Manufacturer restricting market to its authorised sellers alone does not amounts to abuse of dominance #indianlaws

Offline and online markets differ in terms of discounts and shopping experience and buyers weigh the options available in both markets and decides accordingly. If the price in the online market increase significantly, then the consumer is likely to shift towards the offline market and vice versa.

The present information was filed against Snapdeal.com and SanDisk Corporation alleging contravention of Sections 3 and 4 of the Competition Act, 2002 (Act). Snapdeal.com (OP 1) is an online portal (marketplace) wherein different sellers sell their wares by showcasing their products on the portal and the web portal in return charges commission depending upon the product category. It has tie-up with cargo/ logistic companies and they pick up the ordered consignment from the seller’s place and deliver it at the buyer’s address for a fee and the amount charged is credited to the sellers account depending on the payment cycle. SanDisk (OP 2) is manufacturer, distributor and seller of non-volatile memory drives or flash drive and storages devices of different capacities, SD cards, micro SD cards, solid state drives etc.

Informant pursuant to an online agreement with OP 1was started selling various products like pen drives, hard disks, laptops etc through the web portal. Sometime later, OP 1 stopped selling products of Informant and removed its product from display stating that as per the list provided by OP 2, only its authorized online channel partners could sell SanDisk items through its web portal.

The Informant alleged OP 1 and OP 2 of acting in agreement to compel the Informant to become the authorized dealer of OP 2 contrary to terms of agreement between Informant and OP1 and in the process both OPs in collusion with each other are trying to stop the Informant from offering competitive pricing which was much below than the other sellers of the same product. OP 2 was also alleged of monopolising the market and influencing others to sell the products offered only by its authorized dealers. The letter circulated in this regard by OP 2 in the market was alleged as restricting the market to its authorized sellers alone however, the list of sellers of SanDisk products on the OP 1’s website indicated that OP 1 has allowed numerous sellers who infact were not the authorized dealers.
The Commission observed that both offline and online markets differ in terms of discounts and shopping experience and buyers weigh the options available in both markets and decides accordingly. If the price in the online market increase significantly, then the consumer is likely to shift towards the offline market and vice versa. Therefore, these two markets are different channels of distribution of the same product and are not two different relevant markets. It further observed that in the storage devices market there are other players as well offering product with different capacities which indicates that the market is not concentrated. SanDisk apparently was the market leader in the relevant market and also a market mover in terms of patented technologies, wide range of products and good brand image in the relevant market.

The insistence by SanDisk that the storage devices sold through the online portals should be bought from its authorised distributors by itself was held to be not abusive as it was within its rights to protect the sanctity of its distribution channel. In a quality-driven market, brand image and goodwill are important concerns and it appears a prudent business policy that sale of products emanating from unknown/ unverified/ unauthorised sources are not encouraged/allowed. The conduct of SanDisk in issuing a circular asking for purchase through authorized dealer is a part of normal business practice and not abuse of dominance.

OP 1 on the other hand is not engaged in the purchase or sale of storage devices, but a web portal that enables those sellers who stock storage devices to sell such devices through its web portal for a commission. There are number of players present in the e-commerce market offering special discounts and deals. SnapDeal.com prima facie cannot be termed as a dominant player.

It was held that the conduct of SanDisk in restricting the market to its authorised sellers alone does not amounts to violation of Section 3 of the Act.  

[Ashish Ahuja vs. Snapdeal.com and Anr.]
(CCI, 19.05.2014)