CCI Dismissed Allegations of Anti-competitive Agreement against Haicheng Vivo Mobile (India) Private Limited, Vivo Mobile India Private Limited and Vivo Communication Technology Company Limited

On June 19, 2019, CCI dismissed allegations against Haicheng Vivo Mobile (India) Private Limited (‘Vivo India’), Vivo Mobile India Private Limited (‘Vivo Co.’), and Vivo Communication Technology Company Limited (‘Vivo Tech’) (collectively, referred to as ‘Vivo Companies’).[1] The information was filed by M/s Karni Communication Private Limited and M/s Karni Telnet Private Limited (the filing parties hereinafter referred to as ‘Karni’) who had entered into a distributorship agreement to sell mobile phones under the brand name ‘Vivo’. Karni alleged that Vivo imposed vertical restraints on its distributors in the form of: (i) restricting online sales by distributors; (ii) allocating territories for their dealers; (iii) imposing penalties on distributors in the event of market infiltration; and (iv) mandating a minimum operating price policy (‘MOP’), which amounts to minimum resale price maintenance (‘RPM’). To assess the allegations, CCI considered the market for ‘smartphones in India’.

CCI’s dismissed the allegations under Section 3(4) of the Act and observed the following:

i.     Vivo’s Lack of Market Power: CCI observed that Vivo Companies did not appear to command a position which could have enough influencing power to adversely affect competition in India. It was contended that Vivo Companies were controlled by BBK Electronics Corporation (‘BBK Group’), which owns four mobile phone selling brands in India, i.e., Oppo, Vivo, OnePlus and Realme. Accordingly, it was further contended market share of the Vivo Companies should include the market share of all brands controlled by BBK Group. CCI did not find any evidence of controlling influence by BBK Group on Vivo since: (i)Vivo India was held by two individuals, i.e., Mr. Hexi and Mr. Tangwensheng (holding 99.9% and 0.01%, respectively). Similarly, Vivo Co.’s shares were held by Multi Accord Limited (solely held by Lucky City International Limited) and Ms. Aruna Sharma; and (ii) BBK Group does not have any directors on the board of directors of any of the Vivo Companies, thereby resulting in autonomy in decision making. CCI further observed that Vivo had an independent marketing team and competed in the market for sale and distribution of smartphones in India with other BBK Groups brands. Accordingly, the market shares of Vivo Companies should not include market shares of Oppo, OnePlus and Realme.

ii.     No Restriction on Online Sales: CCI held that the restriction on distributors to sell products through online portals, does not directly withhold the supply of Vivo products in the market, and consumers have the option to buy such products through online platforms such as Flipkart, Amazon and Vivo’s website. Further, the ‘Primary Distribution Agreement’ between Vivo India and Vivo Co. was with respect to offline sales only and not online sales of products. Considering Vivo India did not have rights for online sales, the question of restriction on online sales by Vivo India in the secondary agreement with sub-distributors did not arise. Additionally, CCI noted that there were no exit barriers in the market and the complainants could opt out of distributorship if the terms were not agreeable. Therefore, this allegation was also dismissed.

iii.     No Allocation of Territory: CCI observed that the distributors were not restricted from dealing with other brands either within or outside the allocated territory. In this case, the territory allocation did not appear to cause or was unlikely to cause AAEC in the market for sale and distribution of smart phones in India. CCI relied on M/s K.C. Marketing v. OPPO Mobiles MU Private Limited[2] to ascertain this.

iv.      No Imposition of RPM through MOP: CCI noted that there were several players in the market for sale and distribution of smart phones in India and there were sufficient number of distributors/retailers from whom the consumers could purchase Vivo smart phones (online and offline). The imposition of RPM through the MOP Policy did not appear to cause or was unlikely to cause AAEC in the market for sale and distribution of smartphones in India since there was intense inter-brand competition in the said market. Further, it was observed that there were no entry/ exit barriers or foreclosure of competition. Accordingly, this allegation was not founded.

CCI also observed that in addition to the allegations under Section 3(4) of the Act, Karni in a subsequent submission to CCI also alleged that the Vivo Companies were facilitating a cartel at the retailer level under the aegis of the All India Mobile Retailers Association (‘AIMRA’), in violation of Section 3(3) of the Act. However, in the absence of any evidence to prove such an allegation and considering that no retailers or AIMRA had been impleaded in the matter, this allegation was also dismissed by CCI.

[1] Case no. 35 of 2018
[2] Case No. 34 of 2018

Published In:Inter Alia Special Edition- Competition Law - August 2019 [ English
Date: August 7, 2019