Kapoor Glass Private Limited vs Schott Glass India Private Limited Main ... on 29 March, 2012

[Cites 13, Cited by 0]

Competition Commission of India

Kapoor Glass Private Limited vs Schott Glass India Private Limited Main ... on 29 March, 2012

1.'! BEFGRE THE GDMPETETEON CC3MM!8S£QN QF RNEXA {EASE NO 22:'2Q'i0 {Subject iii} Confidentiaiity Rezstguirement under Reguiation 35} Dated: 29.3.2012 lnfcrm ant:

Kapnor Giass {Nadia} Prﬁvate Limited Opposite Party:

Schott Giass india Private Limited GREEK AS PER MEMBER GEETA GGURS This case was initiated an the basis 0f the information ﬂied by Mia. Kapaor Giass ﬂndia} Private Ltd ("Kagrzcor Giass") against Schott Glass indie Private Limited {"Schoﬁ irzdia") to the Competition Commﬁsséon of mdia ("the Commission") under Section 19(1) (3) 02' the Competitian Act, 2002 on May 25, 2910. The Comméssion, upon examination: of the facts cf the information, passed an order under Secticm 2€;'a(13, on éuiy 8, 2010 recording its opinicm that there exists a prima facie case, and directed the Director Geneva? ':0 investigate into the matten The [)6 submitted the investigation report on March 16, 2011. in View :3? the confidenﬁaﬁty ctaimeci by the Parties on specific information and data, the DG submitted cnnfidentiai and normonfidentiai versions. The ncmconﬁdentiai version of was seem to the parties seeking their its repmt in both inVB5ii§}a'i§.Dﬁ report response on the same and further wocess of inquiry was undertaken in acc<::r'dance with the provisions of the Competiticzn Act, 2062 and relevant reguéaiions thereunder, Fuli opportunity was given to both p~:-arusai of an relevarrz records and maki the Commission.

Kapoor Giass and Schmtt India for t :2§f§:x;;i§3#a:?1is;:'}:>2zs, both in writing and <::rai§y. before ,..~-.\~._\'.,\_ ' 7.3

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2.2 2.3 The facts at the case, in brief, are presented beiaw »~ ENFQRMATEQN As stated in: the information, the informant, viz. Kapaor Giasa' a private iimiteci c:em;:sahy, is engaged in the business of manufacturing of glass ampeuies {ampeuiea vieis, dentei cartridges and syringes) which are used by the Pitarmeceuticai companies far fitting and ciisperising iiquici injeateiseie. The key component used in the manufacture of arnpouiee is a specie! kind ef glass tubes viz. rieutrai btorosiiicate giass tubes, preduceci in accordance with reievant Fharntaeepoeia standards and the requireinehis stipuiaied by the Pharmaceutical companies. Apart from the ampeuies business, Kapoor Glass had a presence in the upstream business of manufacturing at horosiiicate giass tubes 'iiii 2008.

The Gppasite Party, Schott imriia, a wheiiy owned subsidiary .01' Schott Gieswerke Beteiiigurigs GmbH, Germany, is engaged in the preduciien at boroeiiicate giees tubes of different varieties conforming to the accepted internaticmai standards. Schott indie was registered as e Frivate Limited Company in the State at Maharashtra, indie on December 5, "3997. On January 27, 1998, Schott indie acquired the assets of i\/ifs. Shara: Giess Tubes i.td., one of the Indian producers of borasiiicate giaas tubes. Subsequentiy, on May M, 2008, Schett Pharmaceuticai Packaging Gmbi-i ('Scihott Packaging"), a subsidiary at Sczhott Germany, entered into a Joint Venture agreement with a ciawristream ampouie manufacturer Keisha Manufacturing Pvt. Ltd ("Kaisha"} to integrate its operations verticaiiy with dewnstream ampouie mariuiacturing business.

The case at the informant is premised on the proposition that Schett indie is a dominant supplier of neutrei hcresiiicate glass tubes in indie and that it is abusing its dominant positien by inciuiging in a mimber at anti-competitive practices. As per the eiiegationsi, such anti~ competitive conduct at Schati India forced thei_i_h'io_rmant and some other piayers ta exit the market of rteiitrai boresiiiaate glass tubes in indie adversely affecting; the competition in the market, thereby corzferriing deminahce its the business cziﬁtzhett indie. Further it is the case of ''c'\ v {T} \ '.: -i \.'\""-

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conducts leading to foreclosure of competition in both the markets of giess tubes and ampouies in inciia. Aooordingiy, the informant aiiegee the infrihgoment of the provisions of Section 3(4) and Section 4 of the Competition Act, 2032.

ALLEGAT3ON$ The aiiegations, as iavelied by the lniomnant, may be summarized as foiiows:

2.4 The Ctppoeite Patty (GP), Sohott tnttia, through its predatory pricing strategy, eiiminated competition and ousted Kapoor Giass and other market ptayors trom the boroeiiicate giass tubes marketin indie;

2.5 The OP induigeci into predatory hiring of the skiiied wortters and pereormefs of Kepoor Giess, having faiied to acquire Kapoor (31333. This practice, as per the informant. couici be inconsistent with the requirement under Section 4{2}(e) of the Competition Act, 2002 2.8 The {JP increased the prices of 'netiirai USP -i horosiiioate glass tubes' sharpiy and consistentiy subsequent to the exit of some of the piayers in this segment; Schott indies practice of charging increiased prices for 'neuti'ai USP "E borosificate gtass tubes' after the ouster of the competitors may be 'unfair' within the meaning of Section 4(2) (3) of the Competition Act.

2.7 The OP, through its riisoriminatory treatment to downstream ampouie manufacturers in the form of target discounts and funoiionat ciiseounte, is adverseiy affecting the condition of competition in the ampouies market; The Scheme of ciieoourits and rebates practiced by Schott indie may be deemed as imposition of 'unfair' and 'oisctiminatiory' condition or prices within the meaning of Section 4{2}{a) of the Competition Act;

ft.) '33 The OP further impoeets unfair condition on sate of its produttts such as tie~in arrangement, wherein ciients are_suppii.ec:§ with one variant of the giasstubei {amber}, of which Sohott indie is the oniy manufacturer in incite, oniy when Sohott inctia;

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2.'i'i 2.12 2.13 2.14 2.16 Schoti indie requires ampouie: mianufamturers not in purchaae: giass tubes from any ether SQUFCS, including imparts and in order to avail the said discount, as Bani»: Guarantee of Rs 'FD iakns is required to be furnished which leads in complete foreciczsure of fine cumpetitinn. This practice is inconsistent with the requirement under Seciian 3{4) of the Clonipeiiiion Act.

it has been further aiiegred that in order in be eiigiiziie far CiiE'«C-OUFIT, anwpouie manufacturers are required in seii ampauias at prices suggested by Schoti.

Mnreuver, it has been aiiegeci that the OP stepped suppiy to the informant whim ied the informant is Lmdertake the work of making ampouies on temporary jab work arrangement iiasis for iViJ5\i'( Ampouiees, in 'reaction in which Schott sioppeci suppiii-as in MAK, which furiher ied in compieie exit oi'.i<apacr from giass ampouie market.

REQEFS SGUGHT The informant has sought the foiinwing iaiiefs from the Commission:

Tn issue interim cirders under Section 33 to restrain Scnott from abusing its sziaminance, including by offering its discaunt scheme by engaging in unfair or ciisazrirninainry pricing; or To issue interim mcie-zrs under Section 33 asking Schoti to extend the same terms cs? discounts and rebates to aii ampouie manufacturers without any ciiscrimination on the basis of ioyaiiy of any other criteria;

To issue interim orders under Section 33 to restrain Sciicsit from continuing with its anti- ctompeiiiive agreements for refusai to cieai;

To issue orders far fines and penalties in: abuse of deininance and entering inim ant§-- compeiitiive agreenienis;

Schoii and Kaisna 3 St3i't:ttutAR'i' CF REPLY {BF GPF'Ct$i'i'E PARTY The saiicrit points of the reciy cf the Opposite Party (OP) are as under:

3.'! Schott india'ss entry into the glass tubing industry in india was by way of acquisition of asscts bciciriging to Bharat Glass Tubes Limited in the year 1998. As part of such acquisition, Schctt india accguixed the prcctuctian taciiities that Shara': Giass had used for mamufactusre cf NSC and NGA, Thercatteri, Schott indie: made ficanciai and tecitncicgicai investments to impmve the standard of these production taciiities. Efforts by Sciictt india in this direciicn enabied Schctt indie: to manufacture a higher' quaiity N80 and NKSA as compared in the other manutacttirers of NGC in india.

3.2 Schctt india aiso made signiﬁcant investments for expansion at its than existing production faciiitics and intrcduccd a superior quaiity of bcircsiiicate giass tubes by isiuiiding a set of n-saw 'production tanks' and introducing technicai knowwhcw and manpower tcr production of 8chott'<.s high quaiity brand cf borcsiiicatc glass La. Ficiax, which has a reduced amcunt cf alkaii reiease and therefore exceeds the minimum standards cf USP Type i.

3.3 At present, Schoti indict mariutactures iwc quaiities of borcsiiicateigiass, i.e. (i) Ficaiax {cniy in ciear version} with aiicaii re-tease of 0.38 mi of H2804 0.02 N per 'mg powered giass, ie. far iacicw the maximum pesrmissibie quantity' cf 'iii mi under USP Type 3:

standards, making it a very high quality bcrcsiiicate giass, and (ii) the basic NGC and NGA witti aiitaii reiease ct 0.50 which thus stiii tuifii the USP -» Type i standards.

3,4 it was turti1r.=sr averted by the OP that ccnsisiant with Schcttc practices gicbaiiy and as aisc its ccmmcm icciustry practice, Schctt was ionizing tc vertically integrate by estabiishirig at prccence in the Ampcuie inanufacturing business segment, in 2008. throcgti Scttctt Pharmaceuticai Packaging €3mbi-it Qerciariy erttered into partnership with the very reputed and wait established Ampcuie mamitacturing company Kaisha Manufacturers Private Limitcd, which post the 365$ --x JV) was renames! ad Schctt Keisha Private Limited.

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3.5 The GP in its repiy asﬁarted that the aiiegaiions made by Kapaor Siass against Scimti india and its afﬁiiaies were compieieiy faise and baseiess and had in fact been made with the malicious objective inf harming E':::hoti's repuiatiion.

3.6 Scihoit submitted that the aiiegatimns made by Kapcor pertain tic: a period prior to the coming into force of Sections 3 and 4 cf the Competition Act. Hence. the cause of action, if any, and the exit of iiapioor {Mass from the Bomsiiicate £33355 tubes market, ail occurred prior to coming into effect 0'? Sections 3 and 4 cf the Act. Tiwerefore, as a matter of iaw, i-{apoor Giass's aiiegaiiuns pertaining tn the aiieged practices of Schott Giass imﬁia cannot be entertained under the Ccmpetiiiorx Act. '

3.? As per the subrnissions of the OP, the exit of Kapnor Giass from the giass tubing industry was not attributabie to any anthsompeititive practices by Schott indie as aiieged. The OP further made 3 hearsay statement ta the effect that there was a ﬁre at Kapoar Giassks production faciiities which resuited in extensive damage to the facility that used 'to manufacture borosiiicate giass tubes. On account of that, the GP addad, Kapacr glass had in step producticn of giass tubes sesverai times due in technical.

reasens resuiting in higher costs which they might not have been abie to absorb and eventuaiivy had to shut down.

3.8 it was aiso subniitted by Schoti India that the Chinese imported giass tubes, which were simiiar to the quaiiiy of giass tubes manufactured by Kapmar C-'siass, mighi have given severe competition to the tubes manufactured by Kapoar Giass and this could have adverseiy affected Kapoor GIass's giass tubing business.

3.9 The reievant prcxciuci market for the present case, in View of the OP, wauid be the USP Type ! Borosiiicaie Giass Tubes. Ali glass tubes confcrining to» Type I specifications, Le. USP Type 1 stanciards efiectiveiy cnmpeiie in the same product market.

3.4.0 As regards the reievani geographic ..market for inomsiiicate giass tubes, the"{3P cpnianded that it was not iimiieci oniy to india, given that borasiiicate giass tubes are procured by various converters in india from ether Asia which is evidenced by the ever rising markei n muniries, particuiariy China.

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3/£'i anti-cemgzzetitive practices ta determine aiapreciabie adverse effect on competition in India, far the present purpases, this issue may not be reievant.

Referring to the deﬁnition of predatory pricing given in the Competition Rot, Schott india arguett that not oniy the price charged by Schott indie aiways remained abnva its average variabie cast but also that Schntt indie has consistentiy charged prices whiten are above its tetai cost. Further, owing to higher quaiity, prices charged by Schott indie for its Bnrnsiiietate Giass tubes have been, anti, are tzurrentty higher in prices charged by other manufacturers of horositicate giass tubes in india. Therefore, iiepeor Giases aiiegations at predatary pricing are cnmpteteiy unsubstantiated and unfcsunded.

3.12 On the issue of consistent sharp increase in prices of tubes, Schcstt submitted that in 2008 the prices fer horasiiicate gtass tubes were increased sawing tn considerable increase in cost at production. Further, prices increased across the warid as a resuit at the rise in energy prices, it being a giahai phennmenon. A cost index tar energy, raw rnateriais, preeiaus metais and personnei, aii at which affect the price at tziornsiiicate giass tubes, indicating an increase in at! such costs, was furnished.

3.13 On the eiieged issue of 'extrerneiy high' prices being charged by Sehett indie for its tunes, Schett indie referred to the various approaches and concepts that have been eppiieci by European Court of Justice in concluding 'excessive pricing' and asserted that there was no disprepartien between Schntt intiiae. precincts and their prices. Especiaiiy, Schott Indies premium brand Fioiax is warth its price as it offers highest quatity on a constant ievei supported by outstanding service.

3.14 Deiineating the terms en which Schott indie suppiies to Schott Keisha, it was suhmitteci that Keisha had estabiished itseif as a ieeding anipauie manufacturer using high standards of technotegy and ensuring suparinr quatity even before the inint venture with Sczhott was put in piece. Schott Keisha had and continues in differentiate itself tram other carwerters because of its high capacity for manufacturing ampouies c'o'ut)'ie<ii'i:iiith use of state of the art technaingy in such manufacturing processes, ensuring supply of high qutaiity arnpantes to Pharmz-3 cempanies. Any aiiagation suggesting that Schott 3.15 Setting out the rlatioriaie for the iaveurable terms that exist between Schatt india and 3316

3. l 7 Schcatt Kaisha, it was aoidurzed by the OP that the terms at which Scimtt indie supplies in Sctzott Kaisha are more favouraizsie ccsmpareci to the other converters primariiy because rm other converter' can match the volume aw' orders that Schcrtt liaisha places cm Schoti lnciia.

lifloreover, it was; pointed nut by Schctt inciia that despite having offered the favcsurairrle terms, the price at which Sclrwti Kaisha supplies ampouiee to Pharma companies is a competitive 'arm's length' price crmeistent with inclustry practice. aeneraiiy, ampcaules euppiied by Schott Keisha are priced higher than ampeuies suppiied by other mnverters. The only affect of the favourable terms is that Schott Kaisha is more proﬁtable than ether converters in india and as a result can distribute higher dividends to its shareholders being the joint venture partners.

'Therefore. the GP stressed that any ellegatiari to the effect that favouraiaie terms existing between Srshott India and Schott Kaisha are adversely affecting the competitive conditions far either the borosiiicate glass tube manufacturers or ampcuie manufacturers are cemptetely false.

3.'l8 Cm the issue at disccunts, the Opposite Party mentioned that discount achemes are not unusual in the glass tubing industry, including in indie. 3chott offers various types of discount schemes and rebates across the wcsrlct in varieus markets that it operates in.

3.19 Appriaing the Commissien on the features of their discount policy in india, Schatt indie staieci that essentially two kinds of ciisceuint schemes were being offered by them to their purchaser corwerters. The firat is at simpie target riisccnunt based on the quantities purchased from Schott inciia. Such a target discount, in View at the OP, is inevitably demanded by ail customers and granted in ccmsideration of the ecenemiee of scale which are genlerateci-by higher purchase volumes. ii. was further ciarifieci that the ciismunt is available in all customers at Schett lndia based on the targets specified in the eireuiar (corny provided), 3.26 substantiating the need far having the funiztioriai discount poiicy, Sohott tndia avgrreci 3.21 that tmce t:som$iiicate giass tubes are said ti: cinnverters, it is very ditﬁcuit for a bomsiiicate giass tube manufacturer to ensure that the converters do not mix the same with inferior quaiity tubes suppiied tc: then': by other rnanutaettireta. This, Schott india felt. was is sericius concern for high quaiity iaottisiiicate giass tubes manufacturers. A Pharma company, the OP mentioned, may purchase ampouies tram a iconvatter on the unicietstantting that the" tubes used for manufacturing of ampouies are those that are procured tmnt Schott indie, when in fact they may be a mixed variety. This has reputatioriai and tiabiltty risks for Schott inciia, Given Scimtt in<:iia's commitment to cunsistent quaiity, Schott tnciia _beiieves that uttering Functional discounts is a mettzod by which Schott inctia can significantly mitigate the 'ittiiéiihg tisk' for its taorasiiicate giass tubes. Therefore, the key tibjectiva of the Functioriai Discount is to etfectiveiy mitigate the mixing risk and to put in piece a modei that iegitimateiy promotes the brands of Schott India.

As the motivating taster fer modifying the functtanai discount poticy into the Trade Mark License Agreement (TMLA), Schott india painted out that white the furictionai discounts did mitigate the 'mixing risk' for Sctiott tntziia, it stiii did not pmvicie Sciiott with any iesgai right to inspect the faciiities of converters tn ensure that converters were not mixing Schott Glass india's borosiiicate giass tubes with tmrcsiiicate glass tubes manufactured by other suppiiers. Schott madiﬁed its Functiiorzai Discount with 3 View to turtiher mitigate the 'mixing risk' and ta create a mtatiei that adciteased the 'mixing risk' granting adequate protectian to Schott intiia against abuse of its brancis Poiicy.

3.22 Under the revised Furactionai Distzmint Poiicy, Schott executes a rayaity tree trademark iicerise agrteemtant with the ccmverter pursuant to which the ccinverter-acquires the rights to ciispiay the Schott itigo and brantt as part of the materiais it uses to market and suppiy ampouies to Pharma companies. Under such trademark iicense agreement, Schott acquires the right ta inspect the premises cit the Converter to ensure that Sr:hott's brandsare mt being abuseti. Further Schcxtt aisti benefits through tité promotion of itsbranci by the converter in its mariteting and packaging materiais. The said tractemark iitzense agreements stipuiateci agreed damages tar breach of its provisions by the tscmveiter, which is wrcmgiy requirement to provide a bank guarantee at Rs. 70, UDIJUO. Schctt errywey prepesee tr} cietete this requirement free": the trademark iiceraee agreement, 3.23 it was further breught en record that atengside the trademark iicense agreement, Schott indie executtes a marketing suppezt agreement ;3ursu';'ant to which the Converter agrees to promote Schott incite and its products and services to enhance its awn business in coeperatien with Schott Glass indie. As ccsnsidreration for this, Srzhott Indie agrees to pay the Gerwerter certain sums on e querteriy basis.

3.24 The OP further everred that they have never impesed conditions on e Converter 3.25 prehibitirrg procurement of Berositicate Giaes Tubes tram ettter sutjptiere of Beroeiiieete Giass tubes in India. As regards Kapoor States, the DP's contention is that they are retuctant to supply its tubes to Kapoor Gtass due to previeue attempts by Kapoor Giass to infringe Schotfs trademarks and is treuduienity pass of bemsilicete gtess tubes manufactured by Kepoer mass as Beraeiticate Giass tubes manufactured by Schott indie. As evidence, e cepy of an order for printing fake Eebets stating "NSC Sr:;hott" and " Made in indie by Sehett Gtass indie Pvt. Ltd"; pereonaity signed by Directer, Kapoor (33335 was annexed, Since the matter was detected, Schott trrdia decided, as a matter of corporate policy, to blacklist Keperer Glass and not enter inte any supply arrangements with Krapeor Glass. Therefore, Schett mciies aileged 'refuse: to deal' with Kapoor C-Siese emanates from its requirement to ensure that its brands are not infringed mean or abused based on Kapoor Glases past corxduct.

Schott India submitted that a party could net be forced to supply its products to a person wha heat by previous acttons Shawn disregard for the irrtetteetuat property rights of such party and has attempted to defraud through rrxisrepresentaticm, other pteyere in the vertical suppty chain, Again, Eichott stated that under the current circumstanr:.es, where Kapeer Glass has shewrr dear hestitity towarcis Schott indie thrcsugh various postings cm its website, it weutd be unreasenabie ta expect Schott indie to enter into any arrangements with Keener Gtaes; ' % it was further adduced that contrary to the impression created by Kapoer G-iaes, Pharma companies actuatiy do not mandate to ptrrchese epeciﬁeetiy ctmtt indies giese tubes. Pharrrse cr;mpanie§§§rr,€:§§%__% L?' r x x.

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conforming ta USP tType,-! standards in manufacturing ampoutes. Given that there are other borosiiicate glass tubes manufactures in irzdia apart from those avaiiabte thruugh imports, Sctmtt contends that there was no compuision on ttagzmor Glass in precure tubes oniy frcsm Schott and hence nomsuppiy at glass tubes by Schott does not affect Kapcsor Gtassﬁs abiiity 'its manufacture arnpeuies.

On the issue of hundiing of amber variant at borosiiicate giass tubes with cztear, Schott stated that such aitegatient was basetess, faise and untrue;

in respcznse to the aitegation of the informant aiieging ;3re~datory_ hiring by Schott indie, the OP submitted thést the Eat at emptnyees provided by the informant in the tnformaticm was incorrect. Another iist at empioye-:-es who resigned from Kapzzor Giass and joined Schott Keisha was annexed. it was further pointed mat that many of these empioyeas had meved to Keisha before the [partnership with Schcztt. it was aiso stated that the Competitien Act dict net expitcitly recagnize the concept of predatury hiring. Further, Section 27 of the Indian Contract Act, 18?"2 (" Contract Act") provides in no uncertain term5 that every agreement by which anyone is restrained from exercising a iawtut profession, trade or business of any kind is void ta that extent. in other words, under indian law, there man be no unreasonabte restrictions on emptoyees to move ta 3 different emplayer and ernplcsyees are free to chaase their empioyers.

3.29 The Supreme Court of indie in the case of M15 Gujarat Bottling Co. Ltd. And Ant. V. Coca Coéa Company and Ami, ('t 995} 5 SEC 5&5 has hatct that every empioyee has a right to imprave himseif. The Supreme Court further crbservatd that under Commcm Law, a mantis entitled ta exercise any lawful 'trade or ceiling as and whewe he witts and that it is public: pcsticy ta wppese aii restraints upon' Eiberty at individuai action which are mjuriotus to the tnterest cf the state.

3.3% They further submitted that emplayees from Kapom' Gtass moved to Srchott Kaisha, on their own acmrct, due to 'raettér termsand "conditions at emptoyment being offeredt by Schcstt tiaisha. inability of Ktaptmr Gtass to reta§3;tiis.\t§_Q3pioyees cannot be blamed on t,\~,<tv:'"~¥L',r*_'_r' another empkayer that offers better terms I. .§;§EE<.v<c;ttit1t2:3?tg=gt§"f: ' pioyment. 3:' h/C) ' 5» £3 5 <>",&t-.»*;<'%a ¢ 13/ #4 iv' ..a---A-«--a...

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{:1 x 4 BEE F-"iNDiNGS $1.1 The BS investigated the matter wiih respect in three majer issues:

issues {a} Whether the OP has a ciominant pcsition in the market of 'neutral USP--E brnrosiiicate giass iubers' go, whether the OP has abused its dominant position in the reiievairifg' market by adopting various exciusionary and expiaitative practices in ccsntravenﬁezn of the provisions cu' Section 4 «sf the Competition Act, 2002 ((3) Whether the DP has abused? its dominant pcisitirzm in the upstream market 9'? 'neutral USP -T» i borasiiicaie giass tubes' to enter and drive out the competitors fmm the downstream market fer ampauies, vials, cierrtai cartridges etc. in contravention sf the provisions of Sectian 4 of the Competiiian Act, 2002 Methadoicgy 4.2 in order in examine the issqes framed abczve, questiornnaires were sent by {JG to the informant, Opposite Party, NEPRO Ciiassi india Pvt Ltd {the cmiy other manufacturer of 'neu'tra1 US?' --i bcsrcasiiicate giass tubes' in india, nineteen cusiomesrs of such tubes. who were named as major piayers in the said market by the informant. Oppasite Party and the Pharmaceuticai companies and to sever: tap Pharmaceuticai zsompanies in india.

4,3 After examination of the repiiesidacumentsiaudio recordings etc received 'iron': the ;3aI'tiE35, iha statements tn' the iaiformazwt. six major glass ampouie manufacturers, Schoti--Kaisha, ex- empioyees Ci-.SChOﬁ india and the Op;5asite'Pér"ryV€1ere récorcied by EEG.

4.4 The difiemnt Pharmacopeia standards, nameiy the Uniﬁed 'States Fharmacopeiiai, the European Pharmacopeia and the inciian prescribirrg the procedure far . X. i £3"-3'?-'~>>«g;""%:\;

'resting 01' glass ampouies were arse per " »' W ' 4.5 The D123 sent emaiie and ta): ta elicit respense from the intarnatianai competitors of the OP.

Two parties responded white the other two did not cooperate and chase not to furnish their resprmses.

4.6 The import data of 'neutrai LES?' -i barasiiicate giiass tubes' into inciia frem TIPS prcsviirieci by 4.7 4.8 4.9 the informant was ioaked into.

ii'3G's findings on Relevant Market Reievant Product Market The 36 examined the infr::rmant's deﬁnition of Reievant Product with reference to the definition of reievant produtci market provided in the Section 20:} at the Competiticart Act read with the factors enumerated in the sub-section (7') at Sectiran '$9 of the Act. Upon avaiuation in terms of these factors, DG upheid the |:ntc»rmartt's deﬁnition of 'Neutral USP -1 borosiiicate giaes tube' as the correct reievant prcsduct market in the present case.

Upon appraise! of the issue of substitutabiiiiiy of inoraeiiicate giass tubes, DE: took into accmmt the two major aspects of 'characteristics' and 'intended use' of the tubes under consideration. The irztendeci use of ismresiiiicate giass tubes is that at manufacturing ampouieslviais/dantai cartridges (Glass ampouies) to stare iiquid injectatzie by Pharrnaceuticai companies. Further, the iiquid injectabie: are complex chemise! cczmpeunds and theytend to react with the surface at the gtass containers/amgnouiies in which they are stored. it is for this reason that minimum standard for '(he giaes that is used for ampouiea has been set out as Eiorosiiicate ifaiass, The United States Pharmacopoeia ---i standards (USP «Type E} are ccaneiciered to be the most reiiabie methea; to checiz the quaiity bf giaéla and imcisi cit the pharmaceuticai companies require that Barcsiiicate giase tubes simuid ccmform: to the US Pharmacopeia (USP) Type i standard. The 138 ccmciudes that the unique characteristics of the 'nautrai USP' «-i borosiiicate giass tube' and its intended purpose to store iiquid injectabie with a requirernent at retaining the safety, quaii Y cantainers makes it a non~substitLttable praduct. As the product has no substitutes and as there is HD r:.omrnereial scopeipsssibility fer the cusicmericonsumer to interchange 'me product by any cvther product the demand far neutral USP 1 Boraaiiicate Glass Tubes, according to £343, is not price elastic.

4flO On supply side substiiutabiiity, DG concludes that the production elf 'neutral USP -1 borosillcate glass tubal' being a very complex pi':3ces:a requiring specialized iechnoiogyiknicnwhow, huge capital investment, high gestation period and running costs, is not easily substitutable from {he keeping in View the supply side constraints.

4,11 Further, BS merstircms that the Opposite i-"arty mm coincurrea-::l with the drefiniﬁrm of relevant product market given by me lnfcarmant.

4.12 Based on the analysis of demaml substiiutabiliiy and supply substitutability of "Neutral USP

-'i Barcssilicate Glasss Tubes', DG states that there is no alternative to "Nem'.rai Barosillcate USP ---I Bnrosiiicate Glass Tubes' for the purpcse Q1' manufacture of glass ampouias.' 4.13 DG extended the aniaiysis further to delve into the different subcategories of 'Neutral Borosilicate USP ~i Borosillcate Glass Tubes". Within the broad product categcsry of Neutral Borosiiicaie USP Type 3 Glass' there are lvariaticsns in the USP iraiues & expansion leveis of the glass tube manufacturecl by different manufacturers. There are five broad sub categories in' the prcnduct under zonsideraiian, which competes within their respective competitive space, They are as under:

- Flolax Clear --« Neutral Glass Clear tubes in the range of expansions below 6.9 ml Fioiax Amber --- Neutral Glass Amber 'lubas in the range of expansions belnw 3.0 '1 Neutral Glass Clear (NGC) ---- in the range m' expansion between 5.0»-6.5 8* Neutral Glass Amber QNGA) ~ in the range of expansion between 5.310 6.5 3 Neutral Glass Clear tubes having expansiun ranges higher than NSC 81 NGA but ,..wiii3i,n the standarzls prescribed ass USP Type 2.

4.34 E38 further states that the Fiolax Clear andf,§§§§§~g_§;.-Amber in the range balraw 8.0 ~' ' \A"\\'<~-L -"NV expansilcms are the most advanced versi?@\£la%.W§§! .4-»' ~ lfia

-,5? .

These are sold at prices rmsch higher if '\~ ~34 l>'V , I at I' §.;u'l;;t\ borcrsilicate giass tubes'.

manufacturers (Gsrreshsimer, Amcor, NEG and Neubsr) only produce glass tubing r:rf this sxpsnslsn range. Flcslax ls produced by the Clpposlte Parry largely fear export market. These are also used by converters and the Pharma companies in lnclia for exparting their respective products. The NSC and NGAs are most widely used 'news? USP --l borasilicste glass tubes' in lndla. While the tubes with lower expanslcsn range can be used in place of tubes with higher expansion range, the converse is not true. The fifth category has expsrasion in the range higher than NGC & NGA but slill wilchin the stsndmds prescribed as USP «Type I. They are cheaper than the rather sub cstegaries. The glass mbes imported from China generally fall within the sulimaregnry. These are not being marketed by the Chinese manufacturers ﬁhsmsslvss in lnclla. These are being impcsrlsd; irate the country by variozits importers.

4715 Having regard to the above facts on record, the DC; concluded that while the distinctions 4.16 between the various sub categories cf 'rrsutral USP -l bcarosillcsts glass tube' may be borne in mind in .analysing and understanding the position of dominance ef the Oppmsite Party, the relevant product in this case for the upstream marker'. was "neutral USP ---l borosilicate glass tubef and the relevani product for the dswnstrsam market is "ampoulss, vials 8: dental cartridges made from 'neutral USP ml borosilicats glass tubes' Relevant gecxgraphic market As per the informant. the cuncjlrirans of mmpstltlen for the supply and clsnrand for the relevant product "neutral USP «-5 borosllicate glass tubes" was homogeneous in the whale 9;' lnclia and thsrsfsrs the entire lndian marks': far the relevant prcsclurzl be considered as the relevant geographic market. The OP can the other hand asserted that the rslevarzt geographic market was met limited to lndla given that the relevant prociurzt was procured by various, converters in lnciis from other countries, particularly China. However, since the éppreciable adverse effect on competition was to be examined with respect to lndia, the "'\,\\ relevant geographic market couldﬁs market for the given relevant L'",..l:n5i§x'§ the regional variations in the .Q'''"'' r C§<'3ITi3i'i€i and suppiy cf the reievani product. DG's determination 0'? 'the geographic scope of the market was based on the foiiowing grounds:

The requirement czf 'ineutrai USP' mi borosiiicate giass 'tubes' is bssirig scurced primariiy from within the cmuniry The converters require the said pristine: primariiy m' the OP as their rmstomers, re. the Pharmaceuiicai cc:-mpanies require '(hem to de so even when the same is not specificaiiy mentioned in their purchaae cvrciera an arscrmni of their implicit understanding and reiationships The iriciian market prirrwariiy has the requirement of NGCINGA ---- a category of 'Neutrai USP ~«i borrzsiiicate giass tubes" - on account of usage, practice and prices. NGCINGA are preduced by the OP csniy for indian market and within india The imports from fareigri manufacturers like Gerresheimer, Neuinor, NEQ, Amcor etc. censtitute a very insignificant pczrtion .03' the suppiy for the iraciian market The csnditions of corripetiticin far suppiy of goods or the demand of goods for the foreign entities are distinctly ciiffereni and not humczgenacus {mm that of the cistimestic suppiier(s) cm account of the fact that the foreign suppiiers manufacture "rieutrai USP --~i borosiiir:.ate_ giass tubes" oriiy cri the expamsioin range of 58. Even their amber xrariarrts are 0? a much darker shade and not preferred by the indian buyers.

Further, 'these foreign manufacturers dc: mi have any manufacturing units in india arid are not in as pasiticn is ensure uninterirupteci timeiy suppiy, offer the fuii range of producis required by the iriciian corrverzers and require a rmrch higher iead time. The ianciaci cast of imported prcducts from these marzufacturezs is much ihigirer than the prices at which the DP is abie in suppiy the products is the inciiari corrveriers. This is on asccoigﬂZ.\...~.§i',}__LAimpart duty, shipping charges, .»*"°'ﬂ ( ' K. g of supply abczxrra aii.

': Wk: . QT;

. \""V} fiuciuations iriéxchange :'éte§V§tc.

numbers of Chinese manufacturers, having differing quaiity and they find their way into indie through various importers. These Chinese imported tubes pass the USP ---i test oniy as a bordertine case. Therefore, their usage and consumption is very limited. Further: though the Chinese tubes are consumed in the indian domestic. market. their consumption is iargeiy czontirieci to the northern and eastern parts of indie for generic and BPCG products which are veiy price sensitive. V *8 Examination of stippiyorciere/invoices of various companies pieced on record reveais that there is no signiﬁcant varied condition of demand and suppiy of 'neutrai USP «~ i borosiiicete gtass tube' within the territory of indie.

H Despite the signiﬁcant rise in prices of the product by the DP during the fast three years and its inability to euppiy for some 'period, there has been no inﬂux of suppiy to the indian market from outside: sources barring the impoits from China Retevant Market 4.18 in view of the anatysis with regard to the reievant product and geographic market, the DG concluded that the reievant market in the current case in terms of ctause {r} of Section 2 of the As': is the market for 'neutrai USP «-1 borosiiicate glass tubes for the upstream market and ampouies, viate & dental cartridges for the downstream market in the whoie of indie'.

t}G's Assessment of Dominance 4.19 Having determined the retevant market, the dominance of the Q§3'F3QS§t§~ I§%§'3iii;t:§b'?;osiiicate glass tubes in inctia" in irovigedt in expienatton {3} to Section 4 ' pgfitio Act, 2002.

' '\.( Party in the relevant upstream market 'A accordance with the deﬁnition of ciomi gréf-co.' acct thevfactors prescribed in Section 1' {efctt Market structu re and size 4.20 The marketing mechanism depiayed by the manufacturers of the reievant product in india was studied by the US. The manufacturers, nameiy, Schoii india and Nipro Glass inciia do risi engage agents er intermediaries to market and seii their preducts. Neither of them has any agreements czar uncierstanciing with any of the Pharmacauticai conipanies having a bearing on their pmcuremeni of ampouies. viais and deniai cartriciges. it is from these facts that DG inferred that iiie market for the relevant upséream product was a seiier's market and manufacturers do mi Sirius: for earning the patronage of the customers. Farmer, given the poor quaiity of the prcducizs manufactured by NBPRQ and insigniﬁcant voiumes of impart from major iniérnatianai piayars, the progiucis of Opposite Party are preferred by the Piiarmacseuiicai companies; As a resuii of the prevaiiing market smiciure and the capaioiiiity of the CF' to meet the requii'ement Of the ever grciwing market: the [JG concludes that the GP enjays a pcasitiion of cicminance in this market.

Market share 4.21 The foilowing table depicts the market shares of Schoit indie in different sub categories 0? the upstream reievant product, as per the figures furnished by them to the DG;

Category 2am'-33 2i}i3B--iIi9 239949 N68 38% 41% 42% 'i\iGA " 81% 57% $1396 Fioiax Ciear 91% T 94% 937% T Fieiax Amber T 97% T 93% 87% Totai T 50% 54% 4.22 The toiai size of the market for the r 'igvéiii pi? in i qga cauid not be provided by the parties. DG compiled data avaiiabiw frcgm prﬁs, including Opposite Party, ~°5'\x"" W <5';

'Q. fittered impart data of T3538 furnished by the informant and producticm ﬁgures furnished by NIP'-'RC3. Actczcsrdingty, the market share figures were cnmp=uted> and presented as fottows:

Name of Party 2t)t3'?--{38 2.063-G9 2099-1G Share in Share in M Share in . Share in Stars in Share in Sale Qty sale Sate Qty sale Sate Qty sate value vatue vaiue VSCHCITT Gtass . 65.98% 82.90% 83.02% 80.3% 61.49% 8'? .'t?'% t\ttPF9tOfFRtVEt\tt 18.21% % 10.83% 17.42% "tO.54% 't23.DS3% 181% t imports 15.?9% 6.25% 19.55% 9.24% 25.41% 11.0% 4.23 the markat share computation by DG reveats that Schstt tm:tia's share in terms of sate 4.24 4.25 quantity was 81.49% in EOGEMD, down tram their share at 85.98% in 2{JD7~08. in terms of sate value, the share of the DP was 81.37% in 2GG€~3~tt3, msrgtnalty lower than their share of 82.90% in 20077-08. Schott indie: ttatds by far the tsrgsst market share in the Endtan market for neutral USP wt Borosilicate gtass tubes.

The DG further states that the market share is even mare pronouncect in the specific product segments of NGA, Fiotax Amber and Ftotsx Cteazf of the reisvant praduct. The market shares in these three segments are 93%, 97% 8: 8?% rsspectivety for 2{)()§~tD.

The OP thus has a virtuat monopoly in product segments in the range of NBA, Fiatax Amber aﬂotax' Cteat.

tn the segment of Amber tubes, DG avers that white Triveni, the only other manufacturer of the rsievtant product in tndia, had pmductiszm capacity for smtber tubes since EQQ8 their production has been insignificant. As regards import of amber tubes. this is an a tcsw seats as the tndtsn Pharma czompantes use the lighter shade at amber pmduced by the GP in tndts and not the darker shade of an'tt3t§%'t"\Wf.)f§.?C5tttCeCt by the other intematisnat manufacturers tttte Gerreshetmer or Ns%§.:§'~h§;§tp§ﬁ»..gf amber from them is timtted and ' IQ . A'..:,'.'_\_'» is onty against the speciﬁc: requtrsm these compantss. Ths import data f r j ' is-:5?) ttpaniss for such prcrctucts from ' in<3;mg3% Ftoiax amber tubes imparted '3' n V_ w ' K?' x .3 K}:

x"

{fir "*2

-3 L:

C5' ([3 by Schott tram its plants in Germany.

Size and Resmirces mi the Enterprise 4.28 Asseasing the size and resources 9f the O;3§3Q$itB Party, Sczhoii inciia, DG brought forth the fa-iiowing information: ' R Schoti Group is a muitinaticinai group headquariered in Germany.

B Schoii is in the business Di" deveioping and manufacturing speciaiiy rnaieriais for more than 125 years. One of the business units of Schaii Group is Pharma which ccmsists of twin business segments, namely, tubing and pharniaceuticai packaging. The business segment 'Tubing' manufactures and seiis borosiiiizaies glass tubes mainiy for Pharmaceuiicai use and aiso far technicai appiiizaiions. it has six produictiun sites aii over the warid.

is Schoiri india Pvt. Ltd manufactures borosiiicair-2 giass tubes oniy for pharmaceuiicai use. The business segment 'Phairmaceuticai Paciraging' manufactures and seiis cnniainiers made out mi' Type ----i Glass Tubes. Thus, Schati inriia manufactures giems iiihes and Schoit packaging converts such tubes into containers.

I Schott packaging is present in india via the joint veniiure company Schati iiaisha Pvt. Ltd of which Schoti Packaging Gmbi-i hoids 58% of the shares. Thus, the Schoti Grioup is present both in ihe rnanuiaciiire of giass tubes and conversion of glass tubes into containers and is as such veiiicaiiy integrated enterprise within the meaning (if clause (h) an Seciicin 2 of the Act read with explanations {a} & (b) in Section 5 of the Act. I 'H . . gm' . ~».. \ sites and seizes 0fiir::es.1n 4:2 cnumri s§j;_\':{\:%iii§i'?é'-'}3='<*.§'_ci'ii_§:;'e:>ri capacity of more than 130,009 tons and production site vi Schoti €3rciu;::'s ginbai saie is of 2.85 hi §.§3ﬁr;'§§§2{i:i3S.,.__@Q09--iQ}, with nianufaniuring "ac.

ii"i§E?..f 'Quin America and Asia, Schoti:

Tubing is one an' the leading mam: i 20 xv Though the Schott Giass india Pvt. Ltd is a separate iegal entity, its functiéomng in Endia is whmiy determined by the coniwi, guidance, sugaervisim"; exercised war it by its parent companyfgrcsugn cormsanyé, m From the statements of the canverters, ii becomes evident that the woridwide resources cf Schott Group have aiways been available to Schott india, which even on its own has reseurces far mare than any of its competitors in Endia.

' Size and Resources of iiompetitors 4.27 in order to evaiuaie the reiative position of strength of the Gpposite Party vis--é-vis its competitors in the relevant market and as mandated by the Act 136 appraised the size and resources of the competitors and affirmed the fotiowing:

I The size and importance of the competiiars of the Oppasite Party in Endia are not of materiak significance, Nipro has a productian capacity of oniy xxx tans as against xxx tons of the OP.

-1 NVi;3m has no presence whatsoéewar in the product segment equivaieni tp Fioéax grade of the Respondent.

5 As per Respondent, Gerresheinwer and Amcor had a combined share cf 27% in the tubing segmeni and 18% in the ampouies segment in 280$.

m it may be seen from import data that the tctai quaniity and vaiue of imports from these entities are not signiﬁcant and as such do not create any competitive pressure an the Respondent 'T ~' iow _ t Q W segmens. M 5",

8. specific pharmaceuiicc-2! w Schotl Group is also the dominant player in the gtobai market of the relevant product anci on account of the strong business relationship; neither Amcor F10!' Garreshelmor is in a position to exerczissz any competitive pressure on the GP in lndia.

Economic Power of the enterprise including commerciat advantage over competitors

-4.28 The D665 opinion on the economic: power of the Opposite Party was based on the following gro=.mds:' ' l Being part of the gtobal conglomerate Sohott AG, the DP has enormous economic: power qua its competitors

- lts economic power is buttreslsed by its verticat integration with its biggest ampoulez manufacturer in lndla, namely Schott Kaisha in which it has 50% stake K lts tutl range of product tine as Ability to supply the converters from any of its global tooatéons at lndian prices on The stability studies done by the Pharma companies with ampoutes and giass made out Schott Glass tubing; the DMF regilstrationfdossier ﬁling done by converters in export regulated markets by showing Sohott tubes as their source of materialisupply Vertical tntegraticm of the enterprises or sate or service network of suoh enterprﬁsos 4.29 {JG states that the OP is vertioaliy integr'ategt_\wittt_A§he downstream manufaotsurez' Kalsha ent between Kalsha and Schott "ﬁx Y

-\ 'er in India givos it a huge and 4.33 4.31 4.32 Further, the OP is seen as e reiiebre partner fer the globaily expanding {radian Pharmeceuiical cempenies by mffering them the same high quaiiry wericiwirie and by prcwiding a giobai neiworir of production feciréties in several countries which guarantees sufﬁcient and timeéy euprzﬂy.

ﬁependemze of consumers cm the enterprrse The cransumers are heevéfy dependent an the OP far their requirement in View of the quaiity of its prariurzts, its. product range, consumer preference for its products and its aiaziiiigrr'-hrr make timely and adequate supplies. DG further aliuded to the statements crf cunveriere wherefrom he conciudes rhar consumers are very heavﬂy dependent on the OP.

Entry barriers including barriers suck as reguﬁatery barriers, finamtiar risk, Mgr: capital cast of entry}. marketing entry barriers, technice! entry barriers, economies er' scaie, high cost at' substituteme goods or service for consumere in assessing the difﬁculry in entering the Indian market for the reievarni product, DG referred to the foliowirrg fears:

is Giass tube manufacturing is a rxighty speciaiized fie-id and requires very advance technoiogy and a very high and superior batch conﬁrm process.

= Heavy capitaﬁ investment, huge running 305%, high gestatirm period re-zguiree scope af markeiebiiity as a prior cemziiﬁon before entering this ﬁe§d.

as investment for an additional rank (manufacturj,r}§§§t€;{r?§:;'-fr::§r___fhe relevant product) makes MT of the same. The * R.equ§2'ament of stabikity studies creates ancather significani entry barrier, Pharma companies do not easily opt far new sources of the material used for manufacturing giass ampouiesfviais as they have tested stabiiity with existing scxurces.

H The import duty on neutrai baraséiicate giass tubes of appm-ximateiy 10% acts as a significant barrier to entry Nioncxpcﬁy or dcsminant pcssition whether acquireﬁ as a resuit of any Statute or by virtue of being a'§g;_ye;nment campany of 3 Puhﬁc Setter Untiartaking car csthezwise 4.33 It was meniiuned by OS that the OP had not acquired its dominant position by virtue of any Statute but on account of its superior product, technotogy, ﬁnanciai strength and other resources which have given it the unassailabte market power in India Countervaﬁﬁng Buying Power 434 EEG examined the issue of ccmntervailing buying power mi' giass ampouie manufacturers in India and the summary cf his ﬁndings are as foiiowsz *8 The giass ampeuie 'industry comprises of several smaii manufacturers w'niz:,h are famiiy Qwnedfrun enterprises. They do not have requisite financiai power to pose any challenge to the Respondent I! They dc: rum have any fmmai or im"ormal association H Respondanfs veﬂicaﬂy' int sales ~/""""""

'5? <-

. C(g_~;¥'{?{.7eg.; .

2&1 4.35 The interment has aiiegeri that Oi:-3 started setting the 'rteutrai USP4 bhreeiiicate glass tut3es'"

4.35 4.37' 4.38 Examination at aiieged abuse of deminensze Fretiatciry Pricing to the downstream giaes ampouies i'i'1Eti'tL1fat'3tUi'F.'i'S at extremely haw prices which can he predatory. it has statett that the prices were signiﬁcantly towes compared to its cost at pro-ductihn as wet! as: the prevaieht prices in the international markets. in order to drive out the competiticm from the market. The GP, however' aituded that in the year 2008 Schott raised its price of borosiiicate glass tubes an over the worid since increase in energy cost a giobai phenonweriert. it has stated that apart from the cost of '7é'herg','§'.i me': of raw miatez'iais, precious metaie and persormei, alt of which affect the price of imrrssiiicate giass tube, aiso increased. ' DG has further stated that the prices of the GP have airways remained significantiy higher than the prices of its cempetitors. As regards the prices of the 0?' being tower than its internationat prices, the same cannot be construed is have any eptpreciabie :.u:iverse effect an competitian in indie as the OP, prim to the acquisition of the Eharat Glass, was cmiy making e>t;::c:rts ta the reievant product to India» and coutct not he stated to have enjoyed market power greater than trtctian manufacturers in indie. After acquiring Bharat Glass and starting manufacturing in India its prices couid we" have heart ihtrcaciuctcery in respcmse to its need its enter the Endiah market.

Aiso the ii" has not given suhstentiai supporting evidence to suppert the fact that that the prices charged by the OP were very tow in the earlier year of their cemmencement.

it is relevant to note that there is no restraint on an enterprise to seii its products at prices that it csmsiders sub serve its interest so long as they are not predatory. i-"urther the issue of predation carimt precede the determine of dominance. Hence, the DB conctuded that the aiiegation of predate iso iegaiiy untenahte. .~ i it

4., ' I in ' 25 .-«.2~--~ Eirestic: increase in prirsee by (JP to reeever ineeee incurreci on eceount of its eiieged preciatury pricing in the eeriier years 4.39 DG eiiuded to the statement issued by the EP ihei after the exit ef the informant iieeii in EOCIB the oppoinent has increased iispricee drasticatiy in remover the lessee it had been incurring an the eccouni of its predatory pricing in the eariier years. The iriiormani has aiscs coniested the OP'e ciaim ef increasing casts {energy and raw materiei), by stating that it can be seen frem the baiance sheei of the DP itself for the period immediateiy preceding the year 2088 and thereafter, thai there has been no significant increase in energy and raw maieriai cost. it has further stated that the Seheii uses PNG to fire its furnace and the price of PNG in indiaﬁs ﬁat subjeci ii) gicbai f:uGR§§St§CnS'{aS it is fixed by the government).

4.40 The DP has given ihejuetificatien of increase in cast 0? energy and new materiai oniy. it has 4.4'?

aisci stated that at times the prices are increased in anticipation ci a change in price cf ihe raw meterieis and not necesseriiy as a result of a change in price of raw meieriaie. it has also been stated that between January and December 2008, the price of certain raw meieriaie increased as ccimpered is the average price in December 209?, Aise in repiy to .

the repudiaiion of the conieniinn the OP that it uses prices whose prices have not increased, it has submitted that it uses LNG and LEG, signiﬁcantly.

the prices of which increased DC-3's View on ibis issue after incerporaiing the responses of the informant and the Cippornent is that after seeing the data previczied by the OF', he coriciucieci that the increase in price is on account of ihe increase in manufacturing caste and were not for recouping the iosses inizzurred on account of preiieiory pricing. As regards is the issue of excessive pricing, there exist no standards to judge as to what can be ecrrzsiiiuted as excessive or high prices. There cannot be any imeehoiai limit for determining the same. DG aiso highiighied the fact that the ii?' has himseif stated ihei precincts of the OP is very grand and this wcuici itseif account in some me 01' its products.

3" «3¢'?i'».';3,~ '=3 .'-3* e -' £1.42 Exit oi ccimpetiiors fmrn the mievarit inarket due to predatcsry pricing by the OP it is stated that though the reascsns for the exit of ihe mmpeiiitors from the market has net been spa-ciiicaiiy investigated bi; DG, there is no evidence in substantiate the allegation of the: ii" that the same was on accourii of any aiieged predatory pricing on the par': cf the OP. The exit of the ersiwhiie competitors ceuici aiso be an account of some iniemai reasons like inabiiity to producer ar maintain quaiiiy pmducis, inabiiiiy in manage ﬁnances csr cash iiows etc. it amid raise be on acwuni :3? their inability to match the product superieriiy of the 033, its supericar marketing strategies, the preference cf the consumer for its product airs.

Preeiatcry hiring 4.43 The iP has aisa aiieged that the DP tried to destabiiize ii. by pursuing a poiicy of predatory 4.44 hiring of its key perscmnei who were operating at the high speed imported iines m' the ii? and also by predatory hiring of its manageriai staff. The {BF has denied these zaiie,-gaticaris on the ground that the Competition Aci does not recagniize the cancept of predatory hiring. it has also stated that under the inctiiari Law, there can be: nu unreasonabie condiiionalresiriciions on the empioyees to move to a different empioyer and empioyees are free to amass their employers.

DG teak into consideraiian the response of the Managing Directmr of the S<:hoti--Kaisha, according to which the penpie: who have been hired voluntarily approached them cieariy stating ihai. they wanted to mm/e nut cif Kapnor (32335 as ii was neither running its production nor were they being paid. Further, the statement of the Managing Qirecior revaais that Scimii Kaisha hired oriiy the peopie occupying iunior position rather than tap ievei technicians. Notwithstanding the injuries suffered by the i9. ihe engagement of the erstwhiie empioyees by Schc:i:i~Kaisha cannot be in vimiaiion of the iaw. These employees were i1ii'6('.ifUiii1~e purpose of their use as can be seer: from their ri5ing prociuciion. Scho':i:~ Kaisha was in need of the addiiicmai manpower in__ ,\*_r of its rising need white there were diiiicuiiies with the Kapoar Giass to retain I deiierioraiing iinaneiai position. it is aisojigegfiigas 53?

apprehensiciri in the minds of the amp <::yé§s 0 4.45 11.45 their wiii .1 chaise and in order to protect fenhance their iiveiiheod and hence the aiiegaticm.

regarding predatory hiring of the emaioyees of the ii1f0fmaﬁ'i by the OP ceuid net be substantiated.

ieeua of unfair and discriminatory conciitien or price in the saie of glass mixes The aiiegaiiona are premised an the twz_:i majcsr issues of discriminatory discount peiicy of the OP anti the aiiegeci bumjiing of amber tubes, which acceunt fur 3D~35% ef the entire market of giass ampouies with the ciear vaiiants using the unique market power that OP enjeys in the amber segment. ' ' The £38, ficim the statements and repiies 03" the parties, cuiied out the foiiowing facts pertaining to the discount poiicy of Schott:

2: The OP grants two types of discounts to the converiers, nemeiy, target discount and functiiienai discount a There are varieus siebs of target discount, ranging from 2% to 12%, which are based cm quantities purchased by the aenveiiers from the OP is The target discount is given oniy on purchase if NGCINGA and the purchase of Ficsiex are reckoned caniy for the purpose of determining the eiaa However, Schoti: Keisha, the JV cf the Respondent is given target discount on purchase af NGCWGA as wait as on Fioiax which no other converter is granted.

is Target discount is given is the converter an a quarterly basis on receipt of certiﬁcate of sales as specified by the GP and upon fuii payment of invoices raised in the said quarter. H-ciwever, the same is paid to the JV on e menihiy basis.

iuifiimerii of the foiicwwing cenditi D i \ 'i '3"

»'"Y}_I',-1,."

i 5512', ~. _ie_«,i'e\ihe converters subject to My is The OP aiso granis fuiiciiona

(a) That the converter:-3 Witt premete Schott tubing by purchasing the agreed quantity in the particutar year of agreement;

(:3) That the convetters wit: not use er cenvert Chinese tubing and wit: prczvicte at? information and proof §n this regard;

(0) Thea'. the converters Witt maintain "Fair Pricing" at ampouies and viats for Schott tubing.

8 From the year 2013, the OP has required the s:om:er"ze_rs teﬂsign its Trade Mark License Agreement and Marketing Support Agreement in order tewget functionai discount 8 The OP' grants functionai discount at the rate of 8% but the converters have stated that there are varietiens in the grant of functionai discounts

(a) The OP in its discount statement has furnished detaiis which Show that the JV has been granted dieccrunt er" xx:<% on NGC, xxx% on NGA and xxx% on Fiolax Ctear in 2608439 and xxx% an NBC, x>:x% en NGA and xxx% can Fiotex deer in 200940

(b) The converters who have signed the TMLA of the OP nemeiy xxx, xxx and xxx have been given the discount at rate of xx:-1% on NGC and NGA and xxx on Fietax deer in 2008439. in 20t09--*10, xxx has been granted :<:<x% discount en NGC & NGA and xxx and xxx have been given >cxx% on NGC & NCSA. They have not been given any discount on Fiotax ciear.

{<2} At! other converters have been given discount ranging frem ><x:<% to ><xx% en NGC and N633, oniy in the years 2008-09 and 20D§--'t£) (ti) xxx has also been granted >:3<><% bonus by Schott Germany for materieis supplied {rem euteide India the years 2008-09 and 20{39~'§0 per the tang term suppty contract of the JV The discount pciicy has not been urziformiy appiicd by the DP even in terms of its deciared pciicy which cointravenes the provisions of Section 4(2) (3) at the Act The discount pciicy at the DP has fed to persistent price discriminaticm whats the same commodity has been soid at ciifferent prices to different customers despite identicai cost. Thus, the unfair 8: discriminatory ciisccunt pciicy of the dominant enterprise, is. the OP, contravenes the provisions of Section 4(2) {a} cf the Act, Apart from Schctt i-iaisha no ether ccmrerter has been granted any discount an purchase of Fioiax tubes. Further; rarity Scshcttiiaisha has been granted discount on procurement of Ficilax tubes tram Sichctt GmbH, Germany. This conduct at the cicminarri enterpirise, ie. the DP, ccntravenes the provisions of Section 4(2) (3) of the Act.

'Whereas alt ccnverters were given target discount on quarieeriy basis and the functional bonus on yeariy basis, Schctt Kaisha was given both the target discount icontravenes the provisions of Section 4(2) {a} of the Act.

The discount poiicy of the DP coupled with its gaie purchase agreement with converters, so as to acccunt for neariy aii their requirements of giass tubes from the OP, is aimed at tczrecicsure of ccmpetiiicn in the reievant niarkci and is a per Se abuse in terms at Eieciicm 4 of the Act. The poiicy cf functionai bonus is ai.-so 'ioyaity!fideiity inducing' which forecioscs the market for its ccmpetitors frcm the demand perspective. The twc discount poiicies resuit in a kinid of tie~in sale which forecicses the market for the ihternaticnal manufacturers. That the discount poiicy followed has indeed forecioseci the Indian market for its international competitors is evident frcm the facts that neither imports in any significant measure {except the import from Ci'ii1i"}<'V:i)4_ has taken piece nor any international manufacturers have entered the indianiriarket despite ﬂ_,"€?§'f'--1'Ij.'?;3i and growth. Thus, the discount action 4 {2} rs} of the Act as its :§"ﬁv\ I ,..n practices have led to Licniai of acct a ' K33. _.

.3; '4.

3&4 .-« \ ., ,...

w' -: " 'W \' ' 4 VI?' U. '\_ _ ' "I. . ,3-

" , -. .»' \ pciicy of the OP also coniravece$';t m f as The discount policy of the OP is at.-so intended to cause secszmciary iine injury by causing dissimiiar financial impact/injuries 10 the converters other than its jnint venture in the downstream market fer ampouies. viais etc. As. a result :32' disisimiiar cast, there is no ievei piaying field in the cicrwnstream market. Thus, the DP by virtue 0? its discount poiicy irzaé iébused its dominant position in the relevant market for 'neutrai USP -§ izsorosiiicaie giass tuiieﬁ' to protect the downstream reiated market for ampauiesfviais through its joint venture. As a result, the conduct of the GP attracts the provision sf Section 4(2) (:3) of the Act.

' o.

4.48 The DC-3 further investigated the terms i':'sbi'?.'i'.i*ie Zﬁade Mark License Agreement (TMLAQ in particuiai' to assess its impact on the competitive conditions in the reievani markets. The DG aiso appraised the validity and signiﬁcance of the 'mixing risk' whisk": the OP provided as the ratiénaie for taking recourse to the TMLA. The DG's conglusion on this issue is quoted below:

"{5} The terms of TMLA have been unifateraliy dsferniined by the OP, more paiiicularfy Schotz' AG, as if seeks ta be an agreement between Schoi1'AL'3 on one part and the respective converters on the other. The purported agreement' between iwcz parties has been signed by S)': Mohan iJoshi, President, Schcff India Pvt. Lid. for (me par? and defivened to the converfers and are enciosed along with iheir replies ag. .-ficfit Corvtainers Pm'. Lid, MAK ampoules, Kishore Industries, Indian Scienfiﬁc Glass indusi'r';'es and Kfienvka C-Siass Products Pvt Lid.

{ii} The farms of the TMLA are gmssiy unfair, one sided and heavily foacied in fa 1/our of the OF. The unfair and oppressive conduct of the GP is evident from fhe fat.-2' that it seeks to reduce ihe converiers {who do business with the OP on a Principal foi Prirzcipal basis and are more its agent} {'0 the stains of 3 coniracf manufacturer' of the OP.

Though ff}.-9 TMLA. cities nciz' speciﬁcally debar a coxwewter from usirsg fubes of iather nianufacturers, but' read wiﬁv the Safe purchase Agreement' & me Mariiefirig Supper? Agreement which are requ:'reo' in be sign<=:_g[_z3;{"gg§inveirfers, if becornes very ciear that the CF' has seévereiy restiairied man fhaz' of Schafi. Fsxriher, in arder $0 disctipiina and enforce its \4"~ ('V {"- __, °'.' "-\ -

4"' «ﬂier 'five OF' thmugh its " ." V .,k_ ;«» k" \. '~ : ~:

31 """ iv " :1?' \\ -I 1} ﬁx "§..

73:' ",1 W1 ¢ c X) 4.49 TMLA, has sought to ecqiiire the iegai right to enter the ,oremises of the conveiters and inspect the contract products and/or the maivufecture thereof and/or to check the compliance by the converters. in terms of the purported egreenierit, the decision as to whettzer the comzerters have breached the terms of the Tivtm {by mixing the tubes of Sotrott with others or using the tractemerk of Sciiott on products matte out of non Sohoit tubes etc) is to be uoiiatereity determined by the OP.

(iv) Upon such uniiaterai determination of breach of the terms of the TMLA by the GP, the ,our,oorted agreement seeks to tzind the converters into paying such damages as shat! be determined by the 01?'. it hasbeejo stated by various converters that the GP sought to obtain a bank gtiarentee of Ftogoees seventy tees to ensure the payment of dernages.

Thus, the E363 conotudes, "the terms of the TMLA, aiong with the Marketing Support Agreement and the Safe Pumttese Agreement sit the dominant enterprise, is. the C)Pf8ohott AG, ettraots the mischief contained in Section 4(2) {.9} ii} 63: iii) of the Act. "

ﬂeniat of Market Access DG examined the TMLA from the point of View of its aiiegeci foreoiosure effect on the retevant market. DG observes, "...even though the Chinese products do not compete with the produots of the OP, it riooetheiess limits the scope of the DP tram being the only source of supply of 'neutral USP mi borosiiioate giass tubes" to the com-*erters...if the converters eouid be mocked from using Chinese im,oorts, then eii segments of the market would have to perforce meet their requirerrient from OF' atone. " He further adds "Under the grab of its legitimate right to protect its trademark and to ensuie that its brand is not misused by the oonverters_. the OP' has raised the bogey of 'rrrixing risk' as mentiooeci eariier: That its stated appreherision is a mere osmoutiage-_. intended to iereoiose tire market by preventing the COi7V&iTE:i::5 frorn usiog 'neutrei USP :_t.:;§_§{osiii§ate giass' tubes' from other sgtzgges Y} ':

tiT?;=7)C)i'tE!Cf"'i'?'OiTi China is evident from t, Tit 'v~. £1', .

incident of its so oaiied 'mixing risir' ti _' 4.50 4.51 4.52 4.53 In this regard. DG aisa referred in the statement of President, Schczti 1r:dia..."We have 1101' came acmss any insfazrce in mafia wfirsn Kapocar Glass (itmfia) Pvt. Ltd. or any othar converfer has been found to have irzduiged in nwixirag of Schofz' fubes with fubes made by other manufacz'ur'ers, inciuding the imported Chinese tubes, for mamrfaciure of ampouies/viaIs. "

it was reveasied during the course of investigation that the GP had introduced a practice of putting a dotted line on its NSC tubing to differentiate its tubing from other suppiiers. The staiernent of OP, reproduced by the DG in its Report wczuid be relevant to menticn here:

"We infracfuced darted lines on our NGC} z'ubing and tire sarng is stiff! being corrtinued. This is fa diﬁferenfiafer our tubing from other sup-pfiers. We béve never introduced dotted lines an Fioiax produced in India".

The DG, based on the above statement of the OP, concludes that such marking differentiated the NSC of Schoit from those of other manufacturers and enabled it to identify if there was any frauduient 'mix up'. M View <33' the same, there was no rationaie for the GP to impose its onerous, one sided and unfair TMLA on its conrverrters. The DG reproduced the statements of the converters who unequivocaiiy turned down the pcssfbiiity csf such 'mix up' on the ground that in case a converter tried to mix is different types of tubes the same would be detected as different giass tubes having different chemicai camprosifior: and have different batch process of manufacturing which wuuid create prabiem at the Pharma and at the time of seaﬁing having regard to their different softening points.

Thus, having regard to the above facts and statements, the QG conciudes, "...2'here is ryeiiher any evidence of 'mix up' nor any scientiﬁc: ratiorialefiechnicai pussibilifyﬂﬁasibi/if_y for mixing of the grass rubs-s of five OF' wifh that of Chinese :'n7parts"'. I2' is therefore concluded thaz' ifs TMLA £1 0i'he.>r reiafed agrezemrrmrs as also its discoum' paficy were may irrfemiec' io foraclose me markez', Iiznitrfesiricf marker, deny market access to the ccnveriers operafing in the relevant markea*.,...iz's theory of possibfe mixing r':"s.¥< was nor even ('If any signiﬁcant prazvproriirwn any way and was oniy interzdsd tO"addfesS?he'requirements emanating from"

smafi Pharma companies who fbr' vaziaug 59:45; were more prone to using Chinese . . x \~ \;'<'-V3:-'W ;mporrs.. .thus the TMLA aftracfs me rm ' re g;:aﬂ1}§5';1é'fi§§r;, Section :r(2)(r>){;) offhe Aer. 43,} fix Aw

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u "*3? \ .' xi: ' C4. 2- yrs " .' 9 :

55: if U ': 3" §~ '<~ :

$1 Q3;

,_ \_ r' A v ' "-' f \\32~3".'iw' '......v----'""' ""v-.w.....

4.54 4.55 Using dnminant pusition in the upstream market far 'neutrai harnsiiicate USP mi glass tubes' to protect the dnwnstraam market of ampouies etc. The invasiigation of {:16 was directed aiso ta examine the aiieged discriminatnry practices cf the OP anti its impact an the downstream market of ampouies. it was evident from the baiance sheets inf the severai converters that the JV of ('JP has grawn much more than the other cssnverters operaiing in the dnwnstream market. A marked increase in the proﬁtability of Kaisha was also observed comparing the ;3re--Jv and post-Ni periods. in view :3? the DG, such growth cnuirsi not be attributed to any efficiency on the part of the JV as claimed by the DP and the proﬁts of Schntt Kéisha were a direct resuit of the favcurah!a.tberms granted in it by the DP.

The favourabie heatment to the JV was examined by the DG by way of anaiyzing the terms and conditions of the Long term Tubing Suppiy Agreement which was entered into by Schntt AG and Kaisha. in accordance with the terms of the agreement, it was observed by the DG, that the prices for suppiy of tubes tn Schott Kaisha remained static: while the other converters were charged higher prices 'far the tubes suiiipiied by the OP during the same:

pericad.

Further, Ciausse (3) in the agreement under the heading of 'Deiiveries, Rayment Terms and Prices', as per the [JG provided far a continuing discriminatory tréatmeni to the other converters pf Srshstitt to the advantage of Schntt Keisha and the coimpetitors oi' Schcsti Kaisha dc: not have a ievei péaying field, The E3G's investigation further reveaied that the JV had been given preferentiai treatment over the other converters in ensuring uninten'upiec! supplies cs'? the required sizes at' the Giass tubes. As per the clause (3) car' the agreement, the OP is under contractuai obiigaiican in make suppiiies to its JV. Therefore, whiie Schott Kaisha has been getting assured, regular and timeiy supgziies of the required sizes of tubes, the same have been denied in other tOi'iV£3i'i€:'i'S. This restiitesd in hiss oi' busines§for fhérn. it aisci ie-id in a situation where they have remained uncertain about their su;3jgii'§2§;§:§;3g;i,VAhave had to carry huge inventories. it was further brought to the notice cf ihgﬁigi converters that this prisition of preference and priority of Schoti Kai:-:2 and promoted before the 4.58 4.59 4.50 4.81 it has been aiiaged by the informant that the DC} aiso observed that Schott Giaas has forced other ccmverters 'em suppiy 'tubes not below the pricaa charged by Schott Flaisha. ifs JV company has sent amaiis in inform a convartar regarding its prices for 3 particutar Pharma company so as rig ana_ure._,that the said canvariar does not charge: price iawar than its prices, and in effect, in withdraw {mm suppiying to the said Pharma company.

The above findings Xed D13 :0 the conciusion that "fire OP has groasiy abused ifs daminant position in the upstream raiavanf market which has far)' £0 a sifzratian where the lava! of ..___r:§>r:z;:3r-afiriorz in the downstream mankaf has been disforfad is war}: in fayoqr of its Joint .

Venture. . irze said act on the part of the OP atz'racf.9 fha prm«'fsIo:7 wf Saciiorr 4(2) (a) of the Act.

The D6 further observes, "Since the pracficas of the GP in favour of the JV has .9230 rasrrifad in Iimifingfrasfricfing the market' for the converrars .-and has led to deniaf of market' access to them, the same afso attracts the pmvisirm of Sacfion -;1(2){b) & {<2} of the Act. . ma favourable farms given by the OP, which is a daminam' errtarprisa in the upstream market, fo its verﬂcaliy mragratad JV company, eperafing in the cibwnstraarn rnarket, contravenes savera! provisiorns of the Conrpeiition Act 2002 as aforesaid. In this regard if is stared that Section 50 0:' the Cornperifion Act sfates asunder."

"The pr'ow'sic>ns of this Ac: shah' have aria-r;f nofwifhstanding anyming fnconsistanrf fharewifh contained in any othariaw for the tirne being in forcta".

Thus, in View of the above, even if these agr'earr2ar2fs are enforceable infer sa between {ha confrarcrfing padres in farms of the indian Contract' Act, they are voidabia in farms of the Competition Act 2002 to the ax1'an2' they are irrmgnaisterrf w:':'h I2'. "

' Leveraging Mmmpoiy in A13:a_ba'r sagment is make' sale of amber tubes contingent upan purchase cf ciear tubes its monopoiy in the Amber \':' H u

9 ' ~ ¥fra\c0r1varters. Same of the 9 ''-'f as segment is ansure fair ﬁne enforcement of ' '-3..

s,/ «W aé m § 3 3*';

ts: 2:"

as a r .3 4;

4.533 4.83 4.64 4.65 .45 on 2:33 converters in their statements to the DG mentioned that Schwtt has. been forcing them to meet their entire requirement from them only failing which they wcsuid stop suppiies ta them.

The OP cm the other hand denied this allegatian and stated: "I deny this aliegad practice {and deiivery rr-siiabiiify of NGA to our majar Gust:-naers is more fhan 95% and if is nor linked is safe :32' NSC?"

The {JG did not find rr';er§*.5 in the OP's wgumenrs. The statenwents of the wrwerters traart the GP ieverages such power in the amber segment to enforce sate of dear tubes, he conciuded, finds force when the same is viewed along with the TMLA1Discoun'c poiicy of the OP wr3i_§h__§;r_e intended to achieve fuii ﬁne enforcement. DG conciudad vi:3i:;2j_ti<1rr---af..Se<$tien 4(2) 1(a) Br the Act.

Eeniaf of Market Access to the informant The {'38 investigates? the matter of cczntinued refuse! is safe of grass tubes by the GP in the Informant despite the exit 92' the Informant from the upstream market of 'r'aerutraI borczsiiicare USP Type i giass tube and its ability to pose any competitive threat in the said market.

The DE': took note 9f the response of the OP on this issue that the informant previousiy atfempted to intentioraaiiy infringe Schoi'z's trademarks and to frauciuienriy pass borosiiicate glass tubes manufactured by Schcit Giass inc§ia.. The SP produced a cnpy of an order for prmting fake iabels of 'N80 SCHOTT' and 'Made in india by Schott Giass Errdia Pvt. Ltd', under the signature of Dirrector, Kapcmr Grass. in View of this, OP biacklisted Kapoor Giass and decidaci not to enter into any suppiy arrangements with Kapoor Giass.

_ The informant contested the stand taken by the DP and stated that Schett india refused to dea! with Kapoor wide its letter dated 05.84.2001 whereas the incident of atieged attempt of infringement. of Schotfs trarsiemark is of 29.7.2502. Thus, Sch0tt'5 refusai to dead there is rm correiatinn between with Kapoar and thguaiieged incident, it averred.

The fnfornaani further explained its conducrtgrre iabefs cf Schcztt Endia were afﬁxeci onrhe consignment of Schott Encii §"°m' had obtain-szd from armther C, 'I? \~_,_.;' V_.\ ampouie maker because of Schott India': , ::§p£y iiapaer Giass.

.<="\' , ' ~>'§'.\Z'.' '>' "

refééai' Q w T 4.6?

4.88 It was stated by the informant that as some 01' their customers had atabiiized their formuiations with Schott tubes, they required ampouies made out of Schort tubes oniy. Or:

acco.14n_5;<».%{~J£-gihis, they were frsrcad to procure Schott tubes frcim other ampouia makers, who Semi: irrdia was suppiyirig to and who had excess stock of tubes, in order to retain its customers in the maricat for ampouias. These ampouia markers however decided to suppiy Schoti tubes is Kapoor an ' no names' basis and after removing the iabais in order is avoid getting naiiced by Schoti.

Having ragar§i,.,ig ting axpianatien furnished by the lnfcwmani as abmra, thawii3G"Aoaaar1}és,,fir__ ,, .

is evident' that' ma IF' has indulged fr: unauthorized uaage car' the rradamarir af fhe OF'. However, the culpability of me JP regarding suck: unauthorized usage of iradeniarrlr of the OP has to be viewed in ihe backgmund of the facts of the case that such usage: was ratify in respect of the pmducts of fire OP, which far reasons best fmawn to GP was not being supplied to the IP...Thu.s, the iasue herein for the OP was not of fraudulanrfy passing off the producfs of ofhers as those af smart but' aasantiafiy cf unauiharized usage of its Iabais. . .iz' cannot be ai/owed io refuse supply air 'nez1i'ra1 Immaiiicara USP 4 gfass tubes' is the IF', more so iwhen the CF' is in a dominant position and the IP has axiied the said upstream reIevam* rrrarkar since 2008. ...Thai if continues to deny are products manufacruress by if to me JP shows that the OP is iridrrfging in the abusive conduct of its posiribn of darrrinanca in the relevant marker' which attracts five mischief as contained in Sactian 4{2);'c) & (a) of the Act. "

The cuipahiiity of Sci1ottAG, @ermany in the abuse cf dominance by the GP The DG, rzavirig EQVBSEEQEEQGN the case, formed the View that Schott AG was fuiiy raspcsnsibie for the abusive conduct of its wheiiy awnad subsidiary Schott Glass india Pvt. Ltd. which had an appreciabie affect on competition in the upstream and the downstream raiev.-ant markets in india. The fafiowing ifacia, evidences and reasoning were adduced to by the DG ' "iﬁ support oi' this view:

H The operations of the GP and the JV the same strategy of the parent company to further its in'rarasis in since Schoti Slasa india Pvt.

:',7-5'*"Ir5" \ .a Q. .~'\ 3r I' ""'é.~'*/,3). Qfrligi E"

} '-.

~"'~"'«rm~.,%:,_««/ Ltd is a whoiiy rziwned subsidiary of the parent ccnmpany anti Scheti Kaisha is its jtzint venture in which it has 50% stake.

we The ..siatem.ent sf" iF'residan'r, Schott india: "We work cfosely in conssufiatianv~wiihm?iy-. boss, who is the head of Tubing Division which is under Schott Phamiaceuficai Systems and ofher coiieagues who are at corporfaie of Pharma Tubing business at' Germany, Major tiecisions ccxrzcerning pricing, ciiscaunfs, tneiting prcucesg pmduction, qziaiify, branding of our products, investments in the coumty, employment of fum:z'ic:na} heads of diffeseni' depa:fments...are taken in joinf cohsuitafion.gx1<i£i;z.the Curparafes Headéguazféf of Tubing Divisian of Gen'nan_v....Qn .~..

formal? basis there is a mcmthiy ielepfwnic conference Gaff fo review perfonnance vis- a~v1':~3 ihe monthiy berformance objeéctiveaxﬁgoals and bafance score card :3bje::tives."

is On perusai of the czcspy of the TMLA, it was found that the agreement was between Schott AG. Germany and the respective converters. The price circuiars as aise the discaurwt offers are issued by Schott AG, Germany.

a The statenieni of Presideht, Schott indie on Lang Term Tubing Suppiy Agreement with Kaisha: . ihough fhave signed the icing 1'ermsupp.!y agreement cf the J1/w:'1'h Schotz' Kaisfva, aii decisions inciudirig prising of the suppiies to JV wens: faken by the corporate 05503 in Germany of 861102? and .2 was assaciafed at fhe very and for my' signature and {be necessary documentation"

5 REPLEES {BF PARTEES TQ DG REPGRT 5.1 The main submissicms made by the inforrrzant on the ﬁndings of DG's investigation and coinciusiansi, are summarised as under:

Q The infnirnianvt endorsed the EI>G's findings anﬂé-iiexiani ma:rket, doniinant position of the GP. They further added to fine DG's csizassrvaiions stating that Schcitt, india is whoiiy awned subsidiary of Schoti A?.f.§::;»gi§§:;h_Ais whciiy owned by Cari Zeiss Foundation and is the saie sharehe fax ' :'\<i\*«'~«'}' _ zzﬁwasvmgsiiizae' 5 power houses Cari Zeiss A '-* ,-c-4:

AC3 sales ~ EUR 2.98 biiiion (2.01 '"~§7'd. _ 'AE§i;wit1EUR 2.85 biiiion with a $7.; S is"

$3 i.=,'§*-'ixi V ' *:,.3~'».\_"_\ 3 ,i\( S 'R

1.. ft 'Aw z'-:'§'-'(.-_F ("~39 1; xx number of business sgsreaid across Europe, North America, Gentrai America and Asia.

On at' unfair price. the infmmant abserves that the DG has erred -

confusing a "predatory price" with an "unfair twice" when the latter is net ccznfided to the former and in daring so, has rendered the iangruage used in Secticm 42(2) {a} (it) redundant. Kapoor Giass submitted that wag incumbent on the DC; to ﬁfﬁi cietermine whether the margin is excessive. Thereafter, it was imperativé: for the DG ta anquire further and check whether the prices that were charged by the Schott Grcug_t::at;i,gtttygreasonabieness. That the Commission may aécordirtgiy find that the Scttott Group was in tact charging excessive prices and set aside the DG's ﬁndings that the Sctmtt Group has not said its products at an "unfair price".

it was further averreid that the {)8 white deaiing with the Emma of predatory hiring has failed to appreciate a number of factors:

0 The intention behind such hiring was singiaci out for such treatment because it was engaged in the business of making both borosiiicate gtass tubes as wait as gtass ampouies and ccsuisci pose significant competition to the Schott Group's operation in india.

o Gnce Schott Groug::='s bid to acquire Kapoar Giass failed, it began in hire its key workers from Kapcuar Giass. And it is not right that the employees approached the Schott Group since they were mat being paid by Kapoor Giass.

«:2 Such predatory hiring harms Kapoor Giass's abiiity to produce: gcarsds and is prohibited i.i!'iEi'E-Ii' Section 4(2) (b)(i}. Bath Sctmtt Gmup and tiaisha * }:1pd._§kiiis tc: make ampouies and j Giass anty amouhts to £3' '3:

39' Agreeing cm the fmciings of 'the D8 an the issues cif ciiscaunis offered by the DP, bundiing sf amber giass tubes with cisar, isvs-raging of dominance in the tubes market in praise: the dcawrastream canvsrsisn market, refusal to deal with the inisrmant and the cuipabiiity sf Schg§iA4_V;¢i§',sAthe inicirmani urged that the highs-si ievei cf penaiiy isviabie under the Competiticm Act be imposed cm Schott Group fur abusing its dciminani posiiicin and rssuiting massive tosses to enterprises such as i{a;:2c>m' Glass and either convsrisrs.

5.2 The key abservsticms, ccimmeriis and addiiisnai iniarmation pmvideci by the {DP in response to the DG report are sumnjsrissd as under:

.. vs'?

Thai the reievant product market wouid be Borczsiiicate Glass Tubs-s market. is-iewever, the relevant geographic market is not iimited to india given that the borosiiicate giass tubes are procured by conizeriers in India from other Asian countries.

That the reiievant market is ccxmpetiiive given the 'fast that NiPF{C) entered both; in ihs Bcimsiiicate Glass Tubes manufacturing segment as wait as in the ccsnversion iausiness The aiiegaiion of majcxr iniernationai manufacturers carving different geegraphicai domains for tiiemseivss is compisieiy baseiess and unwarranted.

Thai most of the Piiarma sompainiss contacted by the DE» stated that despite siabiiiiy studies, change from a bomsiiicate giass tubes manufacturer to ansiher was feasible.

Thai Sciioti fﬁisss indie offers ciiscsunis on its bomsiiicaie giass tubes is clear evidence of corripstiticm in the relevant market.

Thai discriminaiion as a iegai concept is unsquai treatment 02' equaiiy pissed parties. Thus, different discounts when given in different persons who are Lmequai cannot, per site, be treated as discrimina'u::r_y or unfair.

a. Srshoii Kaisha has been by far the SGI. No other converter =9 *2 -

.-4}' __, \ venture with Schott was put in piece. Any aiiegatiori suggesting direetiy or indireciiy that Schcitt Keisha gamereci significant market share oniy because of the terms at which it is euppiieci GST by Schciii {Biases in india is iaise. The terms ef suppiy ta Sishetiiiaieha were negotiated by Schoti Keisha with Schcti Glass indie in e campeiiiive environment using its muntervaiiing buyer power being the largest customer of Schciti Giass indie independent as' the JV arrangements. As a matter ei fact, Ampeuies suppiied by Schoii Keisha are not priced tower than Ampzauies suppiieci by either ecinveriere. Hence, ihe terms offered to Scheii Keisha are not used to cause any appreciable adverse effeei en»{Z;cimpetiiien in _ indie.

Thai Scimit Giass indie denies aii such aiiegetions that ii. has cieiiberaieiy StCi;};38Ci or delayed supplies to other converters so as is provide Scheti Keisha with a competitive advaniage. Whenever a shoriegie in 5u;:ii:ii_y of borcisiiiceie giass tubes has occurred, Schoti Giaes indie immediately provided the same item nianufaciuring sites in other ceusriiries.

That Sciiati Glass indie cieriies the aiiegaticm that their cifiiciais have canvassed Scheti Keisha in front of the Piierme ccimpanies. in fa-tici ne Pharma campany it its statement to the US has stated that Schoti Giess indie canvassed for Sciioti Keisha.

That the aiiegatien that Schoii Glass indies discount poiicy ensures that the prices of its Aboresiiiceie glass tubes for converters remain iower than the cast of imperieci boresiiicaie giese 'tubes manufacturieci by iriternaticiriai competitors fereciosing the Indian market for inierrieiionai competitors is mieconceiired and inconsistent with and contrary is other sietemenis in the DG report. The OS report itself has mentioned the': due to superiar pmduci quaiity and merketirig strategies af Scheii iffsiase indie the ether competitors had in exit the market. However, exisierice of irriernaiienai cempeiiiar NIPRQ shows that there is no iorezsicisure cf conipeiition. Moreover, supplying high quaiiiy products at irziw prices in iiie iermei discqiinis is pro~compietiiive'""es being beneficiai for ccinsumers and cenriei be said a 3ciii§§g:

Thai i3Cii'ii'.1ei"i'!'.":"; raised eariier on passing 0 argii mi§§.T'g re gérggiine as opposed in BB. Wk 3. RF . ii; iii. ' finding. Thai whiie Arnpmiiee made from ' ,;riii§§\ieJ:'giaee tubes may have V I " ' ' {tr .~ .~r~s ' ' «.2 1- ' .a~* 41 different shade; this is not true fer ail Ampoiuies made from Chinese beroeiiicate giaes tubes. The TMLA heips Escher: Glass indie to mitigate the risk of conventere mixing Ampouies made from biorossiiieate glass tubes emnpiied by Sazhcati Glass indie with these made from inierier quaiity i:mre5iiicete....giaee_tubes iniperted from China. The cnrwerter acquires the right is} display Scheit iogo and brand as griari of materiaie it uses to market and suppiy Ampouies to Pharme companies. Under the TMLA Schoti acquires the right ta inspect the premises of converter to ensure that Sehoife brands are inei being abused. Schoii C-Eiass indie. aiso executes a marketing support agreement pursuant to which the converter agrees te promeie Schoti (3135:; india and its products and services. to enhance its own business in ca-operaticrrz wifbi'Scio_iott Gieee indie. e7m5:i""ta'i'§5'i'£;E;%i;eﬁ:s' through the prometion of its brand by the converter in its marketing and packaging materiais. Seheii indie agrees to pay the converter certain sums on e quarteriy basis. The ciiscounis and payments made to mnveriere who have executed the TMLA and the marketing euppmi agreement is the funciionai discount efiered by Scheit Giaee indie to such eenveriers. There is me discrimination in offering such funciienaii discounts and eimiier functional discounts are offered by Sizhoii Giase indie in eii eenverteirs Whtﬁ have executed the TMLA and the marketing euppmi agreement.

That the practice of incorporating a dotted line was an effort made by Scheti Giese indie to eiiminete the passing efflmixing risk. Despite the dotted fine an Schoft Glass inriia"e NGC3 berosiiicaie glass tubes many Pharma companies' pariieuiariy smelter ones are net aware of this identiﬁcation mark. Srshcstt aieo had a eomparabie mark on its; Fioiex brand of berosiiicaie glass tubes. However, Pherme companies did not eppreciateihe resuitant markinge en the Ampouiee since theee markings caused probieme with their automated optima! defect control and reeuiieri in waste for ihem. Therefore Scimtt had to discontinue such markings.

'That offering functiorzai discount' disceunts ' which Schoti Giees indie can V_.;\V§":§f>Er made frem inferier quaiity Q3, \.:__,! ..

bergeiiieete giess tubes; being passe riff: s Q onjieiisf oreeiiicete giaseiiiiitiee and L3?" 3' $22:

the': of its bereeiiicate giaes tuizxes e"rn"§ nwizéf ' <3 .

signiiieantiy mitigate the eoneerns it with 3§ii?i{ r inferior borosiiiceie giaee ., , Mr; e mi'. "

', ti)' .' ' \~;\__*~"$.-"' 7 .- . .' '3' '~???-\'.~';'{ Ks Ngﬁf Va-\\1-Iv»-

£12 That the afiegation of ieveraging the amber segment is make saie of NGA contingent upon purchase of NGC is denied and it is maintained that Schcatt Glass indie has nut made the safe sf amber borosiiicate giass tubes conthingent upon the converters purchasing dear bormsiiicate glass tubes.

That given the previous atﬁempﬁs of Kapoczr {Stags to intentionaiéy infringe Schatfs trademarks and to frauduientiy pass off borosiiicate giass tubes manufactured by Kapaor Giass as bornsiiicate giass 'tubes manufactured by Schcttt Giass inciia, Schott Giass indie is rehsctaht to suppiy its hercasiiicate gfass tubes to Kapoar (;'sE_a§§. ' That a party cannat he farmed to suppfy its products to a person who has by phrevious actimns shown disregard for the mteﬁiectual property rights cf such party and has in fact aﬁehmpted to defraud through misrepresentation, other piayers in the verticai supply chain.

That sineze the Schcct! brand is owned by Schcatt AG. in iegai terms, the right to dismay the same can orﬂy be granted by Schutt AG. Hence Schott AS is the party to the TMLA. Given that Schcatt Giass india is a whmliy owned subsidiary of Schoﬁ 8+-mbﬁ, which, in turn, is a whoiiy owned subsidiaay cs? Schott AG; it is naturaf for Schott india to discuss its straﬁegies and poiicies with Schott GmbH. kt is aism exVpected that Schcstt Gmi:sH being the sharehoider cf Schott Glass india wouid share its experience and support Schott Glass india.

That the DG Repcxrt was hasty and contradictory to other statements within the EEG Report itself and suggest a preconceived dispusiiihn against Schott. in fact ah the adverse ﬁndings seem to be based on siatemems made by certain Converters (without any crass examination} whcr are clearly confiicted as they are direcﬁy ihnterested in an adverse ruling against Schott Giass Endia. As a few examples of the ctmtradictions in the DG Repor': in this context, the GP minted am the fcriiawingt a. The E3-{E§..ﬁepor': shows a decrease in Schtagjgi' 'as§._.India's market share and an" ' ' ﬁ£,ﬁggi§$;§3harmany}. Even Kapmar \. O A 1 _,a .

rt, increase in imparts {exciuciing impcn _5q§rc§jg1 "A.C' 1'.' Gﬁass in the Snformatiorz has stated V A 5*' '_ Q)/* 4.3 V<"t~'!.? I in 231i}, Trivsni Giiass said its tubs giass business to a Japanese company, MPRO. MPRO has aisc: rscsntiy acquired majority shares in an indian Converter, Tubs Glass Contairisrs Limited, These heavy investments by NWRO ciesriy indicate that NiPR{Zi ssss gated chsncssm snter the indis market and that there is competition in both the upstream and downstream markets.

The {)3 Report conﬁrms that the exit of certain domestic competitors was not on ascmint of any aiisgsci practices at Schott Gisss indis but could be because at insbiiity to manage business, prsduce quality products, manages finances sr inability to match the czgusiity and marketing standards at Sshstt 'C-fdsss. indis. Brit the same BG Report csnitrsriists itseif by stating; Vstiptjiiersiihavei b i in had to shut their tubing business rzrmssqusrtt upsn sritry sf Schsti Giass inciia though the uitimsts csnciusion is still the former statement.

Even thsugh the DG Report idsntiﬁes the requirement of a stsbiiity report as an entry barrier, the fact sf the matter is that a icxt of the Phsrrns Companies from whom that DB received information have stated that it is commsrsisiiy feasible tr:

shift from one source of giass tubing to another; The £363 is in possession of various statsmsrits from other Converters which evidences that varirius ccmpetitors of Scimtt Giass india have compistsci stabiiity studies.

White on the one hand the DG Rspart states that the sitsmats sources sf tubs giass do not impose any significant pressures on Schott Giass india, the DG Report has mt even investigated sr explained why then is there any need for Schott Gisss imtiia to sffsr any discounts whatsoever to its custsmsrs. The fast that Schott Giass ilnciia has to offer discounts in the first piacs to its custsmsrs is indicative that it carmcn', afford to be misiivious to its competition.

Ccrntrary to the ccznciusisns reached by the DC}? in the {)6 Report, Schctti Giass inciis is highty incsntivized to sujppiy Borosiiicsts Giass Tubes ta ski Converters and Resp aii such Comrsrters satisﬁed. Firstiy, this pmciuctiori tanks required for manufacturing Borssiiicats Giass Tubes must prcsctucs certain minimum quantities in _::i'§is;' to protect these major~invsstmsr'»tsfrom damage and to justify any other Ctamrertsr couid potsntiaiig}.

I .

. ,_r .

profitatsiy run a production tank.

against Sshott Czéisss India since Sfisitaift Gi; ' d 548 *5 4 business it gets fmm the ether Canverters. Sciiott Giass india's sales teams are incentivizsci to saii more Barosiiicate Giass Tubes to Converters {either than Scimtt Kaisha) since they receive incentives on saies meets to such Converters.

g. Lastiy, the DG Report paints a picture which shows that Schott Giass india heids the other industry players at ransom in terms of prices and supplies ' (thaugh at the same time the DG Reiport records that Schatt Giass indies quaiity and reiiabiiiiy are unsurpassabie anti cites that as the main reasan for preference tciwards Schott Giass ii'idi3'S products}; That sash a mnciusiion by the DG is naive and impracticai. Stctmtt Giass India can néi2éf'i'i¥si>iEi"the Pharma Clcsmpanies {which are the industry giants} to ransom in terms of prices or supplies. in fact the BS Repart itself states that Pitarma Companies have confirmed that prices are negotiated with the Converters on a one to one basis.

ti. The.DG has recognized that the industry of tube giass manufacture is nmt an easy one, patticuiariy if one were to star': tram scratch (given the high capitai investment required and the tong gestation period of the i:+usiness}.However, an the other hand, the DG has aiiegect that Sctmtt Giass india is foreciosing competition far its foreign campetitors. The DG does not seem to have even investigated this allegation. To the contrary, the D6 is tuiiy aware of i\iiPRO's entry and the continuousiy rising market share of Chinese imports, which goes against his contention. Hence ncs act at Schoti Glass indiai can be said to be keeping intemationai campeiitors cut. The DG has further made a very tease and unwarranteciiunsubstantiateci statement that different interinaticnai manufacturers have carved out different gemgraphicai domains for themseives and that they dw not ccmpete with each other. Not an Esta of eviderice ta prove this ever; remateiy has been pmciucett. The statement is made mereiy' on the basis of an unsubstantiated write up provided by Kapneir Giass, which even the DG was not abie to verify.

= On the issue of target ciiscount, the OP pointedﬁisﬁ-»th ticn as a iegai concept V' it f' F impiies unequai treatment amongst squats. attic t ' ' _ gin irtdiaﬁas ever uttered the t3usim=35s that Sctmtt Kaisha did (even betoi G3' "'.~§'\ .3 V jo:?it§'3_ V v ii";

.95. 1'! .;=',»*' \' -

B Sahel: Glass indlal Schoii Kaisha has always been a markei leader in terms of the capacity, resourcles and size. Hence any alisgaiictrn of dissliminaticsn mus': be viewed taking these factors intn account. Tlial l<aislis's grass margins have been growing 'steadily even before the jsint venture.

That the terms and conditions available is Sciioil Kaisha under the long term supply contract have been negotiated as pan of the joinl venture arrangements by Small Keisha wheels Kaisha was clearly in a very strong negaliailng gzicssiiinn. The favourable terms are a result of the countervailing power that Schotl Kaisna as a cuslan1;s§>li_s_clvj{sys{ $_r;__l'_intt__ Glsss__li1;lia as the siinpliér Di Borssilicaie Glass Tubes. Given the pnzifilsnlijrllsllziggest éilslolnér that Schoil Keisha is is Schcsii: Glass ll'I'C§la, Scholt Glass indie, in order to satisfy Sciioti Kaisha hall in re-lent to-such terms in favour of Schott Kalsha. $choil Glass lndia cannot afford to lose even a single (Jonverhsr lei alsne its largest custcamer.

Thai the favourable terms available is Schoit Kaisha have not been used by Schotl Kaisila is undercut other Cnnverlsrs. Scholi Kaisha does nnl use the discounts available to it from Schotl Glass lndia to supply Ampauiss at prices lower than these of other Converters Hence there is no effect on competition at all on acsounl ml the favsurable ll:-arms available in Schoti Kaishs. in fact, Tube Glass. the second biggest customer of Schntl Glass india. has specifically stated that the faint vsnlure with Kaisha has not adversely affected ihsm at all and that Tube Glass has grswn pnsl ins joint venture. in terms of deliveries to customers, Schotl Glass lnclia has ccrnsisienlly performed in favour of all its Converters and in fact has an average of 95% performance record on clsliverles, lts ability is supply and make timely deliveries is admittedly a quality that Converiers and the 338 have recognized. i-lance any allegation that it prefers 8siii:>ii Kaislia on supplies and deliveries is false.

Thai csntrary is what has been alleged Schoii Glass lndia has never canvassed or prsmoted Scholl Kaislia laefcnre the Pharma Companies. Ssllotl Glass class not deal wilii or inﬂuence the relationship between Pnarnla Companies andﬂcnveriérslfiil is naive to even suggest that 3 tube glass nlanufaciurer could effectivvaly inlaid Phsrins Cornpanlss to ransom or influence their decision can which Convesll Thai while the US Report has sonclutlsd than integrated with 46 Scnott Giaes indie it has not been able to Show any eoverser irnpiioation on competition in the upstream and downstream markets as e resoit of the same. As an exenioie' {3} Sonott Glass India continues to compete with its competitors in the upstream market to get orders from Converters. it therefore offers discounts to thern to procure orders from them;

(ii) the terms and conditions offered by Sohott Giass indie to Schott Keisha are not used to undercut other Converters on the prices of amooules or in any other way actverseiy affect the downstream market of ernpouies. Further the EU regime recognizes that benefits aveitsbie between verticaiiy integrated enterprises are not to be seen as anti-= zcoinpetitive unless such beneﬁts were in fact being used to cause adverse effects on competitiorgtirnirgtt is oieeriy not the present case. % I 4 I i V 4 On TMLA and the Marketing Support Agreement, the OP observes that the meiiteting support agreement is basioaiiy an agreement by which Schott Giass indie endeavours to co~promote its brand and products with the Converters to the Pharme Companies. By this agreement, in consideration of the Converters promoting Sehott Giees indies brands and products, Schott makes certain payments to such Converters. Since the co-promotion under the ntariteting support agreement requires Schott to iioense its trademark to the Converters, Schoit {though Schott AG, the owner-of the trademark) executes a trademark iicense agreement to use its trsoemerks under the royeity free tradernarit license agreement (is. the TiViLA),'i'hat white Sciiott Giass indie makes an extra payment as consideration to those Converters which enter into the marketing support agreement to rsmprromote Schott Glass in::iia's brand and products, the regular voiume discount and suppiies are avaiieioie to aii Converters even if they may choose not to enter into the marketing support arrangement with Schott Glass indie.

That Schott Glass indie is very conscious about its quaiity and any suppiies to Pharme » Companies of Arnpouies oiaimed to be made from Sonott Glass indies Borosiiicste Glass Tubes though aotuaiiy made from inferior Borosiiioste Gisss Tubes wouio be extremeiy detrimentai to Sohott Giai-IS India both from a_3;o:_i§.uEa;§/ten perspective as weii as from at product iiatriiiity perspective, To protect its ' R i . I T rights were included in the TMLA, whim agreements across the worid. Evidenc

-*' ' - .°">.='73 :~. "0 3' \ - i.

e%{e.>"e~ sgetqmary in trademark iicenee . , 'M K ":2 <3' _' W% gees rig off risks are rest have .3 been provided in the Deteiied Response.

;§ro.§§J§fiek§"oi.:ggeesing off or mixing, "visitation '0 E On the attegation of teveraging amber segment to make NGA sates contingent upon purcrzese cf NSC, the DP stated that this was a compietety feise aiiegetion based on statements at just three Cenverters. No written evidence whatsoever has been found to substar3ti_§gite_\tt1is. atiegetion, Further after atreaciy acknswiedging that Schott Gtass indieis» ciearty distinguishiable anti pre'ferrei:t on account of its high quatity and reliability, there is no reason why Se:.:h0tt--G¥a$s indie woutizt even induige in such a practice or need to induige in such a practice.

a On the issue of dealing with Kapoor Gtaas, it was mentioneci that 'r1:;»igv§)eife_Wita_ tt}e_r_ewa ' cieniat in the D13 tﬁepertttietviiepsor Gtavssesmmiitted a fraud. Nothing can justify a fraud. * The tact that Schoti: Glass indie did net take iegat ectien against Kapsor does not change this. it woutd be very unfair to farce Sstmtt Giasa India to deai with S-{apsor Giass under any circumstances. Kapeor Glass has shown its hostility tewards Sczhott States indie very pubiisiy ant} bletantiy. Further, ctearty there are other manufacturers in the market apart from Sczhett Glass India. Therefore Schott Gt-ass indies refusal to supply Bcsrasiiicate Gtass Tubes to Kapoor Giass does not effect Kapoer GEaes's abittty to manufacture Amsouies. F"urth:er, the DC: Report does not seem to have investigated into the manner in which Kapoor Giass conducts its Ampoules business and what its standing is in the market qua quaiity, reiiabitity and creriibitity as these are cieerty tasters that would affect deatings with and business of any entity.

is That it is a pure tectmicatity that Schstt AG is a party to the TMLA because Scheti AG technicality owns the brands. T0 use this techriicatity and ignore the overeii arrangement and scheme is a gross error and shouid be disregarded. 4 6 ISSUES FOR DETERWNATION at in the Eight ef the DGt's tiwestigeiiicm Report, written submissions and the arguments during hearirtgs of both the parties, the foltowtng key issu;e§_Vemerge as the main psirits 'far determination of viotatior: of Section 4 of the Act in the instant c:aee:~ L;»._ -3 \ x c _ 5 a What is the reievarzt market in the cegtg&t?et'%§gsﬁ§e5§rSgr , {as} and {t} read with 'N 4~.«:_%;:;y ' V Sectisn 18(8)/{?)ofti1e Competition {R - ' {es \ '3' I

-:1 3 m "xx .

8 Whether the Opposite Party, Schott India is dominant in the relevant market?

3 Vviieihegrwﬁchoti India has abused its E§0i'E'1§i'!Ei.'"tC:& in the reiavant market and by --

ccmductsé has infringad the prcwisions of Secticm 4 of the Competition Act, 2002?

This issue can be further bifurcated into the foilowing sub issues in anaiyse the conducts in question and thair effect can the reievant markets:

a. Whethef. Wiia has imposed unfair and discri§'§5.iﬁé'§gr"§f' on its converters ihrough its désceuni policy?

b. Whether Schnﬁt indiefs conc:iu«:t{s} leads tq exciusionary effects or fcereciosure of cempetitian in the upstream reievant markets?

ct. Whether E-chott India has ieveraged its dominance in the upstream market of tubes to pretest the downstream market of crmtainers'?

d. Whether Schcstt india leverages its dmminance in the amber segment of tube$ to make saie of amber tubes contingent upon purchase of dear tubes e. Whether Schott indiAa's decisicsn to stop suppiy to Kapcmr Giass amounts to derziai of market access for Kapaor Giass'?

? A?*«3ALYS§S OF ESSLEES 7.3 Pharmaceutics! packaging fur iiquid injectabiet some facts 7.1.1 in assésé§ng"§§§é:'T§ésués 'i dentified above, reg «(In '3 . ._r .,-'-

1;-.34 , \ r liquid injectabie, the \§ features of the value chain of pharmac , ' -.' §zz\'.$' cgfnp f ccmstruc': of the markets irwalved and th partécipants in the value chain are: '-'-"W"

as The bo:'<:>siiic:ate giass tube msnufacfmrsrs ("Tubs manufacturers") an The manufacturers cf ampouies, vials, cieriiai cartridges and syringes ("Cantainers"}, commoniy imcawn as "C0nverters" and "

as The pharmaceutisai csmgzsaniss who buy the containers from the converters and use the sanwsligi iniectabie ("Pb-arms cx3mpanies"'} ?'.1.2 Prior is 199?, the domestic prcsduction cf borosiiicais giass tubes in india was contrsiisd by five major piaysrs Seraiksiia Giass Wsrk Lid {asrsikeiis Giass), Bharsi Glass Tubes Ltd, Twincity Giass inciis Pvt Ltd. (Twincity). Trix/sni Giass Lid (Triveni} and i-(spear Gisss (sntsred in 199?); in Ds¢g;1;iner,13,99?i Schntt india was set up as ii%ié"»iiii5ii;2"'5i};ii?£'é'd subsidiary of ihe woricfs iesdingiiubes manufacturer Schott Giasswerks, Germany, which commenced producﬁicm in inciis from January 1998 pursuant to its acquisition (if the assets of Bharai Giass. The industry in the subsequent years saw exit of two companies, nsmeiy Twincity and Kspoor and the oniy other existing indian company Triveni go': acquired by a Japanese company Niprci in 20%). Currentiy, the entire domestic: pmciuciior: sf USP -4 bomsiiicate giass tubes in India is acczauntsd far by Schoti Giass india and Nipro Gisss india.

T13 White Schatt india and Nipm Giass india (Friveni) meet most of the: domestic ciemand "for 'neutrai USP4 bomsiiicaie giass tubes' in inciia, a psrtisn of the dmmsstic requirement is also being met by imporis from China and DihEéi' countries iiizs Germany, itaiy and Japan. in 2098, 30% of the ciomestic demand was met by imports, rest of the demand being catered to by Schptt india and Nipro Glass India.

The Ci3i'i'tai'i'1ETSi'E!{'!"i§'2:mZiLi¥E.-ES indusiry consists sf a number of independent converters. Eiy far the largest converter Kaisha Manufacturing Pvt. i.,'£d,, entered' into 22 50-53 Joint Venture Agreement with Schoti AG in 2008, creating a veriicaiiy inisgraieci presence of Schott iriciis in the upstream tubes marks: and in the downstream containers market through its JV.

?.'i.5 What emerges frcam the facts and materiai bFQLigM__;.QI3...if§§Qfd is that the converters in '\'-at ; .

india, by and large, remain ccmsisierii ssurc _ '%i§7s_..ﬁi='harma ccmpanies and . -"N 'i W' N" "

" /.3 '.::A "' ' \_.$>P'i%'§rn\*}s company scaurces its 7.2.2 ":1:

requirements. There are nci supniy agreements between the converters and the Pharma cnmpanies. The rates of the ampouiesfviais etc. are determined through direct negotiation beiwaen the Pharma companies and the cnnverters. Far change of one type of giass ampouiesfviais to ::;ihe_V§r_iy'pe giass ampnuiesfviais, stahiiiiy needs in he assured.

The change is advisabie cmiy if the product is stabie in that particuiar type cf giass ampouiesiviais.

issue 'i: Relevant Market The piviotai inquiry in a case of aiiegeﬁiéhhgéi of dominance is whetheir the Q?' is in a ciciminani position in the reievani market. As per expianaiicm to Section 4 of the Act, "dominant position means 3 position of strength, enjoyed by an enterprise in the reievant market....". Therefore, assessment of dominance is to be preceded by deiineation cf the correct reiavani market in which dominance of 'the enterprise under consideration is in be assessed.

Relevant mariiei has been deiineci in sub section {r} of Seciion 2 cf ihe Act, read with sub sections 2(3) and 2{iE). Further, while examining the issue hf reievant market with respect in a pariicuiar case. the Commission must give due regard to any or aii facitzrs mentioned in section 19(8) with respect in "reievant geographic market"

19(7) with respect to "relevant praduct market", and sectinn Reievant Product Market in the instant case, the pairiies, both the ii" and the OP, consider the reievahi pmduci market to be the mairkei of 'Neuirai USP ~i hcarusiiicaie giass tubes'. The BS, in View of the characteristics and end use hi the giass tubes used for pharmaceutical packaging baaed on information cuiieczied frcsm the parties, convertérs, ntzsiemanis of Phnrmaceuiicai companies, has concurred with this deﬁnition. Having regard in the inciusiry value» chain invnived in the case, ithgfheiinedi a ciownsiinam raievani:

__,5,. .. ,4.

'?.2.4 7.2.5 berasiiicate grass tubes', derived directly from the usage of the upstream registrant product.

The DEBS anaiysis on the reievant prodrrct market further brings "forth the fact that the reiévant pradurzt. as deﬁned by the parties and the DC», is characterised by vertical differentiation in terms. of quality or expansion range and h~ori;5onta¥ differentiaticn in terms of ceiourfshacte. As per the DG's report, there are five sub categories of 'nerutrai L}SF'~¥ borositicate glass tubes', as described beiow:

as' Fioiax Ciear equivairmt, Le. Negrtrai gear Glass tubés in 'rhé" rianrge of exparrsrcm bemw Smwhich 3% crirrrmonry krrcswrr in the trade circies as 60 expansion) é - Ficslax Amber ecguivatent, Le. Neutrai Amber giass tubes in the range of expansion betow 6.0(whr<:h is commaniy known in the trade circtes as 60 expansion) at Neutrat Grass Cfear (NC3C} tubes in the range at expanstan between 8.0 to 8.5{whrch is commorrfy knrrwn in the trade circles as 6U~65 expansion} { referred to as "NSC-" hereafter) =5 Neutrat Grass Arnber {NGrA) tubes in the range of expansron between 6.0 to 8.5(which is commoniy known in the trade circies as 5065 expansir3ra)( referred to as "NGA" hereafter) w Neutrat Giass Ciear tubes having the expansion range higher than N613 and NGA but within the standards ;:aresr:ribed as USP Type -r- E kt is deemed nacestsary to appreciate the campetitive linierpiay between the various auteur and quantity variants of the prcrr.tuct irwoived in order to prectucie any possibility of misestimatirng the market power of the enterprise under scrutiny. The apparent distirr<«>2ierr"hebrreen the sub cétegrzrriés in tgrméarnf V'ca'1_gur£s_h§;je' and 'e=xpansi<$'§$ra}'§7§e' merits an appraisal of whether they can be re if H h§§§_'§r§r?érg§5;;'as substitutes and as constituents of the broad retevant product ma ; I ' tubes' at net.

«+2 ""~ 13" P 't barasificate giass S2 7.2.6 The distinction between the different quatity variants at tubes stem from the variatien in expansion timits, aftaeit within the range parmissttjte under USP Type it standards. The ' prices at these variants tau are different.-' *Thiéi't§1Jéstion that is criticat in tzoncluding suhstitutahitirty between these variants is whether they sufﬁcientty constrain prices of each other. tn View of the pricesernsitivity of the indian market and in absence at anything sutzastantivre made avaiiabfe by D6 or the pratttes that conctusiveety rules out the chrnpetitive interaction between the different quatity variants of the gtass tubes under _ consicierétion, clear demarcation of distinct markets far each' quattty variant of tubes appears imptausibte. Therefore. it is pertinent to map the arﬁbit of the reievant pmciuct market bread in concurrence with the DG.

Let us now examine the itketihcsod at substitutability between the two auteur/shade variants cf neutra! USP -4 borosiiicate giass tubes, n:a.me?y, ciearlwhite tubes and amber tubes. From the avaitabfe facts it is understoad that for storing Eight sensitive formutations, containers, §.e., ampoutes, viats or dental cartridges, made of amber tubes are used white fcar other tight non~sensitive formulations containers made from ctearfwhtte tubes serve the purpose, This makes it amply ciear that the and use of amber' tubes is ciistihctty different from that at rstear tubes and amber tubes under nu circumstances car: be substituted or repiaced with clear tubes. A change in price of amber tubes for a given quatity cannot presumably have any impact on the demand of ctetar tubes of the same quaiity or vice -versa. Therefore, amber tithes and ctear tubes cannot be ccmcluded to be interchangeabte and inctusion of both tr: the same reievant market appears unreasonable.

Bearing in mind the newsubstitutabifity between the twin cotour variants of rreutrai USP - E borositicate gtass tubes as discussed earlier, we are at the View that were a retevaht product mark§_+t}rtQ...t:2e defined in the currént'casé}'t'it had tizé be sptit in me: (3) ctistim3t*"

I' n upstream reiegant product markets and (ii) dhwnstrgtam--reievartt product markets. The U' ﬁx?" N '\ upstream reievant product markets wuufrst be: \ 2 Market for 'Neutrat Cigar USP4 Sorosi mag' £33»:

S3 a Market for 'Neutrai Amber USP ----i Botossiiicate Giass Tuines' Aocordirsgiy, the downstream reievant product markets wouici be as Market for 'containers, i.e., ampouies, \;fic'5iAi§',vt_Z.3§\T__'A}?'cTii cartridges and syringes made out of 'Neutral Clear USP-i Borosiiicate Giiooo hikes"

a ixsiarket for 'containers, i.e., ampouies, vials, dontai cartridges and syringes made out of 'Neuttai Amber USP ---i Borosiiicate Giass TL:EJt=es."

Relevant Soograpttic Market 7.2.9 The relevant geographic market according to the contention of the DG is indie, premised inter aiia on the foiiowing grounds:

in The conditions of competition for suppiy and demand of 'neutral USP «i borosiiioate giass tube' are homogeneous in the whoio of indie '4 Requirement of the relevant product by the downstroam piayors are sourced primariiy from within the country; the imports from foreign manufacturers constitute a very insigniﬁcant portion of the supply for the inciian market a The demand of goods from the foreign entities are distinctiy different and not homiogonecrus with respect to that of the domestic suppii.er(s) on account of the fact that the foreign suppiiors manufacture~ the neutrai ciear USP4 borosiiioato tubes oniy of the expansioin range of 543. Even their amber variants are of a much darker shade and not preferred by the inciian buyers 3 Foreign manufacturers, other than the OP, do not have any manufacturing ptant in iniziia and are not in a position to ensure uninterrupteci timeiy suppiy and recguiro a much higher lead time 12.16 The above argumento, taken in conjunction patterns, rnaritet struotiure and consoque tiy cite V W . _ reievant products is ohataotoristicaiiiy differs ">m'i-90' C '}y reasonable CO%"lClUSlD.!'l that the relevant gengraphic market fur the relevant products is lndla.

Relevant Marker 7.2.11 ll" is therefore concluded that the relevant markets in the current case are as under:

iigmtream E Market for 'Neutral Clear USP-l Bormsilicaie Glass Tubes in India '_ Vawnd "Vs Market for 'Neutral Amber USP»-l Borosllicaie Glass Tubes 'Eh lnrira' H Downstream =9 Market for 'Containers, Let, ampoules, vials, denial cartridges and syringes made nut of 'Neutral Clear USP-l Borosillicale Glass Tubes' in lnciia' and E Market for 'Containers, i.e.. ampoules, vials, dental calirédges and syringes made out cf 'Neutral Amber USP-l Borosificate Glass Tubes' in lndia' V7.3 lssue 2: Assessment of {luminance 'i'.3.'l Having delineated the relevant markets for the purpose of the present case, it is now is be ascertained whether the OP enjoys dominance in the relevant marketswpsiream) so defined. Dominarme has been defined in the explanation to Section 4 of the Compeiitirm Act as fol.la:.~ws:« "E:<plar:ariun --~ Fear the purposes of thls Secilun. the expression ~«

a) "dominant positlorl" means a pasllzion of strength, enjoyed by an enterprise, in the relevant market, in lndia. which enables it to -= gi} operate independently sf competitive forces prevailing in rhe relevant market; or ii . ' r .. . ., 5'» ' :., {:0 affect lts can1petrtc:z's or cor:s:,4r§r .\\ I._ '-«_',»'~ 7.3.2 The Opposite Party Schatt india hperates in bath the upstream reievant markets, namza-iy, Neutrai Clear USP-=i borosiiicate giass tubes in india' and 'Neutraf amber USP-i horosiiicsate glass tubes in Endia'. in assessing whether in thssae two raievant markets the OP has the market powar or the position of strength in speratte independentiy cf competitive forces, it is necessary to give due regard to the factors enumerated in Section 1§{4) cf the Act.

'?.3.3 At this stage it is pertinent to mention that though the non«sub$tituiah§fity beiwe-sm the ' amber _ahcE dear tubes demanded the market deﬁnition to be spiﬁf in hm: refeyzghtéprpduéi ni§Eheté;"Tthe ahatysis of the factors determining cinmiziance, aparf frcem 'n1a§}k«eivsha:'es, ' are based cm the same facts and therefore shah not be repeated for each .

Market share 7.3.4 in the reievant market for 'NeutraE amber USP-3 berosﬁicaie giass tubes in mciia as per the submissions of the Qpposite Party, Srshott india's market shares in India were 93% in the NGA range of tubes and 87% in the branded Fiofax range in 2009-1Q. As reveaied by the submissions, 'aha cmky other indiah competitor Népro (Trhaeni) had been producing amber tubes hit 2009 aibeit in insigniﬁ-rzant voiumes v'ss~3~vi5 the, tatai domestic demand. Nipro repmediy has resuhaed its production of amber tubes recently, the vciunze nonetheiess are in no manner ccvmparahbie to that of the OP's. §mpcsr':s of amber tubes from other foreign mahufacmrers have aisa hut gained momenftum for the reason that the Pharma companies in India use the lighter shade of amber tubes produced by the {JP and the darker shades praduhceci by the other internaiionaf manufacturers are geherahy nut preferred. Furthermore, a significant portion of impart of amber tubes in indie: is acccumted for by the imparts from Schott AG from its various ihcations.

" ?:3;£.i in the rehevant market of 'Neutrai Giavar USP4 horesiiicaie giaéé tuhééih Ihciiai. the DPS market share, as per their submissions, stood at;f},22j§=r;§31:g'iQOQ-70, moving up from 38% '' {AK Y.'-Ix,'-_.-" S' .

in 2007108 far the NSC range' in the iarandecygﬁélafétz §§ga§9,l'g'f;:;g_§i:.xw=<.ant up fmm 91% in pr. '.Q 1.. 'h~,:'_~;p .«'_;' _=" \ 2a'3CJ?'«D8 ta 973% in 20aMs::z_. The clear varia "' LE?

age: héghg supphed ass: by MPFEO {Trivehi} and ove=ez' the §as': few years % :rr§-5% ;

t0*;§§h'.§§'e made ihrcads into (

-.,,A_ the tndian market. On the other hand, the attemative saurces cit Fiotax clear tubes are imports from internationat manufacturers from itaty, Japan etc. attaeit in smaii voiumes.

733.5 The 'market share data mmpiied by the me, which inctude aft the sat TE§§tE§5ties of barositicate giass tubes proctuced by Schett India i.e., ceambining both the reievant markets discussed above, shows that Schott indie':-3 share in Indian market for clear and amber tubes; i'nr:.Iuding bath Fiotax and NGCINGA varieties in terms of sales vaiue has destined marginaity from 83% in 200'?--«O8 tn 8? % in 2009~tG.7"§"he ﬁgures demonstrate that the Opposite Party has the largest market share in each at the two reievant markets saiﬁaratety --:em«f.i 81.49% in terms of Quantity and 81.."i?% in terms of tiétue it'! t?TieT'T market :91' 'nautrai U$P mt borosiiicate gtass tubes' in lsnctia; the nearest individuai competitrrws share in the broader market being 13.09% and 33.81% respectively.

T Name of Fatty 200?~08 2€}i}8~0S 2839-10 Share in T Share in Share in Share Share T Share T Sate Qty sate vaiue Sate Qty in sate in Sale in sets value Qty value SCHOTT Glass 85.Eé8T% 82.90% 83.02% 8D.2t% 51.49% 8'i.'i?'% MPRQIFREVE 13.21% 18.83% 't?.42% 10.54% TT 13.03% ?.81% Ni imports 't5.7'9T% 5.25% T 19.55% Q.24% 25.41% 11.0% Size and resources of the enterprise! Size and tmpartance at ccsmpetitctrs 27.3.?" it has been brought out dearly in the Df3's Repmt that given that the parent company of chott India is one at the teacting ptayers in the gtobai market of tubing with six ' ptodugtion sites in the world, 3 capacity of moire than 130,000 tonnes,..pr.<:3er2»:e across 42 countries, the OP is placed an a much sttdgéer footing compared to its competitor in the tndian market Nipm {"i'ri\:ani) having a productic:t3.~;'};:§;i§'§;;t:it3§\Qt xxx tonnes. Further, in ' :5 ."'I.\_1»\ ~. _ Nipro has no presence whatsoever in the produc ! "$§.3§ri_x;;a'tte§q'z to F iotax grade of I:'_-: ._§ . fﬂ ') i .

the Respondent. The canverters' statements at "'X§"<§ gﬁupgiitiegtmade to them by T.'-2 ' E th».-=1 OP from the various manufacturing éocatians autside iindia at Erma? prices whanaver the OP had any technicallprcductiéon probiems boisier the argument that the OP enjoys access to the worid wide resources sf Schmt Group.

7.3.8 As regards the ether majnr tuba manufaciurers in the gfobaﬁ market, it may be seen from impart data that the totai quantity and vaiue of imports from these entities are not significant and as such do not create any ccmpetitive pressure on the Qppcsite party. The imp-arts 0%' Chinese mines in india are cm an upswing; neverthetess they are fragmented across many piayers.

Econnmic Pmmeriﬁiommarsziaﬁ Advantagelverticai integraiioniiionsumer dependence 73.38 The economic paw:-zr or ccmwnercia! advantages of Schott is buttressed by its ME range of product ﬁne, abiiity ta suppiy from any of its glubai iocaticms at indian prices, vertical integration in fmmé of the 50-50 paint venture with the largest converter in India, naméiy Schott Kaisha. Adding to these advantages is the fact that for the amber tubes, ccnvertars and pharmaceutica} ccsmpanies are nearly entireiy dependent an Schctt as they areﬁhe oniy suppﬁers of the: tubes in meferred shades to the Endian market Entry Barriers im:iu-ding barriers such as regu§atm°y barriers, ﬁnanciai risk, high capital cost cf entry, marketing entry barriers, 'technical entry barriers, ecanomies 03' scale, high cost of substitutabie gaods or servica for consumem ?.3.'¥{}Heavy capital requérement, huge running cost, high gestaiian period and economéias of scale in the production ef the upstream reievant praducts are amcang the Ventry barriers identified by the D8. The requirement of stabiiﬁy test by the Pharma companies' acts as __,23no'gh§=V1;: g§r3jg_ri3x_~:§§;=*_k;;;=z'a'e:1t, DE further adds. Sivan the grcwing demand and mavrkeat size, T. these 'factors do not render a pmﬁtabie ent W_:3t'i;1gz:r§<et permanently infeasibée;

and dekaying entry. For " 'V however they are capabie crf eresting ie a . . ' \ 'y ' .

smports, the import duty of 10% acts as ea :gr§ficar§;% cc%a'stz'§:nt, us» + ?.»%:=~'§'- "--"§ .-:4-\-. 1;

15¢ \;<~ ,5

-:"x""'~>~';

55 M Countervéaiiing Buying Pcswer 7.3.11 The dcawnstream re¥evant markets, Vieaving aside the JV of the OP ScVhott--Kais:ha, consists of several smaii manufacturers whcs individuatiy tack the requisite size, importance c5:'firiza'%:c§ai strength to exercise cwntervaiiing buying power on the OP.

?.3.'§:3 Cmileciive consideration cf the 'factors reviewed in the faregainég paragraphs' in the Eight of the deﬁnition of doménant position as provided in the Act establishes the-[dominance of Schoti Glass indie: in the upstream reievant markets 9:' 'neuirai dear U$P «'1 ' b bcwmsiiicate giass tu;t;es:jn Qindiaé' and 'neutral amber USP ~--'i borosfiitaté glassniubes in india'.

7.4 issue 3: Abuse of ﬂominance: Conducts in Questiun '$4.1 Eub 'issue 'i: Rmpositﬁon of unfak and ciiacriminatory condition er price ﬁn the saie cf neutrai aziear US?-S bcrmsiiicate giass tubes and neutrai amher USP4 boresiﬁcate giass tubes [infringement 9!' Section 4(2) (a}(:j} and/or aﬁi) :12' $329 Act} 7.4.1.? The aiiegatinn pertaining to impositian of unfairfdist:riminaiur;,r price or canditiion in sale of neutral US$34 bomsi¥i:cate giass tubes {dear and amber) by the DP on the downsiream ampouie manufacturers/convezriers ﬁnds its founciaiions on the ciiscount paiicy cf the OP. As emerges from the subméssions made by the parties and the DG's investigaticm. Szzhcatt india affers two kinds of dismunis to the downstér-eam cmweriers of the upstream reéevant products - (E) vaiumeitarget discmznt {ii} loyalty ciiscauntlfunctionai trcmus. '

(i) Targai

7.-'$.1,2 The target discount is a Vciiume based digcougifsgsﬁiéiféh §Eiff§;_§eni rates of disccaunt "ranging from 2% to 12%) are offered by t 2 voiumes gsurchased ever a neriod of one y _,§ ,_a;,e';iu:1*. achgme, in form an' a .V A 'f eEr§§§~g/iéizigers depending on quantity slab-discount rate menu, is made eviaiiebie to the converters at the beginning of the transaction period. The discount amount is paid to the converters on e qiierteriy basis on receipt cf certificate of seiee es speciﬁed by ihe OP arid upon fuii payment of invoices raised in the said quarter.

?.4.1.3 This volume based ciiecoimt is offered cniy on purchase cf NSC and NCBA tubes; the purchase of the branded Fieiex categcry is reckoned for the purpose of determining the siab and the eppiicabie discount rate. The downstream JV Schott' Keisha is the only ccnverier entitied ic target diecciisji igigurcheee cf Ficiax category of iiibes. i ?.i4.'i.4: in aneiysirig the eilegeiiori, we note that the impugned unfair/ctiiecriminatcry content of the target discount policy of the OP is eseentieiiy comprised ef two components, nemeiy, the target ciisccuni pciicy for the NGCINGA category of iubee in iiseif. by design and impiementaticn, and eeconciiy, the policy cf granting target ciiscount can Fieiex categcry tubes cniy to 3chott Keisha, ihe JV of the (JP;

7.4.1.5 ii is evident frcm the vciume discount scheme pursued by the OP that by design it ieacis to a 12% difference between the ectuai price or peet~die:.:cunt price that is charged to the ioweet volume band purchaser (purchasing beiow the icweet ihreehoid V. of 250 MT) and the ccrsbdiecouni price charged to the highest voiume bane purchaser (purchasing abcve the highest tiireshoid of 2000 MT}. Each issue has been aneiysed eeperaieiy in the ensuing eiscuesicn.

7.4.1.6 Anaiysie cf <:iiem'im'maticn in price discounts mus': start with 'the cieseificaiion of discounts into two categories of anonymous and ncnwaricriymoue characteristics of ciiscountsi. Through the iens ef anonymity cf ccntraci features, it appears that the vciume discount ori 'i\iGCfiiiGA ie, by cesign, anonymous. Any ceriireci between agents in a market which is anonymous to indiviciuei agent characteristics dues not raise competition concerrre, in the case of ncn*anonyn'ic¥g,egi§§gr§§3inaiion, outcomes wouici _}.. in: ' ~ come into eiey. Ncnetheiese, the issue that me '_ ' vs' . ..

etfeieiajiere is whether the e' i 9 .--" \. .

egg size cu' transaction _.I 3";

7.4.1.7 sufﬁces far the discount pcaiicy to be mnetrued as discriminatory anti therefore to be seen as an abusive conduct of the dominamt ﬁrm.

Voiume discount is a form 'oi' eecand degree price dieciiminatian er ncm--iin.ear pricing threugh 'which the price of a unit varies depending an the quantity purchased by the buyer. Such quantity based discounts, where they mereiy refieizt cue! efﬁciencies stemming from the iarger voiume of pmduct soid, are not deemed ciiscrimiriatary per ' se. Further, it is aiee to be kept in consideration that price ciiecriminatian aiiowe ﬁrms 7'.-=i.'i .8 7.4. 'Vi-AS-

faczihg iafge fixed costs to expenci iheir_gui9iii_a_nd thus spread iixegii'ceLsi§ eﬁ:er.a ierge number of uriits.[Price ciiscriiniinatitiii niieyiihcziiiiever be used strategiceiiy by iiieieeiier is create exclueicnary effects on its current or patentiai rivais. which shaii be anaiyseci in a eeparaie eeciipn iaier} The Competition Act. .2002 prohibits discriminatory pricing by a dciminant enterprise. Hciwever, the vsriieria far iasseesrnerit of discriminatory pricing iiave not been iaici dawn in the Act. it is therefore reievant to refer to the internaticsnai jui'isprui:3ence on this issue. As per the Robinson Patman Act, in the US cgiiecrimination in prices between different purchasers cf' the same producie is concienmeci where ihe efiect ef such discrimination may be to substanﬁaiiy lessen ccmpetitian. in EU, acccarciing to Article 82 (C) of the EC Treaty, if a dominant firm appiiee "diesimiiar conditions to equivalent transactions with ether trading parties, thereby placing them at campetiiive disadvantage", it is ccmsiiziered an abuse of dominant positiczm, 'These suggest an interpretation of iiniawfui idiscriminaiian ihet eriiaiis estebiiehmeni 02' (i) ciissimiiar ireetmeni in equivaieni transactions and {ii} harm in coimpeiitien er is iikeiy harm is campeiition in the sense that the buyers suffer a competitive disadvantage against each ether leading is mmpetiiive injury in the dcxwrieiream market.

in the instant case, the iérgéi dieicouriiiieeiieduie of the OP has been Sfedé-Teiigned that the iarger the vaiume of purchases of custemer, ihe¢i_1_iQ,i<zeL_i_i;}e discount it can enjoy. *5 ixionetheieee, same rate of discount is to be appii .4 ye iiisxeﬁga ,_je\<:ii0n5 faiiing in the same quantity siab. As the {JP has submitted, _'§éggii't§iscaunt has been devised based an cost efficiency consideraiio 553' E 61 gﬁeiting giase and _ manufacturing bcrcsiiicate giass tubes frcm various raw materiats is at ccmtinucus process which requires thc prcducticn tank to be corrtinuctisiy at high temperatures and turicticning at ati times. Substarttiai energy costs are incurrect to bring a production t.r.:mi< to the required temperature at which grass tubes can be manufactured and energy ccsts' have to be ccntiriuousiy incurred to keep the prcriucticn tanks running at the reievant temperatures without any interruptions. Given the specific nature of tube manufacturing princess, any instabiiity in icad or demand may 1833125 to heavy damage tcs the production tank causing the ma.nut'acti.irer to incur tosses. Theretcre it is tr: ensure stability in demand and iriccntiirisse iarge purchases that the target rsiisccunt system has been put in piace. in View of this, transactiuncbqf different voiumas hcfttcttes cannot be inferred as equivaient transactiicns warranting equivaient treatment tram the setter and therefore the design of the discount per se cannot be deemed to be discriminatory in the sense at appiying different price ccnditicns to icienticai transactions with different buyers.

?.4.1.'i0 it is ricw tc be seen whether the actuai implementation of the target discount was in ccntcrmity to the declared design at the discount and whether the discount system has impaired the competitive ability of some ciayers leading to a weaker competitive market structure in the ttownstream ccrttairiers industry.

?'.4,t.'i'i Ail relevant evidences and information gathered by the EEG with respect to the impiementaticri mechanism and past records of actuai r,tisbursernerrt cf target" discount were examined. The converters in their statements axrerrcci that the 0?' had been behaving in favour at a set at buyers and ciiscrimiriatirig against the others through various means, target discount being one of them. in order to confirm the veracity of the ctairn, the financial data submitted by the {DP retating to the pciicy ct target discount was ariaiyseri in cietaii. ' Evatuaticn cf Eiisccunt Pcticy aiiowed in them. The C)?' was asked to pmvide the detaifs which were submitted by the OF. The C3?-3 has failowed the veiume discount pcficy for a very tong time and the detaiis were submitted by GP for the pericd 20{)'%~2GQ'?' and for ZGVD?-2910 reépectiveiy. 3% was also noticed that quantity siabs fmdtha. puriposes of discaunt were changed in '2007. when the maximum rate of ciisccauni was 3130 increased in 12% from 10%. The data on target quantity and corresponding discount is tabuiated in Tame 1 represented as under:

"riabses ZOOHZOO7 2007 afterwarcis Range cf Quantity Range of Quantity Rate of Purchased Rate: sf Discount Pumhased Disccunt 2% J . 2% ?5 ta 'I50 258 to 500 4% 50*; @5750 I 4% M 151 to 400 6% 751; to was (23% 401 to 690 ' 8% 1001 to 1500 8% S8'? to 900 19% T I 10% 900 and abcve ' 1501 it: 200::

12% I More than 2000 Source: Data submitter; by Schott Glass !%"ii2§Ei."T,§'1£-":4 which zcsoms was; flat 8%.

*7, 2? .

325 63

: Tube Giass Lisa Dataiis of quantities said to converters from Schatt Glass India and the ciiscsrrunts aiiowau' is each converter were tabulated far the period 2Q02~"OO3 to 201 O~'I'E and are given in Tabies 2 and Brespectéxreiy.

Tame 2 [malls of was made gag Sam: %nd_i';gjg~5{:;rEeus convertars and the ifj§:ounts affg_{ggE_;a them 2 V _ __ mm in 53':

A 2952-2383 2Gﬁ3~2804 208:3-2855

-Cusxnmer

-Kaisha .136! Klsaré Adlt Glass Ambika . .\ .

Kusha! Mlrra mhers 2099-28% Clear "fatal 2f31ﬂ~28'¥§ Custamer Ciear Keisha Tube 6333:;

Ftisa 136$ '$435019 Azfst Sass Mai:

industries him Source: Data Submitied by Schott Giass India 653 Customer Tainieﬁ B Dis¢é&éi:€I%fé:é8T:;iA%s ztmzaes zen;-mi zmzaaé 42-swans M299?

9&3! mi Kaisha 'ﬁzise Glass Lisa ISGE Kisere Mi! »- .

G§i§§S' Rmbika ﬂak Kushal Mirra '3'"ﬁ§s}£é's}ii§'éi§§éEé'§ia 2997-2995 zaems 29:23-mu Customer Kaisha Tube Giass iiaa 358% Kiscre Adi:

Giass iamhika T kiak faﬁrra Source: Dataéis Submitted by Schott Giaas énciia 65 7,Al.'l.13 Analysis of the off take date sf varluus converters in association with the declared " lr'.4.3*;1'4' dtsceurzt schedule reveals that en numerous occasions, the discount allowed by Schoztt Glass incite was not as per discount schedule. Similarly placed buyers in terms of volume purchased in a given year were founcl to have been granted different rates of target clisceunt. For cempaniles such as xxx, .xxx, in particular the policy was found to be applied very lenlsntly and they were given the benefits of higher discount rate. However, discounting pelicles of ctampanies may be based en a host sf ether unc%eter'mlnisﬁr; factors.

-.-'.\-'-,:e; .----:' 52¢?' ' V the effect of such dlffersntlsl treatmerri on the competitive ability of the set called 'clisfsvoured buyers' and any iniurjz that may have been caused or is ilkely to be caused to the competitive conditions in the downstream containers' markets. in analysing this, cognizance needs to 'be taken of the competitive construct of the market and the nature of cempetition between the converters. The facts end materials brought on record shows that Schoti Keisha is the largest tube converter in lmtlis followed by Tube Glass Centainers Pvt. Ltd. and Klssslpack Pvt. Ltd and the rest of the market ts fragmented acrcsss several small players csnstltutlng insigniﬁcant shares ef the market. The rccmrverters manufacture and supply containers, i.e., ampoules/viratsfdentai cartridgesfsyrlnges, canvelrted out of the boroslllcate glass tubes (clear and amber), to the Phsrmaseuticai csmpanies based on their requisltlsns.r The Phsrmaceutitcat campenies usually deal with twcethree vendor converters and as per the statements of the converters migration to new cczxwertsrs is unusual. Prices of containers are negotiated between the converters and Pharrnsceuilcal companies on a one-to~rme basis. The invoices submitted by the converters further revealed that the prices charged by different ccrmrerters were similar and exactly same lira scams instances for a given Pharmaceutical company. Therefore, the cost differential in inputs (tubes) caused by the volume based discuunt scheme of the OP does not get .-transletecl into price dlfferentla_l_;;§r: ﬁgsl products msnteleers)' 'fer tlie Pharrmacéutlcal companies. Consequently, any change in strursmre of the market or market share composition cannot be logicatly linltesl tn: the disco _t the csrwerters. in 'l§>. r-*~ "} '- _ '_.\;'A::\_ terms sf tatal sales, it was rather seen from ' 3$§s;5;lts\sL:bn:ltted by the 5%?

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' \ I' \ 35; e C"

53' $3?' }'{'§ 5? .5 K L} w :" 1?r1'i<"§ as ::;e>*r I $5 '~C.>'s"' I VV::§__' . ' ' ' ' ' ,. V' . _ ;'.-;Z.'..;;..\- -l;,_ V, in order to arms at a concluslcm on mfrmgement, zt ts therefsrs necessary ta examine cenverters that the tetai saies of aii the etmveriers have grown ciznsisieniiy over the years as can be observed frem the growth rates in saiee ferthe period 2001-2919.

Table 4 T Bateef Sales of siarieiis compa nies mi figures Company mm 2999 21338 2933 2005 .2095 2094 29.93 20:12 am Scizeﬁ Keisha xxx xx)»; xxx xxx xxx j xxx xxx xxx' T ':&>::i<' xxx Adit T xxx xxx xx): i xxx >:x_>: xxx xxx xxx xxx xxx Kishere xxx xxx xxx xxx xxx xxx xxx T xxx >30: xxx I56'! xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx tube eiass xxx xxx xxx xxx xxx T xxx T N xxx xxx xxx xxx Khemka ..><>:x. xxx xxx xxx xxx xxx xxx Mak ix>T:';T*<"T TT xxx xxx xxx xxx xxx >::<>: xxx xxx .x:T=Ex Lisa xxx xxx _>e:x xxx xxx xxx xxx xxx xxx xxx T Avon xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx Sambay Giass xxx xxx xxx xxx xxx xxx xxx xxx xxx Txxx Ambika xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx Ti£iassPa:;k xxx xxx xxx xxx ixxx xxx xxx xxx xxx xxx ?.4.1,i5 Mere i:mper'tentiy_. an anaiysis of the operating ratios of the cor:v--en'.e're over a peried of ten years show that the cenveriers have had very different cost structures with a consequent wide variation in operating reties. Operating ratie, which is defined as the ratio of operating expenses to saies. is an accepted measure of overaii efficiency of e ﬁrm. As Tebie 5 beiow rriepicts, eperaﬁng ratios of converters ranged from 375% in 111% for different converters for different years, impiying that voiume or target discounts were not the cmiy or meet signiﬁcant factor { ranging fmm 2% to 12% ) inﬂuencing the ﬁnancieie cf downstream comreiiers, Further, the directienai change in operating ratios of the converters has he': been consistent with the directional' change in ciiscount rates in many instances. T "'f"abie 5: Operating Ratiee for Converters fer the varied 208'! to 2819 (Rs. Laiihs) ~ TCo':'r'i';3::.n§I Name emu 2:309 2:303 20%;: 2395 23:35 2004'? 2933*-2352i"~:2em« Schott Keisha xx xx >:x xx xx xx xx xx xx xx Adit T -- xx xx xx xx xx xx % iiiehere -- xx xx xx xx xx --

iE3C3i xx xx T xx xx xx xx xx 6?

Tube Giass xx xx xx xx 3 xx -- ' - « -- 5 --

Khemka « xx xx xx xx xx xx xx xx xx Max -- xx xx xx xx ' xx xx xx xx xx Lisa xx xx xx T xx xx xx xx xx xx Aver: ~ T xx xx = xx xx xx [ T -- T - ~ ~ Bdmbay Giass - xx xx xx xx xx xx xx xx T xx Ambixa --- xx T xx xx xx xx xx xx xx xx P(1assF'ack T D 0 0 T ---- - 3 ~ ~ « -- --

Source: Financial Statements cf converters submitted to £3473 Simiiériy xxégntabtysiated as .23 !T3S3$UFvE>*-13? financiat v§abi§§t3}; zit Twéé obsenxed ihxt \ mast cf the converters such as xxx, xxx, xxx, xxx, xxx and xxx including the so cafied 'disfavcsured' buyers have experienced growth in EBSDTA aver the years. Therefare. the second necessary element of 'harm in competitive abiiity of the customers and competition in the dawnstream reievant markets' owing to target discaunt scheme of the OP comd nix be estabiished.

Tame E: EBKDTA CAGE 2i3é€a\dn'EET§§)'TA ufﬂirahriaué companies ' I ' " : ' ' : T AI! ﬁgures {Rag Laxhs} T ﬁampany 2013 2:102 2903 T 295? me 2935 2394 2003 2392 203»:

;Schuti Keisha xxxx xxxx " xxxx xxxx ><:<:><x xxxx xxxx xxxx xxxx ms: xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxx):

§Kishore xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx uses TT xxxx xxxx xxxx xxxx xxxx xxxx xxx}: xxxx mx i7Tube Giass xxxx xxxx xxxx xxxcx xxxx ><;xxx xxxx xxxx xxxx ?KhTE:m§<a xxxx xxxx xxxx xxxx xxxx xxxx x:~o<x xxxx xxxx x:«:x>< iikéak xxxx xxxx xxxx xxxx xxxx xxxx. ><::><x : xxxx xxxx susa xxxx xxxx xxxx xxxx xxxx xxxx xxxx >3«:xx xxxx men T xxxx >rx>:>: xxxx xxxx xxxx xxx>:

:E%on":bayGiass xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx ;Amb§ka - xxxx xxxx xxxx xxxx xxxx xxxx 'zK1assPa::k xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx Saurce: Financial Resutts submitted by various converters ' ?'.4.H7 As re.-gards the issue 01' price discrimination on acccnunt of targei discount cm the Ficalax than >o:% of the total ermuai capacity of the OP; from the oo:'c:hase ﬁgures of Fioiex tubes by each oonverter over the last ten years it was observed that there are no other Fioiax customers in india whose requirements of Fioiax Giass are substantiaiiy oomparabie to timetrequirement of Keisha. The transaction of Fioiax category tubes with -» « Keisha therefore in no manner can be construed as equivaient with the transaction of Fioiax Cate.-goty tubes with other piayers in indie. Further and more importantiy, the iavourat:»ie terms offered to Keisha for Fioiax category tubes did not affect the market structure or oornpetition downstream since the prices of the fine! products (containers) charged by Kaisita to the Pharmaoeutioei companies were some or in some instances higher as compared toj;i}et_ prioes charged by the other players. i 7.4.1.18 Therefore, bearing in mind the construct of the downstream relevant market and the nature of competition between the oonvterters, having done a comprehensive review and anaiysis of the quaiitative and quantitative evidences, in absence of any perceivabie harm to competition in the downstream containers market and that to consumer interest {price of containers being discount neutral}. the target tiiscount ooiioy of the DP cannot be inferred to be discriminatory as it retaino the characteristics of anonymity. Accordingiy the aiieged vioiation of Section 4(2) (3) and (is) remains unsubstantiated.

(ii) Functional disooum'.ITrade Mark License Agreement ?.4.'i.'i9 The facts and materials brought on record by the patties and the DC3's investigation bring forth another discount offered by the OP, nameiy, ftmotionai discount. The tunotionei discount was offered by the OP at a iat rate tiii March 31, 2319 to at}! converters subject to fuifiiment of the foiiowing conditions:

=4 That converters wiii promote Sohott tubing by purchasing the agreed quantity in I ti1e"§:artiotii:a7t year oféﬁgreentent " "

xQ~ .

y'o.\ '\"' 53, What the converters wiii maintain 'fair % rzc3;;§g"y 5 tubing {ﬁr "r',4.t.20 From Aorii 2Q'iQ, the OP required the converters to sign s Trade Mark License Agreement (TMLA) and Marketing $upport Agreement in order to be eiigibte for avsiiing tunctiona§"d.i'sooiiot. From the evidences brought on record it was observed that the tunotiorzai discount potioy had been applied uniforrniy to at converters at the some tiat rate since its inception' Through the lens of anonyrnity of ooritralot features, the functional discount is anonymous to indiviouai agent charaoteristiios and is nor:-a discriminatory. it is the impugned eiement of 'unfairness' in the discount or the conofitiorts inxioixreci therein which merits examination and is focuserd upon hereunder.

714.'! .21 The restraint on use of Chinese tubes as stipulated in the erstwhiie functionsi discount poiicy (in existence tiii March 31, 2010), has been aiieged to be an unfair condition imposed by the OP on the converters. The reievartt products in the instant case being differentiated in terms of price and quaiity or technical parameters, restriction by the dominant supplier on use of any other quaiity variant of tubes or 3 class of tubes may impiy a restriction on consumer choice for variety thus iesoiog to reduced consumer sL:rpius._ However. it is importarit to note that the converters had the choice of using both Chinese tubes and Schott tubes by foregoing the 8% furnztionsi discount. The suoply of tubes by the dominant firm was not contingent on fuifiiment of the 'No Chinese' conditions but oniy the funotiornai discount was. The choice of tubes is essentieiiy cieterrriiried by the end users, i.e., the Pharmaceutics! companies. Therefore, the condition cannot be construed as 'unfair' as it neither restricted the choice of the converters not did it have the potentisi to harm competition between converters in the downstream containers' markets.

7.4.1.22 Let us now examine the currentty existing rzsoiicy of forictioriai discount is. Tivitﬁ, atorig with the Msriteting Support Agreement and its impticstions for the downstream buyers and end users. V V T' »'."";_\g_the 3P and some of . \ ésteisi drafting of the TMLA by the OP, unfair and restrictive oiauses therein. which include aiieged exclusivity, the right to enter any part of any factory or any pramises wheré manufacture of contract products is carried on, uniiaierai cieterminaiiori of jbneach by the GP and penalty amount ofﬁs. 70 miilicin in case a sample was found to be sub-- standard. The TMLA oniaccount of these factors, was not found to he acoeptahie to some of the converters who therefore reirairmd from signing it thereby iosing the ﬁinotionai disoouni on their purchase {if tubes from the GP, 7'.4.'i .24 The {BF on the other hand has stihmiitgg thgt the Ti\iii..A was brought into force: in order to mitigate 'rriiidng risk' of its producté with inieriar tubes such as Chinese tubes. it has further been averraci that it was in response to the increasing pressure from lowuprice manufacturers from China, that Sohott lnclia strongiy felt the need to emphasize and promote its brand. To this end, it introduced an aoprcach invoiving the marketing support agreement which was hasicaliy an agreement to co-pramote its brand and products with the converters to the l3hai'maoeuiical companies. By this agreement, in consideration of the oonveiters promoting Schotfs brands and prociuots, Schoti wouici make payments to such ooiweiters. in order to give the converter the right to use the logo, the TMLA had to be conciuderi.

7.4.1.25 Careful coiisideration has been given to the ciaus-es of the TMLA, interpretation of the same by the DP and the concerns raised by the EP and other converters. The evaimation of the conflicting persperstives of the parties in this respect has been done keeping in View the _princi;::al objectives of trademark iioensing in genorai and the implications of the agreement and the clauses therein on competition in the clciwnstream reievarit markets.

7.4.1.26 Among the many iunotilonsé of/fnad§:rnari§._ and trademark licensing are to inform the purchaser about the aotuai origin of thé good, to asesure the consiimeriiireéiiciabie rziuaiiiy with respect io the goods heai'ing the trademark Y §g:?:;€£;}hanoe the visibiiity of the brand oi the trademark owner. The coiiriition iicense is that the iicensor controi the nature and quality of '(F EA ﬁrxiiifhjos old under the '2'. .\ .9; 1 ' , trademark. Without the requirement of quaiity Rdhrtiérol, §;£$>ro§:§ict°§_a° bearing the 4': Ei~a:"s' trademark might no icmger signify the requisite standard and it is therefore that a trademark iicense itypicaiiy inciudes provisions cieaiing with qneiity controi, whereby the iicensnr has rights to inepectinn and rnnnitnring.

7.4.1.2? in View of the above, it is trait that the ciauses in the TMLA pertaining to right to enter the premises and uniiraterai determination tn' breach ere oniyi in furtherance to the uncieriying objectives at a standard TMLA. Even if the nnssitsiiity er' mixing of tubes of the OP with inferior quaiity Chinese tubes is oniy a perceived threat, the 0?' cannot be denied at its right to pretest its nreng ;;--_zZnci reputaticjn 'end prevent' brand infringement thrinugh measures which areiiconieietent with the provisions tn' the Canipetiition Act. As aireaciy discussed, visitation or inspecticsn rights are integrei to trademark iicense agreements. Fm" no reasnns these conditionsfciauses couici be coniciuded unfair or restrictive for a converter, who ennverts Scnoti: tubes separateiy from Chinese or any ether variety nf tubes and cities not mix varieties, uniees tn' course the TMLA ciemands ioyalty or exciusive deaiing of Schott tubing. The fnregning diecussrion notwithstanding. it is emphasised that absent ioyaity or exclusivity requirements or restraint an choice which may have irnpiicatinns for competition, unfairness in other conitractuai aspects cf the Ti\r'ii.A or Marketing Supprrirt Agreenient sin not merit competition evaiuation and therefore do not warrant ' intervention of this Commission.

'7.4.1.;?.8The requirement of icsyaity or state ecsurci:ng may however be deemed as imposition nf unfair conditinn it it is tnunti to be restricting choice, access to competing suppiiers and freectnm of trade. However, upon appraisai. at the TMLA, it was noted that there was no express partiai 0!' mi! exclusivity ciause in the agreement. Further, it has been repeatediy submitted by the OP that the TMLA at no instance requires exciusive dealing not Schott tubes by the converters and that the converters are free tn procure and to pronesre tubes ifronfi -any ether". manuiaeturer. The crux of the TMLA requirements, as per their submissions, is to attach the Inga of Schott to the package at the cantainers matte nut mi Scnntt tubes which the signee cenverter delivers to the pnarmaceuticai cnmpanies. it is on reiiance of the ciaims made by the OP in this 72 statements of informant and some aggrieved cnnvariers cf the GP), in the contrary, ihe TMLA cannot be c<::r1strLsed in be an exciusive deaiing arrangement.

?.ai.'i.2E% Based on the above discuissicsn, it is conciuded that the aiiiegaiinn pertaining to impnsitien of uniairfdiscriminatory condiiinn on converters through the TMLA iacks merit and nines net consiitnte a vaiidi ground for conciuding infringement csf Section L 4(2) {3} {E} andfcr (ii).

7.4.2 Sub issue 2: Exciusicnary nr forecinsure effect sf the discount pniicy cf the {I}?

74.12."! 7'.4.l2.2 on the upstream reievam markets [Infringement ofﬁection 4(2) (ab) and (C) cf the Act] As per the aiiegaiions made by the informant, Schnti inciia'ss scheme far granting discounts on the basis cf quantity ofi«iai<e is such that canverters are required to procure iheir entire need for tubes fmm Schott indie. Thus, the scheme 0? target discount as pursued by Schoii indie is anii--competitive and ieads to ciéniai of market access in infringement of Section 4(2) (6) of the Act, as aiiegeci by the inionnant. it has further been contended that the erstwhile functional discount pniicy en' the {DP and the currentiy existing pciicy of TMLA create exciusinnary effect on nihar tube manuianiurers in the relevant markets and inerefore iimits the market for imrosiiicate glass tubes fwm converters viniaiing Section 4(2) {in} of the Act.

it is therefnre to be examined whether the two discount pniicies pursued by the OP Scnott iniziia have the eifeci of restricting Di' denying accesis of other producers to the reievani rnarkets andior restriciing Di' denying access 0f the cionverters to other producers. in other words, inn? e>§»ciusiAana§;_y___g:r:3'nreq§Q§greT_«T_4L§§ﬁects of target and nznciioiniai discount practiced by the OP can its i 9 A ~ I_;- A \ upstream reiiievant markets' if any, are to be assea éisg:

?.4.2.3 Let us tirst iddk into the target distzdunt scheme pursued by the (JP and the effect it 7'.4.2.-4 '?'.4.

£..

(.31 has had mr is i_ik»eiy tn have an cdmpetition in the upstream retevant market at' neutrai USP-i ciear borosilicate gtass tubes. A vcztume based discount or target discount that is individuaiizad, aiiwunit and retrospective can give rise ta strdng inc:antives_fdr.buyers to procure from is imminent firm resuiting in a 'ioci<~én' effect fer the buyers. They can atsd make it difficutt to shift smatt voiumes of C)E'dE3I'S to competing supptiers or new supptiers, reducing the size of the 'residuaii demand' or Wzzczntestabie past of the market', which may not atidw recmvery of fixed cost by El new entfant. The affect can be conctuded antmompetitive when rivatsfpdtentiai er1trant§'Q.::::tié§tz_§ gidjitdvf ddst structure» but their scaies get curtaited due to anti--t:om;3aatitivté"discdddté by 'ttjziee _ .

dominant player denying them 'minimum viabte scraiei The detefriiihatidrz of thésame shouid be based on a coherent econdmic evaiuatidn cat that ritechanism of the déscdunt that aiiegedty fdrecioses competition, any commerciail efficiency/pm- cdmpetitive ratidnaie that the OP may have to offer and ﬁnatiy the effect of the discount an the rivets! potential entrants and thus an the overaii retévartt market.

in the instant case, the target ditscount scheme gzursued by the OP is an aihmit retroactive discount, which is given to coniverters on an units purchased on quarteriy basis on receipt of certiﬁcate df sates as specified by Schott and upon tuft payment of invoices raised in the said quarter. Tiit March 2030, each converter was 'required td enter intd a Saiemurctiaste agreement at the beginning df each year whereir: 3 target off take voiume used ta be prtrdetermined by the OP. Such a system of individuaiised target fixing in Emtzsiementing the vdtumeltargat diiscount scheme raises competitidn cdncern amass it is justified by robust prd~can1petitiw::- or efficiency argument.

As a justitﬁtcationi it has been submitted by the DP that the disczcsunt scheme based on target vaiume was prompted by the need at procuring 1argt~3 dtder quantities far a subsstantiai time ii'; advance in drder to ensureV§~3tébie icasd on" the pr0duction'7ta*ﬁks"331d to pre-erupt any damage that may be caused by stopping or siowing down of the producticm tank. As discussed in the aariier section, inicdntrast to other industries' in the manufacturing df ibomsiiicate gtass tubes it is not f£§asi?§;Le~*:(3Ej{%§jIi{i1i2:§;:;'c)f siow dawn a production tank. if a prodwxtidra tank, that is dsuaity ru:1rf§E§ Ceisius, : mi . . \ ......

5?} '?4 cnmpieteiy some down or faiis below a certain statute tevei of ioading. the productian tank itseif may incur heavy damage, in particutar to the spesciai and expensive materiais which are used as the internal mating at the production tank anti the mantifactureris. investment in the production tank can_i;a_,e. signiﬁcantly and 8dV8fSi§iy._3:__w affect:-ted which may iresuit in an increase in the manufacturing cast per unit. in View of the oriiicaiity of demand forecasting in the manufacturing process «of tubes, the efficiency j3i.iSti'ﬁBaflOi"i iorrwarded by the OP nnitts merit.

?.s§.§2.&i A View an the issu§ica_n; be taken Lipon appraisai of the effect at thetziisgccunt scheme on the ccampetitors of GP and patential entrants, i.e., the cnmpétitiiéemnoniiiitibns in the upstream raievant markets. in the segment at NGCINGA giass tubes, the current cosnpetitcirs of UP are Niprci (Triveni) and Chinese imports wheraés the international manufacturers such as Gerresheirner, Amcor. Neubor etc. may be considered as potentiat entrants. An examinatinn of the price data avaiiabie on'ret:orci reveals that prices of tubes said by Nipro and thciae imported from China are isuibstantiaiiy tower as compareci to the per unit prices of Schott tubes net at highest rate of discount. Therefore, the vnitime discount evidentiy cannot be analysed in terms: at a preciatczry car exclusionary strategy with respect tn the currentiy existing cempetitors of the OP; Further, it is to be netted that Nipro, while acknowledging Schott as their competitor. has not adduced any evidencesfstatements indicating Sczticstfs iantimontpetitive behaviour, be it through disccsunts or otherwise. No evidence has been brought can reccird which shows that Niprcfs grmvtii has been thwarted due in Schott's voiume discount scheme. Rather. Nipro 315:: provides simiiat voiiume discounts to its customers. Further, it has been stated by the converters that Triveni(pre«acqui.sition) tubes were not eomparabte to Schott in term5 of quaiity and theriainre they preferreci Sizhott tubes.

7.4.2.? Regarding that entry deterrence effect of the ciisittrmnt. absent cosigstructure infgrm;=._i.t_ignj H _ at pcitentiai entrants, effect on them cannot be ascertained. Given the tcstai demand or market size for the reievaint inrciciucts in india ccaupiaci with the first movefs advantage into the indian market appears constrained; however, from the evidences atraiiabts on record, the entry constraint cannot be corictusivefy attributed to 3chott's oisrzount policy.

?'.4.;?..8 in the Fioiax equivstent segment of the reietrsnt product, volume discount is granted by the OP onty to its downstream JV' Schott--Kaisha, which is tied up with the GP for buying ';<X% of its tots! requirements from the OP. Based on an approximate estimation, currerrtty around >o:% of the totai requirement of high ouatity branded Fioiax souiitraient tubes within indie is accessible to any ooteotiai entrant soert from tire export T opocrtunities that can be expiorsci in the region. Further, note has been taken of the news of the other major international manufacturer Gerresheimer opening its Representative Otﬁce in irrdia in iste .2018. Therefore, given the qusiitstive and quantitative evidences brought on record. the entry deterrence effect of the OP's tsrgetlvoiums discount poiicy cannot be estaoiishsd.

14.2.9 The voiume discount scheme foiioweci by the OP in isoiation cannot thus be seen as an exrciusionary device. However, it remains to be sxsmineci whether the functional discount pcticy of the OP which was practiced for severe? years tit! March 2010 has been used strstegicsiiy by the Q?' as an exclusionary instrument. As discussed in the previous section, the functions! discount potioy exoiicitiy ciebsrrssd the use of Chinese tubes by the converters in order to be eiigibis for functiortai discount. The aspect of functions! discount (ioyatty) as s means for sxciudiog efficient rivets end for creation of entry barriers has raised concern in severe! jurisciictioris. The concern usuaiiy arises from the presumption perhaps simplistic, that the intent of a dominant pisyeﬁs recourse to ioystty discount is to protect his turf. As notectgby an expert on the subject: "The orimary chsiteinge for an antitrust regufatcr is to estsbiish the pro and soticompetitive motives and effects of ioysity discounts. The current state of the case tow, with many .\ ' ,.

appz'opriate theories of harm for assessing sxciusio t as '7.ig5rsjt;y discounts in s '~ different rrrsrket settings."

?6 ?.<-t.i2,tQ in the instant case' it is evident frem the suhmiesicne that Chinese tubes entered the indian market through imports in 2003 and the functicnei ctieccunt echeme was intrcdiuced by the {JP in 2004 with en expiicit restraint on the use of Chinese tubes. Fccm the facts made aveiiabie it is seen that the Chinese tubes are signiﬁcantty cheaper than Schctt products. Unless justified by a prc«-competitive or efticiency retionate, such tying of functicmei discctmt with 'Nc--Chinese' condition in response tc Chinese entry can be inferred as a 'ticieiity Jsuiiding' device designed by Schctt to create entry barriers for cheaper competing Chinese products.

'?.4.2:t'i it is therefore necessary that we examine the argument that has been advanced by the GP in justifying the conditions stiptztatect in the functicnai discount pciicy. The reasczin prcciaimed by Schctt is the need to prevent mixing of high queiity Schott tubes with other icw cost variants of tubes by the ccnvertere; Such mixing, as argued by the OP, cases a threat to their brand and reputation. We tacit ccgnizance cf the facts and evidences submitted by the parties in order tc verify the vaiidiity cf the cieim made by the OP. First of ait, the respondent conceded the fact that not a singie instance of mixing cpuid be found tiii the time of the fiiing of the case. it 'ie further noted that the reputetionei iiabiiity in the pharmeceuticei? paciteging 'industry is shared by ait three ptayere in the vertical vaiue chain which include the manufacturer ct tubes, converter at tubes and the Pharmaceutical ccmcany. itticrecver, the mixing risk at Schctt tubes with Chinese tubes within a consignment was ruled out unequivccatiy by the converters on the ground of technicai inteasibiiity. As evident from the submissions, there are adequate checkc and balances in piece with the Phermaceutice! companies for ensuring the quality aspects of the ampoutes.

Thus, ccnsidering the facts and evidences, the condition of restricting use of Chinese tubes by converters appears to be a disproportionate remedy to the cause of brand . prete~cti.on. Whiie prcztectien .0?-brand and Zquaiity undeniabty is ottgreett_concet'n totthe manufacturer cf tubes: there are ampie iegai in gag;-nteV\etraiiebie to ensure brand or

-c trademark' Therefore, the conduct of ti'1E":;§Z3'§ \"\Q\ gains er prwzcmpetitive motives.

stified by any efficiency D' --,.-A-, t.

17.-4.2.12 it is themfzrire concluded that the functicmai discount poiicy of the {)9 had been diesignrsri to iimii the upstream relevant markets of tui3e$ ai'iE3/0,!" to deny marirei accass to ether producers and there-fare has infringed Sectien 4(2) (hr) and 4{2} (:2) cf the Act.

?.-4.3 Sub issue 3: Leveraging upstream dsminance ta prcztect ciciwristream market 14.3.1 The csther key aiiegaiioin made by the iniormantis. that Schoit in<§iré iisés its diyminance.

7.4. .

[infringement af Secticm -<§{.2) {e} cf the Act] in the upstream reievani markets to protect the dnwristream reievant markets. The aiiegatians in this respect are premised on the iavourabie treatment accorded in the JV cif Séhott inciia, aiiegediy distorting the ievai playing fieici in the ciownstream markets and sieering ii in favour of Schott iiaisha. The aiiegaiian is ass:-eniialiy cnmpriseci (if the faiiowing components:

av The ciauses in the iang term izuitaing suppiy agreement between Schcaii india and Kaisha which ensure price beneﬁt to Keisha vis---a~vis the other rsariverters and priority to iﬁaisiia in terms of suppiy and a ﬂiscount on Fioiax caniy to Kaisha it is ubserved that the icing term tubing suppiy agreement between Schoti and Kaisha was rzosiciucied an xxx. As per the agreement, Keisha is obligated is buy xx% of their requirements from Sciiott. Sczhott in 'turn ccsmmitted in raise price for Kaishia eniy by X){% of the increase in price in the inciiari market in ><:>::<. Theireafter, a price nmratcarium for xxx years ending xxx was cammiiied. The agreement further ensured that from xxx, V the perceniage increase in price for the inciiari marl-zei wciuld be appiicabie for iiaisha but oniy on the izsase: price (if xx which imipii:eri a perpetuaivprica beneﬁt ta Kaisha vi5»é--

vi§ i?.'ie"<3ii1er cmiriverters. Mizireover, the 'agreememi aiso sought to give priority"'z§Kéi§i1a ' A in suppiying products to the customers Fioiax is granted only in Keisha as ', 3 .2 .3' ia...__'iiy the issue of ciiscaunt an ?.4.3.3 it is now to be seen whether such beneﬁts (price and non--price) prsvidsd by the GP to its verticaliy integrated downstream piayer is causing adverse sffsrcts an campetiiion in the downstream cmtaineirs markets. The necessary conditions for a resssnabie serzciusion of adverse effect an competition: in the markets concerned inciude evidence . :.

sf sresinn of competitive ability 0f the other converters war time due to the corxriuct of the (JP and a csnsisqueant Change in the market structure idiverting; saies in favsur of Schott iiisisha.

'?.4i,3..4-- Financiai anaiysis of an the converters was carried cut to conciucis the effect cf the I price bsnsiiis giro'-virisd is Kaisha as part of this Song farm tubing suizrpiy agrésmerii entered into on xxx on iris financiai hsaiih of the scsnvsrters and the competitive structure of the market. Gmwth rats in EBIDTA bsfcsre and after tine:-"agreement was used as a measure to bring out the impact on finsricisl hssith. Far this purpose, the financiaf statements of varisus converters were snaiyssci for the gvariodsk/is. 2"000V---20$}?

to 2007-2008 and from 200? .2008 is 2009 -=- 2{}"lG.in terms of ESWDTA growth, Schctt 3-iaisha has been a beneficiary past the JV with a change in CAGR of xx% white mast of iris converters such as xxx, xxx, xxx. xxx, xxx, xxx, xxx and xxx have experienced iciwsr growth post «~ JV. When snaiysing EBHZJTA er' Schczit Ksishs, it mustibé 'kept in mind that in the case of JV's pricing and proﬁts are more in the nature :33' transfer mechanisms. interestingiy the data shcrws that post 20{)?~D8, in terms of sbsoiuts amcmnts, the EBWJTA margin has grown pssitively can a Ycﬁi' basis for ail the piayers with the exception of xxx, xxx and xxx wha have suffered margins! -dsc:rsass in EBHBTA margin.

Tabie '3' V I EM-atuatlzrn Schnrt Kaisha Source: Financiai siatenaeents submitted by various corweﬁcers ?'.4.3.5 Effect on saiee beet refiecte the changes in campetitive structure :3? the market. CAGR (Ciompeund Annual Growth Rate) of Sales wee caleuiated for two pericde viz. 2OQ0«2()0'¥ to ;'30G?--2'O'D8 and fmm 2007- 2008' tD"200E3 --- 3010. The saies data and CAGE': fer saiee is refieczied in Tabie 8.

Tabﬁe 8 Dzia En' Sales af varimxs anti the CKGR before the JV of Sﬁhatt mm Keisha and after the JV AH ' case 2861 N Sczhoii Keisha Adi! Kishore $1361 Tube Giass iihemka Mai:

Lisa ﬁwnn Giasgs Ammka :Ki22ssPac!=:

.5§*9.=:=sa.?£9ea29Ie3.§:ee3?99=ﬁ; WWW, "-'Y.F§¥i3?i%.?.E$>*1Y3.!'§*9 §s!5te:Dther?r§§ume asrepv3i{é7éi}'r{'FfE{éz5éiaiSistemeﬁs m;sfs;a'a;;;ei;;a;a§es;;1'gag; " "

7.4.3.5 The tabie reveafs that Keisha had a GAGR of eaies of >:x% prior to the formatien of JV, thereafter it feii to xx% pest-JV. Though, an a year to year (YOY) basis the company gained by xx % in xxx as cemparecf to x:<% in previous year, but in xxx, the conwpeny inst xx°/Es on YOY basis thus ieading to a faii in CAGR. As far as other players are concerned, there are mixed reeu§ts.Whi1e some piayers have shown increase in eaies.

such as xxx, xxx, xxx, xxx, xx)»: and xxx. some have iesi such as xxx, xxx. xxx and xxx. The biggest Sczser in these terms is xxx with '-xx% and :0: with xx%. In fact in terms csf abseemtee amounts, higher growth rates have been registered far aii the piayers in 2099 vés-anxxis 2008 excepi wbjgh is an exszepiicm. Tube Glass, the secbnd biggest customer :3? L venture with £°<.ei;~:{ha has not' adv /i§eeV_ speeiﬁcaiiy stated that the joint grown post the joint venture.

SO 74.3.? The important ﬁndings of the firianciai ariaiysis are as foiiows:

{i} F-'est JV, Sschoit Kaisha.'s. EBiDTA has sharpiy increased. EBHJTA far most at the other converters have been increasing and have continued to increase even after the JV, aibeit at a tower rate. However, comparisnrrpt E,$i'i"DA between converters is not meaningtui in View of the differing ezftiizia-ncsies cf varicms converters a$ estabiished tram their Operating Ratios.

{ii} in terms at CAGR of sates, the resuits are mixed, white considering the trend in aiziscsiuie sates, at! the converier'sfhave gmwn post the JV {éxiépt xxx}

(iii) The CAEER at sates of Schott~Kaisha hés decreased past the N; in 'fact the growth rate for 2009~'i€i has turned negaiivéon a YDY basis 7.4.3.8 On the issue err' pricrity in suppiy, the OP furnished the record of deiivery which showeci an average of 95% performance record on deliveries tcir aii converters. Further', given the new capacity addition made by the OP, suppiy avaiiabiiity rm hanger remains an issue at signiticanece in this discussisan.

"r'.4.3.9. As the anaiysis of the performance at the curwerters in the downstream relevant markets reveals, the tong term tubing suppiy agreement batween Schoti and Kaisha dici not have an apprr-sciabie adverse effect an the cumpetiiiczn sirricture of the market. Titus, the aiiegation that the OP ieverages its dominant position in the upstream tubes market to pretest the d0WI'iS'ii'BEii'ﬂ containers market tacks merit and is therefore dismissed.

2.4.4 Sui: issue: 4; Bungiiing arnizrergtubeg with r:iear__i:u1h;esr {grgfrigiggrrgenr of Section 4(2) {:1} and rréfinr the Act] '}'.4.4.'i it has been aiieged by the informer/ri3,#ﬁ%§;t§'..""§E,§§§r{Rverages its rnonupmiy in the amber .

segment to ensure tut! tine enforr __ on the converters. Some at the 'K5 'n\\¥' converters in their statements t ., 1%

2.--.-'~: wi-

. '~i ' _ ' aneggi. Scrmti has been forcing them -

i""M?.'é.4.2 374.453 7.4.5 7315.2 ta mast their entire requirement from them only, faiiirig which they wcmid stop suppiies to them.

The OP on the mthesr hand der§i7e7d:"tiﬁ.ié aiiegati-an and furnisitéri deiivery reiiabiiity report which showed tieiivery reiiabiiity at amber tubes to their customers was more than 95%. On the issue of bundling the discounts on the two ~.rai'ieties. the OP submitted that both N68 and NGA tubes are manufactured an the same production tanks. The tunctianing of these production tanks on a continued anti statute basis requires a stabie demand fer both N80 and NGA gtiass tubes. it is for this reascm, the avarreci, that the NSC and MBA itave been: marketed jointiy witti mmrniun incentives for the customers.

No dnicumrantary evidence has been brought in support of tits aiiegaticn that the GP maria the sate of amber barosiiicate glass tubes ceniingent upon the ctmverters purchasing clear bomsilicate giass tubes. in View of lack at evidence in fax/cur of the lnformarit's aiiegation and having regard to the cieiivery reiiabiiity report submitted by the UP, it cannot be ta-asicnabiy concluded that the OP ieverages its mcnopcsiy power in the amber segment to enforce saie of ciear tubes. Acccirdingiy, vioiation of Section 4(2) (d) of the Act cannot be estabiisrxed.

Sub issue 5: Refusai to deal with irifarmani: ieading to cieniai at market access [infringement czf Section 4(2) (ac) and {E} at' the Act} it has been aiiegeci that the OP' stopped supply to the informant which was not resumed even after the informant exited the tube manufacturing business, ieading ta deniai at market access to the informant.

The C3? submitted that the informarit attempted taxifjfringe Schotfa trademarks and t0 trauduientiy pass borosiiicate giass tubes " n_i3"_At_y{.Schott Giass india. The OP . V r'.:-'._\1/_,,'_'§.,x V V V §g.t"'*§{GC\\ SCHOTT' anti 'Made in ., K 'it:

e produced a copy cf an order for printin O 1"

) ,___Wm' ' india by Schcstt Giass india Pvt. Ltd', under the signature of mrector, Kapoor Giass. in View of this, OF' biaczkiisted Kapoor (31333 and decided net to enter inter) any huppiy arrangements with Kapocr Giass, 7'.4.5.3 The informant coittested the stand taken by the DP anti stated that Schctt india refused 37.4.5.4 ta desai with Kapoor wide its letter dated 05.C34,2GO1,i whereas the incident at aiieged attempt of infringement cf Schhtfs trademark is of 2§.7.2D€32. Thus, there is no correiaticm he-tween St;hc:i:t's refusai to daai with Kapoar ahd the aiie.-gee! incident. it averred. it was stated by the infcahnant that as some of their théir fornttiiations with Schtatt tubes, they requireizi amphuies made but i::f"S<:.i:6tt'tui3es oniy. On account at this, they weirei forced ta pmcura Schott tubes from ether ampbuie makers, with Schott India was suppiying tau and when had excess stock of tubes, in order to retain its customers in the market for ampouies. These ampcsuie makers however decided to supply Schott tuhas tc: Kapoor on ' no names' 'h3siéhhd after ramming the iabeis in order to avoid getting noticed by $ChOtt.I in View of the fact that the ii?' induiged in unauthorized usage of the trademark of the UP, the OP cannot be directed or forced to cieai with the 3P. (in the issue of refusai to suppiy ieaciihg to dehiai 0'? market access for the H'-1', it is noted that the OP is mat the oniy tube manufacturer in the upétream reievant markets andthe ii?' has access to other producers in inciia and abroad. The statements at the Phatma companies make it evident that in most cases the Pharma cnmpahies prescribe usage at tubes which ccsnform to the USP Type «E standard and net speciiicaiiy Schott tubes. Further, the contention that Chinese tubes as a group cater to a different market cauid not be vaiidated from the various quaiitative and quantitative evidences since imported Chinese tubes are 22355:: aw.-iiiabie in many different quatities. Further, cbntrary to the ciaims made by the informant on high switching cost owing to requiremeht of stébiiity test, most?-'harma companies repertecithe periéd ofstahiiity test as six'i'm'c3'riths t«£ii'}jiL;j;is:1 implies shifting to a new suppiiar is not signiticahtiy conatirained by the requirement of stability test. The statements made i§:};w.e-triers on the recent switching of demand by the F-'harma companitest Q; T' er of cheaper hon-Schott tubes further retnfcirces the fact that sw tzhiitg :3 t ta"

l; L. 7.4.5.5

8.'?

8.2 tutﬁiment at stability test. The ability at the iP to survive in the market therefore is net determined by the evaiiabiiity of Schett tubes as input. Capacity utiiisetiori is a function at many teeters ether than eveiiebiiity of input and e deciine in capacity utiiisetion theretere cennet be conciusiveiy interred as e eotfiseguenee of refuse! te supply by the GP in the instant case, M i i it is to be kept in mind that the mandate of the eompetitien law is tci safeguard the tomes of cnmpetiticm and not indiviciuei eempetitors. in View of the feet that the upstreemiteievent markets. i.e.. the markets of U3?'-i boricisiiiceteﬁiiese'titties ifi ing§iie..

nae been found to be dynamic with increasing euppiy from eiternetive seurces, reguietory intervention into the 0P'e decision of net deeiing with the SP is not warranted. The ctmduct ef the GP in this respect does not attract the mischief es ccintained in Section 4(2) (C) SK (e) ef the Act, as aliegeci by the 1P.

CONCi..,U$iQi'>i$ Price dieerimihetien through discounts by a dominant piayer is e conipiex issue which can have outcomes that ceuid be positive in terms ef weitare enhancing or negative in terms of creating cempetitive constreiints in the market. Sensitive in the pcseeibiiity of eitemete eutcemee, e carefui layered aneiyeis was undertaken in this case under consideration. Ciiscounts to start with, are identified and ciessifieci on the basis of their discriminatory characteristics inherent in whether the discount schemes are 'am:mymous' er 'newanonymous'. Competition cericems arise when discounts are nan"

anonymous. Discrimination thereafter, by a dominant piayer in terms of price or other conditions, examined through the tens of cempetition, is estebiieheti upen iuitiiment of two conditions: (i) dissimiier treatment to simiieriy pieced buyers and ate: (ii) izorieequent harm to competition or iikeiy harm te competitien.

Schott inciia, a manufacturer at boreeiiieetei glass tubes, enieys e dominant position in the reievent markets of neuirai cieei USP4 berosiiiceteg eesutubs;":s emit neutrai ember LISP»! bomsiiieate gieee tubes in indie and its ﬁg.» 4-' 11?' -.

Aiiegetiens at visitation cf dominance tinder sséeieii:

+8.3 Generaiiy. a iowor input cost charged by the dominant ﬁrm 8.4 3.3 indie by Kaooor Glass, a converter of tubes into ampoules, viais etc. The aiiiogation of vioiation centres on the price discrimination foilowed by Sohott in their voiumo and funotionai discount. The orohiem is compounded by the foot that Schott India has a joint--ventozje'_"(;5g3-50) with the major downstream confgertor Kaisha sharpening the-

ccmoems of oossibie competitive constraints or; other downstroeam: prayers.

to its own ioint venture partner vi3~é~vis the other buyers in the market shouid be iooked at as intarnai transfer of proﬁts, uniess an adverse effect on downstream competition due to the riifiérentiai treatment can he Siéariyostabiishod. it is to be kept in mind that techhoiogy is an important factor and for a giass tube manufacturer the need to have a stabie suooiy of orders on hand to stoke the furnace is oriticai for maintaining quality. it wouid be normai to expect iargo converters to negotiate for better price deais in this industry. Kaisha has been the largest player in the market pro and post JV. ixiiatureci competition authorities have looked at No as antmompetitive oniy when used to create iconstraints on the competitive process. in this framework carefui detaiiing of both quantitative and , quaiitative data was necessary before arriving at 3 oonciusion.

in terms of competitive structure in the downstream market, it was observed that Schott Kaisha, although a Jvvand the iargest converter. maintained its share in terms of gates and market chum over the entire period. At the some time other converters were aiaie to increase their saies and expand husiness post JV. The input price benefit for the JV has not trarisiated into a iower price of the finai product charged by the JV. in an ex post onaiysis, the cieoign of the JV therefore was found to have no ciisoemibie effect on the competitive process in the downstream market. Creation oiioint ventures with Sarge players seems to be a strategy adopteci in this industry. NEPRO too has rocontiy acquired majority shares in the second iargost converter, Tube Glass Containers Limited. VI As regards the discount policy, Sohott iridia offers two kinds of discounts to the downstream ciorwertors oi the upstream roievant

(ii) ioyaity discount/fumztionai bonus.

8.4 8.5 8.6 conditions both in the CiD\l'."fi$'{i'e.alTi coniverter market and the upstream market at tubes. in the instant case, the competitive strength: or weaknesses of the various converters, as reﬁected in their financial performance studied ever a peritzd cit teri years, could mat be attributed to trig 'target discounts provided by Schott india. The target di$C£)i..lI1i policy designed and implemented by Scltcitt india cannot therefore loé reasonabiy interpreted as an imposition of ciiscriminatcsry price ar ccsnditicm on the ccinwarters.

{'3n the issue cit' functional discount, the analysis brought to fare that the scitenta was appiisd uniftnrmiy acrcass converters and the converters had the choice at using both Shinese tubes and Schéitt tubes by foregoing the 8% functirsrtai -.discc:sunt. The functional discount offered by the OP was contingent on the tultiiment at the 'No Chinese' ccndition and did not have any 'refusal to £1523!' iimpilications. Therefcare. the ccmditions stipulated in the functional discount poiicy cannot be viewed as imposition of unfair condition on the converters as it neither restricted the chaiée of the converters nor dict it have the potential is harm competition between converters in the downstream contaihers' markets.

Having examined the faczts and evidences bath from an economic: and finaniciai perspective, it is concluded that Scxhott india, aithough a dominant player in the upstream raievant markets of clear and amber rteutrai USP-i borosiiicate glass tubes, has nut through its conduct created competitive constraints in tha downstream raievant markets at containers.

However, it is noted that ciiacounts can be used as exciusitmary instrument to exclude i"iV3}SVCH' erect iartificiai entry barriers for potential entrants. While assessing whether a discount is used as a strategic exciusionary device, the theory of harmirieecis to be spelt out expiicitiy and veriﬁed against the characteristics at the market in questicm. A blanket 'harm' conciusiczn may nut be appropriate.

in this case, the anaiy:-sis contlrmeti that gsv§i\({§'hi§: rgg at"

trursture in the upstrearn reia-want markets, the target discount pmiicyleiia/§iif§§\.

xv ttéiéﬁpable of creating any __ rlts. 'gﬁgtgaever, the functional exclusionary effect on its rivals anciicar ;ic:ta§§ltiai .\§' ':3 Q s; "' ,5;

88 \ ﬁ\ i§,'¢§ F3 12),' ,.-\t?;' e"

8.8 discount, intmduced in response to the rising import nf cnmpeiing Chinese tubes which were substariiiaiiy cheaper than the OP's products. raises cancem in the upsiream market. The C>P's proclaimed inteni of 'mitigation sf mixing risk' for impcising speciﬁc and expiicit restriction cruise :32' Chinese tubes could not be substantiated by facts and avi:ciehces. Absent a vaiici prmcnnipetitive or efﬁciency rationaie, the inieht of the OP behind tying the functicnai zziiscmunt with the expiiisii restraint cm conversicm cf Chinese tubes therefere can ha inferred as anti-cerinpetitive. Behavioural Vechhhmics does suggest that attraction effect' of such ciisccsunis can be found in which the recipient of the discount, in this case the converters, maintain status quo and acceptﬁhe discount and the ccmciitions there-ih ever} thougzgh it may beirationai far t::2«:Swiich.A ii is nohefhE'ié§S important to note ithgt despite the fUT}CﬁGi'lE.i discount of ihé {héi éhgie 03' Chinese imports in the neuirai bcimsiiicaie giass iubes market in india has gone up sigriiﬁcaahtiy and they currentiy account for a quarter of the market. Further, the funciionai discount poiicy waa withdrawn by the OP with effect from Aprii 1, 2010 replacing it with TMLA, which is campatihie with the prcivisions of th§§'AE:i..' Hciwever, given that the fuhctionai discount pmiioy with an overt antiecmmpeiiiive intent had been in practice between the date of ncitificatiori mi the reievant gjraiiisions of the Competition Act, 2002 Le. May 20, 2099 and March 31, 2010, ccantravehtion 02' the provisions of Section 4(2) (b) and 4-(2}!;f§§-;'9'?3t}§§>j;f\Ci fstands estabiished.

'e .

"(mi 'to V; ' .

""'-.....,, Grder Having examined aii the evidence and data provided a cietaﬁed assessment was made of exciusionary impact of discounts bath in the cicawnstream and upstream market. it is opined tha'; on the basis of the abmve exercise and taking into cognizance the scope affczarded in terms cf weifare effect of poteéniiai entry in the upstream market with lowering sf prises the functionat (ioyaity) discount poﬁcy as it opefated tiii ifs régdeai in April, 2D10.».Adi:3.désp1ay characteristics tﬁét cbﬁiraxrene the provisiﬁné ti? Séé. {£3}.-V and 4(2) (3) of 'the Act.

Based on an assessment however, of the nature and seveﬁty ef the cﬁmtravention in the context mf the markets ccncerneci, a taken ﬁne of Rs. '$.31 cmres is ieviesd.

The Secretary may be directed 'to inform the parties accerdingiy.

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Competition Commission of India

Kapoor Glass Private Limited vs Schott Glass India Private Limited Main ... on 29 March, 2012