Competition Commission of India
Prints India vs Springer India Private Limited & Ors. ... on 3 July, 2012
BEFORE THE
COMPETITION COMMISSION OF INDIA
{Case No. 16/20101
Informant: Date of Order: 3rd July, 2012
Prints India Through Mr A N Haksar,
Mr Ramji Srinivsan,
Sr. Advocates & Associates
Opposite Parties:
1. Springer India Private Limited Mr Krishnan Venugopal,
Sr.Advocate & Associates
2. Indian Academy of Sciences Through Mr C.S.Ravi Kumar,
Advocate
1. Indian Association for the None
Cultivation of Science
2. Indian National Science Through Mr A N Thakur,
Academy Advocate
3. Operational Research Society of None
India
4. Dept. of Psychology, University None
of Delhi
5. Indian Statistical Institute None
6. Association of Food Scientists & None
Technologists (India)
7. Indira Gandhi Centre for Atomic None
Research
ORDER
The Competition Commission of India (Commission) received an information on 12/04/2010, filed by M/s Prints India (hereinafter referred to as Informant / Prints India) under section 19(1) (a) of the Competition Act (hereinafter referred to as Act) alleging certain anti- competitive behavior by Springer India Private Ltd. (hereinafter referred to as Opposite Party / Springer India) and eight Indian institutes as mentioned above.
Factual Background
2. As submitted by the Informant, Prints India, a sole proprietorship firm founded in 1966, is engaged in the business of distribution and exports of Indian Journals for domestic and foreign clients. It is also a major supplier of back ui than journals.
Prior to the entry of Springer, Prints India ng most of
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- the reputed Indian scientific journals published by several institutes of national repute in their respective fields.
2.1. Springer India is a part of Springer Science + Business Media, a leading global academic and scientific publisher. The latter has around 60 publishing houses in about 20 countries in Europe, Asia and USA. According to its website, Springer publishes over 1700 journals and more than 5500 new books every year, making it the second largest publisher of journals in science, technology and medicine (STM) sector with largest STM e-book collection worldwide. Springer India commenced its operations in India in October 2002 as publisher and distributor of journals.
2.2 Opposite parties No. 2 to 9 are the leading academic / research institutes of India.
2.3. Business of the Informant as per the submissions had been running smoothly on cordial terms with the publishers of the Indian journals until Springer India entered the Indian market. Thereafter, the latter started acquiring control over most of the Indian journals by entering into exclusive co-publishing agreements with the institutes publishing most reputed journals in STM market in India.
2.4. Springer India entered into co-publishing arrangements with 33 institutes and societies (in STM segment). Through these agreements, Springer India reserved for itself the right to decide, inter alia, the terms and conditions for the sale of these journals. It also took away the right of the institutes to further license the publication, distribution and sale of these journals, thus making it an extremely powerful player.
2.5. After Springer India became co-publisher it imposed the following terms and conditions on Prints India:
i) Prints India to pay according to the USD list price of the journals. However, final payment to be made in INR after conversion at ongoing forex market rates.
ii) Discount reduced to 5% on the list price from existing 10-25% offered by the Institutes previously.
iii) Prints India to provide end-user clien to Springer India.
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In case such details are not provid ises to supply journals to Prints India.
iv) Prints India required to make lQ'0 a*e py ent for the order placed with Springer mdi . ° • * * /Ne\N0 [2] 2.6. To remain in business, Prints India had to abide by the conditions imposed by Springer India. However, after noticing that it lost some of the clients whose details had been provided to Springer India, Prints India declined to provide any further client details. To this, Springer retaliated by refusing the supply of journals to Prints India. As a result, Prints India lost its clientele and its revenue took a hit.
Relevant market
3. In order to delineate the relevant market, the Informant has relied on the experience of the European Commission in various cases, general industry categorization and observation of competition experts. On the basis of its analysis, the Informant has identified the relevant market as 'market for publishing Scientific, Technical and Medical (STM) journals in English language'. Citing the provisions of the Act, the geographic market has been limited to India.
3.1. This definition of the relevant market has been premised on the fact that STM is considered to be a group of similar subjects under the academic publishing industry and promises supply-side substitutability and to some extent demand-side substitutability from the perspective of libraries or institutional subscribers that have ' a requirement for a bouquet or portfolio of journals in the said category.
Dominance
4. The Informant has made the following submission on the issue of dominance in the relevant market:
i. Springer India has entered into co-publishing agreements with thirty-three institutes and societies that publish oldest and reputed journals in India in the STM segment. Thus, it has extremely powerful journal portfolio which gives it unique market power.
ii. The STM publishing industry has high entry barriers as it requires several high-cost activi, iesclis-'j€tuiting writers, Gom T judging, reviewing, copy editing ticles. Other significant structural barrier to ee trk'in rl re journal's reputation, built over a time and pee~rreT. * /Nei [3] iii. The academic publication is distinct on account of 'must have' characteristic and is generally considered indispensable by the customers.
iv. Springer enjoys one of the most powerful positions in the world in respect of STM publication. It has a global turnover of r Euro 892 million (2008).
v. Due to asymmetrical market power between buyer and seller, Springer India has achieved an unassailable position in STM journal publication.
vi. Out of a total 150 STM journals published in India, 47 are published and distributed by Springer India. Circulation figures reveal that Springer India enjoys 64% market share in the STM segment.
vii. Springer India publishes 47 journals for which it has acquired the co-publication rights; these journals are popular ones with 'must have' characteristics.
On account of above considerations, informant has submitted that Springer India enjoys dominant position in the relevant market.
Summary of allegations
5. It has been submitted by the informant that Springer India has abused its dominant position in the market for STM journals published in English language in India as under:
i. Directly imposing unfair (excessive) prices on the consumers in the sale of journals infringing S. 4(2)(a)(ii). ii. Imposing unfair conditions in the sale of goods requiring the purchaser to furnish commercially sensitive information infringing S. 4(2)(a)(i).
iii. Completely squeezing the margin of the distributors by imposing unfair prices on the distributors infringing S. 4(2)(a)(i).
5.1. The informant has also leveled allegation against Springer India and 8 Indian institutes of entering into anti-competitive agreements (co-
publishing agreements), thus violating Section o'€om ? by entering into with the institutes which permits it to: ~;~°`` ''SS p o a. Directly determine sale price v ating (a) Iwo' Qi PA [4] 7 ~/NeWQ/ b. Control the supply of the journals by imposing unfair conditions of furnishing commercially sensitive information violating S. 3(3)(b).
C. Share the market by way of allocation of types of goods, i.e. print version and e-journal violating S. 3(3)(c).
Relief Sought
6. The informant has prayed for the following reliefs and requested the Commission to:
i) Find that Springer has infringed Section 4 of the Competition Act, 2002;
ii) Find that Springer has infringed Section 3 of the Competition Act, 2002 by entering into anti-competitive agreement;
iii) Find the revised prices to be unfair and order Springer and the Institutes to reduce the prices to reasonable levels with sufficient margins to the subscription agents to survive in the market;
iv) Find the conditions imposed on the distributors as unfair and order the institutes to supply the journals without asking for end-used details;
v) Find that the agreements between Springer and the institutes are anti-competitive and declare these to be void;
vi) Impose the highest level of penalties on Springer in accordance with the Competition Act, 2002, so as to have deterrent effect and ensure fair competition in the STM publishing market in India;
vii) Require Springer to pay all the complainant's costs; and
viii) Pending the complaint the Respondent No.1 may be directed to supply the Journals without asking for end-user details;
ix) Pass such other order as the Commission may deem fit to ensure fair competition in the STM publishing market in India.
Additional Information
7. Subsequently, on 03.06.2010 and 09.07.2010, the Informant made further submissions (additional information) before the Commission to supplement the original Information with add) at t1 and legal CO submissions The additional information is paragraphs The informant has detailed the a0gr fA11*\opposite party and its parent organization on how th4y &ve recth present status and has highlighted the fact that gi 1y,igei 11s always / [5]
- been trying to strengthen its dominant business position through various means including acquisitions or mergers with other similarly placed business houses.
7.1. Data pertaining to journals published in India has also been provided, according to which there are approximately 1000 journals published in India. Further, out of 150 STM journals having total circulation of about 55000, Springer publishes and distributes 47 journals having circulation figure of 35000. Thus, Springer has 31% market share in STM journals and about 64% share in total circulation.
7.2. The informant has submitted that the 47 journals for which Springer has acquired rights to co-publish and distribute are the most popular and are the must have titles for subscribers and these standard makes their position even more dominant in the STM segment. It has also been submitted that because of anti-competitive approach of Springer, there has been a significant drop in the business of the informant to the extent that it is on the verge of elimination from the market. In this connection, the informant has averred that it gave a list of the subscribers to the institutes with whom it has distribution arrangement and that Springer obtained the list under agreement from the institutes with which it entered into co-publishing agreement for the detriment of the informant i.e. supplying the journals directly to the subscribers.
7.3. Another piece of information that the informant has submitted is the fact that immediately after entering into co-publishing agreement, Springer increased the price of journals and decreased the distributor margin to 5%. The informant has argued that such a low of margin is insufficient to maintain the establishment, do PR and marketing exercises to gather business, make advance payment to the publisher, bear the risk of order cancellation and loss or damage of the shipment, providing replacements etc. Further, to completely oust the informant from the market, Springer came out with a pre-condition of supply of such journals; the condition being that Prints India will have to part with the complete details of its subscribers along with the entire subscriber list for any such journal of which supply is sought from Springer.
7.4. The informant has also highlighte uctscriminatory
and arbitrary terms of agreement signl it Which, as
submitted, has been introduced on accou & do ht poi ion of the
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later. Further, supplementary obligations having no connection with the subject of the contract have been introduced.
7.5. Replying to the query of the Commission, the informant has furnished the name and address of four other distributors engaged in the business of supply of journals. It has also been averred that these distributors too had lost all the clients / business in view of new terms and conditions.
Reference to the Office of DG
8. In the ordinary Meeting of the Commission held on 08/06/2010, the case was considered and on basis of facts and circumstances and documents available on record, the Commission opined that there exists a prima facie case for making a reference to the DC for investigation. Accordingly, the matter was sent to the DG for investigation on 13/07/2010. Subsequently, vide Order dt 22.12.2010, Commission issued directions under section 26(8) to DC to further investigate on certain specific issues relevant to the present case.
Finding of the DC
9. Having received Commission's Order dated 23.07.2010 under section 26(1) of the Act to investigate the matter in the instant case, the DC submitted investigation report dated 19.10.2010 and supplementary report dated 16.05.2011. DC has investigated the conduct of Springer India vis-à-vis the allegations pertaining to abuse of dominant position as also anti-competitive agreement (co-publishing agreements) with the named research institutes of India. Questionnaires were sent to Springer India, Prints India and four other entities engaged in the distribution business of STM journals, viz; (a) UBS Publishers, (b) Bibila Impex, (c) Allied Publishers and (d) D.K. Agencies. In order to get the perspective of the Institutes/Societies engaged in the publication of STM journals, one of the societies based in Delhi, namely, the Indian National Science Academy, New Delhi was also summoned by the DC.
10. In the overview of the publi business practices, DC notes:
[7]10.1. That STM publication could either be formal (e.g. journal articles, books) or informal (conference presentations, pre-prints). In the group of formal publication, books and journals are distinct on the basis of time-sensitive content and content itself, historical perspective and coverage. Publishing cycle comprises of submission of research articles to the journal editorial office, peer review for a methodological check on the soundness of the arguments and strength of originality of the conclusions. Once the journals are published, they are made available to the subscribing institutional libraries, often through a subscription agent.
Authors publish to disseminate their results and also to establish personal reputation and priority of ideas. Citations, an important part of scientific articles, help the author build their arguments by referencing to earlier work without having to restate that work in detail. The number of citations a paper receives is often used as a measure of its impact and of its quality.
10.2. Journals are marketed to the library and individuals. Subscription agents are an important part of the sales channel. Agents act on behalf of libraries, allowing the library to deal with one or two agents to manage relationship with large number of journal publishers, each with different order processes, terms & conditions. Agents also provided a valuable service to publishers by aggregating library orders and converting them to machine-readable data, handling routine renewals, and so on.
10.3. The number of agents, as observed by DG, has been declining in recent years, primarily due to mergers and acquisitions in the industry and the lack of new entrants. Further, the move to electronic publishing and consortia sales has also brought about increasing disintermediation of the function of the subscription agents. With the rise in electronic publishing, sales of individual journal subscriptions have fallen as a proportion of total sales in favour of bundled subscription. The library is offered electronic access to all titles in the bundle at a price reflecting the libraries' existing print subscriptions plus a top-up fee for electronic only access to the non subscribe titles. It is estimated that about 96% of STM journals were accessible electronically in 2008 (Cox & Cox 2008).
10.4. The annual revenues generated from E language STM journal publishing are estimated at $8 billion r the report of UK's Research Information Network, RI scriptions account for 68-75% of the total reve i foliff 'ç' corporate subscriptions which accounts for 15-17%, 4%4 mbership fee and personal subscription 3% and variosu iepments 3%.
By geographical market, about 55% of the global STM revenues come from the USA, 30% from Europe, 10% Asia/Pacific and 5% from the rest of the world. India with compound annual growth of 4.5% has failed to grow as fast as other Asian countries like, China, Singapore, South Korea and Taiwan.
10.5. The distribution of journals by publisher is highly skewed. It is dominated by a small number of commercial publishers (Elsevier, Wolters Kluwer, Thomson, Springer combined represent almost 50% of the market). Elsevier leads the market with around 28% market share whereas, Springer has approximately 10% market share. Apart from the commercial publishers, there are many societies who publish a few journals. The third type is the university press, notably Oxford University Press (OUP) and Cambridge University Press (CUP). Analysis done by Elsevier reveals that proportions of article output by type of publisher are: Commercial publishers - 64%; society publishers - 30%; University Presses - 4%; other publishers - 2%.
Analysis of relevant market:
11. DC has submitted that relevant product market in the present case has to be determined with reference to 'Journals published in India in English language in the field of Science, Technology and Medicine' that are published I marketed commercially by the publishers as a distinct category. It has also argued that STM journals, comprising of narrow range of journals which are purely academic and are of highly advanced and sophisticated standards meant for scientific researchers and academics, constitute a separate and distinct category of product. Further, DC has limited the market to 'STM journals published in English' on the grounds that advanced level academic work and research in the field of Science, Technology and Medicine is carried out in India almost exclusively in English.
11.1. On defining the relevant geographic market, it is been submitted that the market conditions and terms of procurement of STM journals are same for all distributors in India and there are no regulatory barriers within the boundaries of the,4 / ther, citing the provisions of the Act that limit its app in India, DC has concluded the relevant geographic P1 21
- Dominance of Springer India in the relevant market
12. The DC has analyzed conditions given in section 19(4) of the Act to ascertain dominance of Springer India in the relevant market.
12.1. Market Share I Power: DC has stated that for assessing the market share I power, revenue figures may not be relevant, especially in the present case. Rather, the appropriate criteria would be the portfolio of 'must have' journals possessing 'must have' characteristic. Therefore, a look at Springer's portfolio of STM journals published in India is necessary to examine its market power. As submitted, Springer India co- publishes 43 STM journals in association with prominent scientific societies I Institutes in India. Most of these journals are being published from decades and they enjoy high reputation in academic reference circles. Accepting the data provided by the Informant, DC has concluded that Springer has 31% share in terms of number of STM journals (47 out of 150) and 64% in terms of circulation numbers (35000 out of 55000) pertaining to these journals. Further, DC has submitted that the 47 journals for which Springer India has acquired rights are the 'must have' titles for subscribers and this standard makes their position dominant in the STM segment. Any library or institution or even an individual interested in research work being done in India in the field of science, technology and medicine, cannot afford to ignore Springer's portfolio. On the basis of above, DC has concluded that the market power of Springer India is unassailable and fortifies its dominant position.
12.2. Size and resources of Springer: In order to evaluate the size and resource of Springer India, DC has cited the Annual Report 2008 of Springer Science + Business Media, according to which it is second largest publisher of STM journals, largest publisher of STM books and a significant publisher of information for professionals, especially in Germany and Netherlands. The group publishes around 2000 journals and more than 6500 new books a year, and offers the largest STM e-book collection worldwide. Springer has operations in about 20 countries in Europe, the USA and Asia, and has around 5000 employees. In 2008, it generated annual sales of around 892 million Rums. Thus, DC has concluded that size and resource of Springer India is immense giving it unparalleled market power in the STM Jour .4t India.
12.3. Size and Importance of the Conjth Fa.s ubmitted that
Springer India does not face any signficit titi&l*i the relevant
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market and goes on to say that anyone having access to copyright material acquires a unique position.
12.4. DC has submitted that publishing STM journals is a highly specialized field and involves several high-cost activities like recruiting writers, judging, reviewing, editing, copy editing and typesetting articles. Most importantly, the journals' reputation is built through rigorous academic quality. All of these act as entry barrier for new entrants. Other barriers are network effects, coordination, the existing stock of journals held by incumbents, and the high switching costs for libraries. To support the view, it has cited Annual Report 2008 of Springer that mentions about high entry barrier in the relevant market.
12.5. Dependence of consumers: From the perspective of academician and researchers, the STM journals of a particular discipline are indispensable to scholars/academics of that discipline. Based on the reputation and reliability of journals libraries / institutions can also not afford to substitute a particular portfolio of journals. As Springer India is having co-publishing rights of most of the leading STM Indian journals, the scientific research scholars and institutions, involved in the activities of knowledge sharing in this field in India or interested in the field of STM research in India, are hugely dependent on it.
12.6. Vertical integration of the Enterprise: DC has submitted that Springer India has a wide sales network and is spread over several countries and has huge financial and marketing capabilities. It also provides electronic platform "Springerlink" which gives the company a cutting edge. Thus, the exclusive co-publishing rights of Springer India coupled with its presence in the distribution network of 'STM journals published in English in India' makes it a vertically integrated enterprise and gives immense power to dominate the relevant market.
12.7. Countervailing buying power: DC has submitted that on account of exclusive rights of Springer India to publish and distribute 'STM Journals published in English in India' and their 'must have' characteristics, neither the distributors nor the consumers of STM journals have any significant countervailing buying powel. Further, in a short span of time, prices of the journals published by Springer India has increased manifold. 4 x çOflThS,' 13 On the basis of aforesaid, DC h that ringer India enjoys dominant position which enabi s ito ate ia pendently of çZ) [11] 1if the competitive forces prevailing in the relevant market and/or to affect its consumers in its favour.
Abuse of the dominant position:
14. Having defined the relevant market as "market for STM journals published in English language in India' and concluded that Springer India is a dominant player in this market, the DG has then proceeded to analyze its conduct for abuse of dominant position in light of the allegations leveled by the informant.
Imposing unfair (excessive) prices:
14.1. It has been submitted that prices of the journals published by Springer India have increased substantially over a very short period of time, and even the prices for 2011 are substantially higher than that of 2010, to which DG has observed that the magnitude of the increase in prices of journals and its continuing trend cannot be said to be commensurate with the value of addition of services which the company is claiming. The DG has also submitted that a consumer has not been given any choice to avail or not to avail the value added services and are compelled to avail these services by reason of their dependence on Springer India and to make payment for the services which they may not require. Further, if Springer India had delinked the price of its value added services from the basic price of the product, the consumers would not have been subjected to unfair prices.
14.2. DG has, thus, concluded that Springer India is found to have abused its dominant position by imposing unfair price in sale of its goods in violation of Section 4 (1) read with Sub section (2) (a) (ii) of Section 4 of the Act.
Imposing unfair condition in sale:
14.2. Perusing the co-publishing agreements signed between Springer India and societies publishing the journals, DG has found that the former requires subscription list from the societies and has right to use such data to send information regardi and products.
Also, furnishing of end user details like 'dI'çss, e-mail, IP address etc. by the informant has been k gar\clause in the agreement signed between Prints India n [121
14..4. Citing a clause in the proposed 'Service Level Agreement', DG has submitted that standard commission on subscription has been stated to be 5% with respect to print/electronic journal subscriptions with end user address information while 4% commission has been offered for subscription without end user address and concluded that that end user information is very crucial to Springer India.
14.5. DG has also relied on the statement of the informant that other STM publishers like ICFAI University press, Serial Publications, Taylor & Francis, Medknow Publications, Research India Publications, Taru Publications and Pushpa Publishing House do not seek such end-user details.
14..6. Giving credence to informant's statement that its order for subscription has decreased considerably after supplying end user data (a commercially sensitive information) of its customer to Springer India, DG has concluded that requirement of end user data in the capacity of co- publisher from the distributors is patently wrong and an unfair condition and a misuse of its dominant position in violation of section 4(1) read with 4(2)(a)(i) of the Act. Further, the stoppage of supplies of journals to the distributors for want of end user data from them would also violate section 4(2)(c) as it will be a practice resulting in denial of market access to the distributors. The imposition of the obligation by Springer India to furnish the end user data upon a party with whom it is dealing on a principal to principal basis would also be in violation of Section 4 (2) (d) of the Act.
14.7. Margin Squeeze: DG has observed that margin available to the distributors/subscription agents before acquiring co-publishing rights by the Springer India were in the range of 10% to 30%, which subsequently was reduced to 5% by Springer India. It has been submitted that a subscription agent has some major responsibilities towards the customer like making of advance payment to the publisher, bearing of cost if order for journal is cancelled and loss to be borne out if material is damaged or is lost in transport. In view of this, reduction of margin to such a low level of 5% would make business unviable for the distri ors resulting in their being driven out of the market. DG hasGo , u,ç1 .,d that margin squeeze is a part of design of Springer In distrutors out of the market and amounts to unfair conditi fi'i hen€ violation of Section 4(2)(a)(i).
0 [13]14.8. Allegation of Anti-competitive Agreements: Regarding the allegation of anti-competitive agreement (co-publishing agreement) between Springer and the named Indian institutes, DC has stated that these are more appropriately covered under Section 4 instead of Section 3 of the Act and that it would not be appropriate to charge a party in terms of Section 3(3) and Section 4 at the same time. Also, such agreements are usual norm in the field of STM Journal puMishing all over the world.
14.9. Further, DC has submitted that the Societies / Institutes are engaged in serious academic research work and are not business entities and that most of them appear to be fully funded by the government. Their co-publishing agreement with one of the leading publisher of the world can be seen as an attempt to become free from the responsibility of marketing the journals which they are publishing. In the process, they are also gaining wider reach of their journals. Thus the co-publishing agreements between Springer India and the Societies/Institutes cannot be said to be anti-competitive in nature.
Conclusion of DG Report:
15. In view of the investigation conducted in the case, DC has concluded that Springer India is found to have abused its dominant position and the same is prejudicial to the interest of consumers at large and competition in the relevant market.
Response of the Opposite party on DG Report
16. In their response Springer India has stated that the investigation report and the supplementary report prepared in the instant case by the DC is flawed and based on assumptions and erroneous facts provided by the informant. Further, it has submitted that the DC has not conducted any independent analysis / investigation of any data to support conclusions made in the reports.
16.1. Springer India has submitted that there is no comparison in the business models of Springer India and Prints India; the latter is a subscription agent whose main motive is pp i g,, Moreover, 65% of Springer India's STM journals in red through subscription agents and 35% of the by Springer India itself. There is no exc1usi(v gre it bet* en Springer () \0 çq/ [14] -r I"
India and the subscription agents and transactions are on a principal to principal basis.
16.2. In the following paragraphs, arguments advanced by Springer India are briefly provided issue-wise.
Malafide intention of the Informant:
16.3. Springer India has pointed out that Prints India has engaged itself in the malpractice of purchasing Indian journals at Indian subscription prices and selling them to foreign subscribers at higher rates, thus earning supra normal profits. Further, it has attempted to sell the journals outside India, when it does not have the overseas distribution rights.
Presumptuous Approach of DG:
16.4. The DC has predetermined the relevant product market and then tried to justify the same without conducting any independent exercise. Further, it has not done any survey from the libraries I institutions to determine what constitutes a 'must have' journal and that it has relied on the submissions of the informant that journals of Springer India belong to the 'must have' category.
16.5. The DC has concluded that since price of the journals published by the opposite party has increased, it is dominant. Springer India has pointed that such a methodology has a circular fallacy in that a firm could be found dominant due to its conduct and the dominance would lead to the conduct itself being categorized as anti-competitive.
Relevant market:
17. Springer India has disputed the description of relevant market by the DC. It has submitted following arguments to bolster its view point:
17.1. DC has made erroneous refer the J&aiover case, a 0m m merger case as opposed to abuse of domi tati&t to arrive at the conclusion that STM journals publish 4is\i language constitutes the relevant market. It has t he] European o çJJ [15] Commission had concluded that 'strong indications have been found that a distinct market for STM publications may be considered to exist, however, market definition may be left open since the competitive assessment, even on the basis of a narrower market that an overall market for academic publishing, is not changed'. Similar approach has been adopted by the Office of Fair Trading, United Kingdom in its guidelines on market definition.
17.2. The European Commission had recognized the difficulty in defining the relevant market in publication industry strictly from a demand side perspective and, therefore, suggested supply-side substitutability. It has also been submitted that suppliers are able to switch production processes, thus having considerable effect on the competitive behaviour of the companies producing products which are demand substitutes. In view of this, relevant product market may be broadened to include all academic journals published in English in India.
17.3. Although journals, books and magazines have some different characteristics, they also share many similar characteristics, which suggest that they all should be part of the same relevant market. Further, Springer India has argued that two products do not have to be identical to include them in the same market; if consumers view them as sufficiently close substitutes, then they belong to the same market.
Dominance:
18. Springer India has submitted that DG has relied on the fabricated data of the informant to arrive at the conclusion that it is a dominant player in the relevant market; in the process, it has also ignored the reality of the market dynamics of the industry. Following submissions have been made in this regard:
18.1. DC has failed to show that Springer India has been holding persistently high market share over a period of time, thus enabling it to acquire the status of a dominant player.
18.2. There are market intelligence agencies which show that Springer India holds less than 10% of the market. Further, response of Elsevier India suggests that they hold about 23% of the market share, which makes them leading player.
18.3. Contesting the data of DC that tin $ournals, out ;
of which Springer India publishes 47 that io\urnals and that market share of Springer India is 31% of journal and 64% in terms of circulation of these erJ India has submitted that one of the publishers i.e. Medknow publishes nearly 151 journals in medicine. It has further submitted that there are about 700 STM journals in India, and therefore market share worked by the DG is not correct.
18.4. DG has not considered the fact that Springer India has two types of co-publishing agreement with Institutes in India - full service journal (Springer India has the world-wide distribution right) and hybrid journal (Springer India has overseas distribution rights). Springer India has argued that if relevant geographic market is taken as India, DG ought to have considered only the hybrid journals (only 26 out of 47 publications) for determining the market share. Springer India has argued that in such a scenario, it would have a market share of about 17% only.
18.5. Springer India has submitted that value figures provide a more appropriate picture of market share in case of differentiated products, like in the present case. While submitting that it does not have the leading market share in terms of sales revenue, Springer India has also submitted that DG has ignored the sales revenue in determining the market power in India but has relied on the global sales data of Springer India's parent company to establish that it has unparalleled market power in the STM journal sector in India.
Abuse of dominant position:
Imposing excessive price
19. Springer India has submitted that abuse of excessive pricing occurs when a dominant firm charges a price that has no reasonable relation to the economic value of the product supplied. In the present case, the DG has failed to show that prices charged by Springer India are excessive when compared to cost of publishing the journal. Moreover, no price comparison has been done between Springer India's price and that of competing journals published by other competing publishers. It has also submitted that DG did not make any attempt to consult the customers while determining and conducting that the rise in prices did not reflect the value addition to the consumer. Finally, Springer India has averred that it is not a . to compare the prices of two different time periods since JOUTI'IaIS W e distributed by a different firm which had totally diff rfpje'o CL in [17] Imposing unfair conditions in sale 19.1. On this particular issue, Springer India has submitted that it is an industry practice to call for user details to facilitate access of online format, which not only helps in protecting the copyright and intellectual property rights but also reduces chances of piracy.
Margin squeeze 19.2. Springer India has submitted that DG has failed to establish either that a margin squeeze has occurred or that there has been an adverse effect on competition. Further, a reduction in commission cannot be regarded as margin squeeze unless the DG is able to demonstrate that an equally efficient competitor would not be able to survive with current level of discounts. Springer India has further submitted that despite a decline in the commission rate, the actual discount available to a distributor in money terms has actually increased, suggesting increased revenues for the distributor. Finally, it has said that the discount rate of 5% is in line with international trade practice.
Economic Analysis submitted by the Opposite Party
20. The economic analysis prepared by Compass Lexicon (CL), commissioned by Springer India, has made the following remarks on the DG investigation report and supplementary report in the instant case:
20.1. In the first instance, the reports of DG incorrectly rely on a European Commission ('EC') merger decision in the Candover case as a basis for the STM market definition. In the decision, EC does not conclude on the market definition. It suggests there may be a market for STM but does not provide any evidence. Furthermore, DC incorrectly relied on firms' marketing statements as a basis for market definition for the purposes of a competition law investigation.
20.2. The DG reports fail to consider whether supply-side substitution would justify a wider market. If a publisher was already offering STM journals to a library it seems that it would be easy for it to add additional titles to its portfolio in other fields. It would only have to enter into an agreement with an institute i to publish its Journal CL has also contended keeping Joy I1 'epate market to books and magazines on the ground that do no have to be identical to include them in the same ma etanc1 a1thoh journals, 9\J books and magazines have some different characteristics, they also share many similar characteristics.
20.3. The DC reports fail to provide robust evidence that Springer holds a persistently high market share - no calculation of market share over time in the relevant market has been done. The only market shares in the main report are those tht were supplied by the complaint, which remain unsubstantiated. The market share overstates Springer's position in India because many of the institutes it has agreements with are the "hybrid" agreements, on account of which Springer has the right to distribute only 26 Indian journals within India and this is the relevant number for the purpose of market share given the market definition used in the reports. Consequently, even on a narrowly-defined market that includes only journals published in India, Springer's market share would be only 17%.
20.4. The DC reports fail to provide evidence that Springer's journals are "must have". The reports argue that Springer's portfolios of STM journals give it an "indispensible market power". These arguments are pure speculation and the only evidence that the reports offer appears to be comments of distributors.
20.5. Whereas the DC argues that the exclusive agreements are a barrier, but the reports does not explain why. Further, the reports fail to recognize that Springer itself is a new entrant. If Springer can enter so easily, there is no reason why others cannot enter the same market.
20.6. The DC reports fail to show that vertical integration is a barrier to entry. First, the reports have not yet established that "distribution" is a separate market to "publishing". Second, even if Springer was vertically integrated it might only be a barrier if (a) others cannot replicate that position and (b) Springer is not prepared to supply the upstream product (journals) at a price that allows downstream players to compete. The reports fail to show that (a) and (b) apply.
20.7. Claims that price increases in themselves show dominance is incorrect, which it says is an illogical and circular argument. Further, it has been submitted that no attempt to calculate the cost of publishing the journals has been made. Therefore, the reports cannot conclude that the prices are excessive based on costs. The reports1' ine the prices of Springer's journals against comparae Jccts "\ straight comparison of prices does not reflect the Cal difrce i*ueknd user.
Since Springer has published the journals, çme a#le o access ' r/ electronic versions of the journals. This additional service may justify a higher price.
20.8. The reports have failed to explain why collecting user details will have an adverse impact on competition. First, obtaining end-user data will have little effect in practice. This is because the main customers are libraries, so Springer could easily obtain customer contacts anyway. Second, if Springer obtains customer information and contacts those customers directly, this means customers will have more suppliers to choose from. Third, the request for details may be objectively justified if it is necessary to protect against misuse of the electronic versions of the journals.
20.9. The reports do not show that the distributors cannot make a profit margin. The main report argues that because the distributor has "major responsibilities towards the customer" a 5% commission makes the business unviable. This is a speculative and unsubstantiated assumption and is not sufficient to show a margin squeeze. The reports fail to make a comparison of the distributors' revenues against costs. CL have submitted that there is no evidence to show that the distributors' commission revenue has fallen. The commission may have fallen from 10-20% to 5%, but the price of the journals (according to the report) have risen by up to 600%. Therefore the distributors may actually be better off than before the agreements. Whether distributors can make a profit from the prices is the wrong test to apply for a margin squeeze case. The international practice for a margin squeeze case is to test whether an "equally efficient" competitor could survive with the existing prices. This is to avoid competition law protecting weak and inefficient firms.
21. On the basis of the above arguments, the economic review concludes that:
The reports do not properly define the relevant market. The reports fail to show that science, technical and medical ('STM') journals is a relevant market and fail to show that journals are in a separate market to books and magazines.
Even if the reports and correctly defined the relevant market, they do not show that Springer holds a dominant position on that market.
Even if the reports had demonstrated a dominant
position, they do not show that the co an
abuse. The reports fail to show: th excessive;
*
0 *
120] \* ',
"r I/
- the allegedly unfair contract terms adversely affect competition; or
that Springer's discounts have led to a margin squeeze.
Rejoinder of the informant on Springer's response to DG reports
22. The informant has preferred a rejoinder I reply (Rejoinder) to the submissions made by Springer to the DC Investigation and Supplementary Reports. The main points of the rejoinder are as follows:
i. DC's report is meticulous and proper.
ii. DG has rightly concluded that the relevant product market
would be the market for Scientific, Technical and Medical (STM) publishing in English language, considered a group of similar subjects under the academic publishing industry. While doing so, extensive reference has been made to the celebrated Candover Case.
iii. Letters issued by few research institutes to buttress the claim that sale and distribution of journals by Springer has been done in transparent and professional manner are actually written at the behest of Springer.
iv. Contrary to the submission of Springer that 5% discount is the usual commission rate as per industry standards, the actual commission rates are in the range of 15-25%.
V. The informant has denied that it has procured copies to be sold in India of the journal 'Sankhya' from Indian Statistical Institute in order to sell them abroad. With regard to raising invoice to EBSCO, the informant has submitted that the party has standing orders and hence there is no need for yearly renewal of subscription.
vi. Springer is influencing the market of hybrid journals (where it does not have the right to sell print version in India) also, as evident from the fact that various research institutes have directed the informant to approach Springer.
vii. The informant has denied that it is abusing the process of law and using the garb of ethos of competition law to further its own personal interest. On the contrary, the informant has brought to light the wrongful portrayal of the Order of the Ld Senior Civil Judge, Tis Hazari Courts, Delhi and h d that by doing so Springer has tried to mislead th prayed for I 0 appropriate proceedings. -
viii. As against the claim of Springer eeendir details is
a norm, informant has submitted which has
[21] \
- been quoted by Springer as demanding the same, does not ask
for the same.
22.1. The informant in his response has again reiterated the dominance and abuse of dominance by Springer in the relevant market citing various conditions under section 19(4), as also the anti-competitive agreement sired b twen various institutes and Springer violating the provisions uncer ectim 3 the Ad:. Furthermore in the written submissions dt 12.07.2011, the informant has named five Directors of Springer India namely, (i) Sanjiv Goswami, (ii) Snigdha Goswami, (iii) Derk Johan Haank, (iv) Petrus Wilheelmus Johannes Hendricks and (v) Johannes Pieter Coebergh as new Respondents and has prayed before the Commission to initiate action against them under section 44 and 45 of the Act in the wake of Springer India providing misleading information to the Commission. The same issue has also been brought by the informant before the Commission in their application dt 02.09.2011.
Response of other opposite parties:
23. Having received the DG Investigation Report, Commission ordered the Secretary to send the same to all opposite parties for inviting their comments I response. While Springer India gave detailed response, the Operational Research Society of India conveyed its inability to be present during the hearing and Indian Association for the Cultivation of Science did not comment on the investigation report except for referring clause 13 and 14 of the co-publishing agreement signed with Springer India. Comments I response of no other opposite parties is available on record.
COMMISSION'S ANALYSIS Issues for Determination
24. Having examined the views put forward by the informant, investigation report of DC and response of opposite party, the Commission is posed with the critical issue of how to evaluate competition in a business that is undergoing rapid transform tion. The informant, as noted, was a major player in the business of publication- distribution model. The opposite party represents ing trend in the publication business, combining diverse a d value to journals, not necessarily pecuniary but mo i terms of content and prestige, a sine qua non of goo ade ubltcM on. More significantly, these activities are on-hn enabling (1 21 e flexibility of choice to consumers, authors and readers. To be able to assess the validity of the alleged violation of the Act, be it Sec 3 or Sec 4, the Commission considers the need, at the outset, to deliberate on the changed dimensions of the publications industry with specific emphasis on academic publications. Structural characteristics of the evolving publishing market, the underlying competition issues of how dominance is defined and measured need to he understood before arriving at a conclusion in the matter.
24.1. The Commission considers the following issues as key to determining whether there has been any violation of Section 4 or Section 3 of the Actin this case:
i. What is the relevant market in the context of Section 2(r) read with Sec. 19 (6) and 19(7) of the Act?
ii. Whether Springer India is dominant in the relevant market? iii. Whether there is any violation of Section 4 pertaining to abuse of dominance (AOD) vide the allegations of imposing:
• unfair (excessive) prices on the consumers in the sale of journals infringing S. 4(2)(a)(ii).
• Imposing unfair conditions in the sale of goods requiring the purchaser to furnish commercially sensitive information infringing S. 4(2)(a)(i).
• unfair prices squeezing the margin of the distributors infringing S. 4(2)(a)(i).
iv. Whether there is violation of Section 3 in terms of:
• Directly determine sale price violating S. 3(3)(a) • Control the supply of the journals by imposing unfair conditions of furnishing commercially sensitive information violating S. 3(3)(b).
• Share the market by way of allocation of types of goods, i.e. print version and e-journal violating S. 3(3)(c).
24.2. Before we consider the aforesaid issues, we outline the evolution of the publication industry, especially acade ublishing, in recent years. The following discussion will illu \ ontours of the emerging business model of this indust ( l'tovide a basis for an informed consideration for the Q 1ss1 ! * o \* i' / !23j Publication industry
25. Publication is the act of making content available to the public in various forms like text, images or other audio-visual content on any medium, including paper (newspapers, magazines, catalogs, etc.) or electronic publishing forms such as websites, e-books, compact discs etc and refers to any additional copies made tbereafter. It includes a set of activities pertaining to acquiring, selecting, editing, presenting and marketing and selling content.
26. It entails publication of books, newspaper, magazines, periodicals, journals, information fliers etc. in different categories like fiction, current affairs, literature, academics etc.
27. It is also important to note that 'right to publish' is often classified as a copyright activity. The exercise of this right by a scholar in an academic journal is again defined by the prestige and values a publication company commands. Implications of this right on competition issues will also need to be kept in mind. An author willfully gives the right to the publisher as in return he gets the prestige and visibility associated with the academic journal, which he chooses to place his work in. Thus, this implies that the author will generally be willing to give this right to a publication with a wider circulation.
28. The process of publishing of an article starts with submission by an author. The editorial team of the publisher, then, refers the same for a peer review to ascertain the originality of ideas and authenticity of data.
Once this step is through, the article is ready to be published.
29. In case the journal is to be published in physical form, it is printed and distributed to the libraries / institutions and other users, generally with the help of subscription/distribution agents.
30. In online publishing additional value added activities are included so that perceived benefits actually accrue to the authors by way of receiving citations; to editors for peer review purpose and to the readers the facilities of indexing, cross-referencing and archive-retrieval. Provision of these value added services entails putting in place appropriate software that is capable of perfor n)i1 -g----t. ese activities simultaneously and efficiently. As regards d lbibtx rn., e online format, a user has flexibility of subscription i opt to purchase a particular article or he may subscr eb aal quet of journals, depending upon the requirement anLNIis div rsity of 1% * 241 "r choice may be made available directly by the publisher or indirectly by an online aggregator. An aggregator or a publisher that provides high quality services is able to build up a huge demand on both ends of this two-sided market, discussed later.
Characteristics of publication industry:
31. Academic publishers are grouped into one of three categories: ri commercial publishers, learned societies and university presses. However, majority of contemporary academic publishing job is being done by commercial publishers who are guided by normal business considerations. According to a report available online', top 3 for-profit publishers account for more than 25% of the journals market.
32. The journal publishing industry displays characteristics of a two-sided market. Authors look to journals primarily as a means of facilitating dissemination of their work to as wide an audience as possible. Publication builds the reputation of the author and their work within the academic community, with the systems of peer review and impact factors contributing to this. For readers, journals offer an aggregated collection of current research in the field of interest, with peer review systems ensuring that articles are reputable, and impact factors giving some indication of the importance of the work. Dissemination also ensures that readers become aware of current research and methodology in their fields, preventing duplication of experiments, and raising awareness of new techniques.
33. The demand-price interactions are less clearly discernible given the number, characteristic and diversity of users. While majority subscribers of academic journals are the central library and department libraries of Universities, professional bodies and reputed organizations, the demand for journals is shaped by the reputation its holds. Journals that have established their reputation in a particular field become indispensable by users. In the event of a price increase, libraries cannot afford to cancel subscriptions which would otherwise result in their researchers losing access to the latest developments in the academic research in this field. Also, the other demand--price characteristics such as standard of the work sought, ease of access to articles and the journals not being close substitutes of each other mak eéWEi for academic C\ 0omm journals inelastic over a range, as expected i f et Changing industry dynamics \* * / [25 a
34. To highlight the transformation in the industry, focus is restricted to publication of academic journals (also called scholarly publications), which is a highly specialized activity involving various processes such as submission of articles by scholars I authors, arranging for a peer review, editing, type-setting and finally marketing and distribution.
35. With the switch-over to electronic publishing, the business model has undergone certain changes, including structural changes, notably in the business processes and delivery mechanism. The need for a traditional distributor I subscription agent is no more a pre-requisite for sales and distribution of online journals. With the advent of electronic publishing, new intermediaries have emerged, and the rules of traditional intermediaries have changed. As long as they deal with electronic material, they all can be better described as aggregators. Increasingly, there are evidences of direct interface between subscriber and publisher like pay per use model. More importantly, under the new paradigm (i.e. online publication), marketing and distribution function could either be taken up by the publisher himself or they may appoint an online aggregator for doing the same.
36. The paradigm shift is not limited just to the way business is conducted online it is equally important to comprehend the academic content provided by publishing companies. The intrinsic value of a publisher is derived from the ability of the company to attract the best minds in contributing to their journals. In the earlier publication I distribution business model, good journals, no doubt, claimed premium in terms of quality, number of citations, by attracting eminent scholars and scientists. In the new business model, all of these activities, as noted earlier, are being done simultaneously and online.
37. To highlight the changed paradigm, a working paper presented to OECD' has stated that market share of online format in the category of scientific, technical and medical journals was about 60% in 2003. Now, it is believed that more than 80% of scientific, technical and medical academic journals are available online.
38. Although countries in the Eu successfully implemented the contemporary model tably during the 1970s, India was late to adopt of academic 2htt,n://www.oecd.org/dotooecd/58/32/32145392.pdf [26] publication due to lack of supporting hardware and internet connectivity at users' end.
39. The benefits of online distribution are numerous, all of which improve the accessibility of published scientific research, are summarized below:
i. Speed of delivery has been imtroved. Articles are accessible from the moment of publication.
ii. Online journals are available on the campus network and accessible from any computer system on the network, thus allowing multiple access at the same time.
iii. The speed and functionality of the technology has improved the ability to search and locate research papers, to link from citations to the articles cited, and to link from articles to databases and other resources. Further, indexing of online literature has become easier and more effective.
40. An interesting trend that needs mention is the emergence of alternate online mechanism being adopted to make the journals more affordable. Some of the evolving models being explored are open publication models (generally referred to as open access) and adding community-oriented features to increase the reader-base. Effectively, this means that any person can make available his research work to the world at large by putting his work on an internet portal. The only consideration is that of visibility and acceptability of the portal to attract target readers in large number. To overcome this problem, a number of small not-for-profits learned and professional societies are coming together as an alternative to the commercial publishers.
Indian Scenario:
41. Historically, in India, publication of academic journals was being done by the institutes themselves, primarily in physical form and the distribution was performed by the appointed distributors I subscription agents. As is evident from the case, academic publishers took the help of the distributors to reach to the end-users of their print journals. In return, these distributors were offered certain discounts on the cover price, the price at which the journals were finally sold to the end-users Thus, the institutes and theiv subscription agents shared cozy relation between the \ I
42. Now, academic journal public in isi essing the same paradigm change that world had While
- recognizing that there will be tensions in the existing business model, nonetheless the transition will take place because of its inherent advantages to both authors and readers.
43. The present case reflects the prevailing Indian scenario. The informant is a distributor of journals originally published by societies. It is now a distributor of some of tle journals published by Springer India also.
Issue 1: What is the relevant market in the context of Section 2(r) read with Sec. 19 (6) and (7) of the Act ?
44. The first step is the appropriate demarcation of relevant market and then assessing dominance and alleged abusive conduct for possible anti-competitive behavior.
44.1. In the publishing industry where a distinctive paradigm shift is taking place from print to online, definition of the relevant market will necessarily have to capture the underlying dynamism described above. Prior to the entry of Springer India, the leading institutes, some of them government-funded, used to publish and print the journals in physical form themselves, leaving the subscription function to be taken care of by the subscription agents. However, with the advent of Springer India, these institutes signed co-publishing agreements with the former with a broader objective to free themselves from the time-taking editorial I publishing process and at the same time carving recognition to these journals on a global platform, which has been possible with online format of publishing. Given the fact that new-age publishers possess their own distribution channel, dependence on traditional distributors was minimized. Nevertheless, the relevance of traditional distributors will not be completely lost.
44.2. In attempting to capture the underlying dynamism of the new paradigm several jurisdictions across the globe more prominently the European Commission consider the aspect of supply-side substitutability while determining the relevant market. The Cando ver Case, considered a landmark judgment in the publication to by both the informant and opposite party is re supply substitutability. The case though was a err 0 * 1 'FA [28 / Quote:
From a demand-side point of view, it is rare that two different publications be viewed as perfect substitutes. There usually are differences in the coverage, comprehensiveness and content provided by two different publications. From the point of view of functional interchangeability, two different publications could hardly be regarded as substitutable by the end-users, the readers. This applies to publications pertaining to different areas of professional publishing and addressed to different customer groups as well as within professional categories.
Therefore, Consumers will rarely substitute one publication for another in reaction to their relative prices. In this case, a strict demand approach would lead to the definition of a multitude of relevant markets of imprecise boundaries and small dimensions. This would not allow to properly assess the competitive relations between the different publishers." ( Case No COMP/M.3197 p 3) 44.3. It has been argued by the informant as also by the DG that the relevant market is the STM journal segment published in English language. DG has supported this view on account of characteristics, use, manner of publication, incentives and motivation of the authors to distinguish STM journals from STM books and magazines. Reliance has also been placed on industry standards of publisher-categories. On the other hand, the opposite party submitted that in academic publications, the product is the intangible 'intellectual content' inherent in each article as published in each journal after peer-review. They have further argued that it is the information and analysis that is the relevant product, which is published and reaches the target audience in print or electronic form.
Thus, on account of supply side substitutability, Springer is of the view that the relevant market should comprise the entire academic journal publication and must include books and periodicals as well.
44.4. The definition of relevant market in the Competition Act has been provided for in sub-section (r) (t), (s) of Section 2 of the Act, read with Section 19(6),19(7) Sec 2(r) reads as:
"relevant market" means the market which may be determined by the Commission with reference to the relevant product market or the relevant geographic market or with reference to boti ieai4ce,, 44.5. The Act, as can be seen, enable tl Cjssioji determine either the relevant product market or market or both, depending on the specifics of fining the 29] relevant product market the Indian Competition Act gives weight to demand substitutability as perceived by the consumers. Section 2(t) of the Act reads as:11
relevant product market " means a market comprising all those products or services which are regarded as interchangeable or substitutable by the consumer, by reason of characteristics of the products or services, their prices and intended use;
44.6. DG has argued that books, periodicals and journals would not be a part of same relevant market. The Commission is in agreement with this distinction that publication of journals, are different from books and other types of periodicals. Journals constitute an altogether distinct category on account of its unique characteristics, target readership, contributing authors and selection of content, as observed earlier. The distinction does not end here, but needs fine tuning to cover 'academic scholarly journals' which are distinct from professional journals. This distinction is on account of the fact that journal publication industry broadly caters either to the practicing professional or to the members of academia. The two types of journals differ vastly - academic publishing involves publishing of journals, which are aimed at researchers and academics, whereas professional publishing entails the publishing of periodicals, which are intended for professional use and/or provide information to practitioners and professionals. Thus, while the content of the former category could be new ideas / theories, the latter is the practical application of these thoughts. Academic journals, thus, constitute a distinct genre in publication.
44.7. Going by the facts of the case, the Commission notes that academic journals were initially published by the institutes themselves with their own editorial and peer review system. Apart from these academic journals, the institutes did not publish any other academic work in the form of books or magazines. Also, no other agency published these academic journals.
44.8. The Commission also notes that academic journals, are published subject-wise I discipline-wise in line with the level of specialization and exclusivity of the Institute/University, resulting in attracting limited authors and readers. f151v&, on account of differences in the coverage, comprehe vri's ar4) ' ntent is the hallmark of academic journals. It is a we -lbçf th e cry article / contribution of an academic journal is u i4. F4 the ci t of view of functional interchangeability, two differ on different [30] T / / subjects, often unrelated) could hardly be regarded as substitutable by the end-users i.e. the readers. As a matter of fact, strictly speaking, even two different issues of the same journal having different content might be regarded as non-substitutable by the readers. Relevant market defined so narrowly, then all publishers would be deemed dominant in It their respective publication and consequently, competitive assessment would be nearly impossible. This narrow definition of the relevant market will prevent the assessment of competitive relations among publishers.
44.9. Hence, to assess the competitive structure in the present case a broader definition is required.
44.10. There are evidences that science, technology and medicine are closely related fields for publication industry and some of the leading publishers have built expertise in this area. Further, the existence of International Association of Scientific, Technical and Medical Publishers, founded in 1968 and representing STM publishers worldwide, make us presume that the industry perceives STM to be a distinct segment. Also, various industry reports have treated STM segment as a group as these have been clubbed together for reporting purposes. The argument that STM is a marketing concept as put forward by the respondent is not sustainable.
44.11. Based on collective consideration of the factors discussed above, the Commission concludes that the relevant product market for the purpose of the instant case is "publishing STM academic journals in English language". Furthermore, the market must include both print as well as online version since the two offer the same content and are often offered as bundled product. Also, libraries find it cost-effective to subscribe to both.
44.12. Having defined the relevant market, a quick look at the appropriate business relationship between the informant and the opposite party is important. It has been submitted that the informant is a distributor and subscription agent of academic journals. In contrast, the opposite party is primarily a publisher of the academic journais and also acts as a distributor. It has been stated that near Springer India journals are distributed through Prints mdi I'hda.nd..i at Springer India follows international practice I no r ocounts and trade policies as regards their distributors, incl , litg skWg Qtj Is of end-
user data. 0/
I
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r i
Issue 2: Whether Springer India is dominant in the relevant market?
44.13. Before taking a view on dominance, it is important to note that there is uniqueness in respect of academic journal publishing industry in general and in this case STM journal in particular as much as a dominant position may be an inescapable consequence of structure of the market, on account of "must have" attribute of a journal. The journals with 'must have content are considered indispensable by customers due to their reputation or specific focus of the items contained therein and are the ones which are most read by researchers active in a certain field.
Researchers aim to contribute in the 'must have' journals since publications of articles in such journals will enhance their academic reputation among the peer group.
44.14. Further, there is a tendency of consolidation in the industry, primarily on account of economies of scale and economies of scope. Worldwide, this phenomenon has been observed empirically and there is a tendency for players to dominate in the academic STM segment by way of inorganic growth i.e. mergers and acquisitions.
These shall be factored while assessing dominance in the present case.
44.15. Having considered the above-said vital aspects, analysis of dominance as provided for under relevant provisions of the Act will now be undertaken in terms of the multiple factors listed in Section 19(4) of the Act, for judging the dominant position of an enterprise.
Must Have' concept of Market Power/Market Share:
44.15.1. The DC has used the concept of 'must have' as a measure of market power'. 'Must have' is defined in terms of the portfolio of journals in terms of reputation and recognition classified accordingly by the scientific community as 'must have'. According to DC Springer India journals in the STM segment constitute 'must have' by virtue of their portfolio achieved by way of co-publishing agreements with the major scientific institutes in India. Market power is further strengthened according to DC in terms of market share and as per data provided by the Informant as also response of another Indian distributor DC concludes that Springer India is a dominant player on the criteria of 'must have' journals. According to DC, Sprin , 0 market share in 'must have' STM journals and about 64% i lc€j of the same.
Th 44.15.2. To counter the claim of DC, S iitted that in the case of hybrid arrangements wi tes where / / Springer does not get the distribution rights of these journals in India its market share would substantially go down once hybrid journals are taken out from the purview. Citing NISCAIR data, Springer has averred that there are nearly 770 STM journals published in India, in which case its market share would be about 6% in the relevant market. Further, in order to assess the dominance of a journal in terms of 'must have' Springer has submitted that it is important to refer to the 'impact factor'. It has been averred that the Indian journals have a low impact factor and hence cannot be considered dominant. The impact factor is a measure reflecting the average number of citations to recent articles published in academic journals. It is frequently used as a proxy for the relative importance of a journal within its field, with journals with higher impact factors deemed to be more important than those with lower ones. Springer has submitted data of the impact factors of its journals and they are very low sometimes insignificant.
44.15.3. Let us examine the arguments put forth by DG and Springer India on the 'must have' or alternatively 'impact factor' measure. Strictly speaking, this criteria is better classified under Section 19(m) "any other factor the Commission may consider relevant for the inquiry" than under Section19(a) "market share".
There are two difficulties in using the impact factor. Firstly, the impact factor itself is a ranking of the world scientific community on Indian science journals and cannot be objectively assessed. Secondly, impact factor is developed overtime and may not be relevant for newly launched journals. On the issue of impact factor of the Indian journals, the Commission is of the view that on account of transition from print to online format, the impact factor will indeed be low for a certain period of time. Therefore assessing dominance on impact factor at this point of time (2007-2010) is inappropriate.
44.15.4. On the other hand, the Commission notes that, there are several limitations in the data on 'must have' that has been submitted. Firstly, the data has not been authenticated and no further data has been provided by the informant. Secondly, an exhaustive list of the 'must have' STM academic journals has not been collated. Most importantly, the definition and criteria to be adopted f lssifyi a journal as possessing 'must have' characteristics eve i --h srbiti ted has not been objectively and adequately captur d. ThI ib cations of Springer India has been categorized as' 0s6havirns o attempt has been made to identify such journa &i 4s by other 33I / publishers. Also, it has not been conclusively proven that the journals published by Springer India are the only 'must have' journals in the academic STM category. Thus, determining market power on the basis of 'must have' journals remains elusive and hypothetical.
44.15.5. Accepting the data submitted by the informant, DG has submitted that the opposite party is dominant in the relevant market as it enjoys 31% vis-à-vis number of journals published, which are the 'must have' journals and 64% in respect of circulation figures of these journals.
44.15.6. The Commission notes that the data pertaining to Indian journals used by DG does not include all the journals in STM category. Springer has submitted that there are more than 150 journals that are published by Medknow in medicine segment alone. Data on market share pertaining to online journal has been completely overlooked. Moreover, there are journals that are published outside India (both print as well as online) but are nonetheless subscribed by Indian libraries and research institutes, an aspect that has been overlooked by the DC. In the supplementary report, DG has provided world-wide market share based on revenues of the top five academic publishers for the year 2009, which are as follows: Reed Elsevier (15.4%), WoltersKluver (5.15%), Thompson (5.14%), Springer (4.65%) and John Wiley & Sons (4.44%). In all probability, this market share data would also include the online business, which has not been mentioned categorically. Dominance does not get established from the above date either and the data is of no consequence having recognized that with online publications geographical market remains undefined.
44.15.7. After carefully analyzing the data provided by the parties as also the DC, Springer India cannot be concluded to be the dominant player in the relevant market of STM academic journals published in English language in terms of market share.
ii. Economic power I resources 44.16. tor the year ended March 31, 2011, Springer India reported total income of about Rs 30 crores (inclusive of sales and commission income) with net profit after tax at about Rs 6 . Jle this may not be significant, however, the financialste parenompany i.e. Springer Science + Business Media report ttithl aj% *f ur 866 million and EBITDA of Euro 294 million. Thus, t f the group is certainly vast in absolute terms. Howe erif sier he fact that 134] globally Springer has less than 10% market share, it implies that there are bigger entities like Elsevier, Thompson and others in the market who command greater economic resources than Springer.
iii. Size and importance of competitors 44.17. While it may be true that parent organization of Springer may be a leading publisher of academic STM journals world-wide, it cannot be inferred that the same holds true for India also. The DG has assumed that Springer India does not face any significant competition from its competitors on the ground that the latter is not aware of revenue or market share of the competitors. The Commission cannot accept the argument as no investigation has been done regarding the overall size of the market, number of competitors, their revenues etc. Thus, it would be pre-mature to say that Springer India does not face competitive pressures from its rivals in India.
iv. Barriers to entry 44.18. It is true that academic publication, being a complex process involving specialized expertise, exhibits certain barriers to entry in the short run. However, it is also true that in the long run, these barriers cease to exist as talent pool can be created and reputation build by quality assurance and value added services. Further, as discussed elsewhere, the market for academic publishing is contestable, thus implying that there is perceived competition in the market. World over, there have been several moves by academic community to develop 'open access' journals. It may, however, be noted that their concern is not so much from costs as with regard to the control publishers exercise over how research gets distributed and shared. Scientists are concerned about the copyright issue mentioned earlier as it could restrict wider dissemination of knowledge.
V. Countervailing buyer power 44.19. The Commission agrees with the DC that because of inelastic nature of demand, there is little countervailing power in the hands of the libraries I universities that are the major subscribers of the academic journals. However, if there is potential i3riT-.rom emerging business, it is likely that the enterprise ,i4to"1 111 o monopoly pricing In other words, contestability behaour of the coal existing publishers. CL * [351,"<,7r Vi. Vertical integration 44.20. The vertical nature of the enterprise does not emerge clearly as far as publication is concerned. The different activities performed during the publication process are synonymous with assembly line production in a manufacturing sector. It seems that these activities are performed in- house. However, when it comes to distribution, services of third party like subscription agents or online aggregators may be required. If in the changing business model, the intermediaries are not required, so be it. Competition is not about protecting a business practice that is no more relevant; rather it is about bringing more efficiency and possibly at a lower cost to the consumer.
44.21. Having assessed dominance in terms of the factor listed in Section 19(4) the Commission opines that the new business models in publishing industry in the STM segment reveals a picture of large publishers vying with each other on the online platform and constrained also by emergent models of open access. The two criteria mentioned by DC and the informant namely 'must have' status and 'higher prices' do not stand the test of logic or data analysis. "Must Have' as a measure to capture consumer dependence while it remains unsubstantiated, the entry of established international publishers in the STM segment dilutes the argument. High quality journals providing an array of value added services, as described above, command "higher prices" and the inelastic demand for such journals allows the maintenance of "high prices." Moreover the emergence of open access publications provides alternative platforms to authors.
44.22. DGs assertion that higher price charged by Springer India on consumers in the sale of journals as validation of its dominance and violation of Section 4(2)(a)(ii) is to ignore the reality of two different business models. In the traditional business, price charged was for a single journal. The price now permits the consumer to gain from several values added services. It has been argued by the DC that prices should not be a single price signifying the sale of a bundled product but of an unbundled product where each vertical is priced separately. Pricing strategies differ and competition assessment ta r •ew of pricing strategies. Moreover as journals go online t libraries a single price with a bundle of value aded.eees is'2exected and a , * definitely more economical. *a [36] 44.23. The issue of imposing unfair conditions in the sale of goods requiring the purchaser to furnish commercially sensitive information infringing Section 4(2)(a)(i) could be considered if dominance of the opposite party is established and furthermore the opposite party is able to exercise its dominance. Similarly the argument of completely squeezing the margin of the distributors by imposing unfair prices on the distributors infringing Sec. 4(2)(a)(i) is not valid both in terms of dominance not being established and in terms of the changed business model where the concept of a distributor separate from publisher is not applicable any longer.
iv. Issue 4: Allegation of violation of Section3 by way of anti-competitive agreement 44.24. The Informant has alleged that by entering into co-publishing agreement, the opposite parties have violated provisions of section 3 of the Act by directly determining sale price, controlling the supply of the journals by imposing unfair conditions of furnishing commercially sensitive information violating and sharing the market by way of allocation of types of goods, i.e. print version and e-journal.
44.25. In its report, DC has found that entering into co-publishing agreement signed between Springer India and eight other institutes is not indicative of anti-competitive agreement according to the provisions of the Act.
44.26. The Commission agrees with the DG that the genesis of all the allegations under Section 3 lies in the co-publishing agreements and therefore DC has analysed these agreements in entirety for violation of Section 3. As a matter of fact, when the institutes published their journal themselves, the total distribution rights (India as well as world-wide) were vested with Prints India. Now, the distribution rights are demarcated as domestic and world-wide and for domestic subscription, Springer may not be the sole distributor of print version. By virtue of co- publishing agreement, the institutes are able to benefit from the online expertise of Springer India, which helps in improving the impact factor, thus getting better recognition and reputation for their journals. With the online format, Indian authors / researchers are able to connect and get exposure to international sphere, which rnotgT1. to undertake better quality research and in turn ope4' the possiRity of more research / innovation in India Most imp I' inies are well within their right to outsource the entir blis joIi&i)favor of a particular entity. Hence, there is no breahf o the Act in [37] i4 TT I respect of co-publishing agreement signed between Springer India and the leading institutes/ societies of the country engaged in academic research.
Conclusion The publishing industry is undergoing a complete transformational shift from print to web based publication with emphasis on digital distribution. In the changed business model several complexities have been noted by the Commission. The paradigm shift reflects in the way business is conducted. Authors are interested in wider dissemination of research work, responses from peer groups, citations of their work and look for publishers which command premium in the academic world. Development of repute is a slow process. Buyers also look for journals that have the same characteristics as viewed by authors. Demand tends to be relatively inelastic. As an e-platform the journal publishing industry displays characteristics of a two-sided market displaying tendencies towards dominance. But dominance is not necessarily dependent on the number of journals published by a particular publisher; each journal could possess monopoly power if substitutability is limited by the intellectual content carving out a niche for the journal. Yet again the emergence of contestability in the form of 'open access' by intellectual communities, reveals the potential limitation of the publishing firms of academic journals to exert market power.
In the present case taking cognizance of the dynamics of the publishing industry and on examination of the facts of the case the Commission opines that no anti-competitive conduct stands established. Moreover, the data submitted by the informant and used by1et does, not capture the dynamics of the publishing industry apar,Vfrbi't the fact')4'tat there are problems of authentication Hence, allega pance td its abuse does not get established.
) ORDER Based on the above analysis of the market, the Commission finds that the :vaiiable data and evidence is insufficient to establish the dominance of Springer India, and consequently, the 'question' of abuse of dominance does not arise. Also no violation of Section 3 of Competition Act, 2002 is established. The case is, therefore, closed.
Secretary is directed to take necessary action and inform the concerned parties.
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