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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.
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