CCI's Googly Or No Ball?
Welcome back to The Firm. Imagine if Securities Market Regulator SEBI – whose task it is to regulate stock exchanges, decided to run an exchange itself, even while actively discouraging all others! Or what if RBI got into the business of offering consumer loans! How can that be you wonder…well it’s the same if BCCI or the Board of Control of Cricket - a body that is supposed to regulate the game – decides to become a participant in it? Atleast that’s how the competition commission of India views it. Last week the CCI found BCCI guilty of abuse of dominant position and imposed a 52 crore rupee penalty on it. Payaswini Upadhyay asks experts if CCI bowled a Googly or a No-Ball?
That's a sound and visual that grips Indian audiences every summer! With over 160 million viewers in the last season, the Indian Premier League has become more than just sport and entertainment.
But the format of 20-20 cricket in India was born in 2007 with Indian Cricket League with Kapil Dev as its face. The league didn’t quite take off and finally withered in 2009. Cricket experts attributed ICL's failure to lack of support by the BCCI and the International Cricket Council or the ICC.
Now, if the competition regulator had existed in 2009, it could have been a fit case to examine violation of competition law. But what the ICC couldn’t do then, a cricket fan did in 2010.
Prompted by a complaint, the Competition Commission of India found strong grounds to investigate the conduct of the Board for Control of Cricket or BCCI. The allegations against BCCI pertained to irregularities in the grant of franchise rights for team ownership, media rights for coverage and sponsorship rights for the IPL. Last year, in February the Director General found the BCCI guilty of abuse of dominant position and this week, a majority of 5 CCI members concurred with it.
Partner, White & Case
"This is an issue which has been considered over many years by the EU courts and the current position that they adopt is where a sports governing body, such as the BCCI in this case, is conducting an economic activity, they it is case for the competition regulators or the courts to intervene and to exercise control; if necessary. So to that extent, CCI's reference to European Court of Justice's decision in the ELPA case is appropriate. There is another, more recent, example in the Mecca Medina case where the ECJ confirmed that sporting activities did fall within the ambit of EU law."
Court of Justice, Meca-Medina Case
Sport is subject to Community law in so far as it constitutes an “economic activity”
BCCI's case presented before the Commission a unique question i.e. what is the status of BCCI since it is not a statutory body? On one hand, BCCI’s role of setting the rules and regulations of cricket amounts to a regulatory activity but, one the other hand, when it comes to IPL, the Board assumes the role of an organizer. The distinction is important to ascertain the relevant market for the application of Competition Law. The Commission concluded that historical evolution of BCCI enabled it to attain a monopoly, implicit recognition by the government as the national association for cricket and its linkages with the ICC make it clear that BCCI is the regulator of cricket in India.
To ascertain the relevant market, the Commission examined two issues- one, what form of cricket should be examined- international cricket or private professional leagues and two, whether cricket is substitutable with other forms of sports and entertainment. On the first one, the Commission observed that while revenue generation was incidental in case of international events, it was a primary consideration in Private Professional Leagues. And since IPL was really about commercialization of the game, it was a distinct market from existing cricket events and so, concluded IPL to be the relevant market. The regulator then examined viewership of Set Max- the official broadcaster- before and after IPL. The CCI concluded that jump in TRPs of Set Max during IPL suggested that it’s unreasonable to believe that IPL is substitutable with other forms of entertainment such as films or TV shows.
Partner, White & Case
"You would have expected fairly detailed and probing analysis of the relevant market - a detailed review of the alternatives available, consumer preferences and why is it that IPL represents such a unique product. It seems that the CCI almost assumed that it was the case."
"Application of SNIPP test, for instance, would mean you would conduct a practical survey among the consumers and ask them if the prices of say Set Max channel is increased by ‘x%', would you still watch IPL matches or would you start watching something else. I think that's the manner in which SNIPP test is actually employed in practice. The problem with BCCI’s order is that the Competition Commission assumes that this is the end result of SNIPP which they are going to get without actually indulging in the experiment that should have preceded the analysis and the final outcome which they have mentioned in the BCCI’s order."
SNIPP: Small but significant and non-transitory increase in price
Former Chairman, CCI
"In India, with a population of 1.2bn people, you know how many people are fans of cricket, and how would you conduct SNIPP test over such a large population to find out if the price of cricket entry fee is increased from Rs 50 to Rs 55, whether they would switch to football or so on."
After concluding that IPL was the relevant market, CCI looked at BCCI dominance in it. The regulator distinguished the regulatory powers of BCCI from its commercial interests. Before IPL, BCCI was already a monopoly organizer of international events. But then, it extended its monopoly to the new genre of cricket by starting IPL. The regulator also noted that the right to sanction and approve cricket events vests with the BCCI – a factor which is critical to the success of any competing league. And it’s these reasons that make BCCI dominant in the professional league cricket market.
Former Chairman, CCI
"If you see, BCCI is a monopolist- there is no other cricket league, body in India which is controlling the sport in India. They are the ones who are sending their players; they are the ones who are the full time members of the ICC- which is the other body?"
A proposition that even the BCCI conceded to. But since dominance itself is not a violation of competition law, the regulator investigated for abuse. It noted that in its media rights agreement for IPL, BCCI had committed that it will not organize, sanction, recognize or support any competing league- a conduct that is clearly a misuse of regulatory powers. And so, the Commission found the BCCI guilty violation of Section 4(2)(c) of the Competition Law that prohibits practices resulting in denial of market access.
"This Section 4(2)(c) was actually amended in 2007- so its not mere denial of market access, there was phrase which was added- denial of market access in any manner whatsoever. Now the reason why this was added so that Sec 4(2)(c) goes closer to the idea of essential facilities doctrine whereby a dominant player is in control of, let say, for e.g.- railroads in India. Let’s say the railway sector is opened up and Indian Railways refuses to share those railroads with competitors- that would probably be the violation of essential facilities doctrine because the cost of replicating that infrastructure would be mind-boggling for the competitor. But for sharing that infrastructure, the competitor would not be able to compete at all- that’s the kind of test which is usually utilized for concluding whether there has been a violation of essential facilities doctrine or not."
For this abuse, the penalty for BCCI is 52 crore rupees. CCI has also banned BCCI from signing any contractual agreements that deny market access to potential competitors. It has also ordered the Board to set up internal controls to separate its regulatory powers and commercial activities. Both these conditions can have a significant impact on the cricket market in India. If this order sustains the appeal process, that is if BCCI files one, there is a good chance that IPL may soon have competition- bodes well both for the game and cricket fans.
In Mumbai, Payaswini Upadhyay