CCI orders inquiry against Star, Sony, IBF following allegations of price discrimination by NSTPL

MUMBAI: The Competition Commission of India (CCI) has ordered an inquiry into allegations of prime discrimination against broadcasters Star India, and Sony Pictures Networks India (SPNI) along with Indian Broadcasting Foundation (IBF) following a complaint filed by headed in the sky operator (HITS) Noida Software Technology Park Ltd. (NSTPL).

The competition watchdog has directed the Director General (DG) to cause an investigation into the matter to ascertain whether the broadcasters have indulged in refusal to deal by way of price discrimination with the HITS operator in contravention of the provisions of Section 3(4) of the Competition Act 2002.

The DG is directed to complete the investigation within a period of 60 days from the receipt of this order and submit its report.

The commission also made it clear that, if during the course of the investigation, the DG comes across anti-competitive conduct of any other broadcaster in addition to those mentioned in the information, the DG will be at liberty to investigate the same.

It further stated that the DG is directed to conduct a detailed investigation without restricting and confining to the duration mentioned in the information.

The DG has also been directed to look into the role of the persons/ officers who were in-charge of and responsible for the conduct of the businesses of Star and Sony at the time of the alleged contravention.

In its complaint, NSTPL has has pointed out that under the 2004 Interconnection Regulations (IR) of Telecom Regulatory Authority of India (TRAI) all similarly situated distributors are to be offered the same non-discriminatory prices by the broadcasters in accordance with the Reference Interconnect Offer (RIO).

The HITS operator has alleged that the broadcasters like Star and Sony in concert with and facilitated by IBF are adopting a manipulative and illegal interpretation of the regulatory provisions of the IRs as a result of which two parallel regimes of interconnect agreements are in existence.

It further stated that the RIO based regime in which all distributors on RIO based agreements would be offered the same but extremely high and onerous commercial terms of the RIOs and second, a separate set of interconnect agreements with the preferred distributors that would not be on the RIO model, but rather on a fixed fee and/or Cost-Per- Subscriber (CPS) deal at highly attractive commercial terms, which OPs claim are outside the purview of regulatory scrutiny.

It also stated that the broadcasters frame and price their TV channels in their RIOs in such a manner so as to make it commercially unviable for any distributor operating on the RIO based agreements to effectively compete in the market. It was further alleged that the broadcasters are refusing to disclose the rates at which TV channels are offered to distributors who enter CPS/ fixed fee agreements.

It also alleged that the broadcasters are entering into side agreements for carriage and placement with vertically integrated as well as certain preferred distributors, so as to drastically bring down the costs of acquisition of their TV channels for such distributors.

The HITS operator pleaded that the commission after due investigation declare the practices of the broadcasters to be in contravention of provisions of Sections 3 and 4 of the Act.

It further sought modification of RIO agreements submitted by the broadcaster in terms of provisions of Section 27 of the Act and direct them to furnish an undertaking for providing their services to all distributors on a transparent and non-discriminatory basis and to provide distributors with a non-confidential range of commercial terms provided to distributors on the basis of mutual negotiations. It has also sought a penalty on the broadcasters in terms of Section 27 of the Act and pass any other direction that the Commission may deem appropriate.

Star, in its submissions, contended that NSTPL is indulging in forum shopping. It also stated that the issue of pricing and manner of offering, which is the essence of the case, lies in the domain of sectoral regulator TRAI and is, therefore, an occupied field. It also averred that the carriage and placement fee are also under the TRAI’s purview.

“Under the extant TRAI regulations, if any operator demands carriage fees, it is open to the broadcaster to deny signals to the operator. It is only the quantum of carriage and placement fee that are under regulatory forbearance,” Star said in its submission.

Rejecting the allegation of collusion, SPNI submitted that concert cannot be deduced amongst broadcasters merely because of a similar interpretation of the law by them.

On the allegation of refusal to deal, the broadcaster submitted that as it has no vertical integration, it has no incentive for constructive refusal to deal. Further, it has stated that although in mutually negotiated agreements the rates are different from the RIO rates on account of discount schemes (volume discounts), there was no occasion for it to refuse to deal with the HITS operator on that basis as it was never approached by the Informant for a mutually negotiated agreement.

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