V.S. SIRPURKAR, CHAIRMAN:
1. This judgment shall govern two appeals, they being Appeal No. 91 of 2012 by M/s. Schott Glass India Pvt. Ltd. vs. CCI & Ors. and Appeal No. 92 of 2012 by M/s. Kapoor Glass (India) Pvt. Ltd. vs. M/s. Schott Glass India Pvt. Ltd.
2. This Appeal No. 91 of 2012 is filed on behalf of M/s. Schott Glass India Pvt. Ltd. (Appellant) against the order of Competition Commission of India (for short the 'CCI') whereby CCI has held the Appellant guilty of contravention of section 4 of the Competition Act (for short the "Act") and has inflicted a penalty of Rs.5.66 crore. It has also passed the cease and desist order to the following effect:-
a) That Schott Glass India should desist from applying dissimilar conditions while giving discounts to Schott Kaisha vis-a-vis other Converters.
b) The terms of transactions for supply of tubes to Schott Kaisha, the JV should be similar and non-discriminatory vis-a-vis the other Converters.
c) The discount on both amber and clear tubes should not be contingent upon sale of each other.
Schott Glass India Pvt. Ltd. ("Schott India") is a manufacturer of Neutral USP-1 borosilicate glass tubes which are made of borosilicate glass, a special type of glass having unique properties. Such glass tubes have low thermal expansion co-efficient and are highly resistant to chemical reaction, therefore are used to make glass ampoules, vials, cartridges, syringes, which are primary packaging material for liquid injectables and drugs by the pharmaceutical industry. The pharmaceutical companies generally specify the standards or quality/source for borosilicate glass tubes, which may be used to make glass tubes ampoules, since the molecules in liquid injectables tends to leach with the surface of the glass container in which they are stored over a period of time, which may result in a change in their chemical composition, in turn resulting in reduced potency. This may also result in discharge of alkali from the glass container into the medical solution which might pose significant safety related concerns for the patients being administered with the liquid drugs packed with such glass containers. Only such borosilicate glass tubes which conform to United States Pharmacopoeia-I standard, and, are neutral with alkali release of less than 1.0 ml. are recommended. The borosilicate glass can be amber or clear depending upon the drug which is to be stored in them. Some drugs require very low exposure to light and as such are packaged in amber borosilicate glass. In this appeal we are concerned with the glass tubes which are manufactured by the Appellant, which are then sold to the manufacturers of glass ampoules, vials, cartridges, syringes etc., which are in turn sold to pharmaceutical companies for storing drugs. The market of borosilicate glass tubes, thus is the upstream market whereas the market of ampoules, vials, cartridges, syringes etc. are in the downstream market. The Appellant, in Appeal No. 91 of 2012 is a wholly owned subsidiary of Schott Glaswerke Beteiligungs - GmbH, Germany ("Schott GmbH"). Schott GmbH is a wholly owned subsidiary of Schott AG, Mainz, Germany and thus Schott AG is the ultimate parent company of the Schott group.
3. As has been stated earlier the Appellant is engaged in the production of 'neutral USP-1 borosilicate glass tubes'. It is registered as a private limited company in the State of Maharashtra since December 1997. In January 1998 it acquired the assets of M/s. Bharat Glass Tubes. The Appellant manufactures two qualities of borosilicate glass tubes i.e. (i) Fiolax (in clear version) with alkali release of 0.38 ml of H2S040.02 N per 10g powered glass and (ii) basic Neutral Glass Clear (NGC) and Neutral Glass Amber (NGA) with certain specifications. We are more or less concerned in these appeals with NGC and NGA tubes which are produced exclusively for Indian market. Fiolax clear is produced for Indian market as well as for export.
4. In May 2008, Schott group through Schott Pharmaceutical Packaging GmbH CSchott Packaging') a subsidiary of Schott Germany entered into a Joint Venture Agreement ("JV") with a downstream ampoule manufacturer Kaisha Manufacturers Pvt. Ltd. ("Kaisha") to integrate the operations of Schott in India vertically and with downstream glass containers manufacturing business. It is now known as Schott Kaisha Private Limited ("Schott Kaisha"). Thus ever since then Schott India is connected with Schott Kaisha by way of a joint venture.
5. It will be better at this stage to give the profile of M/s. Kapoor Glass Pvt. Limited ("M/s. Kapoor Glass") the respondent no. 2 in Appeal No. 91 of 2012 and the appellant in Appeal No. 92 of 2012. M/s. Kapoor Glass is a private limited company engaged in the business of producing glass ampoules, vials and dental cartridges (collectively referred as containers) which are used by the pharmaceutical industry as primary packaging material for filling and dispensing of liquid injectables. The key component used in the manufacture of containers is neutral borosilicate glass tubes NGA and NGC. Till the year 2008, M/s. Kapoor Glass also had a presence in the upstream business of manufacturing NGA and NGC. However, now it is engaged only in the business of downstream product of ampoules, vials and other containers.
6. An information was led before the CCI wherein three distinct time periods were referred:-
a) prior to the entry of the Appellant in the year 1998;
b) period between 1998 and 2008; and
c) period from 2008 till date.
7. According to the information filed by M/s. Kapoor Glass (the "Informant") it states that prior to the entry of the Appellant i.e. before 1998 there were five producers of 'neutral USP-I borosilicate glass tubes' in India, namely - Seraikella Glass Works Ltd., Bharat Glass Tubes Ltd., Twincity Glass India Pvt. Ltd., Triveni Glass Ltd. and M/s. Kapoor Glass (India) Pvt. Ltd. It was urged that Seraikella Glass Works Ltd. exited the market around 1996, while Bharat Glass was acquired by the Appellant in 1998 and Twincity exited the market in 2007 followed by M/s. Kapoor Glass, which also exited the upstream market in 2008. Triveni Glass Ltd. was taken over by Nipro Glass India in March 2010. Thus, when the information was led the Appellant and Nipro Glass India remained the only producers of 'neutral USP-I borosilicate glass tubes' in India. It was stated that there is considerable difference in the quality of the product of the Appellant compared to the tubes by Triveni/Nipro India. It was also stated that these were the only two domestic producers in India and most of the domestic demand was met by them and only a portion of demand was met by way of imports from China and other countries like Germany, Italy and Japan. However, these imports remained low because of high cost of importing from other countries. The imports from China, however, were less costly by at least 30 to 35%. It was also less costly than the domestic variance. It was stated that most of the pharmaceutical companies did not prefer to use glass ampoules made from Chinese glass tubes.
8. The information also stated that since there were 'quality' considerations in respect of glass tubes produced by Triveni/Nipro, the glass ampoules manufacturer in India, including the Informant were forced to rely on the Appellant to meet their demand, as the Appellant was the only player producing high quality 'Neutral USP Type I Borosilicate Glass Tubes'. It was made out in the information that the Informant was dependent entirely on the Appellant since most of the Indian pharmaceutical companies insisted on the use of glass ampoules made out of the tubes manufactured by the Appellant.
9. According to the information, from 14.5.2008 after Kaisha Manufacturers Pvt. Ltd. entered into a JV with Appellant's sister concern Schott Packaging which was itself subsidiary of Schott Germany, the Appellant had become vertically integrated with large downstream ampoule manufacturing company. It was, therefore, urged that the Appellant was holding a dominant position inasmuch the Appellant had a dominant presence in the Indian market having a market share of about 67% in 2009.
10. The Informant complained of anti-competitive practices against the Appellant by two types - (a) practices affecting the state of competition in the market for 'Neutral USP Type I Borosilicate Glass Tubes in India and (b) practices affecting the state of competition in market for downstream product of glass ampoules and other containers.
11. According to the information, the Appellant engaged in unfair and discriminatory pricing inasmuch as it sold its product at predatory prices which were lesser than its cost of production as well as prevailing prices in the international market in order to drive out the existing competitors in the upstream market including the Informant and two other concerns Twincity and Triveni. This resulted in significant financial losses to the Informant and resulted their ouster, identically like the other two manufacturers referred to above. According to the information the Informant in this manner established the dominance and its abuse by the Appellant. The information also stated that the Appellant started hiring key managers of the Informant.
12. It was then alleged that the Appellant was charging unfair prices and was also granting loyalty rebates and discounts in order to prevent the shift of ampoules manufacturers to imports and to ensure that ampoules use glass tubes of the Appellant alone. It was complained that the Appellant offered loyalty discounts and initially such discount was given only if an ampoule manufacturer purchased at least 80% of its total requirement from Appellant. In addition, it was also complained that the Appellant insisted on promoting the sale of Appellant's brand and was also required to sell the ampoules at prices suggested by the Appellant. It was also complained that the Appellant refused to deal with such ampoule manufacturers who made ampoules using tubes from other sources. It was further urged that the Appellant required (in order to avail tubes at discounted rates) the ampoules manufacturers to agree to furnish bank guarantee of Rs. 70 lac which was alleged to be an anti-competitive practice. Lastly, it was stated that the Appellant was discriminating in the discount policy also, as it was granting a special discount to its favoured ampoule manufactures like its own JV, Kaisha, Klasspack Pvt. Ltd. and Tubeglass Containers Pvt. Ltd. This according to the Informant was also a discriminatory practice. According to the information, the Appellant was thus driving out competitors from the market of clear variant by making the supply of amber tubes to ampoule manufacturers contingent on the procurement of the clear tubes from no other source but the Appellant alone. It was for this reason that the information was with regard to the contravention of provisions of section 4(2)(a) as also section 4(2)(e) of the Act. It was also alleged that the Appellant was guilty of contravention of section 3(4) of the Act. Various kinds of reliefs were sought by the Informant, which are as follows:-
i) To issue interim orders under Section 33 to restrain Schott from abusing its position of dominance, including by offering its discount scheme by engaging in unfair or discriminatory pricing; or
ii) To issue interim orders under Section 33 asking Schott to extend the same terms of discounts and rebates to all ampoule manufacturers without any discrimination on the basis of loyalty or any other criteria;
iii) To issue interim orders under Section 33 to restrain Schott from continuing with its anti-competitive agreements for refusal to deal;
iv) To issue orders for fines and penalties for abuse of dominance and entering into anti-competitive agreements; and
v) To issue orders under section 27 of the Act for breaking up the joint venture company between Schott and Kaisha.
13. The CCI formulated a prima facie opinion under Section 26(1) and directed the Director General to investigate into the matter.
14. The Director General ("DG") on investigation concluded that because of the unique characteristics of the product of the Appellant, as also its intended purpose, it was a non-substitutable product. The DG concluded that there was no alternative to Neutral Borosilicate USP-I Borosilicate Glass Tubes for the purpose of manufacturing glass ampoules and other containers. According to the DG, NGC and NGA tubes were most widely used 'neutral USP-I borosilicate glass tubes' in India. The DG, therefore, concluded that relevant product market for the downstream market was that of ampoules, vials, cartridges and other containers.
15. The DG held the whole of India as the relevant geographic market.
16. The DG also came to the conclusion that the Appellant was a dominant player and having major market share of 61.49% in 2008-09 and 81.17% in 2009-10. The DG, therefore, held that the Appellant was a market leader in the products like NGA, Fiolax Amber and Fiolax Clear and thus had virtual monopoly. As regards amber tubes also, the DG held the Appellant to be a dominant player. The DG held that Schott group together with Appellant is present both in manufacturing of glass tubes and conversion of glass tubes into containers and therefore was vertically integrated enterprise within the meaning of section 2(h) of the Act read with explanations (a) and (b) to section 5 of the Act. The DG also commented on the strength of Appellant being a leading manufacturer of glass tubes worldwide. The DG also commented on other aspects like relative position of strength of the Appellant vis-a-vis its competitors and held that they could not match the Appellant. It was held that Schott group was also a dominant player in the global market and had enormous economic power qua its competitors. The DG also took into consideration the aspect of dependence of the consumer on the product of the Appellant. The DG also held that the acts on the part of the Appellant created a barrier for the new entrants and that there was no substitutability neither was there any countervailing buying power of glass ampoule manufacturers in India. Thus, the DG came to the conclusion that the Appellant was a dominant player. Insofar as the abusive acts and conduct of the Appellant the DG found, firstly, that there was no merit in the allegation of predatory practices engaged by the Appellant. Secondly, that the allegation of prices being charged to oust competitor out of the market was also not justified. The DG, therefore, cleared the Appellant from the allegation of contravention of Section 4(2)(a)(ii). The DG did not find favour with the allegation of poaching of managers. As regards unfair and discriminatory conditions of price in the sale of glass tubes, the DG, noted two major issues - (i) discriminatory discount policy; and (ii) bundling of amber tubes. The DG found that insofar as the discriminatory discount policy was concerned, two types of discounts were being granted, namely target discount and functional discounts in various slabs ranging from 2% to 12% depending upon quantities purchased by the Converters from the Appellant which was only given on NGC and NGA tubes. The DG found that Schott Kaisha, the JV of the Appellant was given a target discount on the purchase of NGC and NGA as well as on Fiolax tubes which no other Converter was granted. The DG found a difference in respect of JV inasmuch to other discounts was given on quarterly basis while to Schott Kiasha it was given on monthly basis. The DG also considered the functional discount policy and bonus which were subject to certain conditions, viz; that the Converters will promote Schott tubing by purchasing an agreed quantity and the Converters will not use or convert Chinese tubing and will provide all information and proof in this regard. The DG also considered the Trade Mark License Agreement (TMLA) which was brought into existence in the year 2010. The DG analyzed the discounts given on NGC and NGA and Fiolax, and based on the analysis he concluded that the discount policy has not been uniformly applied by the Appellant in terms of its declared policy, which has led to persistent price discrimination of the same commodity being sold at different prices to different customers. He, therefore, held the Appellant guilty of contravention of Section 4(2)(a) of the Act. The DG also found fault on the application of discount on the sale of Fiolax tubes, which was given only to Schott Kaisha. The DG held that the discount policy of the Appellant also contravened the provisions of section 4(2)(c) as its practices have led to denial of market access. The DG also held that the Appellant was guilty of contravention of Section 4(2)(e) of the Act. On the question of TMLA, the DG held that the terms were grossly unfair one sided and heavily loaded in favour of the Schott group. The DG held that the TMLA when read with Sale Purchase Agreement ("SPA") and Marketing Support Agreement ("MSA") clearly showed that the Appellant had severely restrained the use of tubes other than that of Schott. The DG found fault with the condition of the bank guarantee of Rs.70 lacs also and therefore, came to the conclusion that reading the three agreements together, the Appellant was guilty of Section 4(2)(a) (i) and (ii) of the Act. The DG also held that under the TMLA the Appellant had created a bogey of mixing risk, which was non-existent. The DG also held the Appellant guilty of discriminatory practice inasmuch as giving favoured treatment to its JV Schott Kaisha. The DG held that the long term tubing supply agreement which was executed, resulted in different prices for supply of tubes to Schott Kaisha, as under the agreement, the prices remained static between 2008 and 2011 whereas in case of others it did not happen. Therefore, the other Converters suffered as compared to Schott Kaisha inasmuch as in the percentage price increase applied to JV only on the prices prevalent on 1.4.2008 whereas to others it was on the prices prevalent on 31.3.2011. The DG found fault with clause 3 of the agreement also and further came to the conclusion that the Appellant had forced the other Converters to supply tubes not below the prices charged by Schott Kaisha. Thus, the DG came to the conclusion that the Appellant had grossly abused its dominant position in the upstream relevant market. The DG also held that the Appellant was guilty of contravention of Section 4(2)(e) of the Act. The DG also held that the practice of Appellant in favour of JV Schott Kaisha resulted in limiting and restricting the market for conversion and which led to denial of market access. The DG also held that the Appellant had the power to leverage on account of its market share in the NGA (93%) and in Fiolax Amber (87%).
17. The DG also found that the Informant had previously attempted to intentionally infringe Schott's trademarks and fraudulently pass borosilicate glass tubes manufactured by Schott India. DG took note of the fact that because of this the Appellant had black listed M/s. Kapoor Glass and had decided not to enter into any supply arrangement with it. The DG, therefore, observed that the Informant had indulged in unauthorized usage of trademark of the Appellant. The DG, therefore, noted the contention that the Appellant could not be forced to supply its products to the Informant. However, the DG held that reason to be not sustainable and thus found the Appellant fully guilty of the various provisions of Section 4.
18. The report of the DG was supplied to the parties and the Appellant made detailed submissions opposing the findings of the DG. The Informant also gave its comments. The DG's report was criticized as hasty and contradictory. It was pointed out, that DG had committed an error on relying on the statements by certain Converters, who clearly had conflicting interests against the Appellant. In its submission the Appellant had urged that such statements could not have been accepted as gospel truth, as firstly they were by the interested parties and secondly, there was no cross-examination. The observation by the DG that the geographic market was India, was also criticized, as according to the Appellant, the market could not be limited to India alone as the borosilicate glass tubes were procured by the Converters in India from other Asian countries and more particularly from China. It was urged that the relevant market was competitive as the imports of the borosilicate glass tubes were increasing and the market share of the Appellant was declining. It was also urged that the market of Triveni Glass had increased from 12% in 2008 to 14% in 2009. It was also urged that the entry of Nipro had also caused a dent to the market share of the Appellant, both in upstream as well as the downstream market. It was urged that the Appellant could not be blamed for the ouster of some players from the market, as there could be many other reasons for their ouster like mismanagement, inferior quality of products and inability to manage their finances. It was urged that the discounts were necessary as there was competition in the relevant market. It was explained that discrimination in prices was a myth and in fact the discounts dependent upon the purchase of a particular Converters. It was suggested that mere giving different discounts did not amount to discrimination in pricing. It was pointed out that Schott Kaisha was the largest purchaser of the glass tubes and deserved the discounts given to it. The theory of canvassing was also attacked. The intricacies of the manufacturing process were also explained. It was asserted by the Appellant that there was no discrimination in pricing. According to the Appellant, there was no annihilation of the competition. As regards the TMLA, it was pointed out that it was designed to protect their brand and to avoid mixing risk by the Converters of its product with Chinese tubes. It was explained that TMLA helped to mitigate the risk of Converters of mixing ampoules made from borosilicate glass tubes supplied by the Appellant with those made from inferior quality borosilicate glass tubes imported from China. It was pointed out that by signing the TMLA, the Converters acquired the right to display Schott logo and brand, as part of the material they use, to market and supply ampoules to pharma companies. It was pointed out that under the TMLA, Schott - the Appellant acquired the right to inspect the premises of Converters to ensure that its Trademark was not being abused. It was also pointed out that along with TMLA there is a Marketing Support Agreement also whereby the Converters agree to promote the Appellant and its products and services. It was, therefore, pointed out that the discount which the Converters get on executing the TMLA is a functional discount and that there was absolutely no discrimination between any two parties in offering such functional discounts to all the Converters, who agreed to execute the TMLA. In the same way, the practice of putting a dotted line on the glass tubes was explained as an effort to eliminate the passing off/ mixing risk. It was, however, pointed out that for some technical reason that practice was discontinued. Similarly, the allegation of leveraging the amber segment to sell of NGA contingent upon purchase of NGC was denied as false. It was pointed out that this allegation and the resultant finding by the DG depended upon the statement of three Converters, who were not even cross-examined. It was pointed out that there was no written evidence whatsoever. As regards the denial of supplies to the Informant, it was submitted that the Informant had attempted to intentionally infringe Schott's trademarks and to fraudulently pass off borosilicate glass tubes manufactured by the Informant as borosilicate glass tubes manufactured by Schott India and it was for this reason that the supplies were stopped. It was pointed out that the Informant was actually guilty of fraudulently getting the logo of the Appellant. It was pointed out that the DG had not seriously taken note of this very serious issue. It was pointed out that the Informant's conduct was not looked into by the DG with the seriousness that it deserved. It was also urged that nothing was brought on record to show that the Appellant was undercutting the other Converters in favour of Schott Kaisha. Three issues came to be framed, which were:-
a) On the basis of facts involved in the case, what was the relevant market in this case?
b) If the Appellant had a position of dominance in the relevant market in terms of provisions of section 4 of the Act?
c) If answer to b) was in affirmative, was there any case of abuse on the part of the Appellant in terms of the following acts and conduct, which, if established, may be said to be violative of various provisions of section 4(2) of the Act;
In addition to this, seven sub-issues were also framed:-
i) Whether the Appellant has indulged in the act of predatory pricing in violation of provisions of section 4(2)(a)(ii) of the Act?
ii) Whether the Appellant had imposed unfair and discriminatory conditions or price in the sale of neutral USP-I borosilicate glass tubes through its discount policies, TMLA, MSA and SPA in contravention of the provisions of section 4(2)(a)(i) and (ii), of the Act?
iii) Whether the aforesaid policies of the Appellant are exclusionary and limit and restrict the market in violation of provisions of section 4(2)(b)(i) and are also causing denial of market access in terms of section 4(2)(c) of the Act?
iv) Whether the Appellant had leveraged its position of dominance in relevant upstream market of neutral USP-1 glass tubes to enter into or protect the relevant downstream market of 'Containers, i.e., ampoules, vials, dental cartridges and syringes made out of 'neutral USP-I borosilicate glass tubes'?
v) Whether the Appellant had engaged in the practice of making the sale of amber tubes contingent upon the Converters buying clear tubes from it in contravention of provisions of section 4(2)(d) and any other provisions of section 4 of the Act?
vi) Whether the Appellant had refused to deal with the Informant as has been alleged, denying market access to it and if yes, had the Appellant contravened the provisions of section 4(2)(c) of the Act?
vii) Whether the Appellant had indulged in the practice of predatory hiring of employees of the Informant and if yes, could the practice be called inconsistent with the requirements under section 4(2)(e) of the Act? Further, could this act be said to be violative of provisions of section 4(2)(b)(i) since it is limiting and restricting the ability of the Informant to produce goods as alleged by the Informant?
19. The CCI first noted the DG's observation about the relevant product market. It also noted the five categories made by the DG and came to the conclusion that since the Appellant did not question the DG's findings on this issue, the CCI concluded that the relevant product market must be categorised broadly into two upstream relevant product markets, namely (a) Market for 'Neutral Clear USP-I borosilicate Glass Tubes' (NGC) and (b) Market for 'Neutral Amber USP-I Borosilicate Glass Tubes' (NGA). It must be stated at this juncture that the learned counsel for the Appellant did not dispute this finding of the CCI. We, therefore, accept the finding. As far as geographic market is concerned, the CCI noted that the DG had held that the territory of India was held to be a geographical market. The CCI approved of this finding by the DG. Though Shri Billimoria disputed this, we do not think that CCI was in any way wrong in accepting the finding of the DG. We are convinced with the reasons given by the CCI to hold that the relevant geographical market would be India. The CCI observed that in accordance with the provisions of explanation (a) of Section 4, the 'dominance of the enterprise' is required to be tested in relevant market in India. The reasoning is undoubtedly correct and we, therefore, accept the finding of the CCI on the relevant market to be the market for NGC and NGA in India. We also accept the downstream market to be the market for - (a) containers that is ampoules, vials, dental cartridges and syringes made out of NGC in India, and (b) market for containers that is ampoules, vials, dental cartridges and syringes made out of NGA.
20. This brings us to the second issue about the Appellant being a dominant player in the market. We must at this juncture point out that the CCI has taken into consideration the definition of the term 'dominant position'. It has considered all the factors enumerated in Section 19(4) of the Act and has come to the conclusion that in so far as the 'market share' was concerned, the Appellant's market share both in 'sale quantity' and 'sale value' was the highest in comparison to its competitors Nipro/Triveni, as also the material imported. We agree with the observation of the CCI that the Appellant is the market leader. The CCI has relied on some judgments of the European Court of Justice (ECJ) like Hoffmann-La Roche & Co. AG Vs. Commission [Case 85/76] as also United Brands and Co. and Continental Vs. Commission [Case 27/76]. The CCI has also quoted the AKZO V. Commission, Case C-62/86. It has also found that the market share of the Appellant in the upstream relevant market exceeded its nearest competitors and has remained significantly high for a period of three years and this was indicative of the position and strength of the Appellant. The CCI also noted that the Appellant has a downstream market in Schott Kaisha. It was observed that Schott Packaging, which was a subsidiary of Schott group entered into a Joint Venture Agreement with a downstream ampoule manufacturer Kaisha Manufacturers Pvt. Ltd., which was the biggest Indian ampoule manufacturer in 2008. Thus Schott Kaisha was virtually a subsidiary of the Appellant. The CCI also noted that Schott Kaisha was the leading player in the market of ampoules and therefore, it was held that the Appellant together with JV Schott Kaisha, a related group concern, enjoys a position of strength in the upstream as well in the downstream relevant market. The CCI also noted the size and the resources of the Appellant and came to the conclusion that the Appellant's Schott Group enjoyed the global sales of 2.85 billion Euros and that group employed 17,500 employees worldwide. Number of other details were also considered and the CCI ultimately commented that the Appellant and its group companies provided tremendous market power in the upstream relevant market due to which it has been able to deploy huge resources in terms of investment.
21. While considering the size and importance of the competitors, the CCI considered the sale and size of Nipro, the only competitor in the Indian market. It also noted the imports from other major tube manufacturers in the global market and came to the conclusion that in both the aspect, the Appellant enjoyed the strong position.
22. Similarly in so far as economic power of enterprise of the Appellant and its commercial advantage over the competitors was concerned, the CCI took the view that the size and economic power of the Appellant gave it a huge commercial advantage over any of the competitors and contributed to its position of dominance in the relevant market.
23. So far as advantage of the Appellant being vertically integrated was concerned, the CCI took the view that its arrangement with Schott Kaisha gave it a specific advantage.
24. Similar is the situation about the other factors, like dependence of consumer, about which the CCI held that consumers were heavily dependent on the Appellant in view of Appellant's product range, preference of the pharmaceutical companies for its products and lack of viable alternative options.
25. The CCI has also commented on the entry barriers, particularly in view of heavy capital requirement, huge running cost, high gestation period and economies of scale in the production of the upstream relevant products. It was also held that these entry barriers made the position of the Appellant and its JV a formidable one in both upstream and downstream relevant market.
26. Lastly, while considering the question of countervailing buying power, the CCI found that in downstream relevant market, leaving aside the JV Schott Kaisha, the other Converters lack the requisite size or financial strength to exercise countervailing buying power of the Appellant. It was observed that in fact all these Converters were dependent upon the Appellant for their supplies and could not exert disciplinary force on Appellant. On this basis, the CCI held the Appellant to be a dominant player in the upstream relevant market, while it held JV Schott Kaisha to be dominant in the downstream relevant market. This finding of dominance was not seriously disputed by Shri Billimoria, the learned counsel appearing for the Appellant.
27. According to Shri Billimoria, there was no point in giving a finding on Schott Kaisha. The learned counsel pointed out that the Schott Kaisha was not a party, nor did the DG proceed against Schott Kaisha and the allegations, more or the less related only to the upstream relevant market. Shri Billimoria also pointed out that regarding the allegation of leveraging strength in one market to promote or to maintain the other market, there was no real allegation. It was pointed out by Shri Billimoria that the Appellant had no presence in the downstream market whatsoever except that it was doing its business along with Schott Kaisha like any other Converter. It was also urged by Shri Billimoria that there was no favoured treatment given to Schott Kaisha, nor any discrimination practiced against any other Converter. According to Shri Billimoria, therefore, the comments against Schott Kaisha, were not only unnecessary, but the CCI committed a legal error in commenting against Schott Kaisha.
28. Before we take up the contested issues for consideration, we must note few further aspects of the impugned order of the CCI. The CCI did not accept the contention of the Informant as also the finding of the DG insofar as the predatory pricing was concerned. In that the CCI gave the finding that after 2007 the prices of the Appellant remained significantly higher than the cost of production. According to the CCI, the earlier pricing and the cost of production being prior to the commencement of the Competition Act, 2002 could not have been considered. The CCI also held that the issue of predatory pricing could not have been considered unless there was a finding of dominance on the Appellant and in fact the dominance of the Appellant only began after 2008. The CCI, therefore, exonerated the Appellant from the allegation of predatory pricing.
29. Similarly, it also refused to accept the allegation that the Appellant drastically increased the prices to recover losses incurred on account of its earlier predatory pricing. In fact the CCI held that, considering the admitted high quality of the product of the Appellant, the higher prices were justified. It also held that there was no substance in the allegation of competitors exiting from the relevant market due to predatory pricing of the Appellant. It, therefore, exonerated the Appellant from the allegation of contravention of section 4(2)(a)(ii) of the Act.
30. While deciding sub-issue (vi), whether the Appellant has refused to deal with the Informant and thereby denied market access to it and as such breached the provisions of section 4(2)(c) of the Act, the CCI clearly exonerated the Appellant. It upheld the contention of the Appellant that there were attempts on the part of the Informant to intentionally infringe the Appellant's trademark and fraudulently market borosilicate glass tubes manufactured by the Informant as borosilicate glass tubes manufactured by the Appellant and therefore, the Appellant was reluctant to supply borosilicate glass tubes to the Informant. The CCI also took note of the reprehensible behaviour on the part of the Informant in printing fake labels of the Appellant and passing them. It also took note of the fact that the earlier refusal to supply had taken place well before 20th May, 2009 when Sections 3 and 4 were activated and therefore such refusal could not be taken into consideration. It also took note of the fact that the Informant admittedly indulged in affixing labels of the Appellant without its authorization.
31. The CCI also recorded a finding that the actions of the Appellant did not result in the denial of access to the upstream relevant market to the other players. In this regard, the CCI noted that the imports were taking place in some measures of NGC and NGA, and even Nipro Triveni had made entry in the market. In that view, the CCI exonerated the Appellant from the allegation covered by section 4(2)(c). It was however held that discount policies of the Appellant coupled with TMLA, SPA and MSA had exclusionary effect.
32. The CCI also found that there was no substance in the allegation that the Appellant committed the mischief of predatory hiring of the key personnel of the Informant. It was alleged that about 49 to 50 employees of the Informant were hired. It did not accept the contention of the Informant that there was breach of Section 4(2) (b)(i) on that count. However, the fact remains that the finding of the CCI on that allegation has become final. This is apart from the fact that no provision was brought to notice before this Hon'ble Tribunal which prohibited any such thing was predatory hiring.
33. Some of these findings have been appealed against by the Informant in Appeal No. 92 of 2012. We shall deal with those contentions when we take up that appeal for consideration.
34. Presently, however, we must note the other contested issues. Those are :-
(i) Discriminatory pricing [contravention of section4(2)(a)(i) and (ii)];
(ii) Exclusionary policies and restriction of market [section 4(2)(b)(i)];
(iii) Tying in [section 4(2)(d)]; and
(iv) Leveraging dominant position of glass tubing to enter into and protect downstream market [section 4(2)(e)].
We shall now take up these issues for consideration.
35. We must, at this stage, take notice of the minority order by Smt. Geeta Gouri. In the minority order, the learned Member exonerated the Appellant of the contravention of section 4(2)(a)((i) and (ii) of the Act i.e. the imposition of unfair and discriminatory condition on Converters through the TMLA. She has also exonerated the Appellant of the contravention of section 4(2)(e) of the Act i.e. the Appellant's leveraging its dominant position in the upstream market to protect the downstream market. Further, she has exonerated the Appellant for contravention of section 4(2)(d) of the Act i.e. tying in amber tubes with clear tubes. She has also exonerated the Appellant of the allegation covered by section 4(2)(b)(i) i.e. the refusal to deal with the Informant leading denial of market access to the Informant. The learned Member has, however, found against the Appellant on the limited issue of functional discount which was prevalent till April, 2010.
36. We shall therefore take up the first contested issue of contravention of section 4(2)(a)(i) and 4(2)(a)(ii) for consideration. The CCI has devoted a good deal of space for consideration of this issue. It has come to the conclusion against the Appellant and has discussed the quantity discount and its percentage, firstly from 01.10.2001 and secondly, after 2007. This discount was offered both for NGC and NGA glass tubes. It has noted that the discount scheme was made available to the Converters at the beginning of the transaction period and the Appellant used to issue credit notes for discounted amount on a quarterly basis on receipt of certificate for sales and full payment of invoices raised in the relevant quarter. It was also noted that target discounts were applicable only on basic value of NGC, NGA and the sale of Fiolax. Besides the target discount, the CCI noted that another kind of discount, which was known as functional discount, was also being given by the Appellant. This was dependent on the Sale-Purchase Agreement for the year 2007-2008, in which it was generally provided that :-
(i) That Converters will promote Schott tubing by purchasing the agreed quantity in the particular year of agreement.
(ii) That the Converter will not use or convert Chinese tubing and will provide all information and proof in this regard.
(iii) That the Converters will maintain 'Fair Pricing' of ampolues and vials for Schott tubing.
37. This functional discount was granted from 2007-2008 till 2010 on the basic value of purchase of NGC, NGA and Fiolax clear tubing supplied by the Appellant at the end of the financial year. From the year 2010, the Appellant had required the Converters to sign its TMLA and MSA in order to continue to get functional discount. The TMLA gave the right to the Appellant to inspect the premises of the Converters to ensure that its brand was not being abused. There is also a provision of the payment of damages of Rs.70,00,000/- (rupees seventy lakhs) in case of infringement of Appellant's Trademark was found. The Converters who signed the TMLA were given royalty free right to display the Schott logo and brand as a part of the materials they use to market and supply ampoules to pharma companies.
38. Market Support Agreement (MSA) provides that the Converters would agree to promote the Appellant and its products for which the Converters were to be paid certain sum on a quarterly basis. The CCI also noted that target based discount was based on cost efficiency consideration, since the process of melting glass and manufacturing borosilicate glass tubes from various raw materials was a continuous process, requiring the production tank to be continuously at high temperatures and functioning at all times requiring substantial energy costs. The Appellant explained to the CCI that any instability in load or demand may lead to heavy damage to the production tank and would result in losses to the manufacturer-appellant. A plea was also raised that the discounts were necessary to meet competition from imports and new players like Nipro-Triveni. The stand of the Appellant as regards the royalty/ functional discount was that it was offered to mitigate the risk of Converters mixing ampoules made from borosilicate glass tubes supplied by the Appellant with those made from inferior quality borosilicate glass tubes imported from China. The CCI then went on to compare the target discount given to Schott Kaisha, the Joint Venture (JV) of the Appellant for three years in respect of NGA, NGC as also the Fiolax tubes. The CCI then went on to observe that the other ampoule manufacturers were not evenly placed as far as quantum of target discount was concerned and also recorded that this fact was not disputed by the Appellant. In order to support this, the CCI relied on statements of Dr. Anil Aggarwal, MD, M/s. Mak Ampoules Pvt. Ltd.; Shri Krishan Mehra, Partner, M/s. Kishore Industries; Shri Sandeep Khemka, Partner, M/s. Indian Scientific Glass Industries and Director of khemka Glass Products Pvt. Ltd.; Shri Anil Kumar Gupta, Managing Director of Adit Containers Pvt. Ltd.; Shri Rakesh Srivastava, General Manager, Solar Marketing Gujarat Borosil Ltd. and Ex-GM of the Appellant and Ex-GM of Schott Kaisha. On the basis of these statements, the CCI came to the conclusion that at least in the matter of target discount, Schott Kaisha was given more favourable terms in as much as the discount given to JV-Schott Kaisha was more than the one given to the other Converters percentage wise. It was also observed from this, that while target discount was given only on the purchase of NGC and NGA and the purchase of Fiolax is reckoned only for the purpose of determining the slab for other Converters, the JV-Schott Kaisha was given target discount on purchase of NGC, NGA as well as Fiolax. It was also observed that the target discount was given to the other Converters on a quarterly basis on the receipt of certificate of sales, as specified by the Appellant and upon full payment of invoices raised in that quarter. However, the same was being paid to the JV-Schott Kaisha on monthly basis. It was also noted that percentage target discount was determined on the basis of quantity agreed for procurement in a year by the Converters and in case the quantity is less than the slab, the lower slab discount was given. It was also seen that the discounts are bundled together both for NGC and NGA. As regards the functional discount also, it was seen that while the same was given on yearly basis to the Converters, it was given on monthly basis to the JV-Schott Kaisha and that too was subject to the fulfillment of the conditions in TMLA. The JV-Schott Kaisha also got bonus from Schott Rohrglass GmbH Germany for materials supplied from outside India for the year 2008-09 and 2009-10 and the others did not get it. According to the CCI, this was nothing but a dissimilar and discriminatory discount policy towards the other Converters vis-a-vis the JV-Schott Kaisha. It was also observed that the Appellant was discriminating not only on quantum, but also on conditions of discounts.
39. The Appellant had admitted that a more favourable quantity and functional discounts were given to Schott Kaisha, than the others. It however, justified it on the ground that no other Converter could match the volume of orders that Schott Kaisha was placing on Schott Glass India. It was explained in so far as Fiolex tubes were concerned, the discount was given to Schott Kaisha since Schott Kaisha was a strong downstream player and further the idea was not to lose its valued customer, in view of the quantity that it purchased and no other Converter matched the same. It was pointed out that inspite of this the ampoules supplied by Schott Kaisha in the downstream market were never sold at prices less than the other Converters. On the other hand, at times they were costlier as compared to the other Converters. It was argued that the discount schemes are not unusual in the glass tubing industry and that even the Informant was offering such discounts to its customers, when it was in the business of manufacture of the glass tubes.
40. The CCI took the view that there was nothing wrong in giving target discount, however, if the conditions for giving such discounts was dissimilar then it would result in anti-competitive effects in the market. According to the CCI, further this was particularly applicable in this case wherein different sets of conditions have been made applicable for grant of discount between vertically integrated downstream JV and other Converters in the downstream market due to which, competing downstream players were not in a position to compete effectively. The CCI then rushed to the conclusion that the structure and the policy of discount was evidently dissimilar for JV, as compared to other Converters and the discount policy had not been uniformly applied by the Appellant and therefore price discrimination had occurred. Precisely this was strongly objected to by Shri Billimoria. According to him firstly, in so far as target discount was concerned, Schott Kaisha was the Joint Venture of the Appellant.
41. The learned counsel explained that the mother company Schott GmbH held 100% shareholding of the Appellant Schott Glass India Pvt. Ltd., while the same Schott GmbH held 50% of the shareholding of Schott Kaisha. The learned counsel explained that while Schott Glass India Pvt. Ltd. is only operative in the upstream market of glass tubes NGA and NGC, its the Converters around 20 in number and Schott Kaisha, who were operating in the so called downstream market of manufacturing of ampoules. It was explained by Shri Billimoria that the Appellant did not have the activity of converting glass tubes into ampoules. Besides this, the learned counsel was at pains to point out that Schott Kaisha apart from being a Joint Venture was purchasing 30% of the glass tubes manufactured by the Appellant and thus was the largest purchaser of the Appellant's product. The learned counsel was prepared to go on record to suggest that if any Converter matched the purchase percentage of Schott Kaisha, it would get the same kind of discount that Schott Kaisha enjoys. The learned counsel also urged that the CCI had completely missed a very important aspect, that, in order to be 'discriminatory', it must be different for equivalent transactions. In short, according to the learned counsel, if a different price was charged for the same quantity of the same product, then and only then the pricing would have amounted to be discriminatory. The learned counsel went on further to argue that even if the pricing was discriminatory in the first place, it would have been justifiable in terms of consumer welfare or allocative efficiencies. The learned counsel relied on the treatise of Prof. Richard Whish and suggested that there were several examples of discriminatory prices being desirable for example where the same product was sold at lower prices in rural/ low income markets.
42. We have carefully seen the order of the CCI, particularly in this behalf. It appears to be a fact that the quantity purchased by Schott Kaisha, far exceeded the purchases of any other Converter. This appears to be an admitted position, as the Informant itself had admitted that Kaisha was the largest Converter even before it became a joint venture company in 2008. It was argued by the learned counsel that no other Converter even had installed capacity to off-take such large quantities. The learned counsel, therefore, argued and in our opinion rightly so that the price and conditions could be said to be discriminatory, if and only if, they were different for the same quantities of the same product. The learned counsel further argued that no other Converter had the capacity to require the same quantity. In fact, the learned counsel rightly contended that it would not have been possible for the Appellant to make such large investment in such a capital intensive and high gestation industry, had it not been for Schott Kaisha guaranteeing to purchase 30% of its capacity. The learned counsel again reiterated that the manufacture of glass tubes involved melting of glass at very high temperatures of upto 1600 degrees celsius. He further reiterated that in case of inadequate or uncertain demand patterns, the tanks could not be kept going continuously. He further argued that apart from the cost of firing tanks to such high temperatures, the frequent cooling and heating damages the tanks also and in order to ensure at all times sufficient order volumes to keep the process continuous, favourable prices and terms to customers who buy very large quantities is a global industry practice. The learned counsel, therefore, argued that it could not be said that the prices were discriminatory at least in so far as target discount was concerned. As regards the so called admission on the part of the Appellant that it had given more discounts to Schott Kaisha, the learned counsel said that such discount could have been available to all the other concerns who assured the 30% off-take of the production of the Appellant as Schott Kaisha had assured. The learned counsel rightly argued that the Informant's proposition that all the Converters should be treated equally irrespective of quantities off-take would create a chaos in the market place, as that would be unjustifiable.
43. The learned counsel therefore, urged that the CCI had completely misunderstood the concept of 'discriminatory pricing' and ignored the basic principle that the prices could be called 'discriminatory' only if they were for equivalent transactions, meaning thereby that if a different price was charged for the same quantity of the same product, then and only then would the pricing would have been discriminatory. To buttress his contentions, the learned counsel pointed out that the CCI had relied on five statements and in fact those statements merely showed that Schott Kaisha was given more target discount. The learned counsel very earnestly urged that all these statements came from the Converters, who were adversely interested against the Appellant. It was further urged that these Converters were enemically disposed against the Appellant, as these very firms had tried to join the appeal along with the Informant M/s. Kapoor Glass (India) Pvt. Ltd., which application was rejected by this Hon'ble Tribunal. It was further stated that thus, they had a common cause with the Informant, who was clearly enemically disposed against the Appellant. The learned counsel further argued that all the statements amounted to evidence of interested witnesses and therefore should not have been accepted at their face value, at least without an opportunity being given to the Appellant to cross-examine these witnesses. We find that such plea was clearly raised in the defence of the Appellant in reply to DG's notice. Indeed the Appellant had raised this issue regarding the interested nature of the witnesses and the necessity of cross-examining them. We are quite convinced that a total reliance on the statements of these interested witnesses even without their cross-examination was risky and uncalled for.
It is a trite principle of the Evidence Act that any 'untested statement by the cross-examination cannot be blindly accepted'. According to the counsel of the Appellant, CCI had done the same error of acting upon untested statements of interested witnesses. It was suggested by the counsel of CCI that such opportunity should have been asked for specifically before the CCI. We are not impressed by this statement. Once an objection was raised, it would have been appropriate for the CCI to offer such an opportunity to cross-examine at least during the hearing before the CCI. The CCI should not have insisted on a separate application for cross-examining these witnesses, once the question was raised before it through the pleadings. After all, reply of the CCI to DG's report amounted to pleadings, wherein this question was actually raised. Therefore, we are not impressed by the argument on the part of the learned counsel of the CCI that this opportunity was not specifically asked for and therefore, the Appellant could not have made much out of cross-examination of these witnesses.
44. The learned counsel of the Appellant also rightly pointed out that in no statement, it was claimed that purchases by any other Converters matched the purchase by Schott Kaisha, the JV of Appellant. If that was so, there would have been no question of comparison of discount granted to other Converters with the discount granted to Schott Kaisha, whose purchases were huge and according to Shri Billimoria amounted to 30% of the production of the Appellant. In that view, the contention raised by Shri Billimoria appears to be justified. In any circumstances, we find that the statements are of no consequence, because in none of the statements has the claim being made, that the purchases of these Converters matched the purchases by Schott Kaisha.
45. This brings us to observe the EU and American jurisprudence in this regard. Smt. Geeta Gouri has very specifically referred to the Robinson- Patman Act of US, where the provisions provide that discrimination in prices between different purchasers of the same products is condemned, where the effect of such discrimination may be to substantially lessen competition. She has also referred to EU Article 82 (c) of the EC Treaty (now Article 102 TFEU), which provides, if a dominant plaver applies dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at competitive disadvantage, is considered to be an abuse of dominant position. Thereby the learned Member deduced that interpretation of unlawful discrimination that entails establishment of - (i) dissimilar treatment to equivalent transactions; and (ii) harm to competition or is likely harm to competition in the sense that the buyers suffer a competitive disadvantage against each other leading to competitive injury in the downstream market. The learned Member then proceeded to analyze target discounts and observed that the discount in this case were given on slab basis and same rate of discount was applicable to transactions falling in the same quantity slab. She therefore, deduced that transactions of different volumes of tubes could not be inferred as equivalent transactions warranting equivalent treatment from the seller and therefore, the design of the discount, per-se, could not be deemed to be discriminatory in the sense of applying different price conditions to identical transactions with different buyers. After taking stock of the statements by the Converters and after evaluating the discount policy, the learned Member took into consideration the discounts given between 2001-2007 and 2007 afterwards. The learned Member then took into account the details of quantities sold to Converters from Schott India and the discounts allowed to each Converter on the basis of table prepared for the years starting from 2002-2003 upto 2010-2011. The information used was on the basis of the data submitted by Appellant Schott India. On analyzing of the off-take data of various Converters in association with declared discount schedule, the learned Member found that on some occasions, the discount allowed by Schott India was not as per the discount schedule and sometimes the Appellant was more lenient towards some companies. However, the learned Member proceeded to observe that the discounting policy of the companies may seem arbitrary and appeared to be based on a host of other undeterministic factors. We also are of the opinion that there would have to be some reasonable discretion in the manufacturer for conducting business. She then proceeded to consider the effect of different treatment on the competitive ability of the so called disfavoured buyers and any injury that may have been caused or was likely to be caused to the competitive conditions in the downstream containers' market. She proceeded to observe that the facts and materials brought on record showed that Schott Kaisha was the largest tube Converter in India followed by two other companies and the rest of the market was fragmented across several small players constituting insignificant shares of the market. The Converters manufacture and supply containers namely - ampoules, vials, dental cartridges, syringes converted out of the borosilicate glass tubes (clear and amber), which are sold to pharmaceutical companies based on their requisitions. These pharmaceutical companies usually dealt with two-three vendor Converters and as per the statements of the Converters, migration to new Converters was not used. The prices of the containers are negotiated between the Converters and pharmaceutical companies on a one-to-one basis. The learned Member analyzed the invoices submitted by the Converters and observed that the prices charged by different Converters were similar and exactly same in some instances for a given pharmaceutical company. She therefore, deduced that the cost differential in inputs caused by the volume based discount scheme of the Appellant, did not get translated into price differential in final products, namely 'Containers' for the pharmaceutical companies. Consequently, any change in structure of the market and market share composition could not be logically linked to the discounts received by the Converters. The learned Member also found that the total sales of all Converters had grown consistently over the years and for this purpose the learned Member relied on the information gathered during the investigation. The learned Member then proceeded to consider the operating ratios of Converters and deduced that the volume of target discounts were not the only or most significant factor influencing the financials of downstream Converters. The learned Member also considered EBIDTA and found that most of the Converters had experienced growth in absolute numbers and therefore deduced that the second necessary element of harm to competitive ability of the customer and competition in the downstream relevant markets, could not be established.
45.1 Lastly, the learned Member considered the allegation of price discrimination on account of target discount on the Fiolax category of tubes, which was being granted only to the downstream JV Schott Kaisha. The learned Member observed that the demand by Schott Kaisha of 3000 tones covered more than 20% of the total annual capacity of 13,000 tones of the two production tanks, in which Fiolax was produced by Schott India and that there was no other Fiolax customer in India, whose requirements of Fiolax were substantially comparable to the requirement of Schott Kaisha. The learned Member therefore, deduced that the transaction of Fiolax category tubes with Schott Kaisha in no manner could be construed as equivalent with the transaction of Fiolax category tubes with other players in India. The learned Member further observed that more importantly, favourable terms offered to Schott Kaisha for Fiolax category tube did not affect the market structure or competition downstream, since prices of final products charged by Schott Kaisha to the pharmaceutical companies were same or in some instances higher as compared to the prices charged by the other players. On this basis, the learned Member finally came to the conclusion, as regards the target discount that in the absence of any perceivable harm to competition in the downstream containers market and that too consumer interest, the target discount policy could not be inferred to be discriminatory, as it retained the characteristics of anonymity. She therefore, deduced that violation of section 4(2) (a) and (b) remained unsubstantiated. We have purposefully relied on the observations in the minority judgment of Smt. Geeta Gouri, as comparably, we do not find any such consideration in the impugned majority order. In this view and for the reasons stated earlier, we are of the clear opinion that in so far as the target discount is concerned, no contravention can be found against the Appellant. The counsel for the Appellant also supported this finding of the learned Member in the minority order. We accept the arguments by the learned counsel. It was fervently argued by Shri Abhishek Yadav that this analysis was incorrect. However, we do not find any reason, not to accept the above analysis, and other factual contentions raised by the learned counsel Shri Billimoria. This takes us to the other discount namely 'functional discount', which is complained of.
46. The CCI in paragraph 9.42 came to the flawed conclusion that target discount or as the case may be, that quantum discount was evidently dissimilar for JV Schott Kaisha from other Converter companies. It was also given as a finding in that paragraph, that the discount policy was not been uniformly applied by the Appellant, which led to a sort of price discrimination where the same commodity was sold at different prices to different customers despite identical cost for the Appellant. We have in earlier portion of the judgment shown and held that this finding, at least insofar as the target discount is concerned, is erroneous and incorrect for the reason stated above. Having done so, the CCI commenced its discussion on functional discount and referred to the SPA with the converter companies for availing discount. It referred to a clause in that agreement where it was mentioned "Schott Glass India appreciates commitment For not using or converting Chinese tubing and providing all information and proof in this regard' . The CCI then referred to the Supply Agreement with the Converters annually under which the Converters were required to purchase the agreed quantity of glass tubes from the Appellant. It noted that the Supply Agreement was so designed as to ensure maximum quantity of sale of glass tubes of the Appellant and to reduce the ability of the Converters to meet their requirement of the glass tubes from any other source. The CCI noted the following terms of the Supply Agreement:-
i) Right in the beginning of the F.Y., the Converters have to agree to purchase a minimum quantity of tubes from the Appellant.
ii) Discount is to be applicable only for NGC and NGA quantity.
iii) Group discount as certain percentage on total purchase of NGC and NGA is given.
iv) If quantity purchase is more, higher slab discount will be given, and if less, the lower slab is applicable.
v) The Appellant will provide assistance to the Converter signing supply agreement to achieve this volume.
Having come up to this, it was expected that the CCI would continue to comment on the Sale Purchase Agreement and the Supply Agreement for considering the implications of functional discount. However, the CCI straightway proceeded to consider the TMLA and started appreciating the implications thereof. Further discussion thereon is a heterogeneous admixture of the facts regarding the target discount and the TMLA. It is to be seen that in fact the TMLA came into existence only in the year 2010 and more particularly from the month of April. Before that the TMLA was not in existence. It would have been better if the question of the target discount was not mixed up with the question of the TMLA and its effects which followed. Infact what appears from the facts is that after April 2010 the whole mechanism of the discount was changed by the Appellant. The earlier regime of target discount continued up to April 2010 which essentially depended upon the purchases made by the Schott Kaisha as well as other converter companies. We have already found and given a finding that there was nothing wrong if more discount was given to Schott Kaisha, the JV of Appellant as the purchases by Schott Kaisha, amounted to 30% of the total production of the Appellant. We have also taken into consideration the fact and the statement made at the Bar by Shri Billimoria that if any other Converter company matched such purchases with Schott Kaisha then the same kind of discount would have been given. In fact the whole reasoning on this count on the part of the CCI has gone wrong and therefore we have preferred to rely on the minority order passed by the learned Member Smt. Geeta Gouri.
47. In paragraph 9.45 the CCI had observed that the continuation of functional discount of Schott Glass India was contingent upon the Converters signing the Trade Mark Licence Agreement (TMLA) which according to the Appellant was to deal with the problem of 'mixing risk' or of its products with the inferior quality Chinese imports. This observation is only partly correct because this situation started only after April, 2010 and was not in prevalence before that date. It must be realized here that the concerned provisions of sections 3 and 4 of the Competition Act came into anvil on 20.5.2009. The CCI, therefore, would have done better if it had considered the discount pattern which continued between 20.5.2009 to April 2010 i.e. for nearly a period of 11 months. We have no hesitation in confirming the finding of the minority judgment to the effect that at least until April 2010 there was no dis-similar or favourable treatment given to Schott Kaisha in comparison to the other converter companies in so far as target discount was concerned. We, therefore, endorse the observation in the minority order in Paragraph 220.127.116.11 to the effect that, offer of target discount continued upto 31.03.2010 and thereafter by April 2010 began the regime of TMLA. This functional discount was on the following conditions as per the Sale Purchase Agreement:-
i) That Converters will promote Schott tubing by purchasing the agreed quantity in the particular year of agreement.
ii) That the Converters will not use or convert inferior quality Chinese tubing and will provide all information and proof in this regard.
iii) That the Converters will maintain "Fair Pricing" of ampoules and vials for Schott tubing.
48. It is to be seen that from April 2010 the Converters companies were required to sign TMLA and MSA in order to be eligible for availing functional discount. The learned Member Smt. Geeta Gouri in the minority order has observed that this functional discount policy has been applied uniformly to all the Converters at the same flat rate since its inception and was non-discriminatory. We endorse the finding. It is also relevant to take note of the fact that at the time of the hearing on 22nd August, 2012 of the interim application for stay, it was very fairly contended by the learned senior counsel for the Appellant that he will have no difficulty in complying with the condition of not making the discount on both Amber and Clear tubes contingent upon sale of each other. In this view of the matter, we find no merit in the allegation of functional discount policy upto April, 2010 being discriminatory. It was only the computation of discount that was based on the total quantum of sales of both Amber and Clear tubes and not the sale of one kind of tube contingent upon sale of the other.
49. The main attack on the TMLA appeared to be on the basis of its unfairness. We have carefully seen the discussion further in the Minority order. The learned Member in the paragraphs from para 18.104.22.168 upto para 22.214.171.124 has painstakingly analyzed the implications of TMLA. It is not as if the functional discount was not available prior to April, 2010. It was indeed there but was subject to the earlier three conditions mentioned above. It is only after April 2010 that the Converters were required to sign the TMLA. The situation prior to April 2010 included both target discount as well as functional discount. While the target discount depended upon the purchases made by the Converters from the Appellant, functional discount on the other hand depended on the three conditions mentioned above. That is the only difference. This functional discount was only 8% in comparison to the target discount which essentially depended upon the stocks purchased by the Converters from the manufacturer and the slabs were between 2% to 12% in various degrees which have earlier come in the judgment. That is the only difference between the target discount and the functional discount. The situation changed after the TMLA was assailed for its alleged unfairness to the Converter companies.
50. In our opinion, the clauses of TMLA should not have been confused and mixed with the functional discount and the target discount which error appears to have been committed in the impugned majority order.
51. The learned Member Smt. Geeta Gouri while analyzing the TMLA has correctly observed that it was assailed on the ground of its unilateral language and which spelt out unfair and restrictive clauses in that agreement. According to the Informant (or that at least appears to be in this case) the clauses spelling out the right of the Appellant to enter any part of the factory or the premises where the manufacture of the relevant products is carried on, unilateral determination of breach by the Appellant, and penalty amount of Rupees Seventy lakhs in case a sample was found to be sub-standard, were the example of such unfair and restrictive clauses. In fact the oral statements which remained untested by cross- examination and which came from essentially interested witnesses also spelt out these complaints. We have already deprecated that practice of accepting the statements of the interested witnesses without any opportunity of cross-examination as the gospel truth. Be that as it may, the learned Member in the minority order has then painstakingly analyzed these clauses and has also considered the contentions raised by the Appellant that the TMLA was brought to mitigate the mixing risk of the products with inferior tubes such as Chinese tubes. The defence of the Appellant was that there was increasing pressure from the low price manufacturers from China and therefore it was felt that it was necessary to promote its brand and as such it introduced TMLA and also the MSA which was basically an agreement to co-promote its brand and products with the Converters to the pharmaceutical companies. The TMLA was also to authorise Converters to use the logo of the Appellant for its own benefit as admittedly the product of the Appellant was far too better as compared to the imported Chinese tubes. That aspect has already been covered in the earlier part of the judgment that there was a preference to the tubes manufactured by the Appelant and in fact the pharma companies were also complaining about the use of the Chinese tubes. We have in the earlier part of the judgment also referred to the fraud played by the Informant of getting fake logos printed in order to pass of its product under that logo to the pharma companies who insisted on the tubes manufactured by the Appellant company alone.
52. However, it was argued before us that there could be no such mixing risk considering that there were some special features of the tubes manufactured by the Appellant. We are not prepared to accept the argument that there was no mixing risk particularly once the Appellant had learnt its lesson by unearthing the fraud played by the Informant company - M/s. Kapoor Glass. Fortunately or otherwise that appears to be an admitted position, the Informant tried to print fake logos of the Appellant. If that was so, there was no point on the part of the Appellant to play with fire and they would have been quite justified in saving their brand from this mixing risk. In the subsequent paragraphs of the order, learned Member Smt. Geeta Gouri has stressed upon the importance of TMLA and its various implications. The learned Member goes on to observe that among the many functions of trademark and trademark licensing are to inform the purchaser about the actual origin of the good to assure the consumer predictable quality with respect to the goods bearing the trademark and to enhance the visibility of the brand of the trademark owner. The learned Member has correctly observed that without the requirement of quality control the products bearing the trademark might no longer signify the requisite standard and it is therefore that a trademark license typically includes provisions dealing with quality control, whereby the licensor has rights to inspection and monitoring. It is on this ground that the learned Member has chosen to hold that there would be no question of finding any unfairness in the condition of TMLA whereby the Appellant would have a right to inspect the factory of the converter company.
53. A deeper consideration of the term of TMLA does not suggest any clause of exclusive dealing with the Appellant nor does it spell out any loyalty clause. Therefore, the inference reached in paragraph 126.96.36.199 by the learned Member appears to be correct. According to the Appellant the crux of TMLA requirement is to attach the logo of Schott to the package of container made out of Schott tubes which the converter delivers to the pharmaceutical companies. For these reason, the learned Member who has passed the minority order exonerated the Appellant from the infringement of section 4(2)(a)(i) and (ii).
54. Now coming back to the majority order of the CCI, there is bald observation in paragraph 9.51 that the discount policy of the Appellant was intended to maintain its dominance in upstream relevant market and was evident, since its discount policy coupled with its 'Sale Purchase Agreement', 'Supply Agreement' and 'Marketing Support Agreement' with the Converters, forced the Converters to procure nearly all their requirements of glass tubes from the Appellant in order to get favourable terms. In the same paragraph the CCI observed that the target discount, functional discount read with TMLA and MSA amounted to insistence on loyalty. Such cannot be the reading of the agreement. In paragraph 9.53 again a casual statement has been made that after signing TMLA the Converter would have been virtually forced to procure all tubes from the Appellant only because of inherent fear of inspection of its premises by the Appelant and payment of damages in case a breach was found. This observation has to be ignored, since it is incorrect and not borne out from the evidence. Further observation in paragraph 9.54, that the discount policy could put severe restraints on competitive market structure in the relevant upstream market, also appears to be an incorrect statement. The other deductions in paragraph 9.56 and 9.58 are also of no consequence. It has been noted by CCI that the offered prices of the ampoules by Schott Kaisha were sometimes higher or similar (not below) the prices offered by the other Converters. This fact has been noted on the basis of the letter dated 21.02.2011 of Adit Containers Pvt. Ltd and the letter dated 22.02.2011 of Indian Scientific Glass Industries, the CCI has chosen to quote from letter dated 21.02.2011. In further paragraphs also it has been noted that pharma companies did not grant differential prices to the suppliers of glass ampoules and vials. In paragraph 9.65 the CCI has recorded that the prices of ampoules charged by both these companies were similar and at times the prices of ampoules of Schott Kaisha were slightly on the higher side.
55. These facts should have been enough to hold that there was no effect on the downstream market and ultimate consumer did not suffer on the account of the prices of Schott Kaisha and others being similar or the same. Though different or more discount was made to Schott Kaisha by the Appellant, it did not ultimately effect the downstream market at all and in this behalf the principles involved in Article 82 of EU Treaty as also the provisions of the US Robinson Patman Act should have been adhered to.
56. The CCI has then gone to explain in paragraph 9.68 that the cost of procurement of tubes was much lower for JV and the prices of the end products remained identical and the same. It therefore, concluded that the profit margins of the downstream Converters were bound to be affected. We cannot see any relevance of these deductions with the concerned subject. All that the CCI concluded was that the profit margin of Schott Kaisha registered a considerable increase from 2007 to 2009-10, while profit margins of other Converters had declined. In our opinion this cannot be a competition issue. There may be many other reasons for this, non- connected with the controversy.
57. We are therefore unable to agree with the deduction in paragraph 9.70 that the profitability of JV Schott Kaisha appears to be emanating due to the difference in discounts giving rise to adverse cost structure to other Converters as compared to the JV and that in turn caused harm to the competitive ability of the other Converters and consequently harm to competition in the downstream relevant market. This appears to be a very wide statement of law and cannot be accepted particularly when the prices of Schott Kaisha have remained same with those of the other Converters. We also cannot accept the deductions on the part of the CCI in this behalf. That a particular company is making more profits than the others can never be a competition consideration unless the company taking advantage of its dominant position starts abusing its dominance.
58. Being big is not bad. Being big and abusive is bad insofar as the competition culture is concerned. In our opinion, the comparison of Schott Kaisha along with other Converters was also unnecessary. We have definite evidence that the sales and business of almost all the Converter companies was on increase right from 2007 onwards. Similarly, the deductions reached in paragraph 9.74 and the comparison of profits earned by JV with other Converters was also unnecessary unless it could be shown that the downstream market was affected because of the profits earned by JV Schott Kaisha. After having quoted from Robinson Patman Act, Article 82 (c) of the EC Treaty and after correctly mentioning that for attracting the vice of discrimination in pricing, the two principles - (i) dissimilar treatment to equivalent transaction and (ii) fulfillment of the conditions that the competition is harmed or likely to be harmed, the CCI has unfortunately ignored the second principle. In short, we find the approach of the CCI to be erroneous and we prefer to rely on the minority judgment of the learned Member Smt. Geeta Gouri. In view of our findings, it will not be necessary for us to refer to the case law. However, insofar as the judgment of EU Commission in Portuguese Republic vs. Commission of the European Communities Case C-163/99 and also the judgment in Hoffman-La Roche & Co. AG Vs. Commission (Case 85/76) are concerned, it will not be necessary for us to consider those judgments in view of the clear facts which have been brought out in our earlier discussion. We therefore set aside the finding of the CCI that the Appellant was guilty of section 4(2)(a)(i) and (ii) of the Act.
59. We have to now consider the second contentious issue pertaining to the breach of section 4(2)(b)(i) on account of the exclusionary policies of the Appellant resulting in restriction of market. The CCI has also viewed this as breach of section 4(2)(c) while considering the issue. What appears to have been noted by the CCI is that the discount policies of the Appellant coupled with TMLA, Supply Agreement and MSA, attempted to bind the Converters to procure the glass tubes only from it. In this behalf, the CCI again relied on the statements of the Converters recorded before DG, in which it was claimed that they were vary of signing the TMLA, since it put restrictions on them to purchase tubes from any other sources, even if the TMLA did not have any express provision of exclusivity to deal with Appellant. In fact the observation itself is self-contradictory. If the TMLA did not insist on any exclusivity, or did not bind the party to purchase glass tubes only from the Appellant, there was no question of the Converters being vary to put their signatures on the TMLA. In our earlier discussion, we have already referred to the analysis in the minority judgment of the various clauses of TMLA and the real implications thereof. The clauses of the TMLA have been so drafted as to save the trademark rights of the Appellant in respect of the tubes manufactured by them, which admittedly were of better quality and therefore had larger market share as compared to others. We have accepted the analysis about the necessity of securing the trade secrets of the Appellant through that agreement. We have already explained that the real crux of the agreement was that any party signing such agreement would get the right to use the logo of the Appellant, which would have been an assurance to the consumers in the downstream market that they were purchasing genuine glass tubes, manufactured only by the Appellant and not any fake or inferior quality of tubes. This is apart from the fact that Shri Billimoria rightly argued that its only one converter, who signed the TMLA agreement. In that view, we cannot accept the inference drawn by the CCI that TMLA spelled-out exclusionary practice or that it resulted in denial of market access. The CCI also made reference to the statement of M/s. Kishore Industries, which claimed that its supplies were stopped since it had agreed to take up the job work for Strides Arcolabs Limited, a pharma company, which was importing tubes from sources other than the Appellant. For relying on such a complaint, it was necessary for the CCI to offer an opportunity of cross- examining of the representative of M/s. Kishore Industries. Even if that was not possible, such individual example does not in any manner spell-out any exclusionary practice on the part of the Appellant or denial of market access. If M/s. Kishore Industries could get the job work from M/s. Strides Arcolabs Limited that by itself was an example of the available market access. In para 9.91, the CCI has rightly observed that the aforesaid acts and practices of Appellant did not deny access to some essential facilities, which limited or restricted the entry of manufacturers into the market. We endorse the finding in that paragraph.
60. This takes us to the next issue pertaining to tying-in, resulting in breach of section 4(2)(d). The CCI has considered this issue as Sub-Issue No.5, more particularly from paragraphs 9.104 to 9.115. The defence of the Appellant to this allegation was that out of all the Converters, only three Converters namely M/s. Kishore Industries, M/s. Adit Containers and M/s. Mak Ampoules raised the allegation and that there was no documentary evidence produced to bring out that it made the sale of amber borosilicate glass tubes contingent upon the Converters purchasing clear borosilicate glass tubes. The allegation appears to be that the Appellant in order to supply the clear borosilicate glass tubes, also insisted upon the Converters to purchase the amber borosilicate glass tubes compulsorily and thus engaged into tying-in exercise. The Appellant had submitted before the DG that its glass tubes were far more superior in quality and much in demand in the market. The CCI while appreciating the statement of Shri Krishan Mehra of M/s. Kishore Industries seem to have relied on a straight sentence to the effect as stated "They would also insist on purchasing NGC tubes from them (Schott Glass) even when we required only NGA tubes from them". Similarly, the CCI also relied on a letter dated 18.08.1999 by one Adarsh Industries, which mentioned "we have announced some quantity based discount scheme for neutral glass tubes, but you can't avail quantity base discount. As per our policy decision that scheme is applicable only on mix purchases of clear and amber tubings only". The CCI also relied on the reply dated 04.11.2011 to the questioner wherein the Appellant had specifically mentioned that "NGA and NGC tubes were from the same production tanks and the functioning of the production tanks on continued and stable basis requires a stable demand for both NGC and NGA glass tubes. For ensuring stable demand for both these varieties, the NGC and NGA are marked jointly with common incentives for its customers'. The CCI has deduced from this that the products are tied and marketed together and a bundled discount was given to the customer and considering the large market share of the Appellant, the Appellant leveraged its position for sale of amber tubes contingent upon sale of clear tubes. The CCI then relied on the so called leveraging power of the Appellant along with the TMLA and the overall discount policy of the Appellant to hold that the discount offered was a bundled discount. In paragraph 9.110, the CCI referred to statements of some of the Converters, more particularly Indian Scientific Glass Industries that it was difficult for them to import amber tubes NGAs, as they were costly compared to the price of amber tubes produced by the Appellant. In para 9.112, the CCI observed that the policy of the Appellant to market both the product jointly with common incentives, appeared to be designed with a view to protect its dominance in the upstream market. It also observed :-
"It is the pressure from the potential manufacturers which forces it to bundle its products for discounts as a measure of quantity forcing which in a way reduces the demand for products of rival competitors by giving incentives to the Converters to get their entire requirements from Appellant only."
61. On this basis, the CCI found the Appellant guilty of breach of section 4(2)(d). The CCI also quoted section 4(2)(d), which is as under :-
"4(2) There shall be an abuse of dominant position by an enterprise or a group, if an enterprise or a group,,
(d) makes conclusion of contracts subject to acceptance by other parties of supplementary obligations which by their nature or according to commercial usage, have no connection with the subject of such contracts." (emphasis supplied)
62. The emphasis portion itself shows that NGA, which is also the product of the same tanks as NGC, could not have been said to be an entirely different material. The only differences in the two tubes is that some drugs, requires protection from sun rays and therefore are required to be kept and stored in dark colored vials, while others are kept in clear vials. If that is so, the two products cannot be said to be entirely different from each other. This is apart from the fact that the Appellant has 90% market in the amber tubes as they are comparably cheaper to the imported amber tubes. There would be therefore, no necessity of pushing the amber tubes along with the clear tubes. The very language of section 4(2)(d) and more particularly the emphasised portion renders the interpretation on the part of the CCI to be incorrect.
63. The second reason is, that in rushing to the conclusion by the CCI, (that there was such insistence on the part of the Appellant for tying-in) has no basis of any documentary evidence whatsoever. If there was any such insistence on the part of the Appellant, surely there would have been some evidence somewhere apart from the stray, untested oral statements of some parties, who were clearly enemically disposed towards the Appellant. The minority judgment highlights this fact that there was absolutely no evidence of any kind. For this reason too, we reject the claims of M/s. Kishore Industries, M/s. Adit Containers and M/s. Mak Ampoules.
64. There is still another reason, why this theory of tying-in has to be rejected. The CCI has chosen to rely on a letter dated 18.08.1999 which pre-dates the enforcement of section 3, which came into effect on 20.05.2009. Such letters could not have been taken into consideration for that simple reason.
65. Again according to us, merely because the NGC and NGA were the product from common tank and because the same were being marketed by the same Appellant, does not mean that the Appellant was insisting on any tying-in arrangement in respect of NGC and NGA tubes.
66. We are also not impressed by the observations of CCI in paragraph 9.114 to the effect that the Appellant was imposing unfair conditions of sales of tubes, which compelled Converters to procure both kinds of tubes from the Appellant to avail common discount. What is to be remembered is that even in the aforementioned letter of 18.08.1999, it was only in respect of the discount policy and it stated that the discount was available only on mix purchases of clear and amber tubing. If the discount policy has not been found in error of any provisions, there is no question of linking it with the aforementioned question of tying-in. In short, if the parties wanted, they could purchase the amber tubes or ignore to purchase it. It was only a discount which was being mentioned in the aforementioned letter. The minority judgment has exonerated the Appellant of section 4(2)(d).
67. We now turn to the last contentious issue of section 4(2)(e), Sub- Issue 4. While considering this issue in paragraph 9.92 to 9.103, the CCI has found the Appellant guilty of the breach of provisions of section 4(2)(e). The CCI has referred to the profits earned by JV, Schott Kaisha and then has proceeded on the basis that it got favourable treatment on account of discounts. In paragraph 9.94, it has been mentioned that the Appellant was having position of dominance in the upstream market with its Long Term Tubing Supply Agreement with Schott Kaisha, its vertically integrated firm. Again after referring to the preferential treatment given to Schott Kaisha, the CCI referred to clause (5) of Long Term Tubing Supply Agreement between the Appellant and Schott Kaisha. The CCI has also referred to the statement of Shri Mohan Joshi, president of the Appellant, and thereby deduced, that in making supplies, the JV of the Appellant was given preference over other Converters. Thereafter, some statements and replies have been referred to, which are from Shri Anil Kumar Gupta of M/s. Adit Containers, reply of M/s. Kishore Industries, another statement of Shri Anil Kumar Gupta, Dr. Anil Aggarwal of M/s. Mak Ampoules and Shri Krishan Mehra. One look at all this material suggests that the so-called meeting of which the complaint was made by Dr. Anil Aggarwal, as also by Shri Anil Kumar Gupta, Kishore Industries and some others was held on 01.08.2008. that is prior to the enforcement of Section 3 and 4. All that which took place in the meeting would be irrelevant for the purposes of this present controversy. The observation in para 9.102 would therefore, have to be ignored. It is on this basis that the CCI has rushed to the conclusion that the Appellant was in a dominant position in the upstream relevant market of tubes, which contributed to lessening of level of competition in the downstream market in favour of JV, Schott Kaisha. On that count, the Appellant has been held guilty of contravention of Section 4(2)(e). In our opinion, the very language of Section 4(2)(e) is clear enough to show that in order to be guilty of Section 4(2)(e), there have to be two markets, wherein the guilty party would have the participation. It is nobody's case that the Appellant is in any way dealing with or has any presence in the downstream market of ampoules, vials, dental cartridges and syringes etc. In fact the biggest contradiction to be found is that Schott Kaisha is not even a party to the present proceedings, nor has it been dealt with by the CCI. If it was through Schott Kaisha and to favour the interest of Schott Kaisha that the Appellant was vociferously working, then it would have been in the fitness of the case that Schott Kaisha was joined as a party and dealt with by the CCI. That was simply not done. Once it was established that the Appellant has no presence in the downstream market in any manner, there would have been no question of applying Section 4(2)(e). Even if it was held that Schott Kaisha was being favoured, so as to make it strong in the downstream market, it will have to be established, the lack of which would not be sufficient for breach of Section 4(2)(e). Breach would be possible only, if a finding is given, that the Appellant was itself trying to enter into the downstream market or was trying to secure its presence in the downstream market. Both these factors are absent and therefore, there is no question of any such breach of Section 4(2)(e). In that view, we do not find the Appellant guilty of Section 4(2)(e) and exonerate the same. We set aside the finding of the CCI in that behalf.
68. This now takes us to the consideration of the Appeal No.92 of 2012 filed by the Informant before us, challenging the judgment.
Appeal No. 92 of 2012
69. This Appeal is filed by M/s. Kapoor Glass, more or less concentrates on Sub-Issue No.3 (covered in paragraphs 9.88 to 9.81 of the majority order) and Sub-Issue No.6 (covered in para 9.116 to 9.127 of the majority order). Sub-issue No.3 deals with " Whether the aforesaid policies of Schott India are exclusionary and limit and restrict the market in violation of provisions of section 4(2)(b)(i) and are also causing denial of market access in terms of section 4(2(c) of the Act?' While Sub-Issue No.6 deals with " Whether the Schott India refused to deal with M/s. Kapoor Glass as has been alleged, denying market access to it and if yes, has Schott India contravened the provisions of section 4 (2) (c) of the Act?"
70. The main objective in this Appeal is to assail the findings on the above issues. In this behalf the prayer clause of the Appeal must be seen, which is as under:-
"1. Declare that Schott India has, due to its actions denied access to M/s. Kapoor Glass and other manufacturers in the relevant market and declare that Schott India has unjustifiably refused to deal with the M/s. Kapoor Glass for supply of its products;
2. Direct Schott India to resume supplies of its products to M/s. Kapoor Glass;
3. Include Schott AG as also being culpable for contravening Section 4 of the Competition Act in light of Section 27(g) of the Competition Act and increase the quantum of penalty accordingly;
4. To proceed against individual persons or directors within the company who are responsible for the conduct of Schott India and Schott AG in accordance with Section 48 (1) and (2) of the Competition Act;
5. To impose maximum penalty on Schott India and collectively on Schott group @ 10% of overall turnover under the provisions of the Competition Act, given the magnitude of infringement as also found by the CCI.
6. Pass any other or further order(s) or direction(s) as this Hon"ble Tribunal may deem fit and proper in the light of facts and circumstances of the case and in the interest of justice."
71. What predominantly striking is the prayer at clause No.2, whereby M/s. Kapoor Glass has sought direction to resume supplies of its products from Schott India to itself.
72. It is clear that Schott India is not keen to do business with M/s. Kapoor Glass. In this behalf, the CCI has already held that a manufacturer or a supplier is not obliged and cannot be forced to supply its products to an entity, which has used its name and labels without its permission in past. Shri Khera appearing for M/s. Kapoor Glass has assailed this finding and the resultant exoneration of Schott Glass from the provision of Section 4(2)(c) of the Act. In our opinion, the deduction by the CCI referred to earlier is legally correct. It was argued by Shri Khera that Schott India had no objective justification, not to deal with M/s. Kapoor Glass. According to him, the allegation of infringement of trademark was raised as a defence plea by Schott India, eight years after the alleged act took place and that too at the stage of filing response to the application filed by M/s. Kapoor Glass under Section 33 of the Act before the CCI. Very significantly, by that application M/s. Kapoor Glass had sought a mandatory injunction directing Schott India to resume the supplies of its product to M/s. Kapoor Glass. The CCI had rejected that application and in our opinion rightly so. Before we take up the discussion, we must say that Shri Khera very categorically admitted that it was a fact that M/s. Kapoor Glass had tried to manufacture forged/ fake labels of Schott India. According to Shri Khera, however that was an old incident and on that basis alone Schott India could not be held to be justified not to deal with M/s. Kapoor Glass. Our attention was invited to an invoice dated 12.10.2000, which was the last invoice for supply of tubes made to the M/s. Kapoor Glass. Shri Khera also relied on a letter dated 05.04.2001, where Schott India had expressed their inability to supply on account of the fact that their capacities were booked. Further reference was made by Shri Khera on a letter dated 21.03.2008, as also to a letter dated 31.03.2008, whereby Schott India had expressed its inability to supply desired stock of glass tubes. Shri Khera still relied on a letter dated 10.04.2008 and letter dated 11.09.2008, as also letter dated 02.06.2009 and 30.09.2009. Lastly, two more letter dated were relied on by Shri Khera, they being letters dated 23.01.2010 and letter dated 03.05.2010. Shri Khera pointed out that none of these letters were denied by Schott India and further in none of these letter Schott India had referred to an earlier incident and put forth that as a reason of non-supply. On the other hand, according to Shri Khera, Schott India kept on giving evasive replies and insisted on not supplying the material. Therefore, his argument was that the incident of fake labeling on the part of M/s. Kapoor Glass was only an afterthought and a mere excuse to conceal the strong arm tactics by Schott India. Shri Khera on this aspect also invited our attention to the provisions of Section 154 of Criminal Procedure Code Court and compared investigation by the DG to that of a criminal offense. As regards the contention relating to the provisions of Criminal Procedure Code, we are not impressed at all, as the two jurisdictions namely competition jurisdiction and criminal jurisdiction are entirely different from each other. There would, therefore, be no point in comparing the two. He has also relied on a decision in Kingfisher Airlines vs. Competition Commission of India (WP No.1785 of 2009), wherein certain observations were relied upon by him. Very strangely a plea was also raised in the submissions to the effect that the bonafides of the M/s. Kapoor Glass should not ipso facto render the entire proceedings void ab initio. In short, the learned counsel suggested that even if M/s. Kapoor Glass lacked the bonafide, the proceedings could still have gone. There can be no dispute about this proposition, because in fact the proceedings have gone on a full fledged investigation and not only that, the CCI has considered the matter. We do not propose to hold that merely because there was a lack of bonafide on the part of the M/s. Kapoor Glass, the whole proceedings be void ab initio. Therefore, raising of this plea was unnecessary. However, it was further contended that merely because an information was filed by a person, who has allegedly infringed a property trademark, that would not be ipso facto entail denial of any rights that may accrue to him in accordance with the due process of law.
73. We fail to follow the logic behind this contention. It appears to be the contention that M/s. Kapoor Glass had some rights. We fail to see what kind of rights could M/s. Kapoor Glass enjoys vis-a-vis Schott India. There is always corresponding duty to the concept of rights. We fail to see any such duty on the part of Schott India to keep on supplying the materials, where admittedly its labels were forged by M/s. Kapoor Glass by getting them printed. There was thus clear and unabashed breach of trademark on the part of M/s. Kapoor Glass. We fail to follow any logic under which the Schott India had a duty in law to deal with such entity.
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We have already discussed this issue in the earlier part of the judgment that, where the products had a direct relation with human lives and serious consequences could ensue on account of usage of inferior quality of glass tubes for the preparation of ampoules, vials etc. Now, if M/s. Kapoor Glass could pass off any inferior kind of glass tubes with the aid of those fake labels, which it had tried to introduce, we cannot imagine the seriousness of the consequences that could have ensued. It is clear from the facts that the vials and ampoules produced from the inferior material could cause chemical reactions in the drugs contained therein. We really fail to follow the whole logic of this right and corresponding duty. In our opinion, the CCI was absolutely correct in rejecting the plea that the Schott India had to and was bound to continue to deal with M/s. Kapoor Glass. 74. The counsel for Schott India very seriously urged as regards the letters referred by us, that Schott India did not deny the said letters, but had no intention whatsoever to deal with M/s. Kapoor Glass, particularly in view of an admitted serious allegation against it. According to him, M/s. Kapoor Glass, in getting fake labels printed had not only breached the common decency, but had also attempted to play with human lives and therefore, it was only by way of decency that Schott India was not forthrightly expressing its intention to deal with M/s. Kapoor Glass at all. The explanation is satisfactory and we accept the same. Once that aspect is covered, then there would be no question of considering the aspect covered by Section 4(2)(c), as the majority as well as minority order are unanimous on this aspect. They both have held that there would be no question of breach of Section 4(2)(c), particularly on account of refusal on the part of Schott India to deal with or to supply its materials to M/s. Kapoor Glass. 75. In fact, the whole objective in initiating these proceedings appears to be, to obtain the supplies of admittedly superior glass tubes manufactured by Schott India. It is again an admitted position that these tubes were much in demand by the Converters as the pharmaceuticals companies insisted on such tubes owing to their superior quality. There is enough evidence on record that the pharmaceutical companies had expressed quality concerns and were keen that the Converters use only the glass tubes manufactured by Schott India. 76. It was made out by Shri Khera that because of the preferential discount policies on the part of Schott India, the market was affected and that Schott India was itself interested in restricting the supply of these glass tubes to the Converters. 77. Shri Billimoria, however, argued that it would be illogical on the part of Schott India to squeeze the market for the simple reason that Schott Kaisha was using only 30% of its production, whereas for the sale of rest of 70%, Schott India had to depend upon other Converters and that was undoubtedly a larger market as compared to the portion enjoyed by Schott Kaisha. It was also argued that Schott India employed sales force incentive wise by commission payments to ensure sales and, therefore, it was quite illogical to suggest that Schott India had restricted supply to the Converters. In this behalf, Shri Billimoria urged that certain Converters had come together and planed to involve Schott in vexatious litigation. The learned counsel said that after the application by other Converters to join the appeal was rejected by this Hon'ble Tribunal, the said Converters never bothered to approach the CCI in the period of 9 months for laying any information before it. We find good force in this argument; however, all that we would conclude is that the statement of the other Converters should not have been simply relied upon as gospel truth by the CCI. 78. We have already commented on the contentions raised that because of the preferential and discriminatory discount policy on the part of Schott India, the markets were affected and more particularly downstream was affected. However, it has come in the evidence that the price structure was not affected and the Schott Kaisha as well as other Converters were selling their products on same or similar prices. We, therefore, do not accept the contention that there was any denial of market access on account of policies adopted by Schott India. As regards the question of using the statements and as also the issue of cross-examination, Shri Khera has tried to rely on Regulation 43 of the Competition Commission of India General Regulations 2009. He has also referred to a Notification dated 20.10.2010, whereby it was not incumbent on the DG to provide an opportunity for cross-examination. We have already considered this issue and in our opinion such opportunity was bound to have been provided by the CCI itself at least during the hearing when it found that this plea was specifically raised in the objections to the DG's report, which amounted to basic pleadings on the part of Schott India. We have already commented that it was not necessary to make any specific application in that behalf. We are sure that this question was addressed specifically during the oral arguments before the CCI as it was argued before us also. In that view, we are of the clear opinion that when no such opportunity was given, it was improper on the part of CCI to straight way accept the statements on oath by the other Converters who appeared to be enemically disposed towards Schott India. 79. In this behalf, Shri Billimoria also brought to our notice the war of words which was raged by M/s. Kapoor Glass against Schott India. Seeing these documents, more particularly the blogs by M/s. Kapoor Glass, one is thoroughly convinced of the strained relationship between M/s. Kapoor Glass and Schott India. At some instances derogative names have been given. All these convince us that this was a corporate fight and to say the least, the M/s. Kapoor Glass had no bonafide to approach this Hon'ble Tribunal. It was also suggested by Shri Khera that on account of the preferential treatment on price, the margins of the Converters had squeezed which had resulted in limiting, denial of market access to the Converter in the relevant downstream market. We have already considered this issue and have rejected the contention. Lastly, Shri Khera has referred to a meeting and the statement of Shri Rakesh Shrivastava about that meeting. All this happenings are essentially prior to the enforcement of Sections 3 and 4. This is apart from the fact that it does not take the case of M/s. Kapoor Glass any further on merits. These meetings and the so called discussions are of no consequence. 80. We have already commented upon the aspect of mixing risk as Shri Khera has tried to raise an argument that it was not scientifically possible to mix tubes made from Schott glass with any other glass tubes, since the melting point of different tube glass are different. We have already considered this aspect of mixing and are quite convinced that there was undoubtedly mixing risk, as even during the inspection, the fake tubes could have passed. It is in common knowledge that it is only sample testing, wherein there are chances of some tubes not being genuine being passed off along with others. 81. This takes us to the cases in foreign jurisdiction, which we shall now deal with. 82. Following cases were relied upon by Shri Khera to support his contentions. Out of which one pertains to Union of India vs. Suraj Bhan,  ILR Delhi 275. That is in the realm of service jurisprudence. It is on the question of the opportunity to cross-examine the witnesses, a case where the alleged documents were not relied upon by the prosecution and in that view, the High Court did not find favour with the contentions of the delinquent. That is not a situation here. The statements of the witnesses have not only been referred to, but even extensively relied upon by the CCI. 83. The second case cited in the Appeal of M/s. Kapoor Glass is of BBI/Boosey & Hawkes (87/500/EEC) which relates to a proceeding under Article 86 of the EEC Treaty. An abuse of dominant position in that case was defined as a course of conduct adopted by a dominant undertaking with a view to exclude a competitor from the market by means other than legitimate competition on the merits. In that case the documentary evidence indicated that Boosey & Hawkes embarked on a course of conduct intended to remove the competitive threat from BBI, and that its withdrawal of supplies from GHH and RCN was part of that plan. The judgment further mentions well established cases [United Brands v. Commission (Case 27/76) and Commercial Solvents (Cases 6/73 and 7/73)] of refusal of supplies by a dominant producer to an established customer without objective justification which constitute an abuse under Article 86. We have already held that Schott India had every objective justification to refuse to supply to M/s. Kapoor Glass. This is apart from the fact that refusal has not affected the market. 84. The third case that has been cited is of Kingfisher Airlines Limited vs. Competition Commission of India (WP No. 1785 of 2009). This is cited in support of the contention that the lack of bonafides on the part of M/s. Kapoor Glass should not ipso-facto render investigation invalid. We need not comment on this aspect, in view of our earlier discussion. 85. The fourth case that has been cited is Telemarketing (CBEM) v. SA Compagine Luxembourgeoise del Telediffusion. This is also on the same lines as BBBI/ Bossey. It is clearly held in this case that if the refusal to supply is not justified by technical or commercial requirements, but is intended to eliminating all competition from another undertaking, such conduct amounts to an abuse prohibited by Article 86 of the EC Treaty. We agree with this judgment, however, we have already held otherwise on facts. 86. The last judgment that has been cited is Konkurrensverket v. TeliSonera Sverige AB. It is also more or less on the same lines as the two earlier judgments. We do not find anything new in this judgment, so that we should take any contrary view from the one which we have already taken. 87. It is a trite law that every judgment is an authority for the question it actually decides on the basis of the prevalent facts and circumstances. The factual scenario in all these judgments is entirely different. Be that as it may, the case law cited by the learned counsel does not impress us. Again, we see no reason to take any contrary view. 88. In view of all this, we do not find any merits in this appeal. We therefore, dismiss the same. 89. Inspite of the total lack of bonafidies, M/s. Kapoor Glass have chosen not only to approach the CCI, but also to pursue the appeal, in which one of the prayer is to enhance the penalty awarded by CCI against Schott India. Under the circumstances, we deem it fit to inflict costs of Rs.1,00,000/- (rupees one lakh) against M/s. Kapoor Glass. 90. Appeal No. 91 of 2012 is allowed. The judgment and penalty awarded by CCI is set aside. 91. Appeal No. 92 of 2012 is dismissed with costs of Rs. 1,00,000/- (rupees one lakh) against M/s. Kapoor Glass. The costs to be paid within three months of the passing of the order. All the I.A.'s are disposed off in terms of the above order.