DR. B.

R AMBEDKAR NATIONAL LAW UNIVERSITY

TOPIC-BEST XEROX CENTER VS. XEROX MODI INDIA LMT,2010

SUBMITTED BY-SASWAT KUMAR ROUT

SECTION-B
ROLL NO-1901091

INTRODUCTION
The competition act of 2002 was passed by the parliament of India so as to form a commission to
oversee the business operations of companies and individuals in the country following fair practices of
competition and economic growth of the country. Competition Law for India was triggered by Articles 38
and 39 of the Constitution of India.These Articles are a part of the Directive Principles of State Policy.
Based on the Directive Principles, the first Indian competition law was enacted in 1969 and was labeled
the MONOPOLIES AND RESTRICTIVE TRADE PRACTICES ACT, 1969 (MRTP Act).
Articles 38 and 39 of the Constitution of India mandate, inter alia, that the State shall strive to promote
the welfare of the people by securing and protecting as effectively, as it may, a social order in which
justice – social, economic and political – shall inform all the institutions of the national life, and the State
shall, in particular, direct its policy towards securing:

1. That the ownership and control of material resources of the community are so distributed as best to
sub serve the common good; and

2. that the operation of the economic system does not result in the concentration of wealth and means
of production to the common detriment

One of the main goals of the MRTP Act was to encourage fair play and fair deal in the market besides
promoting healthy competition. They seek to afford protection and support consuming public by
reducing Monopolistic, Restrictive and Unfair Trade Practices from the market Globalization has the
fundamental attributes of relying significantly in the market forces,ensuring competition and keeping
market functioning efficiently.

In the Pre-1991 Reforms period, India’s planned strategic and economic development stressed the
broad policy objectives of;

1. The development of an industrial base with a view to achieving self reliance and

2. The promotion of social justice

The MRTP Act has become obsolete in certain areas in the light of international economic developments
relating to competition laws and hence focus was shifted from curbing monopolies to promoting
competition .In October, Central government appointed high level committee under the chairmanship
of Mr. Raghavan, the aim of the committee was to formulate the competition law in tune with economic
reforms and international development. The committee presented its report on May 2000, The draft
competition law was presented on November 2000. After certain amendments the parliament passed
the new law, called completion Act 2002. The act came into force on January 2003.The Act was
amended by the Competition Amendment Act, 2007 and became fully operational from 1 June 2011.

• The provisions relating to competition advocacy was notified in 2003,

• The provisions regulating anti-competitive agreements and abuse of dominance were

notified with effect from 20 May 2009

The Framework of Competition Act 2002 has essentially four compartments:

1. Anti- Competitive Agreements [ Section 3]

2. Abuse of Dominance [ Section 4]

3. Combination Regulation [ Section 5 & 6]

4. Competition Advocacy [ Section 49]

ANTI- COMPETITION AGREEMENT
Anti-competitive agreements are those agreements that are aimed at encouraging or stopping, limiting
or distorting India's market. The 2002 Competition Act determines the form of anti-competitive
agreements that are not possible in India. According to Section 3 of the Competition Act, if it falls into
any of the categories specified in the section, any agreements entered into are considered to be anti-
competitive.

Section 3 of the Competition Act, 2002 - The Act provided for in Section 3(1) precludes any undertaking
or organization from entering into any arrangement that causes or is likely to cause significant adverse
effects on competition (AAEC) within India. The Act specifically provides for the nullity of an
arrangement that is contrary to Section 3(1)

How to determine AAEC (Appreciable Adverse Effect on

Competition)
Any deal, including cartels, is provided for in the Act, which is:

• Defines purchase or selling rates directly or indirectly;

• Restricts the manufacture, supply, technological growth or business provision of services

• Bid-rigging results or collusive bidding results

Section 3 of the Act specifies that the above conditions shall not extend to joint ventures entered into
with a view to enhancing the efficiency of the production, procurement, delivery, acquisition and control
of products or services.

What are Horizontal Agreements?

HORIZONTAL AGREEMENTS- Horizontal agreements are agreements signed between undertakings at the
same stage of manufacture. Section 3(3) of the Act specifies that such arrangements involve cartels
engaged in trade in goods or in the provision of services on an equal or similar basis, which is:

• Determines purchase or selling rates directly or indirectly

• Output limits or controls, supply

• Share the market or source of production

• Bid-rigging or collusive bidding occurs directly or indirectly

Horizontal agreements are put in a particular category under the Act and are subject to the negative
assumption that they are anti-competitive. This is regarded as the law 'per se' as well. This means that if
a horizontal arrangement occurs pursuant to Section 3(3) of the Act, it is assumed that such an
agreement is anti-competitive and has a substantial adverse impact on competition.

What are Vertical Agreements?

VERTICAL AGREEMENTS- Vertical agreements are agreements signed between two or more
undertakings operating at different production levels. Between manufacturers and distributors, for
example. Other examples of vertical deals that are anti-competitive include:

Special contract of supply & refusal to trade

Maintenance of Resale Price

Tie-in-Arranges

Unique deal for distribution

What is a tie-in arrangement?

According to the Law, it requires any agreement requiring, as a condition of purchase, the purchaser of
goods to purchase certain other goods. In the case of Sonam Sharma v. Apple & Ors., the CCI claimed
that the following ingredients must be present in order to have a contractual arrangement:

There must be two goods that can be tied together by the seller. In addition, there must be a sale or an
agreement to sell one product or service on condition that the other product or service is purchased by
the buyer. The condition, in other words, is that the purchase of a product relies on the purchase of
another commodity.

In order to appreciably limit free competition in the market for the tied product, the seller must have
ample market power in relation to the tied product. That is, the seller must have such authority in the
tying product market that it can compel the buyer to buy the tied product; and

A "not insubstantial" volume of exchange must be affected by the tying agreement. Tying deals are
normally not viewed as anti-competitive because there is no effect on a large portion of the market.

REMEDIES TO ANTI COMPETITIVE AGREEMENTS;

After an inquiry if the commission finds that the agreement in question falls within the category of
Section 3, it can pass any of the following orders as the case may be:

⦁ Direct the person, enterprise or association involved in the agreement to discontinue or re-enter
such agreement;

⦁ Impose such penalties on person enterprise or association, as it deems fit. Such penalties shall
not exceed ten percent of the average turnover for the preceding three financial years

⦁ In cases of cartels the penalties mentioned above shall extend to each producer, seller,
distributor, trader or service provider included in that cartel and the amount of penalty could extend
upto either three times of its profit for each year of the agreement’s continuance or ten percent,
whichever is higher.

⦁ Direct for modification of the agreement to the extent and in the manner as may be specified in
the order of the commission.

⦁ Payment of cost and issuing of directions to the enterprise to comply with the orders.

⦁ Pass any such order or direction as it may deem fit.

Abuse of dominant position- Concept

Abuse is expressed to happen when an undertaking or a group of endeavors uses its prevailing situation
in the significant market in an exclusionary or/and in an exploitative way. The Act gives a comprehensive
list of practices that will comprise abuse of a dominant position and, in which circumstances these are
disallowed. Such practices will establish misuse just when received by an endeavor getting a charge out
of a prevailing situation in the pertinent market in India. Abuse of dominant position is decided as far as
the predefined sorts of acts committed by a prevailing undertaking. Such acts are precluded under the
law. Any abuse of dominant position indicated in the Act by a prevailing firm will stand denied.

As per explanation affixed to Section 4 of the Competition Act, 2002, dominant position implies the
quality of an endeavor in the significant market in India which empowers the enterprise to work
autonomously of serious powers winning in the market and to influence the customers or contenders or
the market in support of it.

Factors to determine the dominant position

Dominance has been customarily characterized as far as the part of the market share of the enterprise
or group of undertakings are concerned. In any case, various different elements assume a role in
deciding the impact of an undertaking or a group of endeavors in the market. These include:

⦁ a market share.
⦁ the size and assets of the undertaking.

⦁ size and significance of contenders or competitors.

⦁ the financial intensity of the undertaking.

⦁ a vertical combination or integration

Relevant Market
The first thing to be resolved in quite a while of supposed abuse of dominant position is the ‘relevant
market’ in which the accused party has a predominant position. The reason served by depicting a
relevant market is to characterize the degree inside which the situation of an endeavor is to be tried for
strength and misuse thereof.

The ‘relevant market’ is characterized as ‘product’ and ‘geography’, in other words, the applicable
market recognizes the specific item/administration or class of items created or benefits rendered by an
enterprise(s) in a given geographic territory.

RELEVENT MARKET PRICE

A market comprises all those products or services that are interchangeable or are substituted by the
consumer. Factors determining the relevant product market are :

Physical characteristics or end-use of goods.

Price of goods or services.

Consumer preference

Exclusion of in-house producers.

Existence of specialized producers.

Classification of Industrial products

In the case of Atos Worldline v Verifoneindia, Case No. 56 of 2012, the Competition
Commission of India (CCI), held that the relevant product market is to be looked at from both
demand and supply perspective based on the characteristics of the product, its price and
intended use. Similarly, in the case of Surinder Singh Barmi v The Board of Control for Cricket in
India (BCCI), Case No. 61/2010, it was held that the relevant market was settled on the thought
of demand substitutability of different types of amusement or entertainment. It was held that a
cricket match couldn’t be held to be substitutable by some other game dependent on neither
qualities nor the intention of the person watching the cricket match.
Relevant Geographic Market
A market comprising the area in which the condition of competition for supply or demand of
goods or services are distinctly homogeneous and can also be distinguished from conditions
prevailing in the neighboring areas.
Factors determining the relevant geographic market:
• Regulatory trade barriers.
• Local specialization requirements.

• National procurement policies.

• Adequate distribution facilities.
• Transport cost.
• Language.

In the case of Bijaya Poddar v. Coal India Ltd, Case No. 59 of 2013, it was held that these are
territories or areas where demand and supply of products of administrations can be said to be
homogenous and discernable from markets in neighboring regions.
Similarly, in the case of Atos Worldline v Verifoneindia, Case No. 56 of 2012, it was held that
naturally, a few factors at that point, as regulatory trade barriers, local detail necessities,
national acquirement approaches, satisfactory conveyance offices, transport costs go under the
domain of thought. Consequently, if every such factor were uniform all through the nation
versus an item, the entire nation would be the relevant geological region.

The imposition of beneficial commitments: when an undertaking makes the finish of

agreements subject to an acknowledgment of advantageous commitments by different parties
and those commitments are to such an extent that by their very nature or as per business use
in that field, they have no association with the topic of the agreement.
TYPES OF DOMINANT POSITION
Exploitative such as excessive pricing
Exploitative activities are those where the prevailing body abuses its strength by forcing biased
or potentially low conditions on different firms or shoppers. In the case of, Pankaj Agarwal v.
DLF, Case No. 13 & 21 of 2010 and Case No. 55 of 2012, where, for a situation relating to the
distribution of apartment, the agreements drafted singularly by Delhi Land and Finance (DLF),
empowered them to be discretionary about the designation of super-area, secretive about data
pertinent to the buyer, like the number of the apartment on the floor, and to drop portions and
relinquish booking sums. The Commission held the agreements to be exploitative against
purchasers, and consequently, it was one-sided and abusive.

Exclusionary such as a denial of market access

Exclusionary activities are those in which the dominant body utilizes its strength to confine
entry of competition into the relevant market. For instance, in the case of Re Shri Shamsher
Kataria v Seil Honda, Case No. 03/2011, where there already existed agreement between the
dominant entities and the Overseas Suppliers of unique vehicle parts which kept the Overseas
Suppliers from providing parts to free repairers, such understandings were held to be anti-
competitive as they limited passage of new firms.

WHAT IS COMBINATION:
Combination within the Competition Law is the merger between two or more enterprises or
firms or the business sector acquisitions (such as companies or firms) by other business
enterprises. The Government controls combinations or mergers and acquisitions within the
country to promote competition and thereby seeing to that small scale establishments are not
overshadowed and swallowed by more reputed industries. This is because the merger of big
shot companies not only reduce competition but also make it difficult and almost impossible for
smaller firms to grow or profit from their business. The accumulation of wealth in certain
sectors of business and the consumer concerns can lead to major economic and social
discrepancies within the nation.
Regulation of Combinations
Section 6 of the Act provides for the law relating to regulating Combinations. It prescribes that
all transactions qualifying as a Combination should be notified to the Competition Commission
of India in Form I (short form application) or Form II (long form application) as applicable.

Section 6 further provides that a Combination shall not be given effect to until approved by the
Commission or until 210 days have passed from the date of notifying to the Commission
whichever is earlier. The CCI may either approve the Combination or may approve subject to
modifications in the structure of the Combination or not approve the Combination.

M/s Best Xerox Centre v/s Xerox Modi India Limited

Informant: M/s Best Xerox Centre, Proprietor Smt .Sunder Jain

Opposite Party: Xerox Modi India Limited(MX)

Background of the accused:
Xerox ModiCorp Limited (XML) is a subsidiary of Xerox Corporation, USA. It was incorporated in
1983. Xerox Modi India Limited has been involved in three successful transitions in India which
are from copying to printing,black and white to colour and stand-alone analog to digital,
networked products. Xerox Corporation offers document solutions, services and systems which
includes colour and black-and-white printers, digital presses, multi-function devices and digital
copiers designed for offices and production-printing environments It also offers associated
supplies, software and support .

The Allegation:
A case was filed by M/s Best Xerox Centre through its sole proprietor Smt.Sunder Jain against
Xerox Modi India Limited under Section 26(2) of the Completion Act,2002
According to the informant the opposite party illegally used its dominant position by
unilaterally changing the terms of arbitration. The allegation was that the abuse of dominant
position is for coercing Best Xerox Centre (BXC) to sign the Full Service Maintenance Agreement
(FSMA) with an arbitration clause in which Xerox Modi (Xerox) had the exclusive right to
appoint the arbitrators.
The informant had purchased a Xerox machine at a price of Rs8,05,800 from the Xerox Modi
India Limited in 1997.The grievance of the informant was regarding the condition of
appointment of arbitrator and venue of arbitration was changed by the opposite party in the
Full Service Maintenance Agreement (FSMA) on 11/12/1997.The conditions were different than
the one mentioned in the sale invoice dated 30/09/1997 and 21/11/1997.
The information provided by to the Smt .Sunder Jain to Competition Commission of India to
substantiate their claim in its written submission is as follows:
The arbitration clause as per the sale invoice dated 30/09/1997 and 21/11/1997 stated that if
there was a dispute or a difference in opinion arising between the two parties then it would be
referred to the arbitration of board of arbitrators which would comprise of on nominee each
from MX and Best Xerox Centre and an umpire. The venue would be Hemkunt Tower ,New
Delhi-110019

Now the amended clause of FSMA stated that if there was a dispute or a difference in opinion
arising between the two parties then it would be referred to the arbitration of a sole person
appointed by the Chairman of board of the directors of MX.I t also stated that all proceedings of
such arbitration would be governed by the Arbitration & Conciliation Act,1996. The venue was
the same – Hemkunt Tower ,New Delhi-110019
This showed that there was a difference in the clauses of the invoices.So, it was alleged that the
opposite party was trying to misuse its dominant position which was apparently clearly
comparing the sale invoices and in the FSMA. The informant also alleged that the opposite
party had deliberately incorporated very liberal terms to lure them ( M/s Best Xerox Centre)
into purchasing the machine.
But now since the machine was already bought by the informant, the opposite party
incorporated very restrictive terms in the service agreement, so as to discourage the consumer
(M/s Best Xerox Centre) from raising any dispute to after sales service.

The informant also alleges that the opposite party was trying to take advantage as it held
monopoly in the market of Xerox machines. The technical service engineer and spare parts
were also not available in the open market. So, the consumer was left with no option but to
agree with the conditions stated in the FSMA.
Request by the informant was to penalize the opposite party for unfair trade practices and
abuse of dominant position.

The Verdict after due investigation

After going through the various documents the Commission found that the informant had
brought nothing on record that suggested that the maintenance agreement was mandatory for
them as purchaser. So a user has ample choice of selecting a vendor for servicing. Though Xerox
had a considerable edge over the other competitors there were different vendors like Canon
and HCL Toshiba available.
Also there were many manufactures of photocopiers and so the allegation of Xerox taking
advantage of a monopolistic condition did not baseless.

So, the verdict of the Commission was that that the informant was not able to place any
credible or cogent evidence or material to show or establish any infringement of Section 3 or 4
of the Competition Act,2002.
The allegations were therefore unsubstantiated and uncorroborated. Thus the commission was
of the view that no prima facie case was made out for making a reference to the Director
General for conducting investigation and the proceedings were therefore closed.

BIBLIOGRAPHY:
(Regulations of combination),available at www.legalserviceindia.com

(Provision of combinations), available at www.cci.gov.in

(Competition Act 2002), available at www.byjus.com
(Tax laws and rules), available at www.incometaxindia.gov.in
(Analysis of abuse of dominance under competition act 2002), available at www.taxguru.in

(Abuse of Dominance), available at www.oecd.org