Case No. 08/2009. Case: JAK Communications Pvt. Ltd. Vs Sun Direct TV Pvt. Ltd.. Competition Commision of India

Case NumberCase No. 08/2009
JudgesAshok Chawla (Chairman), R. Prasad, Member, Geeta Gouri (GG), Anurag Goel (AG) and M.L. Tayal (T), Members
IssueCompetition Act, 2002 - Sections 3, 3(4), 4, 4(2), 19, 19(3), 19(4), 19(5), 19(6), 19(7), 26(1), 26(3), 26(6) and 27; The Companies Act, 1956
Judgement DateAugust 30, 2011
CourtCompetition Commision of India

Judgment:

  1. The present information has been filed by JAK Communications Pvt. Ltd., Chennai (hereinafter referred to as Informant) on 22.09.2009 under Section 19 of the Competition Act, 2002 (herein after referred as the Act) against Sun Direct TV Pvt. Ltd., Chennai (hereinafter referred to as Opposite Party) for alleged violation of the provisions of the Competition Act, 2002.

  2. The facts, in brief, as stated, in the information are as under:

    2.1. The informant, a company registered under the provisions of "The Companies Act 1956", is a multi system operator, inter-alia, engaged in the business of collecting signals of satellite TV channel, aggregating these signals and transmitting the same to homes either directly or through local cable operators (LCOs). The informant transmits both free to air channels and pay channels. The Opposite Party, a company, is into the business of Direct to Home Operations (DTH) and receives the signals of various satellite channels and distributes them to subscribers via satellite. The Opposite Party also transmits both pay channels and free to air channels.

    2.2. The Informant has submitted that it is distributing the TV signals through the cable medium while the Opposite Party (OP) is distributing these signals through the satellite medium. However, since both are the distributors of TV signals, they are the competitors.

    2.3. The informant has alleged that the Opposite Party is indulging in predatory pricing by giving subsidy to its consumers in respect of DTH services provided by it with a view to eliminating its competitors in violation of provisions of Section 4(2) of the Act. It has also been alleged that OP is also involved in the anti-competitive agreement with its consumers.

    2.4. As per informant, the OP is providing huge subsidy to the consumers to capture the market. It has been alleged that while OP is spending Rs. 4500/- to acquire one customer, it is offering DTH services for Rs. 440/- only towards subscription charges for 4 months. Further, while Set Top Box (STB) having MPEG technology has an estimated cost of Rs, 2200 in the market, the OP is not charging anything for it from the consumers.

    2.5. The Informant has further alleged that the subscription charges of Rs. 99/- per month charged by OP from its consumers is far less than the basic price of these channels which is about Rs. 156.55 in accordance with the calculations based on circular of TRAI dated 18.04.2008.

    2.6. According to informant, OP by subsidizing the Set-Top Box and monthly subscription charges for paid channels has acted in contravention of the provisions of the Act causing damage to the informant and other similarly placed persons.

    2.7. As per the informant, the above-mentioned acts of OP amount to "predatory pricing" and "abuse of its dominant position" in contravention of the provisions of the Act.

  3. The Commission considered the matter in its various meetings and having formed an opinion under Section 26(1) of the Act that there exists a prima facie case, referred the matter to the Director General (DG) for conducting investigation vide an order dated 04.03.2010.

    Investigation by Director General

  4. The DG after receiving the directions from the Commission, got the matter investigated by the Addl. Director General and submitted his report dated 05.04.2011 to the Commission under Section 26(3) of the Act.

    4.1. The DG after considering the information formed a view that the conduct of OP needs to be examined in accordance with the provisions of Section 3(4) and Section 4 of the Act. The investigation was thereafter conducted in light of these two provisions.

    4.2. In course of investigation, DG asked OP to submit name and address of DTH service providers, their viewership details, details of cost incurred by OP for procuring one set of customer premises equipment including a Set Top Box, Dish Antenna etc. In addition, OP was also asked about amount of cost recovered by it from its subscribers, details of the offer of the other DTH Service Providers in the Southern India regarding customer premises equipments, its market share and that of the competitors, amount of subsidy given by it to its subscribers, its shareholding pattern, copies of audited financial statements etc. The OP was also asked to furnish details of subsidiaries and other companies connected with it, their main business activities, names of other states and the union territories where it is marketing DTH system along with number of viewership, and discounts, offered to the subscribers for subscribing the package 'Freedom Package Tamil'.

    4.3. The DG has analyzed the relevant product market and relevant geographic market in a very exhaustive manner and dealt with the delineation of the relevant market in great detail. In course of determination of relevant market, DG has also considered various cases decided by European Commission to support his contention. DG has determined relevant market in the case as the market for DTH services in the whole of India as against TV Channel distribution market, considering the fact that DTH services and cable TV cannot be regarded as inter changeable or substitutable with each other by reason of characteristics of the product, pricing and intended use based on various parameters such as distribution of TV channels, quality of signals, reliability of transmissions, availability of add-on facilities and interactivity, viewing experience, technology, scalability, various options in the pricing of product, seamless availability of signals for DTH services throughout India and PAN India presence of ail the DTH operators. DG while determining the aforesaid relevant market has considered that the prices of the DTH transmission are different from that of cable transmission. DG has also observed that the picture quality of the DTH transmission is superior as compared to the cable transmission and number of channels transmitted through DTH is also considerably higher. DTH viewers receive the transmission of channels independently from the satellite whereas the cable TV operators receive the signals from the broadcasters through satellite in their control room and thereafter distribute these signals to customers through cables. In addition, DTH services are transmitted digitally and through wireless system.

    4.4. DG in its report while determining the relevant market has also considered that there is no choice for consumers in selection of the channels in case of cable transmission whereas the choice is given by the DTH service providers. The installation of the DTH in homes requires set top box, dish antenna and remote etc. whereas there are no such requirements for cable installation. Further, spectrum used by these two transmissions is also different. There are many other services like games, video recording etc. provided by the DTH operators, while such type of facilities are not available in cable transmission.

    4.5. On the issue of dominance of the OP, DG has brought out that there are six DTH operators in India namely, Airtel TV, Dish TV, Videocon, Big TV, Tata Sky and Doordarshan other than the OP. Except for Doordarshan, all the above DTH operators provide paid as well as free channels. The service of Doordarshan is restricted to 19 of its own channels and 36 free channels of other broadcasters. As per the news paper report (Financial Express dated 14.02.2011) the total number of DTH subscribers in India are 32.7 millions, out of which OP commands a share of 18.65%. The Airtel, Dish TV and Tata Sky commands a market share of 14.98%, 28.74% and 19.87% respectively. As per the said news report, Dish TV has 9.4 million subscribers followed by Tata Sky with 6.5 million subscribers. OP is having 6.1 million subscribers and ranks third at present. The other DTH service providers namely, Airtel, Reliance Big, Videocon are having 4.9 million, 3.6 million and 2.2 million subscribers respectively. The presence of Doordarshan in the relevant market is also meager compared to the other competitors.

    4.6. DG has also analyzed size and resources of OP with competitors and has found that all the DTH service providers have been promoted by the top industrial houses in India and enjoy enormous economic power. While OP is a part of Sun group of companies, Airtel DTH is a part of Bharti Airtel group which has vast resources having a turnover of about Rs. 42,000 crore in F.Y.2009-10. Tata Sky is part of the Tata group which is the largest business house in India and Reliance Big TV is part of Reliance ADAG Group which is at present in mobile Telephony, entertainment, broadcasting, FM channels, and multiplexes. The other two players-Videocon d2h is promoted by Videocon group having a turnover of about Rs. 18,000 crore and Dish TV is part of Essel group of companies.

    4.7. It has also been found by DG that most of the DTH service providers are vertically integrated having wide sales and service network and considering the strength and integration of other competitors, OP does not enjoy any unique position in the relevant market. Further, all the DTH service providers offer almost similar packages targeting the Pan India consumers as well as regional consumers and subscribers of one can always avail services from other DTH service providers. There is no entry barrier also which prevents other operators from gainfully operating in the market.

    4.8. Based upon above, DG has concluded that OP does not enjoy any dominant position in the relevant market of DTH service in India.

    4.9. DG has considered various allegations in the information and examined them on two parameters. First, as regards allegation that the agreement of OP with its subscribers for providing a connection at Rs. 440/- for four months and monthly subscription charges of Rs. 99/- per month plus taxes is anticompetitive, DG has considered that as OP is supplier of DTH service in India while the customers are the viewers of TV channels, the...

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