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After over a decade, the Supreme Court on Tuesday finally rejected the Competition Commission of India’s decision that held Schott Glass India, a dominant supplier of neutral borosilicate glass tubes, guilty of abusing its dominant position by offering exclusionary volume-based discounts, imposing discriminatory contractual terms, and, on occasions, refusing supply.
Glass ampoules and vials manufacturer Kapoor Glass, the complainant in the case, had alleged that Schott Glass had violated competition laws by resorting to discriminatory pricing and using its market dominance that disadvantaged downstream buyers like it.
Upholding a now defunct Competition Appellate Tribunal’s April 2014 decision that set aside the CCI’s order imposing a fine of Rs 5.66 crore and asking Schott Glass to cease-and-desist from discriminatory practices, a Bench of Justices Vikram Nath and Prasanna B Varale held the CCI had relied on untested statements and pre-2009 correspondence and had not undertaking any “credible assessment of harm.”
“…the omission of a proper harm analysis vitiates the CCI’s order in limine. Because each of the alleged abuses has already been negatived on the facts, the appeals (filed by CCI and Kapoor Glass) must fail on this additional ground as well, the apex court held, adding that “…no appreciable adverse effect on competition is shown on the evidence marshalled by the COMPAT, converter growth, stable downstream prices, absence of foreclosure.”
The SC enhanced the fine of Rs one lakh (imposed by COMPAT) to Rs five lakh on Kapoor Glass for its “wholly unsubstantiated nature of the allegations and the prolonged litigation.” The costs have to be paid to Schott India within eight weeks.
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Welcoming the judgment, senior counsel Percival Billimoria, who represented Schott India, “Significantly, the judgment sets out the principle that an “effects based” approach would be followed for Section 4 abuse of dominance cases. It is the first pronouncement on the law in such cases.”The bench said that the competition law is not designed to humble the successful or to clip the wings of enterprises that have, through industry and innovation, secured a commanding share of the market.The true purpose of antitrust laws is to preserve the process of competition, i.e., to ensure that rivals may challenge the incumbent on the merits, that consumers enjoy the fruits of efficiency, and that technological progress is not stifled by artificial barriers, the judgment stated, adding that in today’s global economic climate, prudence is vital.
“If mere size or success were treated as an offence, and every dominant firm exposed to sanction without tangible proof of competitive harm, the law would defeat itself: it would freeze capital formation, penalise productivity, and ultimately impoverish the very public it is meant to protect,” according to Justice Nath, writing the judgment for the bench.
The case had its genesis in a complaint lodged by Kapoor Glass in May 2010 alleging that Schott India, then the principal domestic manufacturer of neutral USP-I borosilicate glass tubing, had abused its dominant position.
While the CCI directed Director General’s investigation in March 2011 had concluded that Schott India had violated Section 4 of the Competition Act, the Commission by a majority order of March 29, 2012 levied a penalty equal at a rate of 4% of Schott India’s average of three years turnover equivalent to about Rs 5.66 crore and also issued a cease-and-desist order against Schott India from doing any discriminatory practices to any of the converters.
Both Schott India and Kapoor Glass challenged the appellate tribunal’s order, with the latter reiterating its refusal-to-supply grievance. However, the COMPAT annulled the penalty on Schott India and held that the evidentiary material did not establish any abuse of dominant position.
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