CCI SEEKS PROBE INTO INTEL’S ALLEGED ABUSE OF DOMINANT POSITION

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The Competition Commission of India (hereinafter “CCI”) has ordered the Director General to conduct an investigation into allegations of abuse of dominant position and denial of market access to other market players against the IT giant Intel Corporation and its subsidiary Intel Technology India Private Limited operating in India. The order has been made under Section 19(1)(a) of the Competition Act, 2002 which provides for inquiry into certain agreements and dominant position of enterprise.

The probe was ordered pursuant to a complaint filed by Matrix Info Systems Pvt. Ltd. (hereinafter “Matrix”) who is the Informant in the matter. Matrix is an entity engaged in the business of importing and supplying various IT products based out of Delhi. Matrix’s allegations primarily comprised of the following contentions:

  1. Abuse of Dominant Position: Matrix contended that Intel has entered into an agreement with certain authorized distributors in India which gives them exclusive rights to sell Intel’s products in India.

Section 4(2) of the Competition Act, 2002 provides that there shall be an abuse of a dominant position if an enterprise or a group:

  • directly or indirectly imposes unfair or discriminatory conditions or prices in the purchase or sale of goods or services;
  • restricts or limits production of goods or services in the market;
  • restricts or limits technical or scientific development relating to goods or services to the prejudice of consumers;
  • indulges in practices resulting in a denial of market access;
  • makes the conclusion of contracts subject to acceptance by other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts; or
  • uses its dominance in one market to enter into or protect its position in other relevant markets (ie, leveraging).[1]

The CCI in its order stated that “On the issue of dominance, the Commission notes that in the case of ESYS Information Technologies, the Commission had found Intel to be in a dominant position in the relevant markets of desktop PCs in India as well as the relevant markets of Micro-processors of mobile portable PCs such as laptops, notebooks, net-books, etc. in India.” Thus, with Intel’s dominant position established, the DG’s probe would determine whether there had been an abuse of the same.

2. Country-specific Warranty Policy: In its submissions, Matrix alleged that an amendment effectuated by Intel in its warranty policy makes it India-specific and disables the customers to avail any after-sales services if they purchase the products from outside the country. It is pertinent to note this change in warranty policy has not been implemented in any other jurisdictions where Intel operates. Matrix contended that such a change restricts the choice of customers in matters of purchase. Also, it has an adverse impact on the business of independent sellers and parallel importers.

As per the new warranty policy, the customers would not be eligible to avail of warranty benefits on products purchased from parallel importers even when such imports had been made from Intel’s authorised distributors abroad. The CCI noted that the policy “seems to be aimed at disincentivising the purchase of Intel Micro-Processors from distributors other than Intel’s authorised distributors in India even though purchased from Intel’s authorised distributors abroad at cheaper rates. This has the effect of raising prices offered by Intel authorised distributors in India.”

Thus, the CCI termed the warranty policy as “prima facie unfair and discriminatory” and  observed in its order that the amended country-specific warranty policy has the potential to deny market access to parallel importers and resellers of Intel’s Boxed Microprocessors in India, who are competitors to Intel’s Indian authorized distributors.

Upon hearing the parties and on the basis of its prima facie opinion, the CCI directed the Director General to submit an investigation report in the matter within 150 days from the receipt of the order.

Report Submitted by-

Aditi Srivastava

[1] https://www.lexology.com/library/detail.aspx?g=80a5d11d-3d08-42f4-899f-a0df66994182