Bombay HC sets aside CCI decision to order inquiry against Star, Sony

Bombay High Court has set aside Competition Commission of India’s (CCI) order against broadcasters Star India and Sony Pictures Networks India (SPNI).

On 30th July 2018, the CCI had ordered an inquiry into allegations of prime discrimination against broadcasters Star India, and SPNI along with Indian Broadcasting Foundation (IBF) following a complaint filed by headend in the sky operator (HITS) Noida Software Technology Park Ltd. (NSTPL) alleging price discrimination.

The competition watchdog had directed the Director General (DG) to cause an investigation into the matter to ascertain whether the broadcasters have indulged in refusal to deal by way of price discrimination with the HITS operator in contravention of the provisions of Section 3(4) of the Competition Act 2002.

Aggrieved by the CCI order, Star and Sony filed petitions in the Bombay High Court. On 16th August 2018, the Bombay HC granted ad-interim relief restraining CCI from taking any coercive steps against Star and Sony in pursuance of the impugned order.

In its order dated 16th October, the bench of Justice SJ Kathawalla and Justice Akil Kureshi allowed the writ petitions stating that the CCI had applied a wrong test to determine the anti-competitive conduct.

“The Impugned Orders dated 27th July 2018 and 31st July 2018 passed by the Competition Commission of India under Section 26(1) of the Competition Act, 2002 and all consequent actions/notices of the Director-General are quashed and set aside in exercise of our power under Article 226 of the Constitution of India. There shall be no order as to costs,” the bench said in its order.

The Bombay HC noted that the in order to hold a prima facie contravention of Section 3(4), CCI ought to have formed a prima facie view that there exists an agreement either between Star/Sony and NSTPL which provides for a refusal to produce, supply, distribute, store or trade in goods or provision of services with/to NSTPL and that such agreement causes Appreciable Adverse Effect on Competition (AAEC).

However, it noted that there is no finding that the broadcasters have refused to produce, supply, distribute, store or trade in goods or provision of services with/to NSTPL. It further stated that the CCI was under an obligation to arrive at a prima facie finding that the conduct of the Petitioners causes AAEC.

“Since there is no prima facie finding by CCI on AAEC, according to us, the mandatory jurisdictional pre-requisite of a prima facie view of contravention of Section 3(4) is absent. Therefore, once again, we are unable to find any reasonable justification justifying CCI’s failure to apply the aforesaid analysis whilst passing the Impugned Order. This being so, the Impugned Order cannot stand the test laid down under the Act,” the order reads.

The bench also stated that it is unable to place any reliance on the various charts submitted by NSTPL to submit that Star and Sony have indulged in price discrimination. It is now clear that the issue as to whether Star and/or Sony indulged in price discrimination is still pending adjudication in NSTPL‘s Second TDSAT Petition before the TDSAT. Therefore, the court said, it cannot pass any finding in this respect.

“In any event, the Supreme Court in CCI vs. Bharti Airtel has clearly laid down that this Court ought not to go into the merits of the Impugned Order. Keeping in line with the Supreme Court’s directions in CCI vs. Bharti Airtel, we also refrain from making any observations as to the conduct and ongoing insolvency proceedings of NSTPL,” it stated.

On 7th June 2017, NSTPL fled an Information against Star, Sony and the IBF with CCI under Section 19 (1) of the Competition Act alleging that Star and Sony have adopted anti-competitive market practices, owing to their strategic position in the broadcasting sector/market by imposing unfair terms and limiting their services to less favored Distribution Platform Operators such as NSTPL in clear violation of Section 3 and 4 of the Competition Act.