the effect of allowing dealers outside Gujarat to sell BMW cars to customers in Gujarat resulting in loss to the Gujarat Exchequer besides causing financial loss to the Informant, would amount to abuse of dominant position is without substance and the competition concern raised is unfounded. Even if it is assumed for the sake of argument that the termination of the dealership of the Informant or refusal on the part of OP-1 to further renew dealership in favour of the Informant is in derogation of the policy framed in this regard and the Informant had altered its position by raising infrastructure and making investment for running such dealership, breach thereof may give rise to civil liability but not have the consequence of abuse of dominant position. Nothing has been placed on record to establish that in the relevant market i.e. the segment of passenger cars, BMW India enjoyed a dominant position. The material available in public domain which has been considered by the CCI unmistakably demonstrates that BMW India -5-Competition Appeal (AT) No. 52 of 2018 had insignificant presence in the relevant market and BMW passenger cars did not occupy a significant market share. Merely because, the act of refusal on the part of OP-1 to renew dealership of Informant beyond 31st December, 2017 may have caused pecuniary loss to the Informant does not raise any competition concern, even if, the consequence of such termination of dealership has proved advantageous to the dealers of OP-1 in neighbouring states of Gujarat to sell BMW cars to customers hailing from Gujarat. As regards, fiscal loss to the State of Gujarat in the form of Taxes leviable on sale of cars suffice it to say that apart from the Informant having no locus to raise such issue the revenue resources available to the State would depend on the profitability of business and it lies within the domain of the manufacturer, whether setting up of dealership in a particular State would promote its business and generate profit. It is inconceivable that an Automobile Company would setup a dealership solely for the benefit of the dealer or for generating the revenue for the State where such dealership is located. Argument raised on this score being highly illogical and repugnant to reason is rejected.” ..

“13.

A bare perusal of the allegations made by the Informant indicates that the gravamen of the Informant pertains to appointment of ZK Marketing as its new service provider mainly due to its political and bureaucratic connections, alleged quid pro quo corruption in government department, violation of French law and Code of Conduct by the OP etc. in this regard, the Commission is of the considered opinion that such allegations do not reveal any competition issues/concerns which can be examined within the statutory framework as provided in Sections 3 & 4 of the Act.

14.

In view of the above, the Commission is of the view that no case of contravention of either Section 3 or Section 4 of the Act is made out against the OP in the present matter. Therefore, the matter is directed to be closed under the provisions of Section 26(2) of the Act.” …