Case No. 2/2009. Case: Consumer Online Foundation Vs Tata Sky Limited, Dish TV India Limited, Reliance Big TV Ltd. and Sun Direct TV Pvt Ltd.. Competition Commision of India

Case Number:Case No. 2/2009
Party Name:Consumer Online Foundation Vs Tata Sky Limited, Dish TV India Limited, Reliance Big TV Ltd. and Sun Direct TV Pvt Ltd.
Issue:Competition Act, 2002 - Sections 2, 3, 3(1), 3(2), 3(3), 3(4), 4, 4(1), 4(2), 19, 19(3), 26(1) and 27; Companies Act, 1956 - Section 617; DTH (Standards of Quality of Service and Redressal of Grievances) Regulation, 2007
Judgement Date:March 24, 2011
Court:Competition Commision of India
 
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Order:

  1. In this case information was received in respect of anti-competitive behaviour by the above named four Respondents. The details are as follows:

    Brief of the Case

    The present memorandum was filed by Shri Bejon Misra, Trustee, Consumer Online Foundation, alleging contravention of various provisions of the Competition Act, 2002 by the four DTH service providers named above.

    (ii) The complainant has alleged that the above mentioned four Direct to Home (DTH) service providers are limiting competition among themselves, forcing the consumers to buy bundled hardware and creating entry barrier for new hardware manufacturers. These practices are anti competitive and violate Sections 3 & 4 of Competition Act, 2002.

    (iii) To avail DTH service, a customer requires 4 instruments beside the television. 1) A small dish antenna (usually fixed on terraces) to gather DTH signal, 2) a small radio-size device (usually placed over the TV set and colloquially called set top box) to read the DTH signal, 3) a control instrument (usually incorporated within the STB) called conditional access module CAM which ensures that the consumer avails only what he has paid for, and last 4) a smart card to identify the user.

    (iv) Ideally the antenna and the STB should be available in the open market and DTH service provider should provide only the CAM + smart card (or possibly only a smart card). So that whenever a consumer wishes he can buy another CAM + card from another DTH service. This way the DTH operators would compete on service, quality and price.

    (v) The DTH operators in the Country are selling CAM + card + STB + antenna bundled together and charging the consumer for all these products. Most popular schemes of the operators state that the consumer gets hardware 'FREE' with 6 month subscription (nearly Rs. 1800). The amount actually includes the cost of hardware, but the operator denies its ownership to the customer and tells him that the hardware is owned by the DTH operator. Moreover, they have manipulated the STB so that it cannot work for any other DTH operator.

    (vi) This way they are able to withhold their customer who is loath to buy the entire hardware again if he wishes to change the DTH operator. The DTH company understands that the customer is stuck and thereafter regularly overcharges him by small amounts in the monthly recharge.

    (vii) Old DTH operators use set top box of MPEG-2 format, while the later entrants have installed the advanced MPEG-4 format. MPEG-4 set top box can work on the type 2 format, but vice versa is not true. Thus, interoperability of older players' instrument is limited.

    (viii) Consumers are entitled to purchase, hire purchase or rent the STB as per government regulations, but the DTH companies hide this option.

    (ix) Consumers are generally unaware that as per government rules, the set top box from one DTH is required to work with smart card of another operator and also that the consumer has an option to rent, hire purchase or outright purchase the hardware from the DTH operator.

    (x) In US, consumers can buy the STB in open market or from the DTH company, and the service is interoperable. The DTH companies were giving discounts on their STBs and this was hurting other STB manufacturers. The authority mulled banning such discounts, but allowed waiver to the DTH operators for 3 years, primarily because it was benefitting consumers.

  2. Allegations

    (i) Tacit understanding among the DTH service providers to reduce competition among themselves by preventing interoperability of the service.

    (ii) DTH service providers limiting competition among them by putting restrictive conditions in the subscription agreement which discourages migration of the consumer.

    (iii) DTH service providers are forcing the consumers to buy / take on rent the STBs along with the DTH service (tie-in or bundling).

    (iv) Exclusive dealing agreements between the DTH service providers and Set top Box manufacturers is suspected.

    (v) By restricting interoperability of the Set Top Boxes (STB), DTH service providers are denying access to market for enterprises which only manufacture STBs and thus abusing their dominant position. Similarly, they are also creating barrier to entry for prospective STB manufacturers who may want to enter the market.

    (vi) Even though DTH service providers are required to provide only DTH service, they are providing service subject to supplementary obligations (consumers take STBs from them).

  3. The Commission considered the information and sent the case under Section 26(1) of the Competition Act to the Director General for the investigation. During the course of the investigation, the D.G. called for details from the four operators namely (i) Tata Sky Ltd. (ii) Dish TV India Ltd. (iii) Reliance Big TV Ltd. (iv) Sun Direct TV Pvt. Ltd. The D.G. also extended the enquiry to two more entities who were in the market of providing DTH facility, namely, (i) Airtel Digital (ii) Videocon d2h. The submission made by the six operators before the DG are summarized as under:

  4. Submissions to the DG (Inv.) by the Respondents

    (i) Tata Sky

    1. Tata Sky gives its set top box on outright purchase to customers.

    2. Its set top box complies with extant rules framed by the government.

    3. Its set top box cannot be used for any other DTH service because it uses old format.

    4. It has not sold any stand alone CAM in the market.

    5. It works on prepaid model, so it does not charge customers when service not used.

      (ii) Dish TV

    6. Its set top box is compliant of extant rules.

    7. Its set top box can work for any other DTH operator.

    8. It does not charge for period when service not availed.

    9. It has sold 571 stand alone CAM to Kingfisher airline.

    10. It has refund partial cost of 30 STBs returned by customers.

      (iii) Reliance Big TV

    11. Its set top box is compliant of extant rules.

    12. All its set top box are on rental.

    13. It has not sold stand alone CAM.

    14. Its set top box can work for other operators if authorized.

    15. It charges Rs. 100 per month for the period that customer does not avail its service.

      (iv) Sun Direct

    16. Its set top box is compliant of extant rules.

    17. Its set top box can be used for other DTH operators.

      (v) Airtel Digital

    18. The Commission has no jurisdiction in the matter.

    19. Its set top box is compliant of prevailing regulations.

    20. Its set top box is not sold but given without any rent for use by customers.

    21. Its set top box can be used for other DTH operators.

      (vi) Videocon d2h

    22. Videocon does not force buyers to accept hardware/set top box from it

    23. Set top box and viewing card is paired to prevent piracy.

    24. It is cheaper to consumer to buy bundled product, rather than separate CAM.

    25. The bundled set top box provided by Videocon enhances customer experience.

    26. Its set top box is compliant of prevailing regulations.

    27. It has not sold any stand alone CAM.

  5. After analysing all material submitted during the course of investigation, the D.G. submitted a report of investigation on 24th September, 2009 making out a case of violation of Section 3(3) of the Competition Act. The Commission considered the report and found that the investigations were not complete. Therefore the Commission asked the D.G. for further investigation and report. The D.G. submitted the second report on 3rd December, 2009. The Commission again considered the report and asked the D.G. to make further investigation. The D.G. submitted his third report on 25th January, 2010. The details of the findings of the report are as follows:

  6. Findings of D G (Investigation)

    First Report dt. 24/09/09

    (i) The license issued by the Ministry of Information and Broadcasting provides for open architecture STB i.e. interoperability among different service providers. The interoperability is also specified in the standards set by Bureau of Indian Standards (BIS). The BIS standards provides for common slot in the Set Top Box to ensure technical interoperability.

    (ii) To comply with standards and guidelines, the service providers have provided for common slot CAM (Conditional Access Module) in STB for inserting smart card / viewing card. However, none of the DTH service providers provide their CAM independent of the STB for sale in open market, thereby effectively limiting the interoperability.

    (iii) Set top box and the Smart Card provided by the various DTH service providers are customized so that they do not work for any other DTH Service provider.

    (iv) As per TRAIs DTH (Standards of quality of service and redressal of grievances) Regulation 2007, DTH service providers are supposed to provide three options i.e. outright purchase, hire purchase and rental for STB. These options are seldom offered to customers.

    (v) TRAIs DTH (Standards of quality of service and redressal of grievances) Regulation 2007, DTH service providers are prohibited to disable DTH set top boxes and discontinue the Free to Air Channels in case no dues are pending from the customers. The DTH operators ignore the rule.

    (vi) Interoperability is desired by the licensor (Mo I & B) and the regulator (TRAI) but it has never been achieved or enforced by them.

    (vii) Most STBs are given under outright sale to the customer. Yet, DTH service providers refuse its ownership to the customer.

    (viii) DTH operators do not offer free to air channels unless the user pays monthly subscription. This is against the government rules.

    (ix) Some DTH operators charge Rs. 100/- or so per month, for the period that the user does not recharge the service.

    (x) A sample survey of DTH users proves that there existed information asymmetry in the market. The customers are not aware of their rights, obligation and various schemes offered.

    (xi) The customer is made to sign an agreement with the DTH operator, in which the onerous conditions are printed in minute and illegible form.

    (xii) The practices of the DTH operators violate Section 3(3) of the Competition Act.

  7. After perusing the report, the Commission sought more information on...

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