Introduction
In an order dated November 29, 2017 (the “Order”)[1], the Competition Commission of India (the “Commission”) found Board of Control for Cricket (the “BCCI”) guilty of abusing its dominant position in contravention of the provisions of Section 4(2)(c) (denial of market access) of the Competition Act, 2002 (the “Act”), for entering into an anti-competitive agreement in relation to media rights with the broadcasters of the Indian Premier League (the “IPL”) and re-imposed a penalty for such a conduct.
Background
In an agreement for media rights with the broadcasters of the IPL (the “IPL agreement”), the BCCI gave a representation and assurance that it shall not organise, sanction, recognize, or support another professional domestic India T20 competition that is competitive to the IPL, for a sustained period of ten years.
In 2010 Delhi-based cricket fan Surinder Singh Barmi brought claims of alleged irregularities in the BCCI’s grant of franchise, media and sponsorship rights regarding IPL matches. In the year 2013, the Commission held the BCCI to be guilty of denial of market access in contravention of the Act. However, the BBCI appealed before the then fair trade appellate authority Competition Appellate Tribunal (“COMPAT”)[2], who set aside the order on the grounds of violation of principles of natural justice, among other things. The matter was then remitted back to the Commission for reconsideration after proving an opportunity for hearing to the BCCI on its representations, after which, the Director General (the “DG”) directed to conduct further investigation into the matter.
Key Highlights
The Commission was of the view that there were three issues to be dwelled upon.
On the issue whether BBCI is an ‘enterprise’ as per section 2(h) of the Act, the Commission notes that Section 4 of the Act stipulates that no enterprise or group shall abuse its dominant position. The term ‘person’ in turn has been defined under Section 2(l) of the Act to include ‘a co-operative society registered under any law relating to cooperative societies’. An activity can be considered as an economic activity if an entity is operating in some market and where there are buyers and sellers. The Commission notes that BCCI is a society registered under the Tamil Nadu Societies Registration Act, 1975 and is, hence, a ‘person’. The BCCI argued that it is a not-for-profit organisation established to promote cricket in India and does not engage in any kind of commercial activity with the aim of profiting; therefore, it cannot be termed as an enterprise under Section 2(h) of the Competition Act or be held guilty of abuse of a dominant position. To this regard, the Commission concludes that organization of IPL and the attendant activities mentioned above, are economic in nature and thus are covered within the ambit of Section 2(h) of the Act. the CCI referred to the EU decision in (MOTOE) v Elliniko Dimosio to support its conclusion that the BCCI should be considered an enterprise. Based on the nature of activities performed, BCCI has been held as an enterprise and thus, would come under the purview of the Act.
As far as establishment of relevant market was concerned, the DG found it to be the market for ‘organization of professional domestic cricket leagues/ events in India’. BCCI objected to this contending that IPL and general entertainment television programmes are substitutable and form art of the same relevant product market. According to the BCCI, the director general was wrong to exclude other forms of entertainment programmes or sports from the relevant market and reiterated that “all the entertainment programs form a single relevant market”. It argued that cricket competed with other sports and entertainment programmes for viewers and emphasised that other entertainment programmes and sports events had higher television rating points than the IPL.
But the Commission, while differentiating cricket from other sports, was of the view that every sport has unique characteristics and is not interchangeable with any other. It further quoted the Lodha committee report to emphasise the strong consumer preference for cricket. Based on this fact, the CCI concluded that Indian consumers generally would not substitute cricket with any other sport. The CCI used the ‘small but significant non-transitory increase in price’ test to conclude that consumers are unlikely to substitute the IPL with other forms of entertainment programmes. Agreeing with the conclusion of relevant market as defined by the DG, the commission further held that IPL differs from other forms formats of cricket in several ways and that the entire organization of IPL like event, including selection of players through bidding process by private clubs is different from the mainstream cricket events. After a detailed investigation by the DG, CCI concluded that BCCI enjoys a dominant position in the market for organisation of professional domestic cricket league in India.
The next issue taken up was whether BCCI enjoys a dominant position in the above-defined relevant market. BCCI has been historically engaged in the organization of cricket events and assumes the role of de facto regulator of cricket in India. BCCI is the only association for cricket in India at national level and in that capacity, ICC vests it with certain rights. Prime amongst them is the right to sanction/approve cricket events in India. The DG concluded that BCCI has a strong position in the market because of its size, resources and economic power. While recognising the role of sports federation in taking measures to serve the integrity or development of the sport, CCI held that the impugned restriction had no nexus to the legitimate interest of cricket in the country. Rather, the restriction was pursued to enhance the commercial interest of the bidders of IPL broadcasting rights and the consideration in turn received by BCCI. Having regards to such facts, the Commission concluded that BCCI enjoys a dominant position in the relevant market for organization of professional domestic cricket leagues/events in India. Therefore, the impugned restriction has been held to be in contravention of Section 4(1) read with Section 4(2)(c) of the Act.
The last issue taken in account was whether BCCI had abused its dominant position in the relevant market. In addition to the terms of the IPL agreement as mentioned above, Rules 28 and 29 of the BCCI had the effect of delegitimizing any tournament of competition of cricket organized in India without the approval or support of the BCCI. It further, prohibits cricket players, umpires and scorers registered with the BCCI (or its affiliates and associate members) from taking part in such un-approved tournaments.
The commission further observed considering this background that the impugned clause had the effect of foreclosure of market for organization of any other professional domestic cricket leagues or events in India for a sustained period of ten years altogether. While reasonable restrictions in any regulatory framework may be inserted to serve as a protectionist measure, such a restriction may only for party of a regulatory framework if it serves the purpose of development or protection of the relevant market.
In absence of any plausible explanation as to why the monopoly of the IPL (created through the self-imposed restriction) should operate for a sustained period of ten years and how it serves the legitimate interest of cricket, the Commission found that the impugned clause was perused solely to enhance the commercial interest of the bidders of broadcasting rights and the consideration received by BCCI in return thereof. Conclusively, the Commission held that such an unreasonable restriction had the effect of creating an insurmountable barrier for any other body or association to organise domestic professional cricket leagues in India and amounted to a complete denial of market access which contravened Section 4(2)(c) read with Section 4 of the Act.
Penalties
The Commission inter alia gave directions to the BCCI to (i) cease and desist from indulging in practices contrary to Section 4 of the Act; and (ii) remove restrictions on organization of professional domestic cricket league and events by non-members, subject to such conditions relating to approvals that are necessary to serve the interest of the sport. Accordingly, the Commission proceeded to impose a penalty of INR 52.24 crores on the BCCI. The penalty levied was 4.48% of the average turnover of the BCCI for the preceding three financial years. Besides, BCCI has been directed to take all possible measure(s) to ensure that competition is not impeded while preserving the objective of development of cricket in the country
Having followed these directions, the BCCI must issue appropriate clarification regarding the rules applicable for the organisation of professional domestic cricket leagues and events in India, either by BCCI members or by third parties, as well as the parameters within which applications can be made and would be considered. The BCCI must take all possible measures to ensure that competition is unimpeded while preserving the aim of developing cricket in India.
This post has been authored by Apoorva Vijh, an advocate practicing in the Delhi High Court.
[1]Surinder Singh Barmi Vs. The Board of Control for Cricket in India, Case No. 61/2010 accessible at http://www.cci.gov.in/sites/default/files/61%20of%202010.pdf
[2] COMPAT has been dissolved now and the new appellate authority is National Company Law Appellate Tribunal (NCLAT).
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