Indian Kanoon - Search engine for Indian Law

8.10. As per ACI, it has low market shares even if only few of the components of the market were to be considered. On the basis of available data, it is submitted that the market share of ACI during financial years 2011-12 to 2013-14 (upto Feb) is less than 40% and on the basis of source of spend, its market share in 2013 is less than 24%.

8.11. ACI has claimed that it is a very small player in a broader relevant market which includes: card lifecycle management software; merchant life cycle management software; wholesale payment processing software for NEFT and RTGS payments; payments initiation software through various channels like mobile internet and phone banking; retail payments switch software (such as BASE24); Interchange software including VISA, MasterCard, NPCI; bill payments software; fraud monitoring software; and payments infrastructure monitoring software. It is stated that in the presence of giant players like VISA and MasterCard in the relevant product market, the question of ACI being dominant does not arise. Further, ACI is not dominant in terms of estimated business share in IT and switch software spends. It is submitted that transaction based market assessment is not appropriate given that license fee is bilaterally negotiated between switch owners and the customers. Banks report the number of transactions to ACI on the basis of which fee is calculated at the agreed rate per transaction. Therefore, it would be appropriate to arrive at the share of total business on the basis of revenue of the parties.

10.15 Having perused the findings contained in the DG report as well as the submissions of both ACI and the Informant with regard to the relevant market definition, the Commission's observations on this sub-issue are recorded in the following paragraphs.

10.16 The Commission notes that ACI in its submissions to the DG as well as to the Commission has contended that 'the market for electronic retail payment systems' should be considered as the relevant product market in this matter. The DG in its findings notes that the function of an EFT Switch is to provide a communication mechanism amongst different components of an electronic fund transfer system such as ATMs, POS terminals and core banking systems. The DG considered ACI's submissions with respect to other components of the electronic payment systems such as card lifecycle management software, fraud monitoring software etc. and found that apart from the basic EFT Switch there are other complementary software modules used along with EFT Switch/ switch software for enabling card-based transactions. For instance, life cycle management software helps to manage all aspects of the life of a card from application to account closure; fraud monitoring software issues alerts after detecting suspicious account and transaction activity etc. The DG found that none of these software can replace the switch software in terms of functionality, but provide additional features and complement the functions of an EFT Switch. It was further observed by the DG that the presence of peripheral software as mentioned by ACI is not mandatory for banks to operate EFT Switch. The DG concluded that an EFT Switch performs a specific function which cannot be performed by any of the other payment software mentioned by ACI as each of them performs a distinct function and cannot be used interchangeably.

10.38 Considering the aforementioned factors, the DG found ACI is in a dominant position in the relevant market of EFT Switch/ switch software in India as defined in the report. As per the DG, since ACI was following a Transaction Based Pricing (TBP) for licensing of BASE24 software, under which the license fee is linked to the number of transactions projected to be processed through the BASE24 software, the volume of transactions that take place through each EFT Switch/ switch software would be the most appropriate indicator for calculating the respective market strength/ share of the supplier of BASE24 software in the relevant market. Furthermore, it was also observed by the DG that a bank with a larger network of ATMs and POS would be processing more transactions through the switch software as compared to a bank with a smaller network and accordingly the number of ATMs and POS that are linked to switch software would be relevant while determining the market share.

14. Considering the nature of the relevant market, the DG has appropriately assessed the market shares of the players on the basis of volume of transactions through each EFT Switch / switch software and the number of ATMs and POS terminals of the bank linked through each switch software. Based on the number of transactions that took place through the switch software, it is reported by the DG that the annual market share of ACI in the relevant market during financial years 2011-14 was in the range of 67% -74%. In terms of total number of ATMs and POSs that are linked through the switch software, during financial year 2011-14, the market share of ACI in the relevant market was in the range of 84% - 86%. In regards to ACI's contention that market share should be measured on the basis of number of banks licensed to EFT Switch software or revenue earned, I observed that the market share calculated on the basis of number of banks does not represent the economies of business involved and also does not account for variations in the size of banks and the underlying devices as well as consumers that BASE24 serves thus, the contention is not tenable. Further, it is observed from the DG report that ATM and POS terminals that use EFT Switch / switch software to facilitate payments through internet gateway constitutes nearly 2% of total transactions served through switch software that does not affect the market share of ACI much in the relevant market.