Competition Commission of India
Prints India vs Springer India Private Limited & Ors. ... on 3 July, 2012
Competition Commission of India
Case No. 16of2010
?JujV ,2012
In re:
Ej
M/s Prints India .Infbrmant
V.
1. Springer India Private Limited .Opposite Party No.1
2. Indian Academy of Sciences .Opposite Party No.2
3. Indian Association for the
Cultivation of Science .Opposite Party No.3
4. Indian National Science Academy Opposite Party No.4
S. Operational Research Society of India . . .Opposite Party No.5
6. Department of Psychology
University of Delhi .Opposite Party No.6
7. Indian Statistical Institute .Opposite Party No.7
8. Association of Food Scientists &
Technologists (India) .Opposite Party No.8
9. Indira Gandhi Centre for Atomic
Research .Opposite Party No.9
ORDER
Per Justice (Retd.) S.N. Dhingra:
The information under consider,á under section
19(1)(a) of the Competition Act, 2002 ('tIje ts India ('the
informant.') against M/s Springer Indi vaMt.cnid ('the opposite
c
party No 1') and the above named Indian research institutions alleging
inter alia contravention of the provisions of sections 3 and 4 of the Act.
2. The informant, a sole-proprietorship firm, claimed to be engaged
in the business of distribution of Indian journals and being a reputed
distributor in this field. It was stated in the information that the
informant was also one of the most recognised and trusted name as an
exporter of Indian publications and since 1966 it consistently worked
in the value chain as the most reliable source of literary and research
materials, emanating from India for clients across the globe. As per the
information filed, the contribution of the informant had been
acknowledged/ evidenced by the increasing list of libraries, research
institutions, scholars, and individuals who continuously patronized
and availed its services on an increasingly regular basis. It stated to
owe its reputation, both in India and globally, to professionalism and
total customer orientation.
3. The opposite party No. 1 is stated to be a part of M/s Springer
Science + Business Media, a well-known/ leading global academic and
scientific publisher which commenced operations in India in October
2002. The other opposite parties are various research institutions
based in India.
4. As per the information filed, before the entering of the opposite
party No. 1 in Indian market in October 2002 and before the opposite
party No. 1 became the co-publisher of the journals and imposed its
own new terms and conditions, the following were the terms and
conditions at which the different institutes used to supply the journals:
(a) The informant would receive the journals from the
Institutes at the INR price (in Indian Rupees);
(b) The Institutes would offer a discount of 10-25% to the
informant on the INR price of the journals;
(c) The Institutes never asked for the end-user details from the
informant. Even today, for the journals which are not with
Springer, the publishers do not ask for the end-user
details as the informationis cop drd commercially
privileged and sensitive in the,6ade
(
(d) The informant had to mak4 a ment to the
institutes for the journals or *
2 \TT I
(e) The informant acted as a major distributor for the journals
of the institutes as it had a very good distribution network,
painstakingly built-up over the years.
5. It is stated by the informant that after entering into the Indian
market, the opposite party No. 1 entered into co-publishing agreements
with the various Institutes, by virtue of which, the opposite party No. 1
got co-publishing rights and became the co-publisher with the various
institutes for most of the reputed journals. As noted above, the
informant had been engaged and dealing in these journals since last
couple of decades. It has been stated that after the opposite party No. 1
got the co-publishing rights in the aforesaid journals, apart from
several fold increasing the prices, the following new terms and
conditions, which adversely affected the informant, were imposed on it:
(a) The informant now had to pay the USD list price for the
journals which was considerably higher than the earlier
INR price. Thus, the informant, based only in India and
carrying on its business from India was required to pay the
international price (USD price) for an Indian journal
published and bought in India. The final payment had to
be made by the informant in INR after conversion of the
USD price into Indian Rupees at the prevailing market rate;
(b) The opposite party No. 1 reduced the offered discount to
5% on the list price of the journals as compared to 10-25%
offered by the Institutes previously;
(c) The opposite party No. 1 insisted on being provided the
complete details of the clients of informant (end-user
details) as a pre-condition of sale of the journal. Such
information considered commercially sensitive in the
industry, was liable to be used by the opposite party to the
detriment of the informant, as had been experienced by the
informant. When the informant provided such details to the
opposite party No. 1, the latter started dealing with the
clients of the informant directly with the intention of
driving the informant out of the
(d) When the informant did no rlcr
4 end.-uer details to
the opposite party No. 1 at tj im 1lac-th)the order for
/
r/e
the journals, opposite party No. 1 refused to supply the
journals to the informant; and
(e) The informant was required to make 100% advance
payment for the order placed with the opposite party No. 1.
46. It is further stated by the informant that in view of the aforesaid
alleged anti-competitive and abusive terms and conditions imposed by
the opposite party No. 1 and given the immense market power acquired
by the opposite party No. 1 through the vast network of co-publisher
agreements, which the opposite party No. 1 has entered into, the
informant had no option but to abide by the conditions imposed by the
opposite party No. 1, to remain in business. However, when the
informant noticed that it lost some of the clients whose details it had
unwillingly given up to the opposite party No. 1, the informant was
compelled to refuse/ decline thereafter to provide the client details to
the opposite party No. 1. When the informant refused to divulge the
details of its clients, the opposite party No. 1, who, having gained a
stranglehold on the market, retaliated by refusing to supply the
journals to the informant reiterating that it would supply the journals
to the informant only if the Informant provide the complete details of
informant's clients. Further, when the informant, subsequently,
contacted a few Institutes for obtaining the direct supply of their
journals, the institutes, in turn, referred the informant to contact the
opposite party No. 1, saying that the terms of sale of journals are
decided by the opposite party No. 1 and that the informant should
directly contact opposite party No. 1 for any other clarification and
information.
7. It has been stated that in view of the aforesaid alleged anti-
competitive practices adopted by the opposite party No. 1, it has
resulted into:
(a) The opposite party No. 1 has squeezed the informant's
margins from a discount level of 10-25% on the list price
given by the Institutes to a low of only 5% on the list price;
(b) The price has been suddenly ikdr4 while earlier INR
price used to be marked on/(hè.1j lsbkr the institutes,
now the international list 'riep i 611ar is marked on
the journals; * 1f'
c)
4
(c) While the Institutes never asked the complete details of the
informant's clients (end-user details), the opposite party
No. 1 refused to supply the journals unless the end-user
details were provided to it for each and every title ordered.
This was against prevailing business practice, and being
commercially sensitive and confidential information, the
aforesaid information was misused by the opposite 'party
No. I whenever supplied to poach on the informant's
clients, consequently, the informant declined to part with
this information. The opposite party No. 1 retaliated by
refusing to supply the journals;
(d) In view of the above, the clients of the informant had been
cancelling their orders with the informant thereby causing
financial loss to the informant, and the informant was
losing its clients base. It has been stated that the total
turnover of the informant was Rs. Five crores in the last
financial year but after the opposite party No. 1 entered
into the Indian market and signed the aforesaid co-
publishing agreements, the turnover of the Informant has
gone down to Rs. Four crores, thereby causing a loss of Rs.
One crore in its turnover. It has been further stated that in
view of the aforesaid acts on the part of the opposite party
No. 1, the reputation and credibility of the informant have
also suffered as it has not been able to serve its own
clients.
8. The Commission after examining the information and the
material on record had found that their existed a prima facie case to
direct an investigation to be made into the matter and accordingly, the
Commission directed the Director General ('the DG) to cause an
investigation to be made into the matter and to submit report.
9. The DG, after completing investigation submitted its report. In
its report, the DG has defined the relevant market in this case as
"Scientific, Technical & Medical (STM) journals printed in English in
India". It concluded that the opposite party No. 1 was a dominant
player and had abused its dominant position and the same was
prejudicial to the interest of consumers at)atge anNQrnpet1t1on in the
relevant market in India However, with,'regard to the èleged violation
of section 3 of the Act, the DG conclud a äs kbo violation of
section 3 of the Act. The DG report ws irciSjd to 1Jie parties for
\*, *
5
their comments and responses, if any. Subsequently, detailed
responses were filed and the matter was heard at length.
10. From the information and the report of the DG, the following
points arise for determination:
(i) Whether the opposite parties contravened the provisions of
section 3 of the Act?
(ii) Whether the opposite parties contravened the provisions of
section 4 of the Act?
(iii) Relief?
Whether the opposite parties contravened the provisions of section 3 of
the Act?
11. Section 3(1) of the Act mandates that no enterprise or
association of enterprises or person or association of persons shall
enter into any agreement in respect of production, supply, distribution,
storage, acquisition or control of goods or provision of services, which
causes or is likely to cause an appreciable adverse effect on competition
within India. Section 3(3) of the Act inter alia states that any agreement
entered into between enterprises or associations of enterprises or
persons or association of persons or between any person and enterprise
or practice carried on, or decision taken by, any association of
enterprises or association of persons including cartels engaged in
identical or similar trade or goods or provision of services which directly
or indirectly determines purchase or sale prices or limits of controls
production, supply markets, technical development, investment or
provision of services etc. shall he presumed to have an appreciable
adverse effect on competition.
12. The informant contended that the opposite party No. l's co-
publishing agreements with the leading STM academic and research
institutes in India amounted to violation of the prohibition under
section 3(3) of the Act, as these were agreements between enterprises at
the same level of the supply chain. It was so since the opposite party
No. 1 was already publishing journals in the STM market which were
being distributed in India as well ardi irtites also used to
publish their respective journals in t€ir cific of specialisation
in the STM market in India. While oipos artyi rio. 1 was a big
commercial publisher producing a V - of journals on
cjy
r /-
almost all the areas under the STM market as compared to the
institutes which generally produced only one or two journals in their
respective areas of specialisation. For competition law purposes, the
opposite party No. 1 and the Institutes were direct competitors of each
other and the co-publishing agreements were therefore agreements
between rival publishers.
13. Per contra, the opposite party No. 1 has submitted that the co-
publishing agreements cannot be considered as agreements between
rival producers so as to attract Section 3 of the Act.
14. Before dilating further on this point, it may be pointed out that
the DG did not find any contravention of the provisions of section 3 of
the Act by the opposite parties.
15. For attracting the provisions of section 3(3) of the Act, there
must be an agreement between the person/ enterprises engaged in
similar business or provision of services. In the instant case, while the
opposite party No. 1 is a publisher, engaged in economic activity and
thereby coming within the ambit of 'enterprise' as defined under section
2(h) of the Act. The institutes i.e. the other opposite parties are not the
enterprises engaged in the business of publication in the same sense as
the opposite party No. 1. Publishing of its own journal by a research
institute would not make an institute an enterprise engaged in the
business of publishing STM journals. The provisions of section 3 of the
Act were therefore not attracted in the present case and accordingly, I
agree with the findings of the DG that no contravention of the
provisions of section 3 of the Act was made out.
Whether the opposite parties contravened the provisions of section 4 of
t1- It't)
16. Section 4(1) of the Act mandates that no enterprise or group
shall abuse its dominant position. The term 'dominant position' has
been defined in explanation (a) to section 4 of the Act as a position of
strength, enjoyed by an enterprise, in the relevant market, in India,
which enables it to operate independently of competitive forces
prevailing in the relevant market; or competitors or
consumers or the relevant market in its fai,1:T.\
/:4 \
17. Thus, before examining the domnait i$s of th enterprise or
group, it would be necessary to determiñè the ntJn ket.
18. The term 'relevant market' has been defined in section 2(r) of the
Act as 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 both the markets. Further, the term
'relevant geographic market' has been defined in section 2(s) of the Act
as a market comprising the area in which the conditions of competition
for supply of goods or ptovision of services or demand of goods or
services are distinctly homogenous and can be distinguished from the
conditions prevailing in the neighbouring areas. The term 'relevant
product market' has been defined in section 2(t) of the Act as 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.
19. It may also be pointed out that by virtue of the provisions
contained in section 19(6) of the Act while determining the 'relevant
geographic market', the Commission shall have due regard to all or any
of the following factors, namely:
(a) regulatory trade barriers;
(b) local specification requirements;
(c) national procurement policies;
(d) adequate distribution facilities;
(e) transport costs;
(f) language;
(g) consumer preferences;
(h) need for secure or regular supplies or rapid after-sales
services.
20. Similarly, by virtue of the provisions contained in section 19(7)
of the Act while determining the 'rele, ti-iiiq market', the
Commission shall have due regard to all 4. f1wing factors,
namely: I
C
(a) physical characteristics or end 1*0
/
8
e'
(b) price of goods or service;
(c) consumer preferences;
(d) exclusion of in-house production;
existence of specialised producers;
(f) classification of industrial products.
21. In the instant case, the relevant segment of market is academic
publishing as the journals in question are meant for scientific
researchers and academics and the main customers of the journals are
libraries, research institutes and research scholars. In short, for the
purposes of the present case, concerning journals brought out by
reputed scientific institutes of India, the most relevant view in tune
with the mandate of section 19(7) of the Act would be to define relevant
product market as Scientific, Technical and Medical Publishing (STM)
in English language which is considered to be a group of similar
subjects under the academic publishing industry and promises supply-
side substitutability and to an extent even 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.
22. It is to be noted that the underlying reason for limiting the
product market to the STM journals brought out in the English
language is that the advanced level academic and research work in
India in the field of science, technology and medicine is carried on
almost exclusively in English whereas advance study in social sciences
and other fields is carried in all Indian languages and research works
are also published in Indian languages.
23. The relevant market in the instant case may be regarded as the
global publishing in the English language of academic journals in the
fields of science, technology and medicine (STM). However, once the
relevant market is so determined, the dominance of the enterprise in
India may be examined.
\-
24. As noted above, 'dominant positiØ fined in the Act
as a position of strength, enjoyed by arf eis il\ the relevant
market, in India, which enables it *t4 0 e thpendently of
9
competitive forces prevailing in the relevant market; or affect its
competitors or consumers or the relevant market in its favour.
25. It may be noted that by virtue of the provisions contained in
section 19(4) of the Act while inquiring whether an enterprise enjoys a
dominant position or not under section 4, the Commission shall have
due regard to all or nv of the following factors, namely:
(a) market share of the enterprise;
(b) size and resources of the enterprise;
(c) size and importance of the competitors;
(d) economic power of the enterprise including commercial advantages
over competitors;
(e) vertical integration of the enterprises or sale or service network of
such enterprises;
(f) dependence of consumers on the enterprise;
(g) monopoly or dominant position whether acquired as a result of
any statute or by virtue of being a Government company or a
public sector undertaking or otherwise;
(h) entry barriers including barriers such as regulatory barriers,
financial risk, high capital cost of entry, marketing entry barriers,
technical entry barriers, economies of scale, high cost of
substitutable goods or service for consumers;
(i) countervailing buying power;
(j) market structure and size of market;
(k) social obligations and social costs;
(1) relative advantage, by way of the contribution to the economic
development, by the enterprise-njing a dominant position
having or likely to have/an ap1e adverse effect on
competition;
(m) Any other factor which!
7 C nssir nay consider relevant
for the inquiry.
10
/
26. In the light of the aforesaid provisions, the issue of dominance
of the opposite party No.1 in the relevant market, as determined above,
may be examined.
27. From the website of the opposite party . No.1, it may be noted
that the opposite party No. I has claimed to the following effect:
Springer publishes over 1,700 journals and more than
5,500 new books every year making it the second-largest
publisher of journals in the science, technology, and
medicine (STM) sector and the largest publisher of STM
books with largest STM eBook collection worldwide. We
leverage our global presence to satisfy global and local
information needs. The breadth of our product range, the
widest in academic publishing, is our strength both
globally and especially in India.
28. From the reports of the DG, it appears that the opposite party
No. 1 has around 60 publishing houses in about 20 countries in
Europe, Asia and the USA. The consolidated turnover of Springer
Group in 2008 was Euro 892 million and in 2007 it was Euro 907
million. It has more than 5,000 employees around the world. Its eBook
Collection includes more than 34,000 titles available online at
www.springerlink.com. Apart from around 1,700 journals and more
than 5,500 new book titles published every year in the STM sector,
opposite party No. 1 has a backlist of more than 45,000 titles. The
business of the opposite party No. 1 encompasses six publishing fields
viz, science, technology, medicine, architecture, business and
transport.
29. In this connection, it may be noted that the opposite party No. 1
has relied on the supplementary report of the DG to contend that it is
not a dominant player. It is noteworthy to mention that the DG in its
supplementary report 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%), Wolters Kluwer (5.15%),
Thompson (5.14%), Springer (4.65%) and John Wiley & Sons (4.44%).
However, the aforesaid data are of little helflthe opposite party No.1
as well as to the Commission as once th MI ket is defined as
'STM journals in English in India', it e fu i\ise to look into
the worldwide data in order to ascetaij-i omiice within the
relevant market. For the purpos* f Ø,• cae,) the relevant
\ *
\( ;$/
consideration would be the market share of different enterprises within
- the relevant market in India and not worldwide.
30. The DG report suggests that out of the 150 STM journals in
India, 47 are distributed by the opposite party No. 1 which translates
into 31% of the total STM journals in India. It has further opined that
the total circulation of aforesaid 150 journals is about 55,000 out of
which the opposite party No. 1 is circulating around 35,000 which
amount to 64% of the total circulation of the STM journals in India and
reflects the strength and extent of presence of the opposite party No.1
in the relevant market.
31. As discussed hereinbefore, the opposite party No. 1 has entered
into co-publishing agreements with more than 40 institutes and
societies which take out the oldest and most reputed journals in India
in the STM publishing market in their respective disciplines within the
STM group. As a consequence of the aforesaid co-publishing
agreements, the opposite party No. 1 has an extremely powerful
portfolio in STM market in India. If one considers the more select group
of prestigious STM journals brought out by the family of highly reputed
and long established academic and research institutes in India in the
STM field, it seems that the opposite party No. 1 has cornered the co-
publishing rights of most of the prestigious STM journals to the
exclusion of other publishers, especially the smaller publishers. As
stated, the opposite party No. 1 has already has a strong position in the
global market in the STM publishing.
32. It is to be further noted that by acquiring the co-publishing
rights over the most reputed Indian STM journals, the opposite party
No. 1 has got a very strong position in comparison with the buying
libraries of STM journals, thereby leading to a total asymmetry of
market power between the buyer and the seller, leaving the buyers with
extremely weak countervailing power.
33. In the STM publishing industry, a crucial determinant of market
power of a publisher is its portfolio of journals. A particular publisher's
portfolio of journals might be such that for a buying library it is an
indispensable supplier, and the library has no option except to deal
with the publisher, which in the instant1,4 1' ipposite party No
1.1n this connection, the following ,6bsetio- s; the European
Commission (Para 47, Case No bMP/37-Cai'y.dover/Cinven/
Bertelsmann-Springer, Date: 29/07/23) mj;bç nid:
The 'must have' characteristic of certain journals
may also be behind the history of significant price
increases of academic journals, in particular STM
journals, in the past. These price increases, and the
high margins enjoyed by publishers, may in
particular result from the market power which
publisher enjoys on the basis of the strength of their
jr?gjoqfpos.
(emphasis underlined)
34. In this context, it is also to be understood that reputed and
highly professional STM journals do not face direct and substantial
competition from the less reputed and less professional STM journals.
Thus if an enterprise controls the bulk of the reputed STM journals in a
market, this gives it a unique market power. For direct customers such
as the buying libraries and institutes and the end consumers that is
the individual researchers and scientists, the real academic and
research value lies in the reading of such reputed and respected
journals.
35. The STM publishing industry has high entry barriers, because
of several important requirements for success in the market. The first-
copy cost of a journal is really high as it includes several high-cost
activities like recruiting writers, judging, reviewing, editing, copy editing
and typesetting articles. Other structural barriers to entry in the
market include - most importantly - the journal's reputation, which is
built through commitment to rigorous academic quality.
36. Further, it is to be noted that an important factor is to get a
highly renowned academic for peer review, thereby maintaining the
quality, reputation and attractiveness of the journal. Other barriers are
network effects, coordination, the existing stock of journals held by
incumbents, and the high switching costs for libraries. In the instant
case, the opposite party No. 1 has already acquired the co-publishing
rights for virtually all the respected STM journals brought out in India,
it has effectively foreclosed the market for other competitors by further
raising the entry barriers.
37. The market for academic publishing exhibits some specific
features. A main feature is the 'must have' characteristic of certain
journals. Such journals have so called I e l contentbecause
they are considered as indispensable by, stome-di\to a, particular
reputation or specific focus of the subjedt. Ui siies'..w}iich are active
in a certain field, depend on the in form!ati n p idedii Isuch journals
/
ill..
13
and cannot, afford to cancel subscriptions without their researchers
risking to lose access to the latest developments in the academic
research in that field. Among those 'must have' journals there are
multidisciplinary journals, the most well-known of which are 'Nature'
and 'Science' as well as more specialised journals in an individual
discipline. These journals are the ones, which are most read by
researchers active in a certain field and in which those researcher's also
aiin to publish since publications of articles in such journals will be the
most valuable for their career.
38. The Commission is concerned with the geographic market as
India, in the field of STM journals. It is quite clear that for those who
are interested in the developments and outputs of the scientific
community of India, the STM journals in question in this case are
collectively an indispensable material, and adds to their "must have
characteristic", and therefore to the dependence of the libraries and
individual readers on these journals, and consequently their
dependence on Springer. In view of the aforesaid position, it becomes
quite clear that the opposite party No. 1 enjoys immense market power,
and creates a virtual monopoly in these titles which are almost non-
substitutable.
39. Further, one cannot lose sight of the fact that these reputed
journals were being published since several decades by the leading STM
institutions of India. The buying libraries and institutions which
subscribed to these journals have their collections for the last several
decades / years, and their member researchers and other academics
have an expectation to find these journals at the particular library, both
current and past issues thereof. The libraries cannot therefore
suddenly decide to exit the subscription to these journals, and this
constitutes an even greater degree of dependence on these journals.
40. As discussed hereinbefore, in the area of STM publishing, it is
quite evident that the opposite party No. 1 enjoys one of the most
powerful positions in the world. It is one of the leading global
publishers of STM journals, having a global turnover of Euro 892
Million (in 2008) (as per Springer's Annual Report, 2008) with access to
immense resources. On the other hand the binJraries have
meagre resources and rely mostly on the from
government or governmental sources, whiUl arq, f 7 àquate for
their vast demands. *
41. In view of the aforesaid discussion, it is quite clear that the
aforesaid indicators of market power correspond to several of the
factors for determining dominance listed in section 19(4) of the Act e.g.
entry barriers, dependence of consumers on the enterprise, size and
resources of the enterprise and countervailing buying power.
42. It is to be further noted that while Springer enjoys a dominant
position with respect to the buying libraries, its dominance is even
more pronounced with respect to the end consumer, the individual
reader, scientist, academic or student. For these individuals, the
product differentiation is even sharper, as no one journal is a complete
substitute for another. Thus the journals that are controlled by
Springer have for the individual reader a completely unique quality,
and a 'must have', non-substitutable characteristic. The opposite party
No. 1 further has the strength to increase the prices of the journals
several fold, which in fact it has done, after entering into co-publishing
agreements with the Institutes, which clearly demonstrate its ability to
operate in the STM market independently of the competitive forces.
Abuse of Dominance
43. Once the dominance of the opposite party No. 1 in the relevant
market is established, the next question that arises for consideration is
whether it has abused its dominant position by indulging in any of the
acts/conduct specified in section 4(2) of the Act. The provisions of
section 4(2) of the Act provide that there shall be an abuse of dominant
position if an enterprise or a group, directly or indirectly, imposes
unfair or discriminatory condition in purchase or sale of goods or
service or imposes unfair or discriminatory price in purchase or sale
(including predatory price) of goods or service. It further provides that
there shall an abuse of dominant position if an enterprise or group
limits or restricts production of goods or provision of services or market
therefor or if it limits or restricts technical or scientific development
relating to goods or services to the prejudice of consumers. Practices
resulting in denial of market access; making conclusion of contracts
subject to acceptance by other parties of supplementary obligations and
using dominant position in one relevant market to enter into or protect
other relevant market are also considered to be abusive for the
purposes of section 4 of the Act.
Jf
CO 7j?
44. In the light of the above provisi s'cf\the opposite
party No.1 may now be examined to same have
contravened the provisions of section 4 Mte i3the c/ conduct of
*J
the opposite party No.1 for the present purposes may be looked into in
the following manner:
Increase in prices of journals
45.1 It was alleged by the informant that the opposite party No.1 has
abused its dominant position by directly imposing unfair/excessive
prices on the consumers in the sale of journals and thereby
contravened the provisions of section 4(2)(a)(ii) of the Act
45.2 In this connection, it may be noted that the DG prepared a
comparative chart showing trend in prices in the years 2010 and 2011
at page 36 of the main report (Vol. 1). From a bare perusal thereof, it is
evident that the prices of journals increased many fold in a short span
of time after the opposite party No.1 acquired co-publishing rights of
the journals. It may also be noted therefrom that the prices for the year
2011 are substantially higher than that of 2010.
45.3 The aforesaid price increase was sought to be justified by the
opposite party No.1 by contending that on account of provision of
enhance services like e-platform 'Springerlink' and more exposure of
Indian scientific journals to international scientific community.
45.4 The price rise in itself may not be considered as an abusive
conduct by a dominant enterprise. In fact, the increase in profit margin
may act as an incentive to bring in innovation and enhancement in
quality of services. This may be true in a market where level of
competition is high as a healthy competition in the market itself would
take care of excessive pricing.
45.5 However, in the present case, as noted above, the opposite party
No.1 had acquired a dominant position in the relevant market by
entering into exclusive co-publishing agreements with various
institutes. Being the dominant enterprise, the consumers are heavily
dependent upon the opposite party No.1 due to must have character of
the journals. Coupled with the high entry barriers for new entrants, the
consumers have very little to choose from the market. Accordingly, any
price increase of journals by the opposite pa.r . 1 is a helplessness
of the consumers and except boycott I asrbo lternative. It is
contended by the opposite party No.,f that s to the end
consumers of printed version of journ1s freaces' t the e-version
thereof which it co-publishes.
* *
'Tr /e
45.6 The plea is thoroughly misconceived. As noted by the DG, from
the statement of CEO of the company that it provides e-version free
only to the subscribers of the print version and not vice versa. As
rightly noted by the DG, apart from adding limited value to the readers
of print version, it allows the company to remain competitive in the
world market for which the charges are being recovered from the
consumers. Moreover, e-ersion is a separate product altogether and
canr'ot be imposed on customer. A customer should be at liberty to buy
e-version independently.
45.7 It may also be noted that a consumer has not been given any
choice to avail or not to avail of the said value added services. It can be
noticed that being dependent upon the opposite party No. 1, the
consumers are compelled to avail these services and to make payment
for the same which they may not require.
45.8 Thus, by linking the prices of value added services with the
basic prices of the product, it is evident that the consumers have been
subjected to unfair prices. Resultantly, it is held that the opposite party
No.1 is found to have abused its dominant position by imposing unfair
price in sale of its goods in contravention of the provision of section 4(1)
read with sub-section (2)(a)(ii) of section 4 of the Act.
Imposing unfair condition in sale! End User Details
45.9 It was alleged by the informant that the opposite party No.1
insists for the complete details of the clients of the informant (end-user
details) as a pre-condition of sale of the journal. Such information is
considered commercially sensitive in the industry, as it is liable to be
used by another party to the detriment of the informant, as has been
experienced by the informant. When the informant provided such
details to the opposite party No. 1, the latter started dealing with the
clients of the informant directly with the intention of driving the
informant out of the market.
45.10 To counter the allegation, it has been contended by the opposite
party No.1 that all journal subscriptions offered by the opposite party
No.1 are for a combined electronic and print version of the journal
because the electronic version is inheren;1y.pa of reaching more
persons among the target audience and )el' bIing the journal
articles available in searchable form, tleyca rioe asily accessed
by those interested in precisely those aiti1esè en&iJser details are
ö E .47. /
\.
17 'NTr
required to guard against misuse of the electronic version. This is
consistent with the practices of other international publishers.
45.11 Next, it is argued by the opposite party No. 1 that the real
reason why the informant does not wish to provide end-user details to
opposite party No.1 is because this would prevent its own malpractice
of procuring copies of journals in India at INR rates and selling them at
USD prices abroad.
45.12 Further, it is contended by the opposite party that the informant
has not set out a single case where it has provided end-user details to
the opposite party No.1 or where the opposite party No.1 has 'poached
any of its clients. It is urged that the opposite party No.1 places
enormous value on its relationship with its distributors. Legitimate
distributors have never had any objection to providing end-user details
because they recognise its importance as a safeguard against misuse of
the electronic version.
45.13 It is not disputed by the opposite party No.1 that end-user
information is sought by it from the distributors. From perusal of co-
publishing agreements signed between the opposite party No.1 and
societies publishing the journals, it is manifest that the opposite party
No. 1 requires subscription lists from the societies and has a right to
use such data to send information regarding its services and products.
45.14 In this connection, a reference may be made to the draft Service
Level Agreement which was proposed by the opposite party No.1 to the
informant. Furnishing of end-user addressed by the informant has
been kept as an obligatory clause in the said agreement. Further,
standard commission on subscription has been stated to be 5% with
respect to print/ electronic journal subscriptions with end-user address
information and 4% Commission has been offered for subscription
without end-user addresses.
45.15 As noted by the DG, the opposite party No. lsubmitted that end
consumer data is required for providing the subscribers of print version
of its journals with free access to the electronic version and the same is
possible only with end-user information and their IP addresses.
45.16 The justification given by the 1 for requiring
end user information appears to be ustainable as
access to electronic version may be the opposite
18
party No.1 to the end consumers by providing details of the procedure
- for availing the facility alongwith the product itself.
45.17 One cannot be oblivious to the fact that the informant has
categorically given names of several publishers who publish STM
journals in India and do not ask for the end user information. The
informant has also shown that after supplying the end user data of its
customers, the order for subscription to it decreased considerably
because the opposite party No.1 used the data for supply of journals
directly to its customers. In any event, the misuse of commercially
sensitive information in terms of details of end consumers cannot be
ruled out.
45.18 In view of the above, it is held that requirement to seek end user
data from the distributors is an unfair condition and therefore, the
same is in contravention of provisions of section 4(1) read with section
4(2)(a)(i) of the Act. It is held accordingly.
45.19 Besides, the stoppage of supplies of journals to the distributors
for want of end user data from them would also violate the provisions of
section 4(1) read with section 4(2)(c) of the Act as it would be a practice
resulting in denial of market access to the distributors.
45.20 The imposition of the obligation by opposite party No.1 to
require 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. The conclusion of contracts being made contingent upon
acceptance by other parties of the supplementary obligation of
supplying the end user details, which by their nature or according to
commercial usage have no connection with the subject of such
contract, attracts the rigours of section 4 of the Act.
Pricing in Dollars! Margin Squeeze
45.21 It has been further alleged by the informant that after the
opposite party No. 1 got the co-publishing rights in the aforesaid
journals, apart from several fold increasing the prices, the informant
now has to pay the USD list price fr rnals which are
considerably higher than the earlier INR,rice f informant and
customers based in India and either carryingo .theiLb\isinesses from
India or needing journal in their own coimtr reijed to pay the
international price (USD price) for an j ublished and
19
a
bought in India. The purchase price has to be made by the customer in
INR after conversion of the USD price of Indian institutes journals into
Indian Rupees at the prevailing market rate.
45.22 It may be noted that by requiring the informant and others to
pay the price for the Indian institutional journals in INR after
conversion of the USD price at the prevailing market rate, on acquiring
the co-publishing rights by the opposite party No.1 in the journals, the
prices of the journals have been left to the vagaries of the currency
market and fluctuations therein despite the fact that printing and
publishing of these journals are done in India. Recently, the rupee has
lost significantly against USD making the payments in rupee a
burdensome proposition for customers to the benefit of the opposite
party No. 1.
45.23 In view of the above, it is held that the aforesaid condition put
by the opposite party No.1 was an unfair condition in sale of goods in
contravention of the provisions of section 4(1) read with section 4(2)(a)(i)
of the Act.
45.24 It is also alleged by the informant that the opposite party No. 1
has reduced the offered discount to 5% on the list price of the journals
as compared to 10-25% offered by the institutes previously.
45.25 It may be noticed from the DG report that margins available to
the distributors/ subscription agents before acquiring co-publishing
rights by the opposite party No.1 were in the range of 10-30%. From
perusal of circular from Indian Statistical Institute placed at page
No. 115 of the information, it is revealed that the institute was offering
10 to 20% discount to the distributors for the product which institute
was directly supplying! selling. Similarly, it is noticed from the copy of
subscription rates 2010 issued by Indian Academy of Sciences placed
at page No. 116 of the information that the academy was still giving 10%
agency discount to distributors for the product which the academy was
marketing. The opposite party No.1 has reduced the offer discount to
the distributors to the level of 5%.
45.26 It may be noted that reduction of paigin--tq such a low level of
5% would make business unviable for tibitoiesulting in their
being driven out of the market and thm 1i14 &t\avention of the
provisions of section 4(1) read with sectio 4('(ai) of;:tè Act.
C *j
/
20
Order under section 27 of the Act
46. In view of the aforesaid discussion, I hold that the opposite party No.1 had abused its dominance position in the relevant market of public distribution of STM journals in India. In view of section 27 of the Act, the opposite party is directed to discontinue the abuses and following di.rectior.s 3re given to it:
(j) To reduce of prices of the STM journals by at least 25%
(ii) To give best price of the Indian journals in Indian rupees instead of dollars;
(iii) Not to ask the informant or any other distributor the details of end-users while supplying the journals.
(iv) To give minimum 10% as agency discount or distributor discount to the informant and other distributors.
47. The opposite party No.1 is also to suffer a penalty under section 27 of the Act. Looking at the turnover of the opposite party No.1 from its sales in India being Rs. 20,36, 81,092 / - for the financial year ending March, 2011, I consider that a penalty of Rs. 2 crore would be just and appropriate. The opposite party No. 1 is directed to deposit the penalty within 60 days with the Commission.
48. The Secretary is directed to inform all concerned accordingly.
Sd!-
Member (D)
/
Certified T 'o -,/
Al P. GAHLAUT
SSISTANT DIRECTOR
etition Commission of India
New Delhi