The Competition Commission of India (CCI) observed that the market for car audio products is fragmented with the presence of a large number of players without any entity enjoying a significant market power. The presence of such players exerts competitive constraints on Opposition Parties (OPs). So, the purported vertical restraints imposed by OPs are not likely to have any appreciable adverse effect on competition in India.
The Commission observes that an important and crucial consideration for analyzing vertical restraints under the provisions of Section 3(4) of the Act is the requirement of market power.
The informant, Accessories World Car Audio Private Limited is a distributor of Sony car audio products and is engaged in the business of sale and marketing of car audio and related accessories.
The Opposition Party, Sony India Private Limited is a private limited company incorporated in India and has footprints across all major towns and cities in India through a distribution network comprising over 20,000 dealers and distributors; 300 exclusive outlets and 25 branch locations. Sony Corporation, Japan is holding company of Sony India Private Limited incorporated under the laws of Japan.
The Informant has alleged that prior to entering into distributorship agreement, the Informant was specifically asked to surrender sale of other brands and deal exclusively with Ops’ car audio products and arbitrary condition of territorial restriction/ territorial exclusivity was specifically made applicable to it only, while the other distributors had no such restrictions and the same came to the notice of the Informant at a later stage. The Informant also alleged that a condition as to ‘not to deal with competing brands’ was implemented in 2012 that caused immense losses to the Informant and that finally led to the ouster of the Informant from relevant markets.
The commission headed by a Chairperson, Ashok Kumar Gupta and the members, Sangeeta Verma and Bhagwant Singh Bishnoi observed the market for car audio products is fragmented with the presence of a number of players/ competitors. Hence, it does not appear that OPs enjoy a position of strength, which enables 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 favor. Since OPs do not enjoy a dominant position in this market, the question of abuse of dominant position within the meaning of the provisions of Section 4 of the Act does not arise.
“An important and crucial consideration for analyzing vertical restraints under the provisions of Section 3(4) of the Act is the requirement of market power. It is also noted that in order to appreciably restrain free competition in the downstream market for the distribution of car audio products, sellers 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 a substantial portion of the market is not affected,” the commission observed.
The Commission lastly noted that at the stage of forming prima facie opinion, the Commission may call a preliminary conference with the parties, if so required.
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