Competition Commission of India Orders Probe Against Star India, Sony Pictures and Indian Broadcasting Foundation

On July 27, 2018, CCI directed the DG to investigate allegations against Star India Pvt. Ltd. (‘Star India’), Sony Pictures Network India Pvt. Ltd. (‘Sony Pictures’) and Indian Broadcasting Foundation (‘IBF’) (collectively, ‘Broadcasters ’) for engaging in unfair business practices with regard to pricing of television channels.

Information was filed by Noida Software Technology Park Ltd. (‘NSTP’), a public limited company, which is a ‘distributor’ of television channels, has been issued a license to establish, install, operate and maintain Head-End In The Sky (‘HITS’) project for digital cable services in India. NSTP alleged collusion between the Broadcasters in determining prices and supply to distributors in contravention of Section 3(3) of the Act. It also alleged (i) price discrimination by Broadcasters in the supply of television content to it in comparison to similarly placed Multi System Operators (‘MSOs’)/distributors/ operators under Section 4 of the Act; and (ii) anti-competitive vertical agreements under Section 3(4) of the Act in the form of ‘refusal to deal.’

CCI rejected allegations under Section 4 of the Act against the Broadcasters, holding that the Act does not envisage the concept of ‘collective dominance.’ Absent credible evidence, CCI found allegations of collusion as being conjecture. CCI specifically held that forming an association or taking a favourable stand by such association before a regulatory authority cannot, in and of itself, be deemed anti-competitive. CCI also noted the lack of evidence re exchange of business sensitive information amongst Broadcasters. On this basis, CCI dismissed allegations of a cartel under Section 3(3) of the Act.

To examine whether the alleged conduct may be scrutinized as a potential vertical anti-competitive arrangement under Section 3(4) of the Act, CCI clarified that the Broadcasters market power would need to be considered in a relevant market. While acknowledging that narrower markets on the basis of genres and regional preferences may exist, CCI identified the relevant market as the “market for broadcasting of television channels in India”.

While noting that the Broadcasters did not hold significant market shares in the identified relevant market, particularly as there existed over 500 channels, CCI nevertheless found that the Broadcasters enjoyed ‘significant market power’ in the relevant market of ‘sports’ and ‘entertainment’ genre in India. Relying on (i) the size and importance of the Broadcasters as compared to their competitors; (ii) commercial advantage over competitors; and (iii) consumer dependence as a result of their extensive channel portfolio in the sports and entertainment genre, CCI was of the preliminary opinion that the Broadcasters had sufficient market power.

Having determined that Broadcasters enjoyed sufficient market power, CCI turned to examining allegations of price discrimination. It was alleged that Broadcasters made disparate payments in the form of ‘carriage fees’ (to carry channels) and ‘placement fee’ (to place channels at prominent positions) to their ‘favoured’ distributors. Allegedly, these fees were often greater than the license fee ordinarily charged to distributors that significantly reduce costs for such ‘favoured’ distributors’ vis-à-vis others. While Broadcasters made channels available on an a-la-carte basis, the terms at which they were offered, including pricing, made the choice between a bouquet of channels and a-la-carte illusory.

Relying on the decision of the Telecom Disputes Settlement and Appellate Tribunal (‘TDSAT’)[1], CCI opined that despite regulatory oversight, Broadcasters had the ability to discriminate amongst distributors. CCI rejected the Broadcasters’ contention that the very offer of channels at rates mentioned in the Reference Interconnect Offer (‘RIO’) (in Interconnect Agreements filed with the Telecom and Regulatory Authority (‘TRAI’)) negates allegations of ‘refusal to deal’. However, referring to observations of the TDSAT and TRAI’s issuance of new regulations to ensure non-discrimination, CCI was of the prima facie opinion that the RIO terms by Broadcasters may well qualify as a mechanism for refusal to deal in contravention of Section 3(4)(d) of the Act.

Finally, responding to the Broadcasters’ challenge of CCI’s jurisdiction to take cognizance of information, CCI held that its powers are in addition to, and not in derogation of, TRAI’s mandate to regulate Broadcasters. CCI also noted that as TDSAT and TRAI have decided the matter fully and recognized that Broadcasters had engaged in the practice of price discrimination/ refusal to deal, nothing precluded it from taking cognizance of this matter.

[1] M/s Noida Software Technology Private Limited v. M/s Media Pro Prvt. Ltd. & Ors. (Petition No. 295 (C)/ 2014 decided on 07 December 2015

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