Tuesday, 17 February 2015

Exclusive trading channels challenged under Competition law

Mr. Ashish Ahuja (informant) [1] had filed an information under Section 19 (1) (a) of the Competition Act, 2002 (the Act) in the Competition Commission of India against Snapdeal.com (Opposite Party 1) and SanDisk Corporation (Opposite Party 2) that both of them were acting jointly to create a monopoly on the online marketplace. The informant is engaged in selling various storage products like pen-drives, hard disks, laptops etc. at very competitive prices for which he had entered into an online agreement on 28.11.2013 with snapdeal.com which is an online portal. Upon a letter containing the list of authorized distributor (the details of which were kept confidential from the informant) from the Indian sales office of SanDisk Corporation, USA the selling of the products of the informant were stopped without notice by snapdeal.com. Thereafter, snapdeal.com and SanDisk asked the informant to enter into an Authorized Distributor Agreement with SanDisk. The informant alleged this act as a connivance to hinder his competitive prices which were lesser than those offered by other sellers. It was also noted by the informant that other sellers were still being allowed to sell their respective SanDisk products on snapdeal.com. Issues were as follows:

1.   Whether the insistence of SanDisk Corporation to get its product sold on online portals from its authorized distributor is abusive and in violation of Section 3 and Section 4 of the Act?
2.   Whether Snapdeal.com is in contravention of Section 3 and 4 of the Act?
3.   Whether SanDisk Corporation and Snapdeal.com are conniving against the informant because of the low prices offered by him?

The Commission observed in the present case that SanDisk’s insistence that its devices be sold on online portals should be bought only from its authorized distributors and therefore seeking a like agreement from the informant cannot by itself be considered as abusive as it has the right to protect the sanctity of its distribution channel and safeguard its brand image and goodwill. Hence, the act of SanDisk to get its product sold on online portals from its authorized distributor is not abusive or in violation of Section 3 or 4 of the Act.

Snapdeal.com is also not at fault as it is not engaged in the purchase or sale of storage devices rather it owns/manages the web portal and is not even a dominant player in its sector. Hence, it cannot be held that it is in contravention of Section 3 or 4 of the Act.

The allegation by the informant that other sellers are still allowed to sell their SanDisk products on the portal fails to prove that the other sellers’ products are not sourced from authorized distributors. Hence, there is nothing to show any connivance against the particular informant. No case of contravention of the sections of the Act was made out against the opposite parties and the information was ordered to be closed as per Section 26 (2) of the Act.


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