Case Law Details
Creed Gym Vs Curefit Services Pvt. Ltd. (Competition Commission of India)
Introduction: In a recent legal battle that has captured the attention of the fitness and business communities in India, Creed Gym and Curefit, two prominent players in the fitness industry, found themselves at the center of a controversy. The Competition Commission of India stepped in to address the allegations raised by Creed Gym against Curefit, shedding light on contractual breaches and potential anticompetitive practices.
Background and Allegations: Creed Gym, a registered partnership firm operating a renowned fitness and wellness center named “Creed Gym” in Hyderabad, accused Curefit Services Pvt. Ltd., a company engaged in various business ventures, of violating provisions under Sections 3 and 4 of the Competition Act, 2002. The Informant alleged that Curefit, through its collaboration with various gyms and fitness centers, engaged in practices that hindered fair competition and exploited its dominant market position.
The Informant’s grievances centered around a collaboration agreement signed between Creed Gym and Curefit. Under this agreement, Creed Gym was listed on Curefit’s online platform, allowing customers to access its services through the cult.fit application. However, disputes arose when Curefit allegedly breached contractual obligations by collaborating with fitness centers within a restricted radius, thus impacting Creed Gym’s market presence. Moreover, Creed Gym claimed that Curefit misused its customer database, shared confidential data without authorization, and engaged in practices detrimental to Creed Gym’s financial stability.
Competition Commission’s Examination: The Competition Commission of India undertook a detailed examination of the allegations and the collaboration agreement between Creed Gym and Curefit. The focal point was the removal of Clause 9 from the agreement, which initially provided exclusivity within a certain radius. Curefit defended the removal of this clause, stating that it encouraged competition by allowing more gyms to partner with them, thereby offering consumers a broader range of choices.
Curefit refuted the allegations of unauthorized data sharing and emphasized the dynamic nature of the fitness industry. The company argued that numerous alternatives exist for consumers to access fitness services, including online platforms, and therefore, its practices do not restrict fair competition.
Commission’s Verdict and Conclusion: After thorough analysis, the Competition Commission of India concluded that there was insufficient evidence to establish a violation of competition laws by Curefit. The Commission noted that the fitness industry is evolving rapidly, with various players and options available to consumers. Additionally, the removal of exclusivity clauses, such as Clause 9, may enhance competition within the same brand, as demonstrated by the case at hand.
The Commission’s verdict underscores the importance of considering the dynamic competitive landscape and the changing dynamics of consumer preferences in the fitness industry. The ruling serves as a reminder that while collaborative agreements are vital for business growth, they must align with market dynamics and evolving consumer needs.
In conclusion, the Creed Gym vs Curefit case sheds light on the complexities of collaboration agreements, competition concerns, and the dynamic nature of markets. The Competition Commission’s ruling highlights the need to balance contractual commitments with evolving market trends, ensuring fair competition and consumer choice.
FULL TEXT OF THE ORDER OF COMPETITION COMMISSION OF INDIA
Order under Section 26(2) of the Competition Act, 2002
1. The present information has been filed by Creed Gym, represented by its partner and authorised signatory Mr. Vangari Prithviraj (hereinafter, ‘Informant’) under Section 19(l) (a) of the Competition Act, 2002 (hereinafter, ‘Act’) alleging contravention of provisions of Section 3 & 4 of the Act by Curefit Services Pvt. Ltd. (hereinafter, ‘Opposite Party’/‘Curefit’).
2. The Informant has stated that it is a registered partnership firm which is in the business of fitness and wellness and running a well-known gym /wellness centre under the name, ‘Creed Gym’ in Hyderabad, State of Telangana.
3. Curefit is a company incorporated under erstwhile Companies Act, 1956. It is engaged in various businesses one of which is the business of offering subscription or membership services under the name Cult-Pass to individuals who are already members of established gyms/fitness centres. Curefit ties up with gyms/fitness centres to offer its users/members, the benefits of using multiple gyms under one subscription as per their convenience.
Facts and allegations as stated in the Information
4. The Informant has alleged that Curefit approached the Informant for collaboration whereunder the Informant would be listed on the online platform of Curefit (website and mobile application) as one of the gyms/fitness centres where Curefit would provide subscription/membership services, i.e., a single subscription plan to the customers of the Informant strictly through Curefit’s platform [cult.fit application].
5. The Informant has averred that considering the nation-wide pandemic and its financial impact and believing the representations of Curefit in expanding its clientele, the Informant accepted the proposal of Curefit, and executed a collaboration agreement with Curefit on 21.12.2020, which, inter alia, entailed sharing of its customer database with Curefit. It is alleged that the said agreement provided that all the customers including those of the Informant could avail services of the Informant only through Curefit’s platform. The Informant would not be able to entertain its customers directly or access their database on its own. Upon gaining access to the customer database and confidential information of the Informant, Curefit not only disabled the access to its own database but also exploited the same to endorse and sell its own products such as sportswear, footwear, nutrition products, fitness equipment, wellness and care product, lab tests, therapies, food without any permission from the Informant.
6. It is alleged that Curefit is committing such data exploitation all across the country with more than 300 gyms/fitness centres with whom Curefit has collaboration with. It is further alleged that such practice is not provided for in the agreements and is being practised by Curefit in an unfair manner by exploiting its dominant position and has thus, affected the working of gyms with which it has collaborated.
7. Further, in terms of clause 9 of the collaboration agreement, Curefit was obligated not to collaborate with any other third-party gym fitness/ wellness centre falling within a distance/radius of two kilometres from the Informant during the subsistence of the agreement and in the event of any intention to open a new centre within such distance, Curefit was obligated to offer the right of first refusal on such expansion to the Informant.
8. As per the above understanding and the terms and conditions of the collaboration agreement, the Informant commenced its services through Curefit. The Informant averred that it was completely responsible for the operation of the gym and Curefit did not provide any assistance for maintenance and operation to the Informant.
9. On 22.06.2021, it was discovered that Curefit had collaborated with one Fit Max Gym, which is within the two kilometres radius of the Informant, to provide gym services, which was in breach of the stipulated contractual obligations under Clause 9 of the agreement. The Informant questioned Curefit on the violations and called upon Curefit to comply with the contractual obligations under the agreement vide emails dated 22.06.2021, 27.06.2021 and 30.06.2021.
10. Curefit orally agreed to cancel the aforesaid collaboration with Fit Max Gym. However, Curefit continued to advertise its collaboration with Fit Max Gym by displaying the advertisements hoardings and boards at Fit Max Gym. Thereafter, it was learnt that Curefit collaborated with another fitness/wellness centre e., Naren Cross Fit, located within the two kilometres radius of the Informant. Curefit is displaying a different location on its platform to show that the centre at Naren Cross Fit is beyond the two kilometres radius of the Informant. However, upon physical verification and by digitised mapping, it was clear that the distance between the Informant and Naren Cross Fit is within two kilometres. Thus, the Informant has alleged that such conduct of Curefit amounts to misusing its dominant position as it controls the data and information of the Informant. Further, Curefit restricted the access of the Informant to only those customers who availed the services through its platform. It also restricted the Informant from providing its services directly to any customer. This completely paralysed the business of the Informant.
11. It is also alleged that Curefit is blatantly sharing the Informant’s customer database with its competitors. The Informant was under the bona fide belief that the confidentiality of customer database shared with Curefit would be maintained and the customers could access the Informant’s gym to avail the services. The Informant was completely unaware that its customer database would be misused and made accessible by Curefit to the Informant’s competitors in the market. Curefit is committing unfair trade practises by deceptively inducing Informant to part with its customer database and then giving access of the same to its competitors, and by keeping the Informant in dark in relation to the access to its customers and services. Thus, Curefit has completely handicapped the Informant from conducting business leading it to severe financial loss. Upon collaborating with Curefit, the Informant has not only lost its customers due to such acts of Curefit but is also facing severe financial crisis.
12. The Informant has also alleged that Curefit has not been transparent and been paying a lower share of revenue to the Informant. This came to its notice during reconciliation of statement of accounts for the period February 2021 to May 2021 when shortfall was discovered in the revenue share. On being questioned about such discrepancies, Curefit informed that the issue would be resolved within 10 days. However, as per the Informant, it was not resolved. Neither the requests and concerns of the Informant were addressed nor Curefit paid the revenue share payable to the Informant as per the agreement.
13. Further, Curefit had introduced a process for payment of revenue share with the Informant whereby payments to the Informant were to be kept on hold and released only if the customer checks in at the preferred centre continuously for 7 days. In other words, Curefit would hold the payments for the said 7 days despite having received the payment from the customer. According to the Informant, no centre can monitor or dictate to the customer to come to a specific centre for 7 days continuously especially when Curefit markets the concept of its services as giving users flexibility of usage of different gyms. This is illogical, unilateral, arbitrary and an attempt to deny payments to the Informant. When Curefit was questioned about the same, the said practice was withdrawn.
14. It is also alleged that Curefit, without any intimation or discussion with the Informant, floated on its platform a new offer on Cult-Pass with special discounts and 2 months’ free extension from 25.07.2021 to the customers which affected the Informant’s revenues. The Informant understands that such offers are necessary to attract the customers however such strategies must be discussed with its collaborators such as the Informant since the gym belongs to the Informant and such offers have a direct bearing on its finances. Also, it is alleged that appropriate share of revenues was not shared with the Informant as per clause 4 of the collaboration agreement.
15. The Informant stated that it also filed a suit bearing Case No. OS 5291/2021 Creed Gym v. CureFit Services Pvt. Ltd. & others before the Principal City Civil Court at Bengaluru seeking permanent injunction and directing Curefit not to commit breach of the agreement and to rectify the breaches already committed. Even after filing of the suit, Curefit collaborated with MH Fitness Centre which was within the restricted distance of 2 kilometres from the Informant.
16. Further, in order to dissuade the Informant from pursuing the suit, Curefit approached the Informant with meagre offers. During talks of settlement, Curefit slyly shared an addendum to the collaboration agreement wherein Clause 9 was conveniently removed in its entirety which stated that the Informant shall not have any issue with Curefit collaborating or opening any gyms or service centres within the restricted 2 kilometres radius. Thus, by abusing its dominant position, Curefit coerced the Informant into entering an agreement without any compensation for the loss incurred and forced it to relinquish its right thereunder.
17. The Informant stated that it had recently learnt about Curefit’s collaboration with Tata Neu, a digital platform to sell various products and services. Despite being bound by the agreement to provide services of the Informant only through Curefit’s platform, Curefit, unilaterally and without intimation, advertised the Informant’s centre on Tata Neu platform. Tata Neu has also allowed access to Curefit to advertise the Informant’s centre on its platform and have started collected payments through subscriptions from the said platform without any understanding arrived or contract entered between Tata Neu, the Informant and Curefit. This shows that Curefit is taking advantage of its dominant position and displaying the Informant’s centre on other platforms which has not been agreed to or consented for. On being questioned about the same, Curefit unilaterally issued a notice of termination of the agreement on 23.06.2022.
18. The Informant submitted that it has put in hard work to earn a goodwill in the market and the actions of Curefit are causing grave damage. Curefit is using unfair trade practices to collaborate with the gyms and fitness centres and trying to foreclose the Informant from the market completely.
19. Accordingly, the Informant has prayed for an inquiry into the actions of Curefit under Section 3 and Section 4 of the Act since they are controlling the fitness market under the garb of consolidation.
20. The Commission considered the present Information in its meeting held on 17.08.2022 and decided to call for comments of Curefit. After seeking extension of time, Curefit filed its response dated 31.10.2022 in confidential and non-confidential version. Thereafter, in January 2023, Curefit filed its supplemental response (in confidential and non-confidential version) dated 12.01.2023 informing about filing of a compromise petition dated 21.11.2022 recording certain settlement between the Informant and Curefit, before the learned Principal City Civil Court, Bengaluru in Case No. O.S. 5291/2021, alongwith copy of the order dated 25.11.2022 passed therein. The submissions of Curefit have been dealt with as deemed relevant for the purposes of analysis, in the ensuing paragraphs.
21. On 16.05.2023, the Commission considered the responses of Curefit and decided to forward a copy of non-confidential version of the responses as filed by Curefit to the Informant, with the liberty to the Informant to file its response thereto, within two weeks.
22. The Commission considered the matter on 21.06.2023 and had noted that the order dated 16.05.2023 along with the response of Curefit, were sent to the Informant by email on 19.05.2023. The Commission further noted that the Informant did not file any rejoinder to the response of Curefit within the stipulated period nor sought additional time to file any rejoinder. After considering the material on record, the Commission decided to pass an appropriate order in due course.
Analysis of the Commission
23. The Commission has perused the Information, submissions of Curefit and noted the information available in the public domain.
24. The Commission notes that the Informant’s allegations pertain to breach of clause 9 of the collaboration agreement dated 21.12.2020 between the Informant and Curefit and other incidental issues such as denial of payments to the Informant by Curefit, extension of discount schemes without consultation, sharing of Informant’s confidential information with its competitors and Tata Neu platform without its consent, restriction on the Informant from providing its services to customers directly, denial of access to the customer database, unilateral termination of the collaboration agreement etc. The Informant levelled these allegations in the context of Sections 3 and 4 of the Act. The Commission notes that although the Informant has alleged the same on the ground that Curefit is controlling the fitness market under the garb of consolidation, however, it has not indicated relevant market in which Curefit can be said to be dominant.
25. The Commission notes that Curefit, in its response, submitted that the Informant has raised the same issues as a contractual dispute in OS No. 5291/2021 filed before the Principal City Civil Court at Bengaluru and misrepresented contractual disputes as competition issues. It further submitted that the Information contained factual inaccuracies and misrepresentations. It stated that the Informant did not disclose that listing on Tata Neu platform is part of the listing of all gyms/fitness centres collaborating with Curefit, as an app in-app extension to cult.fit e. Tata Neu is a super app in which several underlying apps work in an app-in-app construct. One of the apps is the cult.fit, listed in Tata Neu app, which is owned by Curefit. The purpose of such arrangement is to expand the customer base of the Informant and other gym fitness centres by increasing their digital exposure and could not serve as a disadvantage for them.
26. On the allegation of denial of access to customer data and its unauthorised sharing, Curefit submitted that the customer database submitted by the Informant was as on the date of contract. It further stated that the gyms/fitness centres collaborating with Curefit are at liberty to retain such customer database for their own records and there is no restriction on them to either delete or destroy such database and accordingly, there is no issue of denial of access to database. Further, upon conclusion of the contract between Curefit and a gym/fitness centre, an updated list including the customers who chose the gym/fitness centre as their ‘preferred centre’ (the gym/ fitness centre used on a frequent basis) and have an ongoing subscription, is provided to the gym/fitness centre. Further, Curefit categorically denied sharing of customer database of a gym/fitness centre with another gym/fitness centres since it serves no business purpose. The processing of customer data is done to a limited extent for assisting customers in scheduling their visits to the gyms/fitness centres of their liking.
27. On its business model, Curefit submitted that Cultfit Healthcare Pvt. Ltd. has licensed the ‘cult.fit’ brand name to Curefit’s parent entity e. Curefit Healthcare Pvt. Ltd., pursuant to which Curefit offers subscription services under such brand names. Curefit is, thus, engaged in the sale of tiered subscription plans to customers for accessing different gyms/fitness centres in India. It also provides lifestyle coach services as well as online physical fitness content. The gyms/fitness centres contracting with Curefit are marketed under the CultPass membership/program. Curefit does not own any gyms/fitness centres itself and contracting gyms/fitness centres provide their services exclusively to customers of Curefit. Since Curefit undertakes marketing initiatives, branding and advertising for such gyms/fitness centres as well as provides funds for maintaining the gym/fitness centre premises, etc., in accordance with the terms of the collaboration agreement between them, it was within its legitimate rights to have limited exclusivity. However, when the Informant raised the issue, Curefit agreed to amend the agreement. Curefit provides access to a range of fitness activities including cardio workouts, dance fitness and yoga, amongst others.
28. On the dynamics of the market, Curefit, inter alia, submitted that the fitness activities segments include online fitness content (paid as well as unpaid) and gyms / fitness centres (offering various services including yoga, dance fitness, cardio exercises). COVID-19 pandemic increased awareness regarding the importance of physical immunity resulting in expansion in demand and supply of different kinds of products/services including online content providing access to fitness options. Resultantly, there has been an increase in fitness apps such as Heathifyme, Fittr, HIIT and such apps enjoy wide customer reach. Open air gyms are also available at no cost. It further stated that the segment of customer discovery of fitness services is also constantly evolving. Social media platforms have emerged as a medium for discovery of fitness services by the customers. In sum and substance, it submitted that the fitness services industry is evolving rapidly.
29. Curefit further submitted that it faces significant competition in the market and does not have sufficient market power. Curefit’s business model has facilitated optimum utilization of gym/fitness centre facilities and improved customer experience and expanded customer choices. Moreover, several benefits accrue to the gym/fitness centres and end-customers such as transparency and certainty in charges levied upon end-customers, improvement in production/distribution of services. There is increased competition amongst partner gyms/fitness centres of Curefit, as well. A customer is not locked-in to one specific gym/fitness centre. Incase, a customer does not find good services at a particular gym/fitness centre, the customer can switch to another gym/fitness centre through Curefit. Accordingly, gyms/fitness centres are incentivised to improve their services. Thus, there is increased competition amongst partner gyms/fitness centres of Curefit and improvement of services offered to customers.
30. Curefit further claimed that the market is dynamic in terms of interchangeability in fitness services (such as yoga, cardio, etc.), shifting customer preferences, increased reach of gyms and fitness centres etc. There are significant competitive constraints on Curefit in the market. Curefit also submitted that the Informant immensely benefitted from partnering with Curefit.
31. At the outset, the Commission perused the plaint filed by the Informant in the aforesaid suit filed before the Principal City Civil Court at Bengaluru and the Information filed before the Commission and deems it fit to reproduce Clause 9 of the Collaboration Agreement hereinbelow:
CFS obligation: CFS will not onboard another gym/fitness centre nearby within a distance of 02 kms from the fitness centre operated by the partner unless the other nearby centre is also operated by the Partner. Partner shall have a right of first refusal (‘ROFR’) in the event CFS plans on expanding the fitness centre(s) within 2 km radius from the Centre operated by the Partner for the purposes of same fitness services provided by Partner. Such right, if not accepted by Partner in writing within 07 days of receipt of communication from CFS shall lapse irrevocably. Parties may mutually decide to not exercise ROFR rights as detailed.
32. On comparison of the contentions made in the suit and the Information filed before the Commission, the Commission notes that the grievance of the Informant bears its genesis to the breach and subsequent deletion of Clause 9 of the collaboration agreement between Curefit and the Informant. The main prayer in the civil suit as can be seen from the plaint on record, also pertained to clause 9 of the said agreement. Curefit, in its supplemental response, submitted that the said suit was amicably settled between the parties, vide order dated 25.11.2022 of the learned Civil Court. It was also stated that the settlement/compromise application was filed by the Informant jointly with Curefit before the learned Civil Court. The Commission further notes that all the responses filed by Curefit were shared with the Informant, vide order dated 16.05.2023 and the Informant was given the liberty to file its rejoinder thereto. It is noted that no rejoinder was received from the Informant to the response of Curefit. The Commission is, thus, of the view that the Informant has no further comments to offer in this matter.
33. The second limb of the allegations of the Informant pertains to sharing of data of the Informant with other gym centers and/or Tata Neu platform. The Commission notes that Curefit has categorically denied this assertion in its response to the Information. Moreover, the Commission notes that the Informant’s allegation of improper sharing of data is not supported by any material to indicate anything contrary to the submissions made by Curefit. Further, Curefit stated that, pursuant to the settlement/compromise, it returned all confidential data of the Informant including the customer database and the Informant acknowledged that it does not have any outstanding claims or any contractual dispute with Curefit. Thus, the Commission is of the view that any further examination of this issue is not warranted.
34. Further, from competition perspective, perusal of clause 9 indicates, that the existence of Clause 9 in the agreement bore some exclusivity. Though its existence may have its own business justifications, the removal of the same as can be seen from the addendum annexed with the Information, suggests that more gyms/fitness centres in the locality now could find opportunity to get associated with Curefit and this may enhance the competition in terms of services offered, amongst the gyms/fitness centres. This would, in turn, provide more choices to the customer within the same brand of cult.fit and may result in increased intra-brand competition. Moreover, the Commission notes from the submissions of Curefit that it does not own any gyms/fitness centres itself and gyms/fitness centres with whom it has collaboration with, provide their services exclusively to customers of Curefit. Therefore, it cannot be said that the removal of clause 9 was to prefer any gym operator against the Informant.
35. As far as the provision of gym centres/fitness services is concerned especially the online availability of fitness services, Curefit has submitted that the market is dynamic and is currently evolving. The Commission notes from the information available in public domain that there are entities such as Anytime Fitness1, Fitpass2 and Gympik3 apparently providing similar services. Further, there is no material on record to indicate that there exists any barrier for market participants in providing or accessing online fitness services.
36. The Commission is of the view that, in the facts and circumstances of this case, an exact delineation of relevant market is not required as it would not materially impact the assessment of dominance. In the absence of dominance, there is no occasion for the Commission to look into alleged abusive conduct. The Informant has also not been able to raise any concern which may be anti-competitive in terms of Section 3 of the Act.
37. The Commission is, thus, of the opinion that there exists no prima facie case of contravention of the provisions of Sections 3 and Section 4 of the Act against Curefit in the present case, and therefore, the matter be closed forthwith under Section 26(2) of the Act.
38. Before concluding this order, the Commission observes that Curefit has filed its submissions in confidential as well as non-confidential versions. Accordingly, confidentiality, as claimed, is granted for a period of 3 years from the passing of this order, subject to the provisions of Section 57 of the Act. It is, however, made clear that no such confidentiality claim shall be available in respect of the information that might have been referred to in this order or which otherwise is available in the public domain.
39. The Secretary is directed to communicate the decision of the Commission to the parties by email/speed post, accordingly.
Notes:
1 https://www.anytimefitness.co.in/
2 https://fitpass.co.in/
3 https://www.gympik.com/
