NCLAT Affirms CCI’s Order Penalizing Verifone India Sales Pvt. Ltd. for Contravention of Abuse of Dominance

On March 13, 2020, NCLAT dismissed two connected appeals filed by Verifone India Sales Pvt. Ltd. (‘Verifone’) against two orders passed by CCI finding an abuse of dominant position by Verifone (‘CCI Orders’). The CCI Orders were passed pursuant to information filed by Atos Worldline India Pvt. Ltd. (‘Atos’) and Three D Integrated Solutions Ltd. (‘Three D’)[1].

Atos, in its complaint (‘Atos Case’), alleged that in 2012, Verifone sent it a draft Software Development Kit (‘SDK’) agreement with restrictive conditions and emphasizing that the same was not open to any negotiations and amendments. Atos further alleged that Verifone delayed the supply of products to Atos, which led to losses incurred by it. Further, on receipt of letters by Atos highlighting the unreasonableness of the SDK agreement, Verifone sent a termination letter to Atos. Atos further alleged that Verifone, a dominant player in the market for ‘Point of Sale’ (‘POS’) terminals, tried to leverage its dominant position in the market for ‘Value Added Services’ associated with POS terminals. CCI, after a detailed investigation by DG, held that Verifone had abused its dominant position and violated several provisions of the Act. For instance, the terms of the SDK agreement amounted to the imposition of unfair conditions under the provisions of Section 4(2)(a)(i) of the Act. CCI further held that Verifone’s conduct limited/restricted the technical and scientific development of VAS services used in POS terminals market in India which was in contravention of Section 4(2)(b)(i) and (ii) of the Act. Last, CCI also held that the conduct of Verifone with respect to seeking disclosure of sensitive business information from the customer in the downstream market of VAS services so as to enter the said market was in contravention of the provisions of Section 4(2)(e) of the Act.

A similar complaint was filed by Three D (‘Three D Case’) where it was alleged that Verifone supplied restricted Electronic Ticketing Machines (‘ETMs’) with an additional requirement to purchase SDKs, thereby leveraging its strength to enter into the market for software loaded in ETMs. Three D also alleged that Verifone tried to force Three D to sign a very restrictive agreement. Three D further alleged that Verifone illegally withheld certain integral components of the SDK supplied, thereby restricting Three D from using the ETMs. CCI came to a similar conclusion as in the Atos Case.

With respect to the Atos Case, while challenging CCI’s market definition i.e., market for ‘POS terminal in India’, Verifone submitted that all electronic payment devices perform the same function, with the same end use and therefore, the relevant market should be considered as the ‘market for electronic payments in India’. Similar submission was made by Verifone in the Three D Case that the relevant market cannot be held to be ‘POS terminal in India’ as the supply of ETMs by Verifone to Three D does not relate to supply of POS terminals by Verifone. Verifone further submitted public reports to show that it had a smaller market share compared to its competitors during the relevant period of investigation. However, NCLAT noted that given the nature of the products and the market, there was no substitute for POS terminals and thus affirmed CCI’s market definition. NCLAT further held that, given the material on record and the inquiry conducted by CCI and DG, it was not inclined to interfere in CCI’s orders. Accordingly, NCLAT dismissed the appeals.

[1] TA (AT) Competition No. 1 of 2017 (Order delivered on March 13, 2020)

Published In:Inter Alia Special Edition - Competition Law - May 2020 [ English
Date: May 11, 2020