File Copyright Online - File mutual Divorce in Delhi - Online Legal Advice - Lawyers in India

Abuse of Dominance in Relevant Market in Competition Law

Faridabad Industries Association V Adani Gas Limited[1]:

  1. Parties To The Case:
    1. Faridabad Industries Association — Informant.
    2. Adani Gas Limited — Opposite Party.
  2. Facts Of The Case:
    Faridabad Industries Association (FIA) is basically a society registered under the Societies Registration Act 1860, with members primarily involved in a variety of industries including steel, alloys, medical devices etc.

    Adani Gas Ltd. (AGL) is a company engaged in the business of setting up of distribution network in various cities for supplying natural gas to industrial, commercial and domestic customers. It would purchase natural gas from GAIL and supply them in the Faridabad market.

    The FIA alleged the terms of GSA to be biased and one-sided, without any scope, who were solely dependent on Adani Gas for the supply of natural gas.

    The case came up before the Competition Commission of India (CCI) based on the information filled by the FIA alleging contravention of Section 4 of the Act. FIA is an association of industries whose members consume natural gas supplied by AGL. The primary allegations against AGL were that AGL was abusing its dominance in the relevant market of 'supply and distribution of natural gas in Faridabad' by incorporating unconscionable and one-sided terms in the Gas Supply Agreement (GSA). On this basis they requested the CCI to modify the clauses of GSA, direct AGL to discontinue such practice and to impose penalties for its acts.

    Finding a prima facie case, the CCI directed the Director General (DG) to cause an investigation into the matter. The DG Report concluded that various clauses of the GSA hinted towards abuse of dominance by AGL.
  3. Issues Of The Case:
    1. What is the Relevant Market in the present case?
    2. Whether Adani Gas is dominant in the said Relevant Market?
    3. If yes, whether Adani Gas has abused its Dominant Position in the Relevant Market?
  4. Judgement:
    The Commission ordered,
    1. Directing AGL to desist from indulging in such practices and to modify the GSA accordingly.
    2. In pursuance of S. 27 (b), imposing a penalty of around Rs 25.67crore.
  5. Commentary On The Issues:
    Answering on the first question, of finding what could constitute a relevant market in this case, The Competition Commission denied the arguments of Adani Gas on substitutability and affirmed that Relevant Market in this context is the market where supplying and distributing Natural Gas to the Industry players in the Faridabad District.

The Commission held that, various criteria such as consumer preferences, end usage of goods, price of goods or service, product classification, physical characteristics, excluding the in-house manufactured goods, must be taken into consideration in order to determine the Relevant Market for the products under Section 2 (t) of the Competition Act. It conformed to the DG's survey where it was found that Natural Gas is being used by consumers for various different purposes.

Also, The Commission took note of the fact that the Natural Gas can be used for various purposes of Fuel, Domestic fire, and was thus, distinctive in nature and characteristics from other similar products. Adani Gas opposed that its fuel supply is only worth 5% of the consumers while 95% of consumers opted for alternate forms of fuel in Faridabad. The Commission rejected this argument stating that natural gas had unique application and features.

Regarding the relevant geographic market, Faridabad was considered to be it since Adani Gas had built and operated a CGD Network and the Haryana Government had authorized for only one service provider in Faridabad. Therefore, the first question is answered by Commission.

Answering on the second question, the position of Dominance in the Relevant Market through the eyes of Adani Gas, the Commission held that Adani Gas held 100% Market Share in the Relevant Market. With it being the sole entity supplying the Natural Gas as allowed by the State Government.

Further, it was noted that as per the provisions of Petroleum and Natural Gas Regulatory Board Act, 2006 the distribution of Natural gas was regulated. Such Regulations specifically provide for three years marketing exclusivity from the date of authorization to an existing CGD networks and five years from the date of authorization to a new CGD network from the purview of common or contract carrier, consolidating the dominant position of Adani Gas”, the Commission noted. In all it seemed that Adani Gas enjoyed the Dominant Position with respect to structure, Market size, existence of entry barriers etc.… Thus, the second issue on whether Adani Gas is dominant is answered.

Answering the third issue of the Abuse of the Dominant Position in the Relevant Market held by Adani Gas Limited, two clauses viz., Clause 9 and 10 of the GSA were regarded. These Clauses meant Quality of Gas and Measurement and Calibration”.

Referring to GSA's Clauses 9 & 10, the Commission held that Adani Gas sources the from GAIL only and in turn, GAIL provides for a quality check certificate for the same, to Adani Gas. This certificate is accessible to the Consumers which in turn, allows them to verify the quality of Gas. On this note, FIA's arguments were rejected by the Commission on basis that they were selectively interpreting GSA's Clauses and considering the fact that Adani Gas was a supplier prima facie, and not the producer of natural gas. Thereby, such arguments of the FIA on quality, measurement and calibration of Gas were unreasonable and not fair.

Regarding Clause 11, the Commission opined that based on the context of entire GSA and considering its overall commercial arrangement, Clause 11 was not felt unreasonable and unfair. It further noted that both the parties to the case will not be held liable for any incidental, indirect or consequential damage or loss with respect to profit making edges.

The Commission further stated that Clause 21.5 said about fluctuation of prices etc., that the FIA had clearly ignored. In this position, fixing the same prices or regulating a constant price considering the dynamic nature of the Natural gas industry will not be possible or practical. Therefore, these variations on the front of pricing and its changes, for whatever that is sold, will not be considered to be a discriminating provision.

With respect to Clause 13.7 of GSA that talks about repayment of interests, the Commission held that Adani Gas were of no obligations to pay any amount or its interest to any of its customers and thereby, finding the Clause to be discriminatory in nature and contravening Section 4 (2) (a) (i) of the Competition Act.

With respect to expiry and termination as stated by Clause 17 of the GSA, the Commission was of view that the Directive General terminating Adani Gas' contract on the reason of failure to off-take more than 50 percent of the collective shares during the period of 45 days consecutively in pari materia with the Adani Gas agreement. By way of this, an unfair condition prevails that contravenes Section 4 (2) (a) (i) of the Act. Further, the Commission stated that although GSA was revised, it did not make any significant changes or amendments.

The Commission ruled out other Clauses as well to pave way for Adani Gas to vest the right to judge on any application solely, on force majeure and other payment obligations imposed on the customers, contravening Section 4 (2) (a) (i) of the Competition Act, 2002.

With the growing amount of competition litigation penalty being imposed to keep a check, it is high time that jurisprudence on penalty and commercial angle to these issues are clarified so that companies are well aware about the consequences and risks involved before entering into any such agreements.

Secondly on the issue of unfair and arbitrary terms being imposed in the agreements, per se they may not appear to be unfair however the requirement is to analyse them in the right context-both legally and commercially, position of parties, bargaining power and circumstances in which the same were agreed upon between the parties to determine its true effect.

List Of Similar Cases:

Maharashtra State Power Generation Co. Ltd. v. Coal India Limited[2]. In this case, the terms of the Fuel Supply Agreement of non-coking coal were found to be discriminatory towards public sector power generators as well as old power generating companies. The court rightly held these terms to be in violation of s. 4 (2) (a) (i) because such conduct would have a serious cascading effect on the entire economy and would impact the consumers ultimately.

  1. Faridabad Industries Association v Adani Gas Limited, Case No. 71 of 2012 (CCI).
  2. Maharashtra State Power Generation Co. Ltd. v. Coal India Limited, Case Nos. 03, 11 & 59 of 2012 (CCI).

Law Article in India

Ask A Lawyers

You May Like

Legal Question & Answers

Lawyers in India - Search By City

Copyright Filing
Online Copyright Registration


Section 482 CrPc - Quashing Of FIR: Guid...


The Inherent power under Section 482 in The Code Of Criminal Procedure, 1973 (37th Chapter of th...

How To File For Mutual Divorce In Delhi


How To File For Mutual Divorce In Delhi Mutual Consent Divorce is the Simplest Way to Obtain a D...

Whether Caveat Application is legally pe...


Whether in a criminal proceeding a Caveat Application is legally permissible to be filed as pro...

The Factories Act,1948


There has been rise of large scale factory/ industry in India in the later half of nineteenth ce...

Constitution of India-Freedom of speech ...


Explain The Right To Freedom of Speech and Expression Under The Article 19 With The Help of Dec...

Types of Writs In Indian Constitution


The supreme court, and High courts have power to issue writs in the nature of habeas corpus , quo...

Lawyers Registration
Lawyers Membership - Get Clients Online

File caveat In Supreme Court Instantly