NATIONAL COMPANY LAW APPELLATE TRIBUNAL

Parsoli Motors Works Pvt. Ltd. Vs. BMW India Private Limited and Ors.

MANU/NL/0560/2019

25.11.2019

MRTP/ Competition Laws

Refusal to renew dealership of Informant resulting in pecuniary loss does not raise any competition concern, even if, dealership termination has proved advantageous to dealers of Opposite Party

Present appeal arises out of order passed by the Competition Commission of India ('CCI') under Section 26(2) of the Competition Act, 2002 in Case whereby the information relating to allegations of contravention of provisions of Section 4 of the Act filed by the Appellant (Informant before CCI) was ordered to be closed on the ground that, the existing Dealership Agreement between the Appellant and Respondent No. 1 stood expired by efflux of time on 31st December, 2017 due to non-renewal thereof and the Informant had not challenged any term of the aforesaid Dealership Agreement which has since expired.

Abuse of dominant position by an enterprise, forbidden under Section 4 of the Act, essentially arises out of a position of strength enjoyed by an enterprise in the relevant market enabling it to operate independent of the competitive forces or affects its competitors or consumers or the relevant market in a manner that tilts the balance in its favour. While holding and enjoyment of a dominant position in itself is not prohibited, its abuse is proscribed. It is therefore relevant to ascertain whether OP-1 did enjoy a position of strength and was dominant in passenger car segment in India and if so, whether termination of the dealership of Informant ensued the consequence of abuse of such dominant position.

It is not in dispute that, the Informant was a dealer for BMW vehicles for the Gujarat State under a Dealership Agreement and it enjoyed such position since 2001 in terms of an agreement executed inter-se the relevant parties. The dealership was to last till 31st December, 2017. However, OP-1 shot letter dated 7th December, 2017 intimating the Informant that the existing dealership would not be renewed and would expire on 31st December, 2017.

The contention put forward on behalf of the Informant that, while it was not given sufficient time to exit from the business and the effect of termination of its dealership had the effect of allowing dealers outside Gujarat to sell BMW cars to customers in Gujarat resulting in loss to the Gujarat Exchequer besides causing financial loss to the Informant, would amount to abuse of dominant position is without substance. Even if it is assumed for the sake of argument that the termination of the dealership of the Informant or refusal on the part of OP-1 to further renew dealership in favour of the Informant is in derogation of the policy framed in this regard and the Informant had altered its position by raising infrastructure and making investment for running such dealership, breach thereof may give rise to civil liability but not have the consequence of abuse of dominant position. Nothing has been placed on record to establish that in the relevant market i.e. the segment of passenger cars, BMW India enjoyed a dominant position.

The material available in public domain which has been considered by the CCI unmistakably demonstrates that BMW India had insignificant presence in the relevant market and BMW passenger cars did not occupy a significant market share. Merely because, the act of refusal on the part of OP-1 to renew dealership of Informant beyond 31st December, 2017 may have caused pecuniary loss to the Informant does not raise any competition concern, even if, the consequence of such termination of dealership has proved advantageous to the dealers of OP-1 in neighbouring states of Gujarat to sell BMW cars to customers hailing from Gujarat.

The Informant is said to have obtained financing facilities from OP-2 for running its business and default of debt advanced by OP-2 to the Informant is stated to be staggering amount exceeding Rs. 54 Crores, in respect whereof OP-2 is stated to have filed application under Section 7 of the Insolvency and Bankruptcy Code, 2016 pending consideration before the Adjudicating Authority (National Company Law Tribunal). In the context of this factual background, the allegation emanating from the Respondents that the information filed by the Informant with CCI raising competition concern was merely as a counterblast cannot be dismissed offhand. The appeal is accordingly dismissed.

Tags : Information Closure Legality

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