Intel in CCI net for alleged abuse of dominant position

Introduction

Intel is up for an inquiry by Competition Commission of India (CCI), with regard to their alleged anti-competitive agreements and abuse of dominant position. This article discusses the same.

Information filed

Information was filed by the Matrix Info System Pvt. Ltd. (“Matrix”) under section 19 (1) (a) of the Competition Act, 2002 (“Act”) on March 1, 2019 seeking inquiry into several exclusive agreements and dominant position of enterprise against Intel Corporation set up in California and Intel Technology India Pvt. Ltd. (“Intel”) alleging the contravention of section 3ⁱ and section 4ⁱⁱ of the Act. Matrix is a Delhi based IT company which basically deals in importing, supplying and distributing of IT products. Matrix itself was a parallel importerⁱⁱⁱ of Intel’s micro-processors. Matrix filed information stating the changes in the policy of warranty of Intel regarding its boxed micro-processors. It was further stated that Intel Corporation has entered into several exclusive agreements with several sellers and distributors of its product in India and the same are being appointed as the authorised distributors of Intel in India. These distributors are selling the Intel IT products to the consumers with the “tweaked” manufacturer’s warranty instead of worldwide warranty. From 2016 onwards Intel amended its warranty policy for India. According to which Intel does not acknowledge warranty requests on boxed micro-processors that are purchased from anywhere else in the world, even though if the purchase is made from authorised distributors of Intel from other nations. Matrix claimed that because of the change in the policy of warranty the customers are buying the products from such limited number of authorised distributors and eventually effecting the competition in the market.

Intel in its counter stated that under the new Indian specific warranty policy, it is only the “warranty services” which cannot be availed in India if the boxed micro-processors are not bought from the authorised distributors. Similarly if the boxed micro-processors are bought from outside India, the warranty services can be claimed from the place of purchase.

CCI’s prima facie observation

After hearing both Matrix and Intel, the CCI prima facie observed that the tweaked policy of Intel can lead to denial of access to parallel importers or resellers of Intel boxed micro-processors in India, who are usually the competitors of the Intel’s authorised distributors. Moreover, the CCI noticed the comparison of the boxed micro-processor rate in India is twice the rate of the micro-processor outside India. After noticing that there were limits or control in production, supply, market, technical development as stated under section 3 (2) (b), shares the market or source of production as mentioned under section 3 (2) (c) and by imposing unfair or discriminatory conditions in price of sale under section 4 (2) (a) (ii) and limits or restricts and indulgence in practices resulting in denial of market access under section 4 (b) and (c). After considering all the facts and circumstances of the information provided by Matrix, the CCI directed the Director General to investigate the matter and submit the report within 150 days.

Consequences

Considering the CCI in the case of Indian National Shipowners Association (INSA) v. Oil and Natural Gas Corporation Limited (ONGC)^iv examined whether the existence of unilateral termination clause in an agreement and its invocation by ONGC in an allegedly abusive manner was an abuse of its dominant position. For examining the conduct CCI in this case examined the 'termination for convenience', i.e. a clause that allows termination without providing any cause or reason, and whether the same could be considered exploitative and hence, abusive. The CCI took view that the aspect to be looked into this regard is the requirement of 'reasonableness' in the terms of contract. It held that that a provision of termination for convenience itself is not uncommon and should not generally be construed as unfair or abusive, unless it is specifically used in an unfair manner without meeting the legal tests of 'good faith' and 'change in circumstances'.

Similarly, in the case of Belaire Owners Association ("Informant') vs. DLF Limited & Ors.^v , the informant submitted that DLF had used its position of strength in dictating the terms of the Apartment Buyers Agreement ("Agreement') and imposed unilateral and one-sided clauses. Further, DLF had excluded itself from any obligations and liabilities and on the contrary has compelled the Informant to agree to all the terms of the Agreement in toto. The Informant had alleged that the various clauses of the agreement and the action of DLF pursuant thereto are prima facie unfair and discriminatory, thus attracting the provisions of Section 4 (2) (a) of the Act. Hence, in order to arrive at any conclusion, The CCI in this case cannot use the blanket presumption of ‘unilateral change’ as being an act of abuse of dominant position under the Act. It will apart from section 3 and 4, will also have to consider:

(i) relevant market;
(ii) relevant geographic market;
(iii) aspects relating to exclusivity in the relevant markets; and
(iv) determination of dominance in most likelihood based on the market share of Intel.

The finding may set a new trend for examining unilateral provisions particularly for the big players in the market. It may give and shed light on certain important exclusive contracts and may pave a way for exclusive channel partners to exercise their rights in the concerned geographical territory. Further, multiple enquires by the CCI may also force MNC’s rethink their exclusivity charter for distributors in areas and of course ‘unilateral provisions without assigning reasons’.

(i) Anti-Competitive Agreement

(ii) Abuse of Dominant Position

(iii) The activity of importing products that are bought in one country in an unofficial way and then sold more cheaply than usual in a different country

(iv) Competition Commission of India, Case No. 01 of 2018

(v) Competition Commission of India, Case No. 19 of 2010

This Article is by Ms. Shivani Raghubansia, who is interning with the firm under the guidance of Mr. Rohitaashv Sinha, Advocate & Associate Partner at Agarwal Jetley & Co., Advocates & Solicitors. Contact: Email: rohitaashv.sinha@agarwaljetley.com or Mob: (+91) - 9999565393