4th July 2014 The appellant has come in appeal against the order passed by the Competition Commission of India (CCI) u/s. 26(2) of the Competition Act.
The CCI has chosen not to act on the information and to close the matter.
The informant was one Shri Jeetender Gupta, an advocate, who claims to be the Director of M/s. Ispace Buildwell Pvt. Ltd., a company incorporated under the Companies Act, 1956. It is an admitted position that the informant is not a purchaser of the car. It is this company, of which he is a Director, which have purchased the car. We do not have anything on record nor has anything been argued before us that this company has authorized Shri Jeetender Gupta to initiate the case u/s 19 before the CCI. The first question is, therefore, whether the concerned Shri Jeetender Gupta had a locus standi in the matter. We have also noted that there is no authorization from the company nor has Shri Gupta joined the said company as a party before the CCI or in this appeal. We, therefore, do not see any locus standi in the appellant to appear before the CCI. The CCI has not taken this question into consideration. However, in order to put the records straight, we must mention that the informant has no locus standi as he was not in any manner concerned with the purchase or ownership of the car. It is also not his case that the said car was to be given by the company for his own personal use. Under the circumstances, the CCI would have been justified in rejecting the information on the basis of lack of locus standi. The learned counsel, who is appearing in person, argues before us that in the matter of Companies Act, an informant is not required to have any locus standi. He can do it by way of furthering the cause of competition in the market. We are afraid that we do not find even that contention to be correct as the legal machinery under the CCI can not be moved by a person who has no concern whatsoever with the subject. It is not as if the informant was a dealer of the car or had any connection with the trade of the car or was in any manner so connected with the market so as to have any locus standi before the CCI. Such being the case, we are not in a position to accept the contention that he had the locus standi before the CCI.
As per the information, the said company purchased a car with the brand name of BMW, manufactured by BMW India Ltd. which is also an incorporated company. It was stated that the manufacturer did not provide a spare tyre (stepney) in the trunk of the car when the car is sold. The informant went on to state that the BMW brand of cars made and located by the opposite party No.1 who employed a technology called Run Flat Tyre Technology under which the claim of the manufacturer is that even with the flat tyre, the car can run at the speed of 80 km/h for a distance of 80 kms.
Therefore, the car is not provided with the stepney. It is here that the informant appears to have objection. Various complaints appear to have been made in the information that the opposite party No.1 made no suitable efforts to inform their prospective customers that the stepney will not be provided. They have promotional advertisements and promotional material on various showrooms but remain silent on this aspect according to the informant. The further complaint is that the manufacturer remains mum on this subject. Further, according to the informant, the car manufacturer capitalizes on the basis of this run flat tyre technology and gains on account of the fact that it is marketed as an essential feature which attracts the consumers to get tyres replaced free of cost subject to certain terms and conditions. It is pointed out in the information that only 4 tyres can be so replaced through specialized insurance policy. The further complaint is that the tyre replacement is not at all free of cost. According to the informant, the manufacturer not only forces upon the flat tyre technology but also misuses this as an advantage to market an insurance policy through opposite party No.2 and thereby adversely affects the market to sell insurance policies for the cars and preventing the consumers to consider alternate insurance policy. According to the informant, the insurance policy sold through BMW are much higher priced than the competitors, even though the same facilities are also provided by most other insurance companies. This, according to the informant, is the example of the manufacturer misusing its dominant position to force upon the run flat tyre technology which would provide them leverage to sell the tyres at higher price than the market. On this basis, it is alleged that the opponent party had contravened Section 4(2)(b) and 4(2)(c) of the Competition Act. The informant has also prayed for some suitable orders including:- (1) to provide spare tyres or to streamline the tyre replacement procedure; and (2) not to provide undue advantage to opponent No.2, an insurance company, in selling motor insurance policy.
The Commission perused the information and heard the arguments of the appellant on the question of prima facie case. The Commission then went on to examine firstly as to what was the relevant market. It ultimately came to the conclusion that the relevant market in this case was the market for luxury cars in India. For that purpose, it depends upon the Government of Indias budget proposal for the financial year 2013-14 as the vehicles costing more than US &$ 40,000 or having an engine capacity exceeding 3,000cc for petrol run vehicles and exceeding 2500cc for diesel run vehicles would amount to the luxury cars. The Commission, therefore, decided the relevant market to be the market for luxury cars sold in India. It also held that the geographical market was the whole of India. We do not see anything wrong in determination of the relevant market though the learned counsel raises the question that the relevant market will be consisting of only the cars which run on the basis of run flat tyre technology.
We do not agree that a feature in the car can make it a separate category. This essentially would be the feature in that car alone and, therefore, it can not be a relevant market. There can not be a restrictive relevant market, on the basis of a singular feature in the car. It is not the case of the appellant that any other brand of luxury car is also based on the said technology of run flat tyre. The contention, therefore, is rejected and the finding of the CCI is confirmed on this question.
Once the relevant market was determined, the Commission went on to investigate as to whether the opponent party could be said to be a dominant player and had abused its dominance. While finding that, the Commission took the exercise of tracing the history of the sale of the luxury cars in India. The Commission noted that the BMW entered the Indian luxury car market only in 2006 and had been the major player with significant market share to the extent that it toppled Mercedes brands of cars and became the largest seller in the market in 2009. Thereafter, however, the other brand Audi had taken over as the leading brand in the market. The Commission noted that the Indian luxury car market is nascent though rapidly growing and highly competitive market with fluctuating market shares. It, therefore, deduced that a high current market share under these circumstances can not be construed as a sign of market power or dominance. It also considered the reputation of the opponent car manufacturer BMW and ultimately came to the conclusion on the basis of the sale of luxury cars of various companies in India in the year 2012-13. It noted that in 2012, more cars bearing Audi brand were sold and the BMW was in the second position. The table shows that while 9003 cars of Audi brand were sold, 9375 cars of BMW were sold in 2012. However, in 2013 while 10,002 cars of Audi brand were sold and 9,003 cars of Mercedes Benz brand were sold, only 7327 cars of BMW brand were sold. This statistics were taken from the Economic Times. The CCI considered 5 brands namely, Audi, Mercedes Benz, BMW, JLR and Volvo. On this basis, the CCI concluded that the market share of the entire luxury cars segment and that of the individual luxury car manufacturers are transient in nature and the swing in their market share within a period of single year is not a relevant factor to come to the conclusion of dominance and hence only BMW could not be held as a dominant player in the market. The Commission went on to hold that though BMW was a major player in highly concentrated industry with significant market power, however, it can not be said to be a dominant player as per the explanation (a) to Section 4(2) of the Act. On this basis, the CCI went on to hold that since the dominance of the opponent was not established, there was no question of examining the so called abuse of dominance.
On the facts, however, the Commission found that the claim that the BMW was not providing spare tyre was also not factually correct. It came to the conclusion that the BMW customer could certainly have the spare tyre in the trunk of the car on the additional cost basis. On this basis, the Commission ultimately passed the order.
Shri Gupta tried to find fault with this aspect and suggested that the Commissions approach while deciding the dominance of the opponent was not correct and that it should have taken into consideration the powerful position in the world of BMW company. That argument has no basis. The sale statistics belies the same.
We are quite convinced with the correctness of the order of the CCI and would confirm the same. We, therefore, dismiss this appeal.
(Justice V.S. Sirpurkar) Chairman (Rahul Sarin) Member