Case Law Details
XYZ (Confidential) Vs H.N.B. Garhwal University (Competition Commission of India)
The Competition Commission of India (CCI) has issued an order in response to the case filed by XYZ against H.N.B. Garhwal University. The order addresses allegations of contravention of the Competition Act, examining issues related to restrictive terms and conditions in procurement of books for university libraries. This analysis delves into the key details of the CCI’s order, providing insights into the Commission’s assessment and conclusions.
Background: The case centers around allegations made by XYZ against H.N.B. Garhwal University, concerning the procurement of books for university libraries. XYZ contends that certain restrictive conditions in the procurement process have favored a select few suppliers, limiting competition and negatively impacting the market for book supply. The Informant also raises concerns about the use of tender processes and the potential emergence of an oligopolistic or monopolistic market structure.
Key Observations and Analysis: The CCI’s order underscores several key points:
1. Section 3 and Section 4 Allegations: The Informant’s allegations of contravention of Sections 3 (anti-competitive agreements) and 4 (abuse of dominance) of the Competition Act were examined. The CCI observes that the Informant’s allegations under Section 3 lacked specific details about anti-competitive conduct, and the allegations under Section 4 did not establish dominance or define the relevant market.
2. Consumer’s Right to Specify Requirements: The CCI acknowledges the right of a consumer (procurer) to specify technical criteria, conditions, or provisions within tender documentation based on specific needs. This right is essential to optimize benefits gained from consuming products or services. The CCI emphasizes that the entity initiating the tender process, acting as a consumer, has the right to determine suitable qualifying prerequisites based on its requirements.
3. Market Structure and Choice: The CCI highlights that the book supply market involves numerous institutional buyers beyond the Opposite Party (OP) universities. The Informant can supply books to various institutions and organizations, indicating independence from any single OP for business survival.
4. Consumer’s Autonomy in Procurement: The CCI reaffirms that in a market economy, a consumer (procurer) must be allowed to exercise choice freely while purchasing goods and services. The consumer’s decision aims to maximize utility derived from consumption, and it is the prerogative of the consumer to determine what is best for its needs.
Conclusion: The CCI’s order concludes that the Informant’s case lacks specific allegations under Sections 3 and 4 of the Competition Act. It emphasizes the consumer’s right to specify procurement requirements to optimize benefits and encourages a competitive market structure. The CCI’s analysis underscores the importance of preserving the autonomy of procurers in determining specific criteria for procurement, provided such criteria do not lead to anti-competitive distortions.
FULL TEXT OF THE ORDER OF COMPETITION COMMISSION OF INDIA
1. The present information has been filed by XYZ (hereinafter, “Informant”) under Section 19(1)(a) of the Competition Act, 2002 (hereinafter, ‘Act’) against aforementioned thirty-six (36) Opposite Parties, alleging contravention of the provisions of Section 3 and 4 of the Act.
2. As per the Informant, according to “Federation of Publishers’ & Booksellers’ Association in India” (‘FPBAI’), there are ~4000 booksellers, publishers and subscription agents, registered across the country. A large number of enterprises are books suppliers who supply books to libraries of university, NITs, IITs and other higher education institutions. It is stated that generally these suppliers exhibit books or circulate catalogues to the faculties of these institutions and thereafter books are supplied to libraries.
3. It is also stated that books are supplied in accordance with recommendation or supply order placed. It is averred that there are no special or specified conditions to enter into this business. The necessary qualifications to become a supplier include having a Permanent Account Number (PAN), filing an Income Tax Returns (ITR) and prior experience in supplying books to any library.
4. It is alleged that some institutions, university administration (Vice-Chancellor and Directors) and the channels to acquire, manage and provide books to users (teaching faculty, students, and research scholars) have imposed certain restrictive conditions in procurement of books such as – charging earnest money deposit (EMD), security deposit, minimum annual turnover, annual renewal fees, processing fees for expression of interest, performance security, bank guarantee, documentary proof for Goods and Service Tax (GST), profit & loss account, balance sheets, mandatory license of import/export code etc. It is further alleged that an application for empanelment for supply of books was denied/rejected owing to non-fulfilment of some conditions such as the absence of an exemption under the category of Micro and Small Enterprises (under MSMED Act, 2006) and use of criteria of presumptive income (u/s 44AD of Income Tax Act, 1961). According to Informant, the above-said conditions have swept out suppliers in great numbers by favouring few select ones and have the effect of ousting all other small & mid-size books suppliers. Resultantly, the same has the effect of narrowing the option of choosing relevant books for faculty, students, and research scholars thereby, causing an appreciable adverse effect on competition (AAEC) in the market for supply of books.
5. Apart from above, it is also alleged that invitation of tender is neither applicable nor justified for the procurement of books. Relying on the list of empanelled suppliers for supply of books from the following institutions, the Informant has averred that: University of Delhi has about 118 (one hundred and eighteen) suppliers; Jamia Millia Islamia has about 93 (ninety-three) suppliers; Rajiv Gandhi University, Itanagar, has 4 (four) suppliers; both Central University of Jharkhand; and H.N.B. Garhwal University have 7 (seven) suppliers each. According to Informant, such restrictive conditions / clauses in the tender documents, mentioned supra, are making this market an oligopoly or even monopoly which is otherwise an ideal market for perfect competition.
6. Lastly, the Informant has stated that FPBAI had raised this issue before Vice-Chancellors of several Universities. While some universities have relaxed these conditions, many have not changed. Furthermore, some universities have invited tenders by publishing advertisement only on one platform i.e., www.etender.up.nic.in instead of advertising on the central public procurement portal (‘CPP’) i.e., at www.eprocure.gov.in; on Government e-Marketplace (‘GeM’) and/or on their own website, which results in affecting the competition in the marketplace by benefitting few suppliers only.
7. Thus, the Informant has prayed:
a) To conduct an investigation to find out all culprits of this economic offence and impose a heavy penalty on every guilty enterprise;
b) To direct concerned authority to stop the universities from posting advertisements on a single platform;
c) To take suitable action as deemed fit against firms to restrain them from indulging in anti-competitive activities;
8. On perusal of the Information, the Commission observes that essentially the gravamen of the Informant emanates from certain alleged restrictive terms and conditions in the tenders floated by OPs for procurement of books for their libraries. In this regard, the Commission observes that the Informant, apart from making just a passing reference to violation of the provisions of Section 3 of the Act, has not mentioned any specific conduct of the OPs which can be examined under the provisions of Section 3 of the Act.
9. Similarly, although the Informant has levelled allegation under Section 4 of the Act against OPs but has not defined any relevant market or established dominance of any of the OPs. In this regard, the Commission observes that considering the facts, circumstances, allegations and for the reasons detailed in the succeeding paras, it is not necessary to delineate relevant market and to assess dominance of OP(s) therein.
10. The Commission notes on the basis of Information available in public domain that there are numerous institutional buyers regularly procuring books for libraries apart from the OPs. In addition, several organisational buyers such as Government departments, judicial bodies, public libraries, public sector undertakings, professional bodies, private institutions etc., also procure books. In such a structure of the market, the Informant can supply books to a number of other institutions / organisations and thus does not seem to be dependent on any of the OPs for survival of its business.
11. In relation to allegations pertaining to the stipulation of certain requirements such as EMD, work experience, bank guarantees etc. in the tenders floated by procurer(s), the Commission has consistently affirmed through its earlier decisions that a procurer acting as a consumer has the right to make decisions that serve its best interests and can employ its preferences to optimize the benefits gained from consuming a product or service. As a consumer, a procurer is entitled to mention specific technical criteria, conditions, or provisions within the tender documentation in accordance with its particular needs. It’s important to recognize that the entity initiating the tender process holds the status of a consumer and retains the right to prescribe suitable qualifying prerequisites based on its specific requirements. The Commission observes that in a market economy, a consumer must be allowed to exercise its choice freely while purchasing goods and services in the market. It is expected that a consumer can decide what is the best for it and will exercise its choice in a manner which would maximise its utility that is derived from the consumption of a good/ service.
12. Specifically, the Commission, in Mr. Dushyant National Accreditation Board for Testing and Calibration Laboratories (NABL) & Ors. dated 24.02.2022 observed as under:
“…the Commission notes that every consumer/ procurer must have the freedom to exercise its choice freely in the procurement of goods/services and such a choice is sacrosanct in a market economy. While exercising their choice, OPs are free to stipulate standards for procurement, and the same cannot be held to be out-rightly anticompetitive and will depend, inter alia, on factors such as the nature of the procurement, the size of procurer, the goods / services sought to be procured by it, and whether such buying will result in foreclosure for other sellers operating in the market who are competing to sell and are substantially dependent on such buying process. Further, the autonomy to specify the requirements of procurement is inherent in the procurers. When the procurer is a dominant buyer in its sphere of economic activity and its unilateral conduct in the buying process can tend to distort competition on the supply side of such market, then there is reason to be circumspect…”
13. Having thus considered the Information and the material available on record, the Commission is of the view that, prima facie, no case of contravention of provisions of Section 3 or 4 of the Act is made out and accordingly, the Information filed against OPs is directed to be closed forthwith in terms of the provisions of Section 26(2) of the Act.
14. Before parting with the order, the Commission deems it appropriate to deal with the request of the Informant seeking confidentiality. From the perusal of the Information, it is observed that the Informant has mentioned in the Information that it is seeking confidential treatment over its identity and also other Information mentioned therein. However, it is noted from the public version of the Information filed with the Commission that apart from the confidential treatment over its identity, confidentiality has not been sought on any other Information/material. Accordingly, the Commission grants confidentiality over identity of Informant in terms of Regulation 35 of the General Regulations, 2009, read with Section 57 of the Act for a period of three years from the passing of this order.
15. The Secretary is directed to communicate to the Informant, accordingly.
