KhelAdhikar

Play it Even

Surinder Singh Barmi v. BCCI : Analysis of the Competition Law principles


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By Tejaswa Naswa (IVth year – National  Law Institute University, Bhopal)

Email Id-  tejasnaswa.66@gmail.com

FACTUAL BACKGROUND

  1. This case arose on the basis of an information filed by Sh. Surinder Singh Barmi (Informant), a cricket fan from New Delhi against Board for Control of Cricket in India (hereinafter “BCCI”) to the Competition Commission of India (hereinafter “CCI”) under Section 19(1)(a) of The Competition Act, 2002 (hereinafter ”Act”) alleging gross violations of Section 4 of the Act, based on which the Commission admitted a prima facie case in the favour of the Informant and subsequently passed an order in his favour.
  2. The earlier dated order passed by CCI under Section 27 of the Act found the conduct of the BCCI to be in total contravention of Section 4 of the Act that prohibits an “enterprise” from abusing its dominant position in the relevant market.
  3. The order stated that organizing private professional cricket leagues/events in India unequivocally demonstrated BCCI’s dominant position in the market. The representation given by BCCI under clause 9.1(c)(i) of its IPL Media Rights agreement entered into with the broadcasters of Indian Premier League (“IPL”), that “it shall not organize, sanction, recognize, or support during the Rights period another professional domestic Indian T20 competition that is competitive to the league” was found to be in contravention of Section 4(2)(c) of the Act, after having clearly assumed the regulatory powers in the commercial agreement.
  4. Aggrieved by the earlier dated order of the Commission, BCCI preferred an appeal before the erstwhile Hon’ble Competition Appellate Tribunal (hereinafter, “COMPAT”). The COMPAT, set aside the Commission’s earlier order dated 8th directing the Commission to start the matter afresh after finding that the earlier order inconsistent with the very significant principles of natural justice, because the said clause was neither referred in the order, passed under Section 26(1) nor the Director General (“DG”) recorded any finding with regard to its validity and on this count the appellant was not accorded an opportunity to defend the said clause.
  5. The Commission re-directed the DG to conduct further investigation into the matter in accordance with the directions given by COMPAT.
  6. The DG, in its report, cited the pyramid structure of cricket governing bodies; different types of cricket matches, differences in professional domestic cricket leagues and other formats of cricket and the similarity of rules and regulations governing organization of cricket events across India, and concluded that relevant market for the purposes of dominant position is the ‘organisation of professional domestic cricket league/events in India’.
  7. The supplementary investigation validated the fact that BCCI enjoys a dominant position in the relevant market by analysing its market share, size, resources and economic power, the dependence of consumers and high entry barriers. Further, the rules/regulations/bye-laws of International Cricket Council (hereinafter, ‘ICC’) and BCCI reinforced the absolute dominance of BCCI in the relevant market.
  8. The DG submitted that BCCI’s monopolised rules (Rule 28(b) and (d) of BCCI Rules) did not authorise any other enterprise to organise a professional cricket league in India and thereby it amounted to a clear violation of Section 4(2)(c) of the Act.
  9. The Commission relied on the supplementary investigation report and opined that Rule 28 of the BCCI Rules that provides permission for conducting cricket match or tournament will be accorded only to the members of BCCI and Rule 29 that restrict any player, official, umpire, member associated with BCCI to partake in a ‘Disapproved Cricket’ tournament was totally against the spirit and letter of Section 4(2)(c) of the Act. Section 32 of ICC Bye-Laws defines ‘Disapproved Cricket’ as any cricketing event that has not been granted a valid sanction of the member in whose territory it is being played.
  10. Thereafter the Commission found the said clause 9.1(c)(i) of IPL Media Rights Agreement read in conjunction with BCCI’s restrictive rules and ICC bye-laws to be in contravention of Section 4(2)(c) of the Act.

BCCI’s CONTENTIONS:

  1. BCCI contended that is not an ‘enterprise’ within the meaning of Section 2(h) of the Act, placing reliance on the Tamil Nadu Societies Registration Act, 1975, that envisages BCCI as a ‘not-for-profit’ society established to promote the sport of cricket in India and not engaged in any commercial activity.
  2. BCCI relied upon the judgment of the Hon’ble Supreme Court in Secretary, Ministry of Information and Broadcasting, Government of India and Others v. Cricket Association of Bengal and Others [1995 (2) SCC 161] wherein Supreme Court held that sporting organisations like BCCI/CAB should not be regarded as an enterprise by placing them at par with other commercial societies engaged in sponsoring sports events for profits and hence Section 4 of the Act is inapplicable in the instant matter.
  3. The DG erred in chalking out the scenario of relevant market by not taking into consideration viewpoint of consumers. In support of this contention, BCCI filed an Economist Report that described the relevant market as a market focussed on securing entertainment for its consumers during the prime time of entertainment programmes. It further argued that the live telecast of IPL matches is never aired on sports based channels but entertainment channels and thereby the scope of the relevant market is much wider in sense of professional leagues.
  4. BCCI further stated in its submissions that the Television rating point of other entertainment programmes increased post IPL which distinctly suggests IPL is not a relevant market.
  5. The DG relied upon market share, size, resources and economic power of BCCI, the dependence of consumers and high entry barriers to conclude that BCCI enjoys a dominant position in the relevant market.
  6. Since BCCI is a not-for-profit organisation and its profits are being used for development of cricket, its economic strength cannot be considered as a factor to conclude its dominance.
  7. The DG’s report inaccurately concluded Rules 28(b) and Rule 28(d) of the BCCI rules operating as anti-competitive rules, based on the rationale that BCCI prohibits any private organisation to conduct cricket match/ tournament. However, Rule 28(b) provides that no member or a Club affiliated to a member or “any other organisation” shall conduct cricket match or tournament specified therein, without the approval of BCCI.
  8. It is pertinent to note here that ‘any other organisation’ does not include private organisations by reading the principle of ‘ejusdem generis’ into it and there is no prohibition on private organisers to organise a professional domestic cricket league/event.

Dominant Position defined:

There have been myriad number of cases in the past decade wherein industry giants and luminaries have monopolised the functions and operations of the services rendered by them in the relevant market by using their financial wrath on small and financially vulnerable entities, which has gone on to create an obnoxious anti-competitive atmosphere within the realms of the industry. These bulwark enterprises deploy murky practices by enjoying ‘dominant position’, with the object of thrusting the growth of such vulnerable entities to operate independently and carve a popular image of their own in the particular sector. Section 4 Competition Act, 2002) defines Dominant Position as a position enjoyed by an enterprise whereby enables it to:

  • operate independently of competitive forces prevailing in the relevant market;
  • affect its competitors or consumers or the relevant market in its favour.

The settled position with regard to the dominant position was determined in the case Fast Track Call Cab Pvt. Ltd. and Meru Travel Solutions Pvt. Ltd v. ANI Technologies Pvt. Ltd., wherein the CCI while determining whether OLA held a dominant position in the relevant market or not remarked that abuse of dominant position under Section 4 would be attracted only when the entity under scrutiny holds a dominant position in the relevant market. CCI also elaborated on the concept of dominant position and stated dominant position as a position of economic strength enjoyed by the enterprise in the relevant market, which enables it to operate independently of competitive forces prevailing in the relevant market or affect its competitor or consumer or the relevant market in its favour.

Such an enterprise will be in a position to disregard market forces and unilaterally impose trading conditions, fix prices, etc. The abuse may result in the restriction of competition or the elimination of effective competition.

What Is Abuse of Dominant Position under Section 4 of Competition Act, 2002:

An enterprise in dominant position performs any of the following acts:

  • directly or indirectly, imposes unfair or discriminatory practices.
  • limits or restricts production of goods or provision of any services in any form.
  • indulges in practice or practices resulting in a denial of market access.
  • concludes of contracts subject to acceptance by other parties of supplementary obligations which have no connection with the subject of such contracts; or
  • uses its dominant position in one relevant market to enter into, or protect another relevant market.

An undertaking in a dominant position is entitled also to pursue its own interests. However, such an undertaking engages in abusive conduct when it makes use of the opportunities arising out of its dominant position in such a way as to reap trading benefits which it would not have reaped if there had been normal and sufficiently effective competition. This proposition was explained in the case of Jupiter Gaming Solutions Pvt. Ltd. v. Government of Goa & Ors.,  wherein CCI opined that abuse is said to occur when an enterprise uses its dominant position in the relevant market in an exclusionary or /and an exploitative manner. In the case, the Government’s tender bid of lottery contained certain conditions which apparently restricted the size of bidders such as, minimum gross turnover of the participating entity, the participating entity should have experience of at least three years. The CCI held that the Government of Goa by imposing such conditions abused its dominant position denial/restriction of market access to the other parties in the relevant market.

Before deliberating upon the issue of BCCI’s alleged abuse of its dominant position within the relevant market, it is imperative to construct the regulatory/custodian status of BCCI and whether it is an enterprise to be incriminated under this act. BCCI has repeatedly flouted significant provisions of competition laws in the current past, escaping its penal provisions by contending that under no circumstances its functional/operational structure and financial dynamics (that form part of its transactions) qualify to be services of an ‘enterprise’ that is covered under this Act. However, a thorough and comprehensive reading of the provision suggests BCCI’s functioning and structure do not take it out of the ambit of the definition of ‘enterprise’ even though it is a non-profit organisation. A detailed explanation with regard to BCCI’ regulatory/enterprise status has been discussed in the next segment.

COMMISSION ORDER:

  1. The CCI in its detailed order ruled that BCCI’ actions and conduct are de jure within the realm of regulatory function/role. By virtue of laying down the rules of the game and team selection, affiliation to International Cricket Council (“ICC”) and operation Section 32 of the ICC Manual, that authorizes BCCI to sanction/ approve cricket events in India (“Disapproved Cricket”) BCCI continued to function as a statutory body having regulatory functions and thereby is a de facto regulator of cricket in India.
  2. The Commission further noted that the Legislature intended to draft the Act that is primarily centred upon the mechanisms and operation of an enterprise rather than the structural form of the entity. It elaborated the definition of an enterprise by relying on Hemant Sharma & Ors. v. Union of India & Ors, (W.P. (C) 5770 of 2011) wherein the Commission held chess federation as an enterprise within the meaning of Section 2(h) of the Act and on similar lines held BCCI accountable as an enterprise under Section 2(h) of the Act.
  3. The activities of sports organisations quite certainly fall within the ambit of an “enterprise” and the mere fact that BCCI is a “not-for-profit” organisation does not take it out of the ambit of definition of an “enterprise.
  4. While determining the relevant market for the purposes of the dominance of powers, the Commission carried out an extensive analysis of the market factors,  the producer on the supply side, the consumer on the demand side and the underlying product or service. It based its judgment on the reasoning that the Act considers the relevant market to comprise of goods and services which could be interchangeably used by consumers which are to be tested on the touchstone of a consumer’s perspective based and not the producer’s supply side.
  5. Further the Commission after considering all the factors that carve out a systemic portrayal of success of a Professional Cricket League in India (TRP ratings), held that even though entertainment is the desired result of organising a Professional Cricket League, definition of relevant market, in this case, cannot be replaced by other forms of sporting events and entertainment programmes.
  6. The Commission established the relevant market by differentiating between First Class/ County Leagues and Private Professional Leagues wherein foreign cricketers partake in large numbers and held that the relevant market is the organisation of these Professional Cricket Leagues.
  7. With regard to the BCCI’s dominance in the relevant market, the Commission observed that the anti-competitive rules deployed by BCCI (Rule 28(b) and (d) of BCCI Rules) in putting a blanket ban on any member, official, umpire affiliated with BCCI to form an association with an entity that organizes “Disapproved Cricket” (Section 32.1.1 of ICC Regulations 2011) amounted to a clear dominance in the relevant market.
  8. The Commission in its final statement laid down that owing to its regulatory role, monopoly status, control over infrastructure, players, ability to control entry of other leagues and historical evidence that BCCI is in a dominant position in the market for organizing private professional league cricket events in India.
  9. It further noted that the said clause (Clause 9.1 (c) (i)) and Rules 28(b) of BCCI Rules that allow BCCI to dismiss the functioning of any event it fears being competitive to IPL clearly and unequivocally amounts to a practice through a contractually binding agreement resulting in denial of market access to any potential competitor, and is without a shadow of doubt violation of Section 4(2)(c) of the Act.

PENALTIES IMPOSED BY THE COMMISSION:

  1. BCCI shall cease and desist from indulging into the aforesaid conduct, which is found to be in contravention of the provisions of Section 4(2)(c) read with Section 4(1) of the Act;
  2. BCCI shall not place blanket restriction on organization of professional domestic cricket league/ events by non-members.
  3. Penalty of INR 52.24 Crores.

IMPICATIONS/CONSEQUENCES OF THE RULING FOR BCCI AND OTHER NATIONAL SPORTS FEDERATIONS:

The judgment seeks to bring about a change in the entrepreneurial conduct of National Sports Federations that often find themselves at the welcoming end of granting approvals and sanctions to organise a similar tournament by bringing all sports governing bodies within the scope of enterprise in accordance with their commercial activities. The Hemant Sharma ruling is suitably placed at bringing about a change in the conduct of sporting industry by outlining the scope of regulations and entrepreneurial transactions that govern any sporting event potential and binding every federation with the mandatory provisions of the Act.

This judgment has come as a relief for all the small market players who supposedly find it difficult to negotiate a successful deal with a national/international athlete, broadcasting, media agencies, officials and other entities affiliated to sporting federations in order to organise a professional league/event without the heavyweights of the sporting industry. The Order of Commission is quite significant from the small market players perspective inasmuch it rejects the idea of one federation-one sport as put forth by BCCI. The Commission is of the view that it does not authorise sporting federations to monopolize the rights of organising the professional league and it shall be open to every enterprise that desires to organise such a league. The Sporting Federation shall only be concerned with envisaging the rules of the game and laying down disciplinary codes and punitive regulations which are inconsistent with the International Sports rules and regulations.

With regard to the power that BCCI derives from Rule 32 of ICC ostracizing ICL from being organised as ‘Disapproved Cricket’ is liable to be struck down by Commission under Section 32 of the Act that empowers Commission to scrutinize such transactions if they have a domino effect on the competition in India. It certainly seems plausible that one of the most powerful and economically successful commercial organizations in Indian sport should not be protected from the wrath of competition law principles.

The recent case of Pan India Infraproject Pvt. Ltd. v. BCCI re-affirms the position laid down in the Surinder Singh case, in that the Commission held that the restraining of the organisation of a competitive league i.e. ICL by the BCCI amounted to contravention of the provisions of Section 4(2)(c) of the Act by not authorising the organiser from taking part in the bidding process of IPL market rights. The imminent monopoly activities employed by BCCI of reaping huge revenues from discreet sponsorship, commercial transactions shall be evenly distributed amongst players and other enterprises and shall in no circumstances be concentrated in the hands of the sporting sector heavyweights.

Categories: Contract Law, Dispute Resolution

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  1. Demarcating a fine competitive balance: Exploring the monopolistic rationale of sports governing bodies in India (Part 1) – KhelAdhikar
  2. A take on India’s emerging competition law jurisprudence:Deciphering India’s leading sports law cases (Part 2) – KhelAdhikar

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