CCI fines BCCI Rs 522.4 mn for unfair practices in IPL
MUMBAI: The Competition Commission of India (CCI) has slapped a fine of Rs 522.4 million on the Board of Control for Cricket in India (BCCI) for abusing its dominant position as the cricket‘s defacto governing body in India while allocating franchise rights and international media and sponsorship rights for the Indian Premier League (IPL) in 2008.
The penalty amount has to be deposited within 90 days and directions contained in the CCI order also complied with within the same period.
The CCI had initiated the case on the basis of information filed by a Delhi resident Surinder Singh Barmi alleging irregularities in the grant of franchise rights, grant of media rights, award of sponsorship rights and other local contracts for the IPL.
The CCI had asked its Director General to investigate the allegations made by the complainant. Following a detailed investigation, the DG submitted the investigation report on 21 February last year.
The investigation report, the CCI said, was sent to both the parties seeking their responses on the same and full opportunity was given to both BCCI and the informant for perusal of all relevant records and making their submissions, both in writing and orally before the Commission.
The DG in his finding said that former IPL chairman Lalit Modi had used strong arm tactics to rig the bids for franchisee rights based on the show-cause notice issued by the BCCI to Modi after he was suspended from the cricket board on allegations of corruption.
The DG in his report also rejected BCCI‘s submissions that Modi acted arbitrarily while taking these decisions by saying that the decisions were taken with the consent and approval of IPL governing council.
The report also found the base price of $50 million for the sale of franchises was prohibitory for other players. The BCCI, however, had contended that the decision was based on commercial expedience. It further submitted that bids were allowed by various companies as a consortium.
On the issue of grant of media rights to World Sport Group India (WSGI) and Multi Screen Media (MSM) aka Sony Entertainment Television (Set), the DG report noted that the first meeting of tender committee was postponed from 11 am to 1 pm in order to facilitate and allow WSG and Sony to form a consortium.
The DG report also said though Sony and WSGI had submitted the bids separately, they were facilitated to form a consortium and bid was entertained in the capacity of consortium. The CCI also felt that the 10-year period for media rights is very long and creates foreclosure of market.
The DG also questioned the BCCI‘s decision to enter into a new agreement Sony within 11 days without any tender process and despite the fact that the agreement was terminated on very serious irremediable breaches. It also noted that a similar procedure was followed for granting new media rights and international broadcast rights for certain territories.
According to the DG, while the global title sponsorship rights were awarded to DLF for Rs 4.44 billion for five years through tender process the associate sponsorship rights were awarded to various companies for different period and amount without any tender process, based on discussions, negotiations and proposals.
The DG said that almost all the franchisees also admitted that BCCI has ‘facilitated‘ the award of contracts to various vendors which was contravention of law.
"Thus, owing to regulatory role, monopoly status, control over infrastructure, control over players, ability to control entry of other leagues, historical evidences, BCCI is concluded to be in a dominant position in the market for organizing private professional league cricket events in India," the CCI concluded.
The Commission also held that competition is essentially for benefits to be widespread and the game of cricket and the monetary benefits of playing professional league matches must be spread out and not concentrated in a few hands or in a few franchisees.
"In a country of large young population more private professional leagues opens up more avenues for youngsters to play cricket, to earn a livelihood and to find champions where least expected. BCCI in its dual role of custodian of cricket and organizer of events has on account of role overlap restricted competition and the benefits of competition. The objective of BCCI to promote and develop the game of cricket has been compromised," the Order read.
The CCI also issued the following directions to BCCI:
i)to cease and desist from any practice in future denying market access to potential competitors, including inclusion of similar clauses in any agreement in future;
ii)to cease and desist from using its regulatory powers in any way in the process of considering and deciding on any matters relating to its commercial activities. To ensure this, BCCI will set up an effective internal control system to its own satisfaction, in good faith and after due diligence;
iii)to delete the violative clause 9.1(c)(i) in the Media Rights Agreement;
iii)The Commission considers that the abuse by BCCI was of a grave nature and the quantum of penalty that needs to be levied should be commensurate with the gravity of the violation. The Commission has to keep in mind the nature of barriers created and whether such barriers can be surmounted by the competitors and the type of hindrances by the dominant enterprise against entry of competitors into the market. The Commission has also to keep in mind the economic power of enterprise, which is normally leveraged to create such barriers and the impact of these barriers on the consumers and on the other persons affected by such barriers.
The BCCI had contended that it is a ‘not-for profit‘ society for the promotion of the sport of cricket and its activities are outside the purview of the Competition Act. The Director General concluded in its report that though BCCI is a society and supposed to be a non-profit organization, its activities related to IPL where huge revenue is involved fall in the commercial sphere.