CCI dismisses complaint against KAFF Appliances on minimum resale price by Snapdeal

On January 15, 2019, CCI dismissed allegations of resale price maintenance (‘RPM’) filed by Jasper Infotech Private Limited (‘Snapdeal’) against KAFF Appliances (India) Private Limited (‘KAFF’). [1]

KAFF’s products were being sold on Snapdeal for a discounted price. KAFF, on its website, displayed a caution notice alleging that KAFF’s products sold on Snapdeal’s website were counterfeit and that Snapdeal would not honour warranties.

Snapdeal alleged that this statement was due to Snapdeal’s discounts on KAFF’s products on its online portal. Snapdeal further provided the documentary evidence i.e., an email by KAFF which revealed that KAFF tried to impose the market operating price on Snapdeal (‘MOP’).

CCI in its prima facie order found contravention of Section 3(4)(e) read with Section 3(1) of the Competition Act and the Director General (‘DG’) was asked to further investigate. After the investigation, the DG concluded that KAFF did not violate Section 3(4) (e) of the Competition Act.

The DG concluded that since Snapdeal was a marketplace, facilitating exchange of products between buyers and sellers, it would not form a part of the vertical chain. The DG, in its investigation report, noted that an online platform does not perform any material function which could make it a part of the vertical chain. With respect to RPM, there needs to a presence of a buyer–seller relationship, which in this case was not present; further, Snapdeal did not influence the price of the products listed on its website.

CCI observed that online platforms act as a parallel distribution chain, to their offline counterparts. CCI relied on its previous decisions[2] and observed that online and offline platforms are not two separate relevant markets, but two different channels of distribution in the same relevant market. While noting that the DG had taken a myopic view, CCI stated that the online platforms are peculiar in nature and cannot be compared to the traditional buyer–seller relationship. CCI stated that instead of looking at the vertical chain in a traditional manner, the test for determining whether a firm can be deemed to be a part of the product chain should be whether it contributes value to the product (or service). Online platforms can influence the prices by giving discounts or cashback that are limited only to online platforms.

KAFF argued that the caution notice was a knee jerk reaction to the excessively low priced products being displayed on Snapdeal’s online portal which raised a genuine apprehension on the part of KAFF of such products being counterfeit.

KAFF further demonstrated that it never hindered the sale of its products on online portals and the caution notice was not followed by any concrete action on its part and hence, there was no impact on the online sale of OP’s products.

While dismissing the information, CCI held that the manufacturers have a right to choose the most efficient distribution channel, unless the said choice leads to AAEC. Therefore, the contravention of Section 3(4)(e) read with Section 3(1) of the Competition Act was not established and the complaint was dismissed.

[1]   Case No. 61 of 2014
[2]  Mr. Deepak Verma Vs. Clues Network Pvt. Ltd., Case No. 34 of 2016; Confederation of Real Estate Brokers’ Association of India Vs & Ors., Case No. 23 of 2016

Published In:Inter Alia Special Edition- Competition Law - March 2019 [ English
Date: March 1, 2019