Case No. 01/2010. Case: GKB Hi Tech Lenses Private Limited Vs Transitions Optical India Private Limited. Competition Commision of India
| Case Number | Case No. 01/2010 |
| Judges | Ashok Chawla, Chairperson, H.C. Gupta, Member (G), R. Prasad, Member (R), P.N. Parashar, Member (P), Geeta Gouri, Member (GG), Anurag Goel, Member (AG), M.L. Tayal, Member (T) and Shiv Narayan Dhingra, Member (D) |
| Issue | Competition Act, 2002 - Sections 19, 19(1) (a), 19(1)(a), 19(4), 19(6), 19(7), 2, 2(r), 2(s), 2(t), 26, 26(1), 26(2), 26(3), 26(4), 26(6), 26(7), 26(8), 27, 29, 3, 33, 4, 4(1), 4(2) (a) (i), 4(2) (b), 4(2) (b) (i), 4(2)(a), 4(2)(a) (i), 4(2)(a)(i), 4(2)(b)(i), 4(2)(c), 48(1) |
| Judgement Date | May 16, 2012 |
| Court | Competition Commision of India |
Order:
1.1 This case was initiated on the basis of information filed by M/s GKB Hi Tech Pvt. Ltd. (hereinafter "GKB") against M/s Transitions Optical India Pvt. Ltd. (hereinafter "Transitions") to the Competition Commission of India (hereinafter "Commission") under Section 19(1)(a) of The Competition Act, 2002 (hereinafter "Act") on January 06, 2010. The Commission, upon examination of the facts of the information, passed an order under Section 26(1), on January 19, 2010 recording its opinion that 'there exists a prima facie case, and directed The Director General (hereinafter "DG") to investigate into the matter. The DG submitted the investigation report on August 23, 2010. The investigation report was sent to the parties seeking their response on the same and further process of inquiry was undertaken in accordance with the provisions of the Act and relevant regulations there under. Full opportunity was given to both GKB and Transitions for perusal of all relevant records and making their submissions, both in writing and orally before the Commission.
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Factual Background
2.1 The Informant viz. GKB is engaged in the business of manufacturing glass and plastic ophthalmic lenses for both exports as well as domestic markets and reselling of products of various lens manufacturers after value addition. The value addition is in the form of coating of lens i.e. hard coating or anti reflection coating. Carl Zeiss Vision International is a majority shareholder in GKB having a share of 50.15% as in 2007. Carl Zeiss is a German Company and one of the world's leading companies dealing with ophthalmic products.
2.2 The Opposite Party, Transitions India, is an Indian joint venture between Transitions Optical Holdings B.V., The Netherlands and Transitions Optical Inc., USA. The core business model of Transition India is to purchase substrate (semi -finished lens) from its caster partners, process the substrate (i.e. apply the Photochromic coating), and to sell the finished goods back to the lens casters. Transitions India has stated that it is the marketing arm of Transition Optical Inc., USA and does not undertake Photochromic treatment or manufacture lenses in India. The lenses are photochromically treated in plants located outside India and finished products are imported by caster partners.
2.3 The Related Party (to Transitions), is Essilor India. Essilor India is 100% subsidiary of Essilor International which is a world leader in ophthalmic lenses and other allied products. It entered the Indian market through a Joint Venture (JV) with SRF Limited, New Delhi in 1998. SRF Limited exited in 2004 and since then Essilor India is 100% subsidiary of Essilor International. Essilor International is a holder of 49% stake in the Transitions Optical Holdings B.V., The Netherlands and Transitions Optical Inc., USA. The majority stake in Transitions International is held by PPG Industries Inc. Thus, the parent company of Essilor India is a 49% stakeholder in the parent companies of Transitions India. At the operational front, Essilor India is also a lens caster like GKB and in competition with GKB and other similar players.
2.4 The case of the informant is premised on the proposition that Transitions India is a dominant enterprise in the business of Plastic Photochromic Lenses (PPL) in India and that it is abusing its dominant position by indulging in a number of anticompetitive practices. As per the allegations, the Caster Partners are forced to suffer discriminatory and exclusionary conduct because of the dominance of Transitions India. Accordingly, the informant viz. GKB alleges the infringement of the provisions of Section 4 of the Act. The informant has also alleged that. Transitions India and Carl Zeiss Vision have entered into an agreement that violates Section 3 of the Act.
Allegations
2.5 Transitions India, imposed discriminatory and unfair conditions on GKB in violation of Section 4(1) read with Section 4(2)(a)(i) of the Act by: (i) supplying the products to Essilor India at prices lower than those being offered to GKB(ii) allowing a credit period of 60 days as against the standard industry practice of 90 days (iii) not allowing GKB to take advantage of investing in hard coating plant by reducing the price difference between uncoated and hard coated lenses as is applicable to the rest of the world to indirectly benefit Essilor India which does not have coating facilities and; (iv) requiring GKB to provide details of all customers which is a business sensitive information and if shared with Essilor India, it would raise competition concerns
2.6 Furthermore, Transitions India imposed unfair conditions on GKB by not allowing them to export the product even after they have undertaken value addition on the product after purchasing from Transitions India unless GKB paid them the difference in prices in two countries. Also sale to customers in India who intended to export the products to other countries was not allowed. There were also allegations of arbitrary changes in supply chain, supply period being more than assured supply period, restricting the sale of older generation of products even when there was demand for the same, and no settlement of dues against amounts owed to GKB by the OP.
2.7 Transitions India also limited the market of GKB in violation of Section 4(1) read with Section 4(2)(b)(i) of the Act by forcing GKB to sell the product of Transitions India on an exclusive basis and stopping GKB from sale of "Acclimates" brand of Transitions.
2.8 Transitions India also implemented practices resulting in "Denial of Market Access" to GKB and thereby violating Section 4(2)(c) of the Act again referring to the previous allegations of restriction of sale of Acclimates, export restrictions and restrictions in dealings of older generation of products.
2.9 Transitions India is also alleged to have abused its dominance by leveraging its position in the upstream market of processing of PPL's to secure the market of Essilor India in downstream sale of PPL's by indulging in discriminatory and unfair practices as discussed.
2.10 GKB also alleged that Transitions India have stopped supplies to GKB and terminated the business relationship. This allegation has the impact of 'Refusing to Deal' under the Act.
2.11 Finally, GKB vide its letter dated May 22, 2010 has alleged that Transitions India and Carl Zeiss Vision have entered into an agreement called as 'Strategic Partnership Agreement' from January 2010 to December 2014 and this would have the effect of artificially increasing the prices of PPL in India.
Reliefs Sought
2.11 Issue an interim order directing Transitions India to restore supply of product to GKB on non-discriminatory basis.
2.12 Issue orders to Transitions India to immediately discontinue Abuse of Dominance and cease anti-competitive conduct.
2.13 Impose maximum penalties on Transitions India for their anti-competitive conduct in violation of the provisions of the Act.
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Summary of submissions of Opposite Party
The Opposite Party viz. Transitions India submitted its replies to DG during the course of investigation and to the Commission. The summary of the response of the opposite party is as follows:
3.1 Transitions India stated that the relevant product market this case is wider than the market for Plastic Photochromic lenses and is at least wide enough to include "all types of ophthalmic lenses (glass and plastic that protect eyes from ultraviolet rays and reduce glare". In support of this, Transitions India stated that whilst, PPL may have some advantages over Glass Photochromic Lenses (GPL), but on the other hand GPL also has some advantages.
3.2 Transitions India stated that it is not dominant in any market relevant to the case. It has cited a SWV Report according to which its' market share is insignificant. Further, it has been stated that even based on other factors under section 19(4) of the Act such as size and resources of Transitions India, degree of vertical integration, countervailing buyer power, dominance cannot be concluded.
3.3 Transitions India stated that it did not engage in any anti-competitive conduct such as price discrimination. It submitted that while prices in 2006 and 2007 were identical for Essilor India and GKB for "generics", the increase in prices in 2008 was also meant to be uniform for all caster partners for Semi Finished Single Vision (SFSV) lenses and Progressive Additional Lenses (PALs) for Essilor, GKB and Hoya. However, on account of negotiations the intended increase in SFSV lenses of USD 1 was rolled back both for Essilor and GKB but for PALs the increase in prices by USD 0.25 was rolled back only for Essilor and not GKB. The reason cited for the same was that GKB's PAL purchases were solely lower tier specialty products, which had small margins, as compared to Essilor India and the fact GKB did not raise any serious objections to the "miniscule" price increase. Thus, the 2008 price for PALs was marginally higher for GKB but it enjoyed a favourable credit period, marketing support etc. The difference in 2009 prices was on account of foreign exchange mechanism agreed between the parties On the issue of prices for Hoya Optical being higher the OP stated that the quantities purchased by Hoya were significantly less and Transitions India could not achieve the same economies of scale with them and consequently the prices were higher for Hoya India.
3.4 Transitions India stated that the price difference for coated and uncoated products exists not on account of favouring Essilor India against GKB. Transition India confirmed that the price difference existed since the time it started business in India. The price difference between coated and uncoated lenses of Transitions India is INR 20 (USD 0.45) for India while the price difference for other regions is approximately in the range of USD 0.48 to USD 1. Thus the price difference between the coated and uncoated lenses...
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