Commission exonerates Hockey India for alleged abuse of dominant position

Sunday, 13 October 2013 22:06

In its May 5 2013 decision in Pillay v M/s Hockey India(1) the Competition Commission exonerated Hockey India from charges of indulging in anti-competitive practices and abuse of dominance under Sections 3 and 4 of the Competition Act 2002.

Facts

The information relating to the charge was filed by six former Olympian and national hockey players, who alleged that Hockey India was abusing its dominant position and had indulged in various anti-competitive practices in relation to the organisation of the World Series Hockey League. Hockey India is the national sports authority for hockey in India, affiliated with the Indian Olympic Association, the Asian Hockey Federation and the International Hockey Federation.

The case also involved the Indian Hockey Federation, a national federation for the sport of hockey also affiliated with the Indian Olympic Association, but not affiliated with the Asian Hockey Federation or the International Hockey Federation. The Indian Hockey Federation is the co-organiser of the World Series Hockey League, along with Nimbus Sport.

In December 2010 the Indian Hockey Federation and Nimbus announced the introduction of the World Series Hockey League, a professional league for field hockey in India. Following the announcement, organisers entered into negotiations with players and signed them for the league.

The International Hockey Federation subsequently issued regulations relating to permitted and non-permitted events and communicated the same to all national associations.

Hockey India adopted the regulations relating to non-permitted events and accordingly modified its code of conduct agreement with players to include the clauses related to disciplinary action, such as disqualification from the Indian national team following any participation in non-permitted events. Hockey India and the International Hockey Federation also announced an intention to introduce their own league in 2013.

Informants' allegations

The informants alleged that:

  • Hockey India was misusing its regulatory powers by promoting its own hockey league at the exclusion of the World Series Hockey League, resulting in a denial of market access to rivals in contravention of Section 4(2)(c) of the act;
  • Hockey India was abusing its dominant position by conducting international events in India in order to enter into the market for conducting domestic events in India, in contravention of Section 4(2)(e) of the act; and
  • the code of conduct agreement with players entered into by Hockey India was an exclusive supply agreement and the restrictive conditions included thereunder constituted a violation of Section 3(4) of the act.

After finding a prima facie case against Hockey India, the commission directed the director general to investigate. The informant had also filed an application under Section 33 of the act for interim relief, but this was dismissed by the commission.

Director general's investigation

After conducting an in-depth investigation of the various allegations made by the informants, and relying on international jurisprudence relating to the issue at hand, the director general concluded that:

  • Hockey India's conduct constituted practices that would lead to the denial of market access to new sport organisers, players, sponsors and broadcasters, in contravention of Section 4(2)(c) of the act.
  • the code of conduct agreement entered into by Hockey India with players contravened Section 3(4)(b) of the act, as it would have an appreciable adverse effect on competition in India by creating barriers to entry for new players to the relevant market and driving existing competitors out of the market, with no benefits accruing to the players as a result of such restrictive conditions.

Issues for consideration

Jurisdiction
The commission noted that the act focuses on the functional aspects of an entity, rather than the institutional aspects. The scope of the definition in relation to institutions has been kept broad enough to include virtually all entities, including both persons and government departments. A specific exception has been provided only for activities related to the sovereign functions of the government. The nature of an activity will determine whether an entity is an enterprise for the purpose of the act. The commission found that 'organising events' falls within the scope of economic activities, as there is a revenue dimension to the organisational activities of sports federations.

After relying on international jurisprudence, the provisions of the act and a holistic consideration of all relevant factors, the commission held that national sports federations such as Hockey India do not have immunity under the act.

The commission further observed that although the International Hockey Federation was a Swiss body governed by the laws of Switzerland, given the scope of the definition of 'person' contained under Section 2(l) of the act and the commission's extraterritorial jurisdiction under Section 32 of the act, the International Hockey Federation also fell under the commission's jurisdiction.

Relevant market
The commission disagreed with the definition of the relevant market proposed by the director general. The commission observed that governing activities cannot be a part of the market definition, but governing powers can be a source of dominance. The commission instead argued for the delineation of the relevant market for analysis of allegations pertaining to foreclosure of the market for hockey events to rival leagues from the viewpoint of the spectator (ie, the ultimate viewer of sport), in accordance with the criteria laid down under the act – that is, in relation to characteristics, intended use and price. The commission observed that every sport has unique characteristics that lead to the development of a fan following (which will constitute the event's end consumers). This approach of narrowing the relevant market to events within a particular sport is in line with other international cases decided on similar issues.

The commission therefore concluded that the relevant product market, as regards the allegation of foreclosure of rival leagues, was "the market for the organization of private professional hockey leagues in India". The commission also observed that it is more appropriate to define the relevant market in the context of a specific allegation where there are a multitude of consumers, as is the case with sports.

Dominant position
The commission observed that the most significant source of dominance was Hockey India's regulatory powers. Hockey India had the right to approve hockey events in India. Furthermore, along with the International Hockey Federation, it could create entry barriers for other leagues by requiring rival leagues to obtain approval for their tournament and requiring players to obtain no-objection certificates from Hockey India before they could participate in rival tournaments. After considering European case law on the issue and other factors under the act, the commission observed that Hockey India had a dominant position, since it had assumed the role of a regulator in the relevant market.

Abuse of dominant position
The commission observed that the World Series Hockey League was a domestic event, under the definition contained in the International Hockey Federation bylaws, but it was clear that approval was to be given by the respective continental federations and by the International Hockey Federation. Since Hockey India was not the approving authority for such an event, it could not be faulted for refusing approval, as such approval was not granted by or sought from Hockey India. The commission held that there was insufficient evidence to conclude that Hockey India had acted against the players who participated in the World Series Hockey League. Hence, the allegation that Hockey India and the International Hockey Federation had denied market access under Section 4(2)(c) of the act was unsubstantiated.

On the issue of the restriction of free movement of players through the code of conduct agreement, the commission observed that the relationship between Hockey India and the players was tantamount to a vertical relationship, with Hockey India and the players at different stages of the production chain. The restrictive conditions in the code of conduct agreement were inherent and proportionate to Hockey India's objectives and could not be condemned on a per se basis unless applied disproportionately. This was not evident in the case at hand.

Commission order

After considering all aspects relating to the case, the commission concluded that there was no contravention of Section 3(3)(b), 3(4), 4(2)(a), 4(2)(c) or 4(2)(e) of the act. However, the commission observed that Hockey India's economic power as a regulator was unduly broad, with virtually no other competitors. Therefore, it recommended that Hockey India put in place an effective internal control system to ensure that its regulatory powers cannot be abused when considering and deciding on any matters relating to its commercial activities. The commission also recommended that Hockey India set up a streamlined, fair and transparent system for issuing no-objection certificates to players for participating in events organised by foreign teams or clubs.

Comment

Although the commission found Hockey India to be dominant in the relevant market, it did not find its conduct to be abusive. In arriving at this decision, the commission relied heavily on the inherent proportionality test put forward by the European Court of Justice in Meca-Medina (under which the restrictions caused by a sporting rule must be inherent in the pursuit of its objective). This test has been found to be the appropriate approach for addressing competition issues in the sporting sector.

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