Competition Commission of India Case No. 16of2010

?JujV ,2012

In re: Ej

M/s Prints India .Infbrmant V.

1. Springer India Private Limited

2. Indian Academy of Sciences

3. Indian Association for the Cultivation of Science

4. Indian National Science Academy

.Opposite Party No.1

.Opposite Party No.2

.Opposite Party No.3

Opposite Party No.4

S. Operational Research Society of India . . .Opposite Party No.5

6. Department of Psychology University of Delhi

7. Indian Statistical Institute

8. Association of Food Scientists & Technologists (India)

9. Indira Gandhi Centre for Atomic Research

.Opposite Party No.6

.Opposite Party No.7

.Opposite Party No.8

.Opposite Party No.9

ORDER

Per Justice (Retd.) S.N. Dhingra:

The information under consider,á 19(1)(a) of the Competition Act, 2002 ('tIje informant.') against M/s Springer Indi

under section ts India ('the

vaMt.cnid ('the opposite

c

party No 1') and the above named Indian research institutions alleging inter alia contravention of the provisions of sections 3 and 4 of the Act.

2. The informant, a sole-proprietorship firm, claimed to be engaged in the business of distribution of Indian journals and being a reputed distributor in this field. It was stated in the information that the informant was also one of the most recognised and trusted name as an exporter of Indian publications and since 1966 it consistently worked in the value chain as the most reliable source of literary and research materials, emanating from India for clients across the globe. As per the information filed, the contribution of the informant had been acknowledged/ evidenced by the increasing list of libraries, research institutions, scholars, and individuals who continuously patronized and availed its services on an increasingly regular basis. It stated to owe its reputation, both in India and globally, to professionalism and total customer orientation.

3. The opposite party No. 1 is stated to be a part of M/s Springer Science + Business Media, a well-known/ leading global academic and scientific publisher which commenced operations in India in October 2002. The other opposite parties are various research institutions based in India.

4. As per the information filed, before the entering of the opposite party No. 1 in Indian market in October 2002 and before the opposite party No. 1 became the co-publisher of the journals and imposed its own new terms and conditions, the following were the terms and conditions at which the different institutes used to supply the journals:

(a) The informant would receive the journals from the Institutes at the INR price (in Indian Rupees);

(b) The Institutes would offer a discount of 10-25% to the informant on the INR price of the journals;

(c) The Institutes never asked for the end-user details from the informant. Even today, for the journals which are not with Springer, the publishers do not ask for the end-user details as the informationis cop drd commercially privileged and sensitive in the,6ade

( (d) The informant had to mak4 a ment to the

institutes for the journals or *

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(e) The informant acted as a major distributor for the journals of the institutes as it had a very good distribution network, painstakingly built-up over the years.

5. It is stated by the informant that after entering into the Indian market, the opposite party No. 1 entered into co-publishing agreements with the various Institutes, by virtue of which, the opposite party No. 1 got co-publishing rights and became the co-publisher with the various institutes for most of the reputed journals. As noted above, the informant had been engaged and dealing in these journals since last couple of decades. It has been stated that after the opposite party No. 1 got the co-publishing rights in the aforesaid journals, apart from several fold increasing the prices, the following new terms and conditions, which adversely affected the informant, were imposed on it:

(a) The informant now had to pay the USD list price for the journals which was considerably higher than the earlier INR price. Thus, the informant, based only in India and carrying on its business from India was required to pay the international price (USD price) for an Indian journal published and bought in India. The final payment had to be made by the informant in INR after conversion of the USD price into Indian Rupees at the prevailing market rate;

(b) The opposite party No. 1 reduced the offered discount to 5% on the list price of the journals as compared to 10-25% offered by the Institutes previously;

(c) The opposite party No. 1 insisted on being provided the complete details of the clients of informant (end-user details) as a pre-condition of sale of the journal. Such information considered commercially sensitive in the industry, was liable to be used by the opposite party to the detriment of the informant, as had been experienced by the informant. When the informant provided such details to the opposite party No. 1, the latter started dealing with the clients of the informant directly with the intention of driving the informant out of the

4 (d) When the informant did no rlcr end.-uer details to

the opposite party No. 1 at tj im 1 lac- th)the order for

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the journals, opposite party No. 1 refused to supply the journals to the informant; and

(e) The informant was required to make 100% advance payment for the order placed with the opposite party No. 1.

46. It is further stated by the informant that in view of the aforesaid alleged anti-competitive and abusive terms and conditions imposed by the opposite party No. 1 and given the immense market power acquired by the opposite party No. 1 through the vast network of co-publisher agreements, which the opposite party No. 1 has entered into, the informant had no option but to abide by the conditions imposed by the opposite party No. 1, to remain in business. However, when the informant noticed that it lost some of the clients whose details it had unwillingly given up to the opposite party No. 1, the informant was compelled to refuse/ decline thereafter to provide the client details to the opposite party No. 1. When the informant refused to divulge the details of its clients, the opposite party No. 1, who, having gained a stranglehold on the market, retaliated by refusing to supply the journals to the informant reiterating that it would supply the journals to the informant only if the Informant provide the complete details of informant's clients. Further, when the informant, subsequently, contacted a few Institutes for obtaining the direct supply of their journals, the institutes, in turn, referred the informant to contact the opposite party No. 1, saying that the terms of sale of journals are decided by the opposite party No. 1 and that the informant should directly contact opposite party No. 1 for any other clarification and information.

7. It has been stated that in view of the aforesaid alleged anti- competitive practices adopted by the opposite party No. 1, it has resulted into:

(a) The opposite party No. 1 has squeezed the informant's margins from a discount level of 10-25% on the list price given by the Institutes to a low of only 5% on the list price;

(b) The price has been suddenly ikdr4 while earlier INR price used to be marked on/(hè.1j lsbkr the institutes, now the international list 'riep i 611ar is marked on the journals; * 1f'

c)

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(c) While the Institutes never asked the complete details of the informant's clients (end-user details), the opposite party No. 1 refused to supply the journals unless the end-user details were provided to it for each and every title ordered. This was against prevailing business practice, and being commercially sensitive and confidential information, the aforesaid information was misused by the opposite 'party No. I whenever supplied to poach on the informant's clients, consequently, the informant declined to part with this information. The opposite party No. 1 retaliated by refusing to supply the journals;

(d) In view of the above, the clients of the informant had been cancelling their orders with the informant thereby causing financial loss to the informant, and the informant was losing its clients base. It has been stated that the total turnover of the informant was Rs. Five crores in the last financial year but after the opposite party No. 1 entered into the Indian market and signed the aforesaid co-publishing agreements, the turnover of the Informant has gone down to Rs. Four crores, thereby causing a loss of Rs. One crore in its turnover. It has been further stated that in view of the aforesaid acts on the part of the opposite party No. 1, the reputation and credibility of the informant have also suffered as it has not been able to serve its own clients.

8. The Commission after examining the information and the material on record had found that their existed a prima facie case to direct an investigation to be made into the matter and accordingly, the Commission directed the Director General ('the DG) to cause an investigation to be made into the matter and to submit report.

9. The DG, after completing investigation submitted its report. In its report, the DG has defined the relevant market in this case as "Scientific, Technical & Medical (STM) journals printed in English in India". It concluded that the opposite party No. 1 was a dominant player and had abused its dominant position and the same was prejudicial to the interest of consumers at)atge anNQrnpet1t1on in the relevant market in India However, with,'regard to the èleged violation of section 3 of the Act, the DG conclud a äs kbo violation of section 3 of the Act. The DG report ws irciSjd to 1Jie parties for

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their comments and responses, if any. Subsequently, detailed responses were filed and the matter was heard at length.

10. From the information and the report of the DG, the following points arise for determination:

(i) Whether the opposite parties contravened the provisions of section 3 of the Act?

(ii) Whether the opposite parties contravened the provisions of section 4 of the Act?

(iii) Relief?

Whether the opposite parties contravened the provisions of section 3 of the Act?

11. Section 3(1) of the Act mandates that no enterprise or association of enterprises or person or association of persons shall enter into any agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services, which causes or is likely to cause an appreciable adverse effect on competition within India. Section 3(3) of the Act inter alia states that any agreement entered into between enterprises or associations of enterprises or persons or association of persons or between any person and enterprise or practice carried on, or decision taken by, any association of enterprises or association of persons including cartels engaged in identical or similar trade or goods or provision of services which directly or indirectly determines purchase or sale prices or limits of controls production, supply markets, technical development, investment or provision of services etc. shall he presumed to have an appreciable adverse effect on competition.

12. The informant contended that the opposite party No. l's co- publishing agreements with the leading STM academic and research institutes in India amounted to violation of the prohibition under section 3(3) of the Act, as these were agreements between enterprises at the same level of the supply chain. It was so since the opposite party No. 1 was already publishing journals in the STM market which were being distributed in India as well ardi irtites also used to publish their respective journals in t€ir cific of specialisation in the STM market in India. While oipos artyi rio. 1 was a big commercial publisher producing a V - of journals on

cjy r /-

almost all the areas under the STM market as compared to the institutes which generally produced only one or two journals in their respective areas of specialisation. For competition law purposes, the opposite party No. 1 and the Institutes were direct competitors of each other and the co-publishing agreements were therefore agreements between rival publishers.

13. Per contra, the opposite party No. 1 has submitted that the co- publishing agreements cannot be considered as agreements between rival producers so as to attract Section 3 of the Act.

14. Before dilating further on this point, it may be pointed out that the DG did not find any contravention of the provisions of section 3 of the Act by the opposite parties.

15. For attracting the provisions of section 3(3) of the Act, there must be an agreement between the person/ enterprises engaged in similar business or provision of services. In the instant case, while the opposite party No. 1 is a publisher, engaged in economic activity and thereby coming within the ambit of 'enterprise' as defined under section 2(h) of the Act. The institutes i.e. the other opposite parties are not the enterprises engaged in the business of publication in the same sense as the opposite party No. 1. Publishing of its own journal by a research institute would not make an institute an enterprise engaged in the business of publishing STM journals. The provisions of section 3 of the Act were therefore not attracted in the present case and accordingly, I agree with the findings of the DG that no contravention of the provisions of section 3 of the Act was made out.

Whether the opposite parties contravened the provisions of section 4 of t1- It't)

16. Section 4(1) of the Act mandates that no enterprise or group shall abuse its dominant position. The term 'dominant position' has been defined in explanation (a) to section 4 of the Act as a position of strength, enjoyed by an enterprise, in the relevant market, in India, which enables it to operate independently of competitive forces prevailing in the relevant market; or competitors or consumers or the relevant market in its fai,1:T.\

/:4 \ 17. Thus, before examining the domnait i$s of th enterprise or group, it would be necessary to determiñè the ntJn ket.

18. The term 'relevant market' has been defined in section 2(r) of the Act as the market which may be determined by the Commission with reference to the relevant product market or the relevant geographic market or with reference to both the markets. Further, the term 'relevant geographic market' has been defined in section 2(s) of the Act as a market comprising the area in which the conditions of competition for supply of goods or ptovision of services or demand of goods or services are distinctly homogenous and can be distinguished from the conditions prevailing in the neighbouring areas. The term 'relevant product market' has been defined in section 2(t) of the Act as a market comprising all those products or services which are regarded as interchangeable or substitutable by the consumer, by reason of characteristics of the products or services, their prices and intended use.

19. It may also be pointed out that by virtue of the provisions contained in section 19(6) of the Act while determining the 'relevant geographic market', the Commission shall have due regard to all or any of the following factors, namely:

(a) regulatory trade barriers;

(b) local specification requirements;

(c) national procurement policies;

(d) adequate distribution facilities;

(e) transport costs;

(f) language;

(g) consumer preferences;

(h) need for secure or regular supplies or rapid after-sales services.

20. Similarly, by virtue of the provisions of the Act while determining the 'rele, Commission shall have due regard to all 4. namely: I

(a) physical characteristics or end C

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contained in section 19(7) ti-iiiq market', the

f1wing factors,

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(b) price of goods or service;

(c) consumer preferences;

(d) exclusion of in-house production;

existence of specialised producers;

(f) classification of industrial products.

21. In the instant case, the relevant segment of market is academic publishing as the journals in question are meant for scientific researchers and academics and the main customers of the journals are libraries, research institutes and research scholars. In short, for the purposes of the present case, concerning journals brought out by reputed scientific institutes of India, the most relevant view in tune with the mandate of section 19(7) of the Act would be to define relevant product market as Scientific, Technical and Medical Publishing (STM) in English language which is considered to be a group of similar subjects under the academic publishing industry and promises supply-side substitutability and to an extent even demand-side substitutability from the perspective of libraries or institutional subscribers that have a requirement for a bouquet or portfolio of journals in the said category.

22. It is to be noted that the underlying reason for limiting the product market to the STM journals brought out in the English language is that the advanced level academic and research work in India in the field of science, technology and medicine is carried on almost exclusively in English whereas advance study in social sciences and other fields is carried in all Indian languages and research works are also published in Indian languages.

23. The relevant market in the instant case may be regarded as the global publishing in the English language of academic journals in the fields of science, technology and medicine (STM). However, once the relevant market is so determined, the dominance of the enterprise in India may be examined.

\- 24. As noted above, 'dominant positiØ fined in the Act as a position of strength, enjoyed by arf eis il\ the relevant market, in India, which enables it *t4 0 e thpendently of

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competitive forces prevailing in the relevant market; or affect its competitors or consumers or the relevant market in its favour.

25. It may be noted that by virtue of the provisions contained in section 19(4) of the Act while inquiring whether an enterprise enjoys a dominant position or not under section 4, the Commission shall have due regard to all or nv of the following factors, namely:

(a) market share of the enterprise;

(b) size and resources of the enterprise;

(c) size and importance of the competitors;

(d) economic power of the enterprise including commercial advantages over competitors;

(e) vertical integration of the enterprises or sale or service network of such enterprises;

(f) dependence of consumers on the enterprise;

(g) monopoly or dominant position whether acquired as a result of any statute or by virtue of being a Government company or a public sector undertaking or otherwise;

(h) entry barriers including barriers such as regulatory barriers, financial risk, high capital cost of entry, marketing entry barriers, technical entry barriers, economies of scale, high cost of substitutable goods or service for consumers;

(i) countervailing buying power;

(j) market structure and size of market;

(k) social obligations and social costs;

(1) relative advantage, by way of the contribution to the economic development, by the enterprise-njing a dominant position having or likely to have/an ap1e adverse effect on competition; 7

(m) Any other factor which! C nssir nay consider relevant for the inquiry.

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26. In the light of the aforesaid provisions, the issue of dominance of the opposite party No.1 in the relevant market, as determined above, may be examined.

27. From the website of the opposite party. No.1, it may be noted that the opposite party No. I has claimed to the following effect:

Springer publishes over 1,700 journals and more than 5,500 new books every year making it the second-largest publisher of journals in the science, technology, and medicine (STM) sector and the largest publisher of STM books with largest STM eBook collection worldwide. We leverage our global presence to satisfy global and local information needs. The breadth of our product range, the widest in academic publishing, is our strength both globally and especially in India.

28. From the reports of the DG, it appears that the opposite party No. 1 has around 60 publishing houses in about 20 countries in Europe, Asia and the USA. The consolidated turnover of Springer Group in 2008 was Euro 892 million and in 2007 it was Euro 907 million. It has more than 5,000 employees around the world. Its eBook Collection includes more than 34,000 titles available online at www.springerlink.com. Apart from around 1,700 journals and more than 5,500 new book titles published every year in the STM sector, opposite party No. 1 has a backlist of more than 45,000 titles. The business of the opposite party No. 1 encompasses six publishing fields viz, science, technology, medicine, architecture, business and transport.

29. In this connection, it may be noted that the opposite party No. 1 has relied on the supplementary report of the DG to contend that it is not a dominant player. It is noteworthy to mention that the DG in its supplementary report has provided world-wide market share based on revenues of the top five academic publishers for the year 2009, which are as follows: Reed Elsevier (15.4%), Wolters Kluwer (5.15%), Thompson (5.14%), Springer (4.65%) and John Wiley & Sons (4.44%). However, the aforesaid data are of little helflthe opposite party No.1 as well as to the Commission as once th MI ket is defined as 'STM journals in English in India', it e fu i\ise to look into the worldwide data in order to ascetaij-i omiice within the relevant market. For the purpos* f Ø,• cae,) the relevant

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consideration would be the market share of different enterprises within - the relevant market in India and not worldwide.

30. The DG report suggests that out of the 150 STM journals in India, 47 are distributed by the opposite party No. 1 which translates into 31% of the total STM journals in India. It has further opined that the total circulation of aforesaid 150 journals is about 55,000 out of which the opposite party No. 1 is circulating around 35,000 which amount to 64% of the total circulation of the STM journals in India and reflects the strength and extent of presence of the opposite party No.1 in the relevant market.

31. As discussed hereinbefore, the opposite party No. 1 has entered into co-publishing agreements with more than 40 institutes and societies which take out the oldest and most reputed journals in India in the STM publishing market in their respective disciplines within the STM group. As a consequence of the aforesaid co-publishing agreements, the opposite party No. 1 has an extremely powerful portfolio in STM market in India. If one considers the more select group of prestigious STM journals brought out by the family of highly reputed and long established academic and research institutes in India in the STM field, it seems that the opposite party No. 1 has cornered the co-publishing rights of most of the prestigious STM journals to the exclusion of other publishers, especially the smaller publishers. As stated, the opposite party No. 1 has already has a strong position in the global market in the STM publishing.

32. It is to be further noted that by acquiring the co-publishing rights over the most reputed Indian STM journals, the opposite party No. 1 has got a very strong position in comparison with the buying libraries of STM journals, thereby leading to a total asymmetry of market power between the buyer and the seller, leaving the buyers with extremely weak countervailing power.

33. In the STM publishing industry, a crucial determinant of market power of a publisher is its portfolio of journals. A particular publisher's portfolio of journals might be such that for a buying library it is an indispensable supplier, and the library has no option except to deal with the publisher, which in the instant1,4 1' ipposite party No 1.1n this connection, the following ,6bsetio- s; the European Commission (Para 47, Case No bMP/37-Cai'y.dover/Cinven/ Bertelsmann-Springer, Date: 29/07/23) mj;bç nid:

The 'must have' characteristic of certain journals may also be behind the history of significant price increases of academic journals, in particular STM journals, in the past. These price increases, and the high margins enjoyed by publishers, may in particular result from the market power which publisher enjoys on the basis of the strength of their jr?gjoqfpos.

(emphasis underlined)

34. In this context, it is also to be understood that reputed and highly professional STM journals do not face direct and substantial competition from the less reputed and less professional STM journals. Thus if an enterprise controls the bulk of the reputed STM journals in a market, this gives it a unique market power. For direct customers such as the buying libraries and institutes and the end consumers that is the individual researchers and scientists, the real academic and research value lies in the reading of such reputed and respected journals.

35. The STM publishing industry has high entry barriers, because of several important requirements for success in the market. The first-copy cost of a journal is really high as it includes several high-cost activities like recruiting writers, judging, reviewing, editing, copy editing and typesetting articles. Other structural barriers to entry in the market include - most importantly - the journal's reputation, which is built through commitment to rigorous academic quality.

36. Further, it is to be noted that an important factor is to get a highly renowned academic for peer review, thereby maintaining the quality, reputation and attractiveness of the journal. Other barriers are network effects, coordination, the existing stock of journals held by incumbents, and the high switching costs for libraries. In the instant case, the opposite party No. 1 has already acquired the co-publishing rights for virtually all the respected STM journals brought out in India, it has effectively foreclosed the market for other competitors by further raising the entry barriers.

37. The market for academic publishing exhibits some specific features. A main feature is the 'must have' characteristic of certain journals. Such journals have so called I e l contentbecause they are considered as indispensable by, stome-di\to a, particular reputation or specific focus of the subjedt. Ui siies'..w}iich are active in a certain field, depend on the in form!ati n p idedii Isuch journals

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and cannot, afford to cancel subscriptions without their researchers risking to lose access to the latest developments in the academic research in that field. Among those 'must have' journals there are multidisciplinary journals, the most well-known of which are 'Nature' and 'Science' as well as more specialised journals in an individual discipline. These journals are the ones, which are most read by researchers active in a certain field and in which those researcher's also aiin to publish since publications of articles in such journals will be the most valuable for their career.

38. The Commission is concerned with the geographic market as India, in the field of STM journals. It is quite clear that for those who are interested in the developments and outputs of the scientific community of India, the STM journals in question in this case are collectively an indispensable material, and adds to their "must have characteristic", and therefore to the dependence of the libraries and individual readers on these journals, and consequently their dependence on Springer. In view of the aforesaid position, it becomes quite clear that the opposite party No. 1 enjoys immense market power, and creates a virtual monopoly in these titles which are almost non-substitutable.

39. Further, one cannot lose sight of the fact that these reputed journals were being published since several decades by the leading STM institutions of India. The buying libraries and institutions which subscribed to these journals have their collections for the last several decades / years, and their member researchers and other academics have an expectation to find these journals at the particular library, both current and past issues thereof. The libraries cannot therefore suddenly decide to exit the subscription to these journals, and this constitutes an even greater degree of dependence on these journals.

40. As discussed hereinbefore, in the area of STM publishing, it is quite evident that the opposite party No. 1 enjoys one of the most powerful positions in the world. It is one of the leading global publishers of STM journals, having a global turnover of Euro 892 Million (in 2008) (as per Springer's Annual Report, 2008) with access to immense resources. On the other hand the binJraries have meagre resources and rely mostly on the from government or governmental sources, whiUl arq, f 7 àquate for their vast demands. *

41. In view of the aforesaid discussion, it is quite clear that the aforesaid indicators of market power correspond to several of the factors for determining dominance listed in section 19(4) of the Act e.g. entry barriers, dependence of consumers on the enterprise, size and resources of the enterprise and countervailing buying power.

42. It is to be further noted that while Springer enjoys a dominant position with respect to the buying libraries, its dominance is even more pronounced with respect to the end consumer, the individual reader, scientist, academic or student. For these individuals, the product differentiation is even sharper, as no one journal is a complete substitute for another. Thus the journals that are controlled by Springer have for the individual reader a completely unique quality, and a 'must have', non-substitutable characteristic. The opposite party No. 1 further has the strength to increase the prices of the journals several fold, which in fact it has done, after entering into co-publishing agreements with the Institutes, which clearly demonstrate its ability to operate in the STM market independently of the competitive forces.

Abuse of Dominance

43. Once the dominance of the opposite party No. 1 in the relevant market is established, the next question that arises for consideration is whether it has abused its dominant position by indulging in any of the acts/conduct specified in section 4(2) of the Act. The provisions of section 4(2) of the Act provide that there shall be an abuse of dominant position if an enterprise or a group, directly or indirectly, imposes unfair or discriminatory condition in purchase or sale of goods or service or imposes unfair or discriminatory price in purchase or sale (including predatory price) of goods or service. It further provides that there shall an abuse of dominant position if an enterprise or group limits or restricts production of goods or provision of services or market therefor or if it limits or restricts technical or scientific development relating to goods or services to the prejudice of consumers. Practices resulting in denial of market access; making conclusion of contracts subject to acceptance by other parties of supplementary obligations and using dominant position in one relevant market to enter into or protect other relevant market are also considered to be abusive for the purposes of section 4 of the Act.

Jf CO 7j?

44. In the light of the above provisi s'cf\the opposite party No.1 may now be examined to same have contravened the provisions of section 4 Mte i3the c/ conduct of

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the opposite party No.1 for the present purposes may be looked into in the following manner:

Increase in prices of journals

45.1 It was alleged by the informant that the opposite party No.1 has abused its dominant position by directly imposing unfair/excessive prices on the consumers in the sale of journals and thereby contravened the provisions of section 4(2)(a)(ii) of the Act

45.2 In this connection, it may be noted that the DG prepared a comparative chart showing trend in prices in the years 2010 and 2011 at page 36 of the main report (Vol. 1). From a bare perusal thereof, it is evident that the prices of journals increased many fold in a short span of time after the opposite party No.1 acquired co-publishing rights of the journals. It may also be noted therefrom that the prices for the year 2011 are substantially higher than that of 2010.

45.3 The aforesaid price increase was sought to be justified by the opposite party No.1 by contending that on account of provision of enhance services like e-platform 'Springerlink' and more exposure of Indian scientific journals to international scientific community.

45.4 The price rise in itself may not be considered as an abusive conduct by a dominant enterprise. In fact, the increase in profit margin may act as an incentive to bring in innovation and enhancement in quality of services. This may be true in a market where level of competition is high as a healthy competition in the market itself would take care of excessive pricing.

45.5 However, in the present case, as noted above, the opposite party No.1 had acquired a dominant position in the relevant market by entering into exclusive co-publishing agreements with various institutes. Being the dominant enterprise, the consumers are heavily dependent upon the opposite party No.1 due to must have character of the journals. Coupled with the high entry barriers for new entrants, the consumers have very little to choose from the market. Accordingly, any price increase of journals by the opposite pa.r . 1 is a helplessness of the consumers and except boycott I asrbo lternative. It is contended by the opposite party No.,f that s to the end consumers of printed version of journ1s freaces' t the e-version thereof which it co-publishes.

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45.6 The plea is thoroughly misconceived. As noted by the DG, from the statement of CEO of the company that it provides e-version free only to the subscribers of the print version and not vice versa. As rightly noted by the DG, apart from adding limited value to the readers of print version, it allows the company to remain competitive in the world market for which the charges are being recovered from the consumers. Moreover, e-ersion is a separate product altogether and canr'ot be imposed on customer. A customer should be at liberty to buy e-version independently.

45.7 It may also be noted that a consumer has not been given any choice to avail or not to avail of the said value added services. It can be noticed that being dependent upon the opposite party No. 1, the consumers are compelled to avail these services and to make payment for the same which they may not require.

45.8 Thus, by linking the prices of value added services with the basic prices of the product, it is evident that the consumers have been subjected to unfair prices. Resultantly, it is held that the opposite party No.1 is found to have abused its dominant position by imposing unfair price in sale of its goods in contravention of the provision of section 4(1) read with sub-section (2)(a)(ii) of section 4 of the Act.

Imposing unfair condition in sale! End User Details

45.9 It was alleged by the informant that the opposite party No.1 insists for the complete details of the clients of the informant (end-user details) as a pre-condition of sale of the journal. Such information is considered commercially sensitive in the industry, as it is liable to be used by another party to the detriment of the informant, as has been experienced by the informant. When the informant provided such details to the opposite party No. 1, the latter started dealing with the clients of the informant directly with the intention of driving the informant out of the market.

45.10 To counter the allegation, it has been contended by the opposite party No.1 that all journal subscriptions offered by the opposite party No.1 are for a combined electronic and print version of the journal because the electronic version is inheren;1y.pa of reaching more persons among the target audience and )el' bIing the journal articles available in searchable form, tleyca rioe asily accessed by those interested in precisely those aiti1esè en&iJser details are

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required to guard against misuse of the electronic version. This is consistent with the practices of other international publishers.

45.11 Next, it is argued by the opposite party No. 1 that the real reason why the informant does not wish to provide end-user details to opposite party No.1 is because this would prevent its own malpractice of procuring copies of journals in India at INR rates and selling them at USD prices abroad.

45.12 Further, it is contended by the opposite party that the informant has not set out a single case where it has provided end-user details to the opposite party No.1 or where the opposite party No.1 has 'poached any of its clients. It is urged that the opposite party No.1 places enormous value on its relationship with its distributors. Legitimate distributors have never had any objection to providing end-user details because they recognise its importance as a safeguard against misuse of the electronic version.

45.13 It is not disputed by the opposite party No.1 that end-user information is sought by it from the distributors. From perusal of co-publishing agreements signed between the opposite party No.1 and societies publishing the journals, it is manifest that the opposite party No. 1 requires subscription lists from the societies and has a right to use such data to send information regarding its services and products.

45.14 In this connection, a reference may be made to the draft Service Level Agreement which was proposed by the opposite party No.1 to the informant. Furnishing of end-user addressed by the informant has been kept as an obligatory clause in the said agreement. Further, standard commission on subscription has been stated to be 5% with respect to print/ electronic journal subscriptions with end-user address information and 4% Commission has been offered for subscription without end-user addresses.

45.15 As noted by the DG, the opposite party No. lsubmitted that end consumer data is required for providing the subscribers of print version of its journals with free access to the electronic version and the same is possible only with end-user information and their IP addresses.

45.16 The justification given by the end user information appears to be access to electronic version may be

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1 for requiring ustainable as

the opposite

party No.1 to the end consumers by providing details of the procedure - for availing the facility alongwith the product itself.

45.17 One cannot be oblivious to the fact that the informant has categorically given names of several publishers who publish STM journals in India and do not ask for the end user information. The informant has also shown that after supplying the end user data of its customers, the order for subscription to it decreased considerably because the opposite party No.1 used the data for supply of journals directly to its customers. In any event, the misuse of commercially sensitive information in terms of details of end consumers cannot be ruled out.

45.18 In view of the above, it is held that requirement to seek end user data from the distributors is an unfair condition and therefore, the same is in contravention of provisions of section 4(1) read with section 4(2)(a)(i) of the Act. It is held accordingly.

45.19 Besides, the stoppage of supplies of journals to the distributors for want of end user data from them would also violate the provisions of section 4(1) read with section 4(2)(c) of the Act as it would be a practice resulting in denial of market access to the distributors.

45.20 The imposition of the obligation by opposite party No.1 to require the end user data upon a party with whom it is dealing on a principal to principal basis would also be in violation of section 4(2)(d) of the Act. The conclusion of contracts being made contingent upon acceptance by other parties of the supplementary obligation of supplying the end user details, which by their nature or according to commercial usage have no connection with the subject of such contract, attracts the rigours of section 4 of the Act.

Pricing in Dollars! Margin Squeeze

45.21 It has been further alleged by the informant that after the opposite party No. 1 got the co-publishing rights in the aforesaid journals, apart from several fold increasing the prices, the informant now has to pay the USD list price fr rnals which are considerably higher than the earlier INR,rice f informant and customers based in India and either carryingo .theiLb\isinesses from India or needing journal in their own coimtr reijed to pay the international price (USD price) for an j ublished and

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a

bought in India. The purchase price has to be made by the customer in INR after conversion of the USD price of Indian institutes journals into Indian Rupees at the prevailing market rate.

45.22 It may be noted that by requiring the informant and others to pay the price for the Indian institutional journals in INR after conversion of the USD price at the prevailing market rate, on acquiring the co-publishing rights by the opposite party No.1 in the journals, the prices of the journals have been left to the vagaries of the currency market and fluctuations therein despite the fact that printing and publishing of these journals are done in India. Recently, the rupee has lost significantly against USD making the payments in rupee a burdensome proposition for customers to the benefit of the opposite party No. 1.

45.23 In view of the above, it is held that the aforesaid condition put by the opposite party No.1 was an unfair condition in sale of goods in contravention of the provisions of section 4(1) read with section 4(2)(a)(i) of the Act.

45.24 It is also alleged by the informant that the opposite party No. 1 has reduced the offered discount to 5% on the list price of the journals as compared to 10-25% offered by the institutes previously.

45.25 It may be noticed from the DG report that margins available to the distributors/ subscription agents before acquiring co-publishing rights by the opposite party No.1 were in the range of 10-30%. From perusal of circular from Indian Statistical Institute placed at page No. 115 of the information, it is revealed that the institute was offering 10 to 20% discount to the distributors for the product which institute was directly supplying! selling. Similarly, it is noticed from the copy of subscription rates 2010 issued by Indian Academy of Sciences placed at page No. 116 of the information that the academy was still giving 10% agency discount to distributors for the product which the academy was marketing. The opposite party No.1 has reduced the offer discount to the distributors to the level of 5%.

45.26 It may be noted that reduction of paigin—tq such a low level of 5% would make business unviable for tibitoiesulting in their being driven out of the market and thm 1i14 &t\avention of the provisions of section 4(1) read with sectio 4('(ai) of;:tè Act.

C *j

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Order under section 27 of the Act

46. In view of the aforesaid discussion, I hold that the opposite party No.1 had abused its dominance position in the relevant market of public distribution of STM journals in India. In view of section 27 of the Act, the opposite party is directed to discontinue the abuses and following di.rectior.s 3re given to it:

(j) To reduce of prices of the STM journals by at least 25% (ii) To give best price of the Indian journals in Indian rupees

instead of dollars; (iii) Not to ask the informant or any other distributor the details of

end-users while supplying the journals. (iv) To give minimum 10% as agency discount or distributor

discount to the informant and other distributors.

47. The opposite party No.1 is also to suffer a penalty under section 27 of the Act. Looking at the turnover of the opposite party No.1 from its sales in India being Rs. 20,36, 81,092 / - for the financial year ending March, 2011, I consider that a penalty of Rs. 2 crore would be just and appropriate. The opposite party No. 1 is directed to deposit the penalty within 60 days with the Commission.

48. The Secretary is directed to inform all concerned accordingly.

Sd!- Member (D)

/

Certified T 'o -,/

Al P. GAHLAUT SSISTANT DIRECTOR

etition Commission of India New Delhi