CCI introduces Leniency “Plus” regime in India- Will it suffice?
CCI directs probe into the conduct of Volleyball Federation of India; exclusive agreement with Baseline found prima facie anti-competitive may result in abuse of dominant position
The Competition Commission of India (“CCI/Commission’) by an order dated 07.08.2019 has directed investigation by the Director General (“DG”) into the conduct of Volleyball Federation of India (“VFI”) and Baseline Ventures (India) Pvt. Ltd (“Baseline”) to determine whether their conduct resulted in violation of provisions of the Act including that of Abuse of dominant position by VFI.
Background
Information before the CCI was filed by three international volleyball players of India against VIF and Baseline alleging that VIF has abused its dominant position and also entered into an anti-competitive agreement with Baseline which is prejudicial to the volleyball players in India and also lead to monopolization in the volleyball services market.
It was stated in the information that VIF had decided to organize a volleyball league similar to IPL (cricket) with the objective of promoting volleyball in India and to provide much needed impetus to the Indian players to improve their game by playing with world class players across the globe. However, the same could not be implemented for more than 3 years due to internal political rivalries in VFI. It was alleged that Baseline was arbitrarily and unilaterally appointed by VFI as the organizer of Volleyball League and they both entered into an agreement on 21.12.2018 granting Baseline exclusive rights for organizing a Volleyball League for Men, Women and beach volleyball in India for 10 years.
It was alleged that by granting the exclusive right for 10 years to Baseline and prohibiting any other person or enterprise form organizing a similar Volleyball League for the next 10 years, VFI had abused its dominant position. Also, VFI and Baseline, by entering into this agreement has not only put restrictions on other persons or enterprises who wish to conduct such leagues, but also, on volleyball players in India and therefore have violated Section 3 of the Act as well.
It was alleged that the players are restricted from participating even in global events like Asian Games, Olympics or Volleyball World Cup if the dates of these clash with Baseline’s Volleyball League. In addition, the information also mentioned about an announcement made by Mr. Ram Avtar Singh (Secretary General of VFI) during the auction of Volleyball League that the winning team of 2019 edition will be representing India in Asian Men’s Club Volleyball Championship to be held in Chinese Taipei in April 2019. As per the informants, by virtue of this statement VIF arbitrarily and in abuse of its dominant position as the sole authority for selecting the Indian team has taken away the opportunity form thousands of volleyball players across the country who are not picked by any team in Baseline’s Volleyball League. Therefore, VFI in collusion with Baseline has created a monopoly for the teams in Baseline’s Volleyball League comprising an exclusive club of 66 players as opposed to hundreds of players in India to participate in Asian Championship from India.
Preliminary Conference
The Commission decided to hold on a preliminary conference on 11.04.2019 pursuant to which VFI filed an affidavit and written submissions stating that it has amended certain clauses of its Agreement with Baseline by way of an Addendum to clarify that there are no restrictions. To this, the informant stated that the changes made were only superfluous and the Agreement read with the Addendum continues to be anti-competitive. Moreover, the fact that VFI amended its Agreement showed that the said Agreement was anti-competitive at the first place and therefore penalty should be imposed on VIF and Baseline.
VIF, on directions of the CCI, filed a subsequent affidavit confirming that there are no restrictions on any other person or enterprise for conducting similar volleyball league at domestic, state, national or international level. However, the affidavit also stated that such volleyball league conducted by any person or enterprise other than Baseline will not be conducted in association with VFI during the term of its Agreement with Baseline.
CCI Prima Facie Order
Enterprise
CCI noted that VFI is inter alia established to organize national and international championships which generates revenue for VFI. Moreover, VFI collects affiliation and other fees from its members. The Commission held that the very fact that VFI has a mandate to undertake the economic activity of organizing tournaments makes it an enterprise.
Relevant Market
CCI was of the view that the delineation of relevant market for the analysis of allegations with regard to the restrictions on competing organizers to organize events should be considered from the point of view of the final consumers i.e. the spectators and given the unique characteristics of volleyball it is unlikely that the consumers will consider any other sport as substitutable. Moroever, entertainment from sports cannot be substituted with other forms of general entertainment. Accordingly, the relevant product market for assessing restrictions on competing organizers to organize events was delineated as ‘market for organization of professional volleyball tournaments/events.”
As regards the assessment on restriction on volleyball players, CCI observed that VFI requires the services of volleyball players for organizing volleyball events which makes it a consumer of volleyball players and VFI cannot substitute the services of a volleyball player with any other service. Accordingly, for assessment of restriction on the volleyball players, the relevant product market was decided as “market for services of volleyball players”.
With respect to the relevant geographic market, CCI noted that VFI being the National Sports Federation (NSF) governs the game of volleyball by stipulating rules and regulations that are applicable across India and therefore the geographic dimension of both the product markets would cover whole of India.
Dominance
The Commission noted that VFI is the only national level volleyball federation in India and is the sole governing body of the game of volleyball and the players associated or registered with it. Moreover, VFI is the de facto regulator and an exclusive body responsible for the conduct and governance of all volleyball events in India. The regulatory powers enjoyed by VFI includes the right to give permission and rights for organizing any volleyball league. Therefore, the regulatory powers coupled with the right to carry out economic activity to the exclusion of any other body in this field grants virtual monopoly rights to VFI. Therefore, in view of being the only national level volleyball federation in India, regulatory powers enjoyed by it under the pyramid structure of sports governance and being the predominant buyer of the services provided by professional volleyball players, CCI concluded that VFI is dominant in both the markets i.e. Market for organization of professional volleyball tournaments/events in India and market for services of volleyball players in India.
Abuse of Dominance
The Commission observed that competition cases relating to sports associations/federations usually arise because of the dual roles played by them i.e. regulatory as well as economic and following the decisional practice it is required to analyze whether VFI (which is a regulator of volleyball as well as the organizer of volleyball tournaments) was justified to enter into agreement with Baseline giving it exclusive rights for a period of 10 years to conduct and organize volleyball league in India and consequently affecting the free movement of volleyball players in India. The Commission was of the opinion that the restraints imposed by the regulator would be justified if the restraint on competition is a necessary requirement to serve the development of sport or preserve its integrity.
The Commission observed that by way of Clause 2.2 of the Agreement, VFI has prohibited any other league of same or similar nature/format/idea as that of Volleyball League to be organized within the territory of India or abroad for a period of 10 years as well as even after renewal or extension of the Agreement. Similarly, Clause 2.14 ensured that no international or national event of volleyball sports will be organized or allowed to be organized for 10 years which may have an interest conflicting with that of Volleyball League. CCI observed that the agreement also contained a non-compete clause by virtue of which VFI would not deal with or engage in any sort of activity or project or leagues or event of same or similar nature in India or abroad and has also undertaken to not allow any person or association to organize any other league at State, district or local level.
The Commission observed that a collective reading of these clauses prima facie suggests that VFI has put a complete bar on organization of any other volleyball event at international, national, district or local level which potentially forecloses the relevant market for organization of professional volleyball tournaments/events in India to the competitors of Baseline for a period of 10 years or even more, if the agreement is renewed by VFI.
CCI also noted that Clause 2.6 restricts the volleyball players who are in participating in Baselines Volleyball League from participating in other sports tournaments of same or similar nature/format/idea for a period of 10 years as well as after extension of the agreement and the same result in denial of market access to competitors of Baseline.
The Commission acknowledged that VFI, by way of affidavit, had informed that Clause 2.2 of the agreement has been deleted, however, it was of the prima facie opinion that certain clauses of the Agreement as it existed prior to the amendment between VFI and Baseline had placed restrictions on players participating in Baseline’s Volleyball League from participation in similar tournaments for a period of 10 years and even after 10 years, if the agreement is extended. Moreover, the players who would participate in Baseline’s Volleyball League are/were not allowed to participate in any national or international event if its dates clashed with Baseline’s Volleyball League which is prejudicial to the players as they may have to forgo international events such as Olympics, Asian Games etc.
The Commission observed that such restriction appears to have the effect of restricting free movement of participating volleyball players which does not seem necessary for promoting the game or preserving its integrity, and on the contrary, appears to limit the provision of services of participating volleyball players in the relevant market for services of volleyball players in India.
Accordingly, CCI directed the DG to undertake investigation to analyze the conduct of VFI to determine whether the same resulted in violation of provisions of the Act including that of Section 4.
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