‘RELEVANT MARKET’ IN CABLE AND DTH MARKET: A CASE LAW FORMULATED OPINION [A DRAFT PAPER]

By Shruti Ravi, Rsearch Associate – TAD

Paper presented at panel Policy Analysis of Television Distribution IAMCR, Hyderabad, 16-19 July, 2014

INTRODUCTION – MANDATE OF COMPETITION COMMISSION

The passing of the Competiton Act brought with it the constitution of the Competition Commission, that took over entirely from the MRTP Commission. Given the dominant role of policy-framer that TRAI had long established itself to be, the areas that the Competition Commission would cut its teeth on were: prohibiting anti-competitive agreements and the abuse of market dominance. It is also charged with regulating combinations , such a mergers , amalgamations and acquisitions through an enquiry process.

As per procedural norm, upon receiving a complaint by the informant party (IP) under s. 19 of the Competition Act, the commission first considers whether there is a prima facie case and then orders investigation into the matter under s. 26 (1) of the act.

RELEVANT MARKET

The issue of abuse of dominant position and making anti-competitive agreements is determined after the investigations have delineated the relevant market (s. 2 (r), (s), (t) of Act) of the party concerned. Once this demarcation takes place, it is then ascertained whether the party did in fact hold a dominant position in the area and if so whether it is guilty for abusing its position by way of different tactics such as predatory pricing, tie-in arrangements, exclusive supply agreements and many more methods declared to be anti competitive under s. 3 of the Act. This alongside, the company’s actions in reaching to such an agreement, its underlying motives as being an abuse of its dominant position, as per s. 4 of the Act is examined.

The case of Dish TV v. Prasar Bharti (2010) is one such example in the field of cable and DTH. Where the informant approached the Competition Commission with the complaint that the opposite party refused to broadcast ads of the informant’s DTH services on DD National, on a commercial basis. The informant averred that no other DTH service refused to broadcast a competitor’s advertisements, and that nothing in Doordarshan’s Advertisement Code should stop these advertisements from being shown on DD National.

The commission addressed the matter by stating that the informant in filing this complaint has taken the relevant market (defining the field where a situation for abuse of dominance may occur) as the viewership market of Prasar Bharti. Furthermore, the order states that the accurate relevant market in this instance should be in terms of advertisement air time and not in terms of viewership of a particular channel.

As the informant had placed no information in front of the commission in establishing its dominant role in selling airtime for the purpose of commercial advertisements, DD National does not appear to be in the dominant role (there are many other FTA channels in addition to paid channels).

Additionally, it was stated, that the informant can’t force Prasar Bharti’s channel to air its advertisements especially after stating that DD Plus (Prasar Bharti’s DTH arm) is the informant’s direct competitior. The complaint was summarily dismissed on these grounds.

It is seen from above example, how the idea of a relevant market is an issue that finds itself inside the larger debates about ‘abuse of dominance’ (Addressed in Section 4 of the Competition Act, 2002)

JAK COMMUNICATIONS V. SUN DIRECT

In another such case, (Jak Communications v. Sun Direct, 2011) the opposite party was accused of having an anti-competitive agreement by way of promising (and implementing) a subscription of a channel bouquet by name ‘Tamil Freedom Package’ for a sum of Rs 440 for four months and consequently charging its subscribers Rs 99/channel.

This was challenged by an MSO located in South India, as being an abuse of Sun TV’s dominant position in the market – Sun was accused of attempting to eliminate all other players in its area of operation by indulging in predatory pricing, charging fees per channel as lesser than what was permitted by the TRAI circular for subscription rates of channels. It was also accused, in doing so, of having an anti-competitive agreement with the consumers that caused foreclosure of competition in the arena. Thus falling under an abrogation of s. 3 (4) and 4 (2) (ii) respectively. Finally, it was also accused of using its dominant position in one market (i.e. broadcasting) to make itself dominant in the DTH sector (S. 4 (2) (e).

As per investigation by the director general (DG), the relevant market of the DTH services offered by Sun Direct came under the geographic market of India, supported by the reasoning that DTH services are seamlessly available anywhere in the country, whereas that of the informant party was shown to only be restricted to South India.

Second, in terms of the relevant product market of the two parties, they were seen to be far from homogenous, having the same conditions and being clearly distinguishable from neighbouring areas of similar products.

To elaborate, it was seen by the DG that DTH services were very different from Cable services that an MSO would offer. In terms of quality of signal transmission, picture quality, gaming and educational services offered as part of package – DTH seemed to ostensibly cover many more areas as compared to the narrow base covered by cable services. By which logic it was stated by the DG that two were separate entities and not interchangeable/substitutable.

Once having culled out the relevant market area, it was easy to prove that there was in fact no abuse of the OP’s dominant position. As it was shown that on a national market scale, Sun Direct placed third among the main DTH operators (not most dominant).

It was further stated by the DG that as per the ‘50% of Non-CAS’ system rule for subscription fee of channels, the OP had not been taking a heightened subsidy, that the cost of the Set Top Box was embedded in the installation charges itself and that there was no anti competitive agreement made with the consumers as the consumers were free to shift to any other DTH operator as well, in a field where most DTH operators enjoyed the same levels of record growth and multi-company/field status as each other.

Even though the main order of Jak Communications v. Sun Direct declared the opposite party as not guilty of contravening any of the Competition Act’ sections, the dissenting order in the judgment throws much light on why the issue of relevant market is more contentious than what immediately meets the eye.

DETERMINATION OF RELEVANT GEOGRAPHIC MARKET

The dissenting order averred that during determination of the geographical market, it had not been considered that DTH services often divide their channel packages into ‘South India’ and ‘Rest of India’, plus, that as per s. 19 (5) (6) and (7) of the Act, it is important to keep in mind the local specification requirement, language of the area concerned.

The four states of South India were taken as being the market for the DTH services of Sun Direct. Following this thread of reasoning, it was seen that the opposite party did in fact have a dominant position in the area that was being abused by way of unexplained low rates/channel, even in the absence of foreclosure of competition from other DTH services, it was shown that other DTH services may begin following the main lead (i.e Sun’s) cue and also have prices similar to Sun thus hurting the consumer’s interests in terms of choice of packages available. It was also seen as being an anti-competitive agreement akin to an exclusive supply agreement as under s. 3 (4) (b) of the Act.

So, while as per the main order the relevant market has been determined to be pan India and DTH services said to be in its own exclusive terrain, the dissenting order problematizes the idea of what exactly shall constitute as relevant market , while also showing that moving from one relevant market (broadcasting) to another (DTH) in case of Sun also made it liable to be an abuser of its dominant position under S. 4 (2) (e) of the Act.

Supporting the choice of geographic market as state, instead of pan-India based on the peculiarities of the area, choice and preference of the viewer is also something that has been done in other cases based on the outreach/desired effect or lack thereof of the product in question.

In the case of Prasar Bharti v TAM Media (2013), the CCI was probing a complaint filed by the public broadcaster into alleged unfair practices that violated competition norms, re television viewership tracking, by TAM media.

Within the television industry, about 34% of revenue comes from advertisements. Generally, advertisers place their advertisements on various channels based on viewership as measured by TAM. TAM measured viewership in the form of TRP/TVR (television rating points/television viewership ratings). For this purpose, TAM was using the electronic gadget “people meter” connected to TV sets in selected sample households. The CCI said TAM had limited its surveys and viewers measurement only to the larger cities with a population of one lakh or more. According to CCI, the sample size of 8,000 homes in a vast country such as India, with a population of more than 1.20 billion was also minuscule and misleading. “In a country as vast as India with diverse culture, different languages, where the urban population was only 30% and rural population about 70%, not installing people meters in rural areas, prima facie, amounted to restricting use of technology of measuring viewer’s choice to the prejudice of customers (in this case Doordarshan),” it said. CCI said that providing people’s meter in rural areas amounted to discrimination to Doordarshan and other similar channels, if any, catering to the needs of the rural areas. Prasar Bharati, which runs Doordarshan and All India Radio networks, filed the complaint in November 2012.^{^[1]}

To simply state, the CCI’s opinion stated that the use of a people’s metre that gauges its total viewership on the basis of viewers who watch channels that show highly-rated advertisements, is to ignore the large percentage of people whose viewership does not necessarily focus on channels whose advertisements are about high end luxury goods. And this system of tracking television viewership is unfair to free to air channels such as Doordarshan for instance.

While not explicity mentioned, this order made a case for how the relevant market for the advertising of luxury goods is not all of India, but restricted to the large cities.

To add to confusion though (a quality that seems to be consistent in CCI’s orders passed under section 3 and 4 of the Competition Act), this argument was turned on its head in 2012, when in the case of Big CBS Networks & Anr v. Tata Sky Ltd (2012) the relevant market was taken as Pan India when the informant was unable to supply the court with any evidence as to why English channels would not have been watched in certain areas, where the assumption could not simply be made that people residing in rural areas do not watch English channels.

In this case, the complainant had filed a case under s. 19 (a) of the Competition Act, alleging abuse of dominant position in contravention of S. 4 of the Act by the opposite party. The informant stated that the DTH player was charging an exorbitant amount as carriage fee from the informant to broadcast its channels. Where the highest fee being charged by any other DTH operator was Rs 50 lakhs, the opposite party was charging Rs 6 crore per channel with an additional Rs 2 crore worth cross promotion.

The informant defined, ‘The informant submitted that the relevant product market in its case was ‘service of broadcasting channels through DTH platform’. It was further submitted

that its channels catered to english speaking urban population and therefore, the relevant geographic market was ‘the urban market’ which included 6 metropolitan cities i.e. Delhi, Mumbai, Chennai, Hyderabad, Kolkatta, Bangalore and other important cities like Chandigarh, Kochi, Goa, Pune, Mangalore and state of Sikkim. Hence, the relevant market, as per the informant’s submissions was ‘service of broadcasting channels through DTH platform in the urban market i.e. Delhi, Mumbai, Chennai, Hyderabad, Kolkatta, Bangalore and other important cities like Chandigarh, Kochi, Goa, Pune, Mangalore and state of Sikkim’.^{^[2]}According to informant’s counsel’s arguments, OP was having dominance in the above relevant market since OP was most widely used DTH platform in metropolitan and other big cities where viewership of English channels was concentrated.^{^[3]}

The plea of the commission was rejected on two counts, where as per the opposite party’s market share it was seen that it isn’t at the top and does not have a dominant position, it had hold of 18 % of the market. Secondly, the DG stated that as per the informant the channels offered are of the English genre and that the target audience is an English-speaking audience. However, the informant hadn’t submitted anything as cogent evidence to this effect to show that English channels are not watched by non-urban populations or are not telecasted in other areas.

As the relevant market here was seen to be all of India, a case for Tata Sky’s dominant position (and abuse thereof) in all of India was not possible to be made.

CONSULTATION PAPER, SURVEYS AND RECOMMENDATIONS (RELEVANT GEOGRAPHIC MARKET)

It is also interesting to note that the two divergent opinions seen in the above mentioned cases, when it comes to relevant geographic market (of state or all of India) are seen in policy papers as well. Where the main consultation paper on restricting monopoly and dominance in the cable/DTH area suggest the state (as opposed to country/district etc) as best suited parameter for relevant market and all the companies consulted on the same questions rising out of the consultation paper state the nation as best suited parameter for relevant market.

To briefly expound on the above mentioned: In a TRAI consultation paper released in 2013, socio-economic variations are kept in mind, stating that the pre-dominant customer of the area would have to be of course be someone belonging to the region, and this is what primarily determines supply of such-and-such language channels to the area, cognizance is also taken of some MSOs that work at a regional level (i.e. statewise) and not a national level, keeping in mind that often – monopolies of a player in the State may not be noticed as it might be a very small, almost negligible percentage if seen on a national scale, and that defining relevant market as pan India in such an instance would not serve the purpose.

In a discussion between the state or district (which as being more suitable for taking relevant market), the final opinion in the consultation paper as with the recommendations paper (after eliminating all other options with reasons given) was state.

In surveys conducted with companies relating to the same consultation paper, two out of three of the companies questioned, emphasized on the importance of not restricting the relevant market to state In this day and age – citing examples of MSOs in J & K that could connect with LCOs in Kerala under cable and seamless operation for DTH, thus saying that the relevant market should be taken as the nation (and adding that the starting subscriber base must be that of new technologies in the area, meaning that of DTH, for determination of market shares (outside scope of this essay)).

CABLE AND DTH AS INTERCHANGEABLE/SUBSTITUTABLE [RELEVANT PRODUCT MARKET]

CASE LAWS

Furthermore, the rationale for stating that DTH is in its own exclusive product market, removed from that of cable is indirectly questioned as per the case of a consumer filing a petition against Zee Turner and Star Den network, both established content aggregators in their own right – the consumer stated that the planned joint venture by both the content aggregators would lead to a trickle down- control effect where the aggregator would slowly remove competition of MSOs, save the ones’ it preferred, leading to an elimination of LCOs save the ones only the MSOs preferred – finally leading to a restrictive narrow base of choices for the consumer.

In this case the relevant product market was shown to be that of ‘aggregators and distributors of cable and DTH’ in India. While the unique role played by the supply side of aggregators and distributors made it one that could not be substituted and was meeting the requisites as per s. 2 (t) and 19 (7) of the Act (unlike cable and DTH that were said to be interchangeable and substitutable as per this judgment. To quote paragraph 3.8 of the judgment: ‘DG has further reported that in the television industry channels can be classified according to genres such as: English New, Hindi News, General Entertainment Channel & Sports etc. and accordingly such channels may be somewhat substitutable within a genre but not between genres for example; a sport channel that broadcast cricket match cannot be substituted for by a Hindi new channel. However, the consumer can switch from different mode of transmission i.e. from cable to DTH. Thus, cable TV and DTH is interchangeable/ substitutable from the consumer side. For the operators of both the distribution platforms, be it MSO or DTH the agreement has to be entered with the aggregator or the broadcaster of channels and there is no other substitute of the service of distribution of channels for them.’) and where the use of ‘India’ as the market was truly justified (the license provided to the aggregators is that of ‘India’ and their operations are not restricted to any state). In this case, the commission saw the opposite party’s joint venture as not being culpable of adversely affecting competition in the relevant market.

Kansan News v. Fastway Transmission

In M/s Kansan News Private Limited v M/s Fastway Transmission Private Limited and Others (Case No. 36/2011), the CCI considered abuse of dominance by a group of enterprises. The CCI noted that all the opposite parties were related enterprises and formed part of the same ‘group’ in terms of section 5 of the Act. Therefore, the CCI considered the collective market shares and economic resources of the five opposite parties in determining that the opposite parties had abused their dominance. A penalty of 80 million rupees was imposed on the dominant enterprises, which amounted to 6 per cent of their average turnover from 2009–2011.^{^[4]} The opposite party had been complained against for abusing their dominant position in the market under S. 4, The Commission, while giving its orders, also directed that the contravening entities should immediately cease and desist from indulging in anti-competitive practices which have the effect of denial of market access. ^{^[5]}

It should however be noted that the market of the cable MSOs in this case was taken state wise. Even though it is possible for MSOs too, to make the argument of now being geographically agnostic (See: consultation paper where an industry player states ‘An LCO in Kashmir can connect with an MSO in Kerala). This order further underscores the confusion and lack of consistency maintained by the Competition Commission when it comes to determining: abuse of dominance, relevant product market and relevant geographical market.

Dish TV v. Hathway & Ors

In an interesting turn of events, the year 2013 saw a case filed against several MSOs by a DTH company. ‘The Informant’s allegations, inter alia, relate to charging of high carriage and placement fee and under reporting of subscribers by the Opposite Parties, vis.-à-vis. Broadcasters. The Informant contended that the same amounts to abuse of dominance under the provisions of Section 4 of the Competition Act, 2002 (the ‘Act’).’^[1] The Informant submitted that the Opposite Parties in abuse of their position of dominance, were forcing broadcasters to pay high carriage and placement fee for carrying and placing their channels. The payment of such high fees by broadcasters was reducing the Opposite Party’s net content cost, vis-a vis competitor’s namely DTH operators. By this mode, the MSOs were destroying the level playing field and the DTH operators were unable to compete despite having a more efficient technology and a better quality product.

The Informant alleged violation of the provisions of Section 4(1) read with Section 4(2)(a)(i), 4(2)(c) and 4(2)(b)(i) of the Act. The commission replied stating that the allegations made by the informant are not pertaining to abuse of dominance by any one of the Opposite Parties in a specific geographic region. The Informant has attributed collective dominance to all the Opposite Parties together, in the geographical markets of their operation and collective abuse. Therefore, the court averred that ‘collective domiance’ can not be read into the Act’s Section 4 that speaks of abuse of dominance by a ‘group’. The appeal was then summarily dismissed.

This dismissal by the court is however, a curious matter as a TRAI consultation paper rought out on June 3, 2013 on the Monopoly and Market Dominance of MSOs had recommended that the term ‘collective dominance’ be read into Section 4 after defining relevant market.^{^[2]}

Dismissing a matter on the contention of India’s Competition Act not recognizing a concept such as ‘Collective Dominance’ is something the commission stated in the case of Consumer Online Foundation v. Tata Sky & Ors^{^[3]} as well. In it the informant had held the opposite parties (consisting of all the DTH players in India) as being guilty of abusing its dominant position in the market, by limiting market access, of having no interoperability in STBs whereas interoperability was mandated by the MIB, of having exclusive dealings with only certain set top box manufacturers, creating a barrier for others in the same sector, of having tie in arrangements where to get DTH service the purchaser must purchase hardware from service provider and of applying restrictive conditions for availing DTH service.

On these counts, the complaint was dismissed by the Director General on counts of technical feasibility (Different compression technologies for transmitted data used by different DTH service providers, so interoperability not feasible) and two, commercial feasibility (DTH industry requires huge investment, therefore need to expand subscriber base to break even, before service providers compete with each other. ). The commission also said that Indian law currently recognizes no concept of ‘collective dominance’.

CONSULTATION PAPERS ET AL

Two (Asianet Satellite, Den Network) of the three companies questioned with the survey conducted post release of the consultation paper on prevention of monopoly and market dominance in the area, state unequivocally that MSOs and DTH are substitutable, being each others competitors. To repeat a point mentioned above, the companies suggest being geographically agnostic by referring to MSOs and LCOs that can connect to each other from remote areas of the country, as well as making reference to DTH operators’ seamless operation throughout the country, stating both to be performing the same role merely on different technological platforms.

Whereas the third company (SITI cable) called the matter of relevant market to be a highly technical one, to be taken on a case by case basis, while looking at the characteristics of the product concerned as per s. 19 of the Act.

The main consultation paper and recommendation paper were clear about the heightened competition DTH would be to MSOs (and in many ways, already is) in the following years, admitting to TRAI’s stand as cable and DTH both being interchangeable and substitutable unlike that mentioned in JAK communications.

CONCLUSION

The dissenting order of JAK communications v. Sun Direct (2011) concurs on both counts with the opinions made by TRAI consultation and recommendation papers (released as early as 2013), although the main order of JAK communications is far from this opinion, stating DTH and cable to be two different markets, not to be confused with the other and also using a pan-India argument for relevant geographical market.

While the cogency of the use of JAK communications dissenting order alongside TRAI’s consultation and recommendation paper is underscored in this essay, it remains to be seen what route the courts take in forthcoming cases concerning delineation of the relevant market when it comes to DTH services.