Competition Commission of India
Kapoor Glass Private Limited vs Schott Glass India Private Limited Main ... on 29 March, 2012
€Z§MPE'§"3TIQN *£€}MM1SSX$N Q? ENQEA Case Ne. 22 of 2810 iélapcior Glass Pvt. Ltd. : Infermant Against Schett Glass India Pvt. Ltd. : Opposite Party Date of cedar: 29"" sv2arc:._i_i 393.2 es per R. Presefi {separate erder) Greer under Seetien 2'? ef the Cemgetitien est me:
I am' in agreement with the majority order in case of Kepeer Giass Pvt. Ltd. The facts of the case have been mentioned in that order and there is no need to discuss the facts again. But it is necessary to higtiiight some of the facts some of which are historicei. Schett Glass Pvt. Ltd.
entered the Znciian market in 1998. There were five manufacturers of "
giass tubing in India nemeiy Seraikaiia Giess iiiiurks Ltd, Bhai*at Giass Tubes Ltd, "i"win«:ii:y Giass Pvt. Li:c:i., Kepooi" Ciiass Ltd and Triveni Glass Ltd.
Sereikaiia Glass Werks Ltd. cioseci down its business in 1996, Twincity Csiass Pvt. Ltd. exited from business in 200'? and Kepom' Glass exited frem the manufacture of glass tubing in 2008. Bharat Giess Tubes Ltd. was taken over by Schott 'Glass Pvt. Ltd. Triveni Giass Ltd. was taken ever in 2010 by NIPRO a foreign company. The informant has aiieged that ail.
these manufactmers of giess tubes exited the market because of the superior technaiegy of Schott Giass arid because of predatcry... pri__<:i_ng A feiioweci by the said company. It was sitateci by the informant that the predatory pricing was done because Schott Giess was seiiing the goods at
- beiow the cast 0%' ;:»reciuci:icm and aise tieiew the interne§.i_e§¢§:i,.\{narket price.
*"""'(}\\'\'('\.~'.:*'1-:.,-{' :)''~\. The mariiet at that time consisted of glass menui;a{§;fig. "' nverters .~.? ' V who converted the tube into viais, cartridges etcf' _é__ .
e 9;.
. r't.'@.§"§_..}.i seed to \ C'...
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*3}. ,.3§' ,~.+: W' .-'S _ »- .r'L. ; ,», buy giess tram the manufacturers and ccmvert them. There were a iarge number ef converters and they heci a smaii business. The informant has aiieged that Schett Giass wanted to take over its tausmess cit tube manufacture and when it refused Schett Giass started adopting strtmg arm mettieds against Kapeer glass. Ail this happened prior te 20"' May 2009 Let the day on which Sections 3 and 4 of the Competitien Act we;je__ brought inte ferce. The {JG therefore die net imrestigate this issue and the Commission eiso cannot take cognizance :3? facts prior te the 20*" May 2009. Subsequenitiy the manufacturing business ef Kapeer Giess closed down and it remained oniy e ccmverter. Schett Glass stopped suppiy of tubing to Kapeer €3iassci_§ji 2801 and tiii today ¥<a;3g:gor Glass is not abie to take gtess tubes frem Sctiott Gtess.
2. If the facts stated by Kepeer Géess are cerrect then it is ciear that Schett {Bess is the iatgest supplier of giass tubes for ampeuies, visit cartridge etc. in India. A peruset of the facts stated in the main erder shows that new Schott Glass is trying to finish competition from the converters and take a strengieheki in the downstream prcsducts such as vieis and cartridges. This is cieer from the fact that Schett Glass is the omy producer at amber gtess in India and no converter weuid get emtaer giess unless it beught cieer giass from Schett Giass. In 30 to 35% of the vials and empouies amber glass is used and because of the demane fer amber giess the converters have te buy deer giasis from Schett Géess. This is e i:ie--'in arrangement which is in ccaritreventicm at Sectien 3(4) of the Competititm Act. The O.P. in thés case he. Schott Gfiess put ctmditions that me cum"/erter wcauid do the job work for others who do not use Schett Giass tubing, it the corwertet does the jet: work for others then Schett Giass \Neuid"not su;j'pEy giess tubing antiictjnvefier. This is~»aise in contravention of Section 3(4) of the Cemgzietition Act. A system et 'icsyaity' ' '\\.
rebates and discounts was tntroduced, Uncier this scheme the cerwerter had to sign an agreement that it weuid buy 83% ei'/tfj;e'« V_ rs?
C3,P. and that the emtpeutes price weuid be t C.» $5 Rs.T»'{)iai=::i'is was required by the CZLP. Emit the €3.P. «:iist:rirriinateo_ by giving specie! discount to some chosen converters.
3, On 14"' May 2008 a sister concern of Sciiott Glass in Germany took over 50°/o equity in Keisha Manufacturing Pvt. Ltd. company beionging to Siiapoorji Peiionji 'igroup. Thus a joint venture was formed between Schott ;:ieci<ag'in«.g of Germany and the SP Group. The main idea of forming this joint venture was to capture the downstream market and remove. the other converters from the downstream market. The tiosioess or" this company prior to entering into the joint venture agreement was quite minimal but after it entered into a joint venture agreement, Sciiott Giass _.; ~'intenciei:i to nurture it. This was done in a roundabout m,g;;noei:.by riavirigi a system imown as target tiiscoont arizii fuoctionai discount. The other converters were getting target discount 2% to 12% whereas the joint venture was getting a discount of over 30%. Under the functional riiscount the conditions to buy Sciiott Giass were that the converter wouio promote Ci.P.'s tubing and that it wouid be riot use the tube of any other mariufacturer. Even the functions! discount given to the joint ventiire was much more than that given to the other converters. The price fixed of the glass tube soid to the joint venture was at 20£i8 prices whereas the prices at which the tube was given to the other converters were at prices wtiicii were inmeased after 2898. In 2011 the price of tubing for the other converters was much higher than the price which was charged to the joint venture. As a consequence the profitebiiity of the other corzverters decreased and in the icing rim they would be thrown out of the mericet and the entire business wouid go to the joint \.»'entore. The purpose of joint venture is tiieireiore .anti~competitive, as it was created to finish off competition in the downstream activity. As the ioini: venture arises out of' an aioreementvitor antiizomoetitive Dractices. the Commission is i"eCi£.iii'ed to take action aoainst the ioint veni:ure. Schoti: Giass as weii as its joint venture toiti the other" conve, -'7?%t:ii~@t-;\:c\riey czarinot seii the tubing at '33<if§{'"5a.;;-*-'\'. >-
" ' ~ "sz,e:is'ure. This amounts to resaie
-..~ " . QR _ _ ' _in«.._ ti'a§'§;il{iZ!Dfi of Se«:tiori 3{4) of the ' *3.' '3. i icornpetition Act. in 2010 keégfiie converters to enter into a t-§3'°'" ~ ~34» ,. 5 uni' market iicehse agreement and marketing support agreement. By these agreements Schott Giass took upon itseif the power of eriteririg into the premises of the converters and examine as to whether they are deaiing with the tubing of or the tuhirig of any other mahufaiztureri. it was aiso found by the D63 that in acitiitioh to the ciiscourit offereci by the C).P.s the ;;ioiri-t venture was getting a b€3i'ii.iS at 20% of the sa..i.eS.,tr'om Schott packaging. This bonus was given to the aoveritage of the joint venture. This aiso out the joint venture in a better situation as compared to the other converters. There is no doubt that there was an abuse of dominance by Schott Giass and the majority has heiti this view. I agree with__._..t.hatt.view. it is aiso observeot that Schott Giass i.»\iahts__e__'r:i_ght of excitisive supoiy and if any converter bought tubing from" am} other source or any other rnahutacturers then Schott Giaes would not suooiy am; goods to the said converter. This is aiso a contravention of Section 3(4) of the Competition Act. It is aiso observed that fioiax ciear and Amber Tubing meant rhaihiy for export was given by the {}.P. to the joint venture. This was aiso discriminatory. in the iohg ruri as the customs duty was 10% on importeci tubes afld as the CLP. weoiti give discount to its converters it wotiid work as an entry barrier for any other oiayers to enter the market. This is so because the said piayers wouid heave to match the prices as weii as the quaiity of the Oil'. in order to survive in the market. Further, {3.G. has found during his investigation that the tubirig given to the other converters was aiways in short suppiy and for this reason, the converters had to maintain a iarge inventory. This ieci to a strain on the firianciai resources of the corwerters which wouid ieaci to their exit from the market. Though tethnicaiiy, it is riot refusai to tieai but giving short supplies amounts to an eiemerii: of refusai to deal. This is aiso a r:ohtra\reri'ti«3h'oi Section 3%) of the Act.
4. Before estahiishing that the 0?. had entered irito anticompetit.ive agreerrierits with the necessary to examine the fat: ._-
there is a customs citity of ii. C;;e.€§jOi'i which prohibit a converter from using the materiai of any other tube rrienotecturer and aiso through the system of discounts a barrier to the new entrants in the market has been created. It has aiso ted to foreeiosure of competition by hirrciertng entry into the market. Thus cieoses {a} and {C} of Section 19(3) are cieariy attracted. Moreover by its refueaiwto oeai and by its i?:rDi§~€:i»'E3S of discounts, for wii"t_ic;h_ ,var§oos agreements have been entered into with the corwerters, the CLP. is workting for the benefit of its joint venture. This wooio iead to the exit of some of the czorwerteirs from the market. Thus, douse (C) of Section 19(3) is also attracted. The conditions of Section 19(3) tor estabiishing eporecieoie adverse effect on competition (AAEC) in indie are theref_o_re satisfied.
55. Further, in view of the provisions of Section rt-8(1) of the Competition Act, the Commisston has to proceed against the ciirectors of the opposite party. These would be separate proceedings which the Commission wouici need to initiate after foiiowing the necessary oroceduret
6. To sum up X agree with the majority view that there was as viotatioo of Section 4 of the Competition Act as detaiied ir: that order. But there are also contravention of ciaoses (a), (in), (oi) and (e) of Section 3(4) or the Competition Act ttirough various agreements, which the Q.P. had entered with the other tonverteirs and the joint venture. There is aiso 2:3 trarrier to entry. In the iorxg ram in the entire market in India the (LP. wooio become a dominant or a monopoly player in the upstream and the downstream twoditicts. This arises due to the various anticompetitive practices foiioweo by the 0.53. This practice foiiowed by the OP. requires that a Sarge penaity _ shoutci be ievied on the OP. Therefore I do not agree 'with the majoflty View that the oeneity shooio be restricted to 4%. in my view oeriaity should be ievied at the rate of 'P'/':';:g'*"?§¥*§§"t7"tVt",é5'::a;-§x\erege turnover of the test \a\ Qgfit 31'? £33 "trr(i;i>?r\the OP. had refused' to 55* tsgefifised that it shouéo not . "if t I . Sfiimagfriai to the mformant' A 3"' er' 5 ctompiiame reepcwt be submitted within twm months of receipt «:2? this order by the 0.33'.
7. The Secretary is directad to serve this mrder on the concerned parties.
«.=.;¢.=L{--~ (R. Prasad)' Member, {ICE r ff'?
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