CCI Dismisses Allegations of Abuse of Dominance and Contravention of Section 3 of the Act against Oppo

On November 8, 2018, CCI dismissed the information filed by M/s K. C. Marketing (‘K.C. Marketing’) against OPPO Mobile MU Private Limited (‘Oppo’) under Section 3 and 4 of the Act.[1]

K.C. Marketing, a proprietorship firm in Pune, entered into a sub-super mobile distributorship agreement dated July 1, 2016 (‘SSMD Agreement’), with Oppo as the exclusive sub-super mobile distributor of their brand’s mobiles in south and central Maharashtra. Oppo is engaged in the business of trading and distribution of mobile phones and accessories under the brand name ‘OPPO’ in India. It was alleged that certain clauses of the SSMD Agreement restricted K.C. Marketing from selling OPPO products online and outside the sales region of K.C. Marketing (as defined in the SSMD Agreement). For violation of these clauses, Oppo imposed certain specified penalties on K.C. Marketing as provided in the Agreement. It was also alleged that Oppo had illegally charged certain other costs which were not required under the SSMD Agreement and had failed in paying dues.

Since Oppo only manufactured and sold smartphones, the relevant market was defined by CCI as ‘smartphones in India’. CCI considered the market shares of Oppo (10 – 13% in 2017-2018), as well as the combined market shares of Oppo’s group company – BBK Electronics, a Chinese consumer electronics manufacturer owning other brands under the name of ‘Vivo’ and ‘OnePlus’. CCI concluded that the combined market shares of BBK Electronics make it a significant player, but still not dominant in the defined relevant market. CCI also observed that the allegations regarding abuse of dominance by stopping supply and charging amounts beyond what is provided under the SSMD Agreement are unsubstantiated.

Further, CCI dismissed the allegations of violation of Section 3(3) of the Act based on restrictions against selling products online and outside demarcated sales region. The reason cited by CCI for this was the established jurisprudence under Section 3(3) of the Act which restricts it to agreements between parties involved in ‘identical or similar trade of goods or provision of services’. CCI held that since the relationship between Oppo and K.C. Marketing is not in ‘identical or similar trade of goods or provision of services’, violation of Section 3(3) cannot exist. CCI also examined the conduct of Oppo under Section 3(4) of the Act and concluded that for violation of Section 3(4) of the Act, an analysis of the factors to determine appreciable adverse effect in India as provided under Section 19(3) of the Act is necessary. After considering the factors under Section 19(3) of the Act, CCI concluded that Oppo had not violated Section 3(4) of the Act by restricting the sales region of K.C. Marketing. It also held that there is no violation of Section 3(4) of the Act by restricting sales of the product online since OPPO mobiles are freely available in the market at competitive prices on all major websites.

[1] Case No. 34 of 2018.

Published In:Inter Alia Special Edition Competition Law November 2018 [ English
Date: November 30, 2018