Competition Commission of India

Re: Accessories World Car Audio Private Limited vs. Sony India Private Limited & Other

MANU/CO/0018/2020

11.05.2020

MRTP/ Competition Laws

Vertical restraints are not generally perceived as being anti-competitive, when substantial portion of the market is not affected

The present Information has been filed on behalf of Accessories World Car Audio Private Limited ('the Informant') under Section 19(1) (a) of the Competition Act, 2002 against Sony India Private Limited ('Opposite Party No. 1' / 'OP-1') and Sony Corporation, Japan ('Opposite Party No. 2' / 'OP-2') ('the OPs') alleging contravention of the provisions of Section 3 and 4 of the Act.

It is stated that the Informant is a distributor of Sony car audio products and is engaged in the business of sale and marketing of car audio and related accessories. OP-1 is a private limited company incorporated in India and has footprints across all major towns and cities in India through a distribution network comprising of over 20,000 dealers and distributors; 300 exclusive outlets and 25 branch locations. OP-2 is holding company of OP-1 incorporated under laws of Japan. The Informant is primarily aggrieved of the fact that, OPs imposed alleged unfair terms and conditions in the distributorship agreement and arbitrarily terminated the agreement.

At the outset, the Commission notes that the Informant was offered dealership in 2005 and was appointed as distributor by OPs in August 2006. The distributor agreement is stated to be cancelled/ terminated on 23rd June, 2015. Besides the allegations span a period covering years 2012-13. Thus, the Information appears to have been filed belatedly, yet the Commission has examined the Information within the framework of the Act based on the material made available by the Informant.

So far as the allegations pertaining to abuse of dominance are concerned, the Commission notes that the Informant has defined the relevant market by confining the same to 'distribution and sale of car audio products in the aftermarket'. However, the Commission is of the opinion that the market cannot be confined to this level. It is axiomatic that buyers of car can install such accessories even after purchase of car from the open market and as such the market has to be considered as car audio products as a whole.

The market for car audio products is fragmented with the presence of number of players/ competitors. As per the information available in the public domain, there are number of other competing players. Hence, it does not appear that OPs enjoy a position of strength, which enable them to operate independently of competitive forces prevailing in the distribution and sale of car audio products in India or to affect their competitors or consumers or the market in their favour. Since, OPs do not enjoy dominant position in this market, question of abuse of dominant position within the meaning of the provisions of Section 4 of the Act does not arise.

As regard as provisions of Section 3(4) of the Act is concerned, the Commission observes that allegations specifically pertain to the issue of exclusive supply agreement, exclusive distribution agreement, refusal to deal and resale price maintenance. The Commission observes that an important and crucial consideration for analysing vertical restraints under the provisions of Section 3(4) of the Act is the requirement of market power. In order to appreciably restrain free competition in the downstream market for distribution of car audio products, seller must have sufficient market power in the upstream market for car audio products. Moreover, vertical restraints are not generally perceived as being anti-competitive, when substantial portion of the market is not affected.

The Commission observes that the market for car audio products is fragmented with presence of large number of players without any entity enjoying a significant market power. The presence of such players exerts competitive constraints on OPs. Therefore, the purported vertical restraints imposed by OPs are not likely to have any appreciable adverse effect on competition in India. Resultantly, the Commission is of the view that no case is made out against OPs for contravention of the provisions of Sections 3 and 4 of the Act and the Information is ordered to be closed forthwith in terms of the provisions contained in section 26 (2) of the Act.

Tags : Contravention Provisions Vertical restraints

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