CCI Dismisses Allegations of Abuse of Dominance Against a Trading and Distribution Company of Mobile Handsets

On October 4, 2018, CCI dismissed allegations of abuse of dominance against Fangs Technology Private Limited (‘OP 1’) and Vivo Communication Technology Company (‘OP 2’) with respect to certain clauses in a VIVO Distributorship Agreement (‘Agreement’) entered into by the OP 1 with its distributors.[1]

The distributors are members of Tamil Nadu Consumer Products Distributors Association (‘Informant’) which is registered under the Tamil Nadu Society Registration Act, 1975. The Informant pointed out several concerns with regards to the clauses of the Agreement, inter alia that the conditions imposed were unfair and unreasonable for the distributors, resulting in foreclosure of competition by creating barriers to new entrants. The Informant also alleged that the Agreement prohibited the distributors from doing business in Oppo and Honor brand of mobile phones. Thus, the Informant alleged that the conduct of the OPs was in violation of Section 3 (4) and Section 4 of the Act.

While assessing the allegations of abuse of dominance, CCI defined the relevant market as ‘market for smartphones in India’. Placing reliance on the GFK Report (‘Report’), prepared by GfK SE (Germany’s largest market research institute) for the year 2017-18, it was observed that the market for smartphones in India is highly competitive with several players. Moreover, the Report indicated that the brand share of Vivo in the Indian market declined from 14.4% to 12.1% during this period. Additionally, CCI observed that other competitors in the market such as Samsung and Xiaomi held close to 33% and 16.6% respectively. As a result, CCI opined that OP 1 is not dominant in the relevant market. In the absence of dominance, no case can be made against OP 1 in violation of Section 4 of the Act.

With regard to the allegation of resale price maintenance (‘RPM’) under provisions of Section 3(4) of the Act, CCI observed that the Informant had not submitted any evidence to prove that OP 1 has imposed RPM on the Informant. CCI also observed that there exists high inter-brand competition in the smartphone market in India. On this basis, CCI held that OP 1 does not have the significant market power required to impose anti-competitive vertical restrictions. In addition, CCI opined that the restriction imposed by the Agreement on doing business with Oppo and Honor was justified on the ground that it was to avoid leakage of intellectual property of Vivo. CCI also justified some of the other contentious clauses of the Agreement as being reasonable restrictions imposed by OP 1. Therefore, CCI ordered the matter to be closed under Section 26(2) of the Act.

[1] Case No. 15 of 2018 (Order dated October 4, 2018)

Published In:Inter Alia Special Edition Competition Law Third Quarter 2018 [ English
Date: September 30, 2018