In its order of 8 February, 2013, the Competition Commission of India (CCI) has found the Board of Control of Cricket in India (BCCI) to be abusing its dominant position in contravention of Section 4(2)(c) of the Competition Act, 2002 (Competition Act) and imposed a penalty of approximately Rs. 52 crores.

Facts

BCCI is the regulator/custodian of the sport of cricket in India as well as an organizer of cricket events and associated activities such as media broadcasting. The informant in this case was a cricket fan who alleged certain irregularities in the organization of Indian Premier League (IPL), a professional league tournament conducted by BCCI. The alleged irregularities pertained to:

  1. Grant of franchise rights for team ownership;
  2. Grant of media rights for coverage of the league;
  3. Award of sponsorship rights and other local contracts related to organization of IPL.

Key Issues

The issues framed by the CCI were as follows:

  • Whether BCCI is an enterprise for the purpose of the Competition Act?
  • What is the de facto status of BCCI i.e. whether it is a regulator/custodian of cricket in India or an organizer of cricket events or both?
  • Whether actions of BCCI associated with organization of IPL contravene any of the provisions of the Competition Act, in particular Section 4 of the Competition Act?

Decision

The CCI traced the historical evolution of BCCI and its linkages with the International Cricket Council (ICC) to hold that the BCCI is a de facto regulator of the sport of cricket in India. At the same time, BCCI organized cricket events and was thus a commercial beneficiary of the sport. Given BCCI’s revenue-generating capacity by virtue of being an organizer, the CCI heId that BCCI was an ‘enterprise’ under the Competition Act.

In determining the relevant market, the CCI observed that from a demand perspective, cricket was not comparable to the general entertainment programs in terms of advertisement revenue and further, TRP ratings suggested that other sports were not in the same market as a cricket league event. The CCI observed that IPL - a new genre of cricket wherein revenue generation was a primary consideration – formed a distinct market from existing cricket events. Thus the CCI held the relevant market in the present case to be organization of private professional cricket leagues/events in India.

The CCI further held that BCCI was in a dominant position in the relevant market for the following reasons: (a) BCCI was a de facto regulator of cricket in India; (b) BCCI was empowered by ICC by-laws with the right to sanction/approve cricket events in India and consequently, its approval is required by any prospective private professional league; (c) BCCI was at a significant commercial advantage by owning infrastructure; (d) BCCI controlled a pool of cricket players under contract.

The CCI then examined whether BCCI had abused its dominant position in contravention of Section 4 of the Competition Act. The CCI declined to go into the issue of BCCI’s conduct vis-à-vis Indian Cricket League (ICL) as it related to the period prior to the notification of Sections 3 and 4 of the Competition Act. The CCI, however, examined whether BCCI had been anti-competitive in matters related to IPL. The CCI observed that there was an overlap in BCCI’s regulatory and commercial roles, with no clear demarcation between the two. The BCCI had used its regulatory power in the process of entering into commercial agreements. In this respect, the CCI examined Clause 9.1(c)(i) of the IPL media rights agreement whereby BCCI had agreed to not organize, sanction, recognize or support any other professional domestic T- 20 tournament which is competitive to the IPL. The CCI held that the above restriction was anti-competitive inasmuch as it resulted in denial of market access to any potential competitor. It was held that this was in violation of Section 4(2)(c) of the Competition Act. The CCI observed that BCCI had overreached its powers under ICC bye laws to sanction/approve cricket events to protect its market.

For the above contravention, the CCI imposed a penalty of Rs. 52.24 crores, being 6% of the average annual revenue of BCCI for the past three years.

The dissenting opinion written by a single member of the CCI states that the relevant market in the case was promotion and regulation of the sport of cricket in India. While observing that BCCI was in a dominant position in the above relevant market, the dissenting member held that Clause 9.1(c)(i) of the IPL media rights agreement was not anti-competitive as it was necessary to incorporate such a clause to attract investment since the success of the IPL format could not be predicted with precision at the initial stages. Further, the member observed that such a clause was in consonance with international practice because the ICC rules envisaged commercial partners to take steps to protect their investments.

Analysis

The CCI order is an important ruling inasmuch as it confirms that sports regulatory bodies exercising a commercial role are within the purview of competition laws. The order emphasizes the need for subjecting such regulatory power to restrictions, obligations and review.

However, the methodology and tests adopted by the CCI to determine relevant market, dominant position and abuse thereof are likely to be tested at the appellate level.

At the crux of the debate is the idea that the concept of ‘denial of market access’ under Section 4(2)(c) is linked to the essential facilities doctrine. The doctrine deals with situations where a dominant player is in control of certain essential facilities/infrastructure and refuses to share the same with competitors. This is because the cost of replication of the infrastructure would be prohibitive for the competitor.

The concept of denial of market access is unlikely to be maintainable in the context of any corporate entity generally entering into commercial arrangements through, for instance, media rights arrangement. However, where an entity exercises monopoly control over goods/services, it will be under an obligation to ensure that its commercial arrangements do not constitute abuse of dominant position through denial of market access.

In the present case, it appears that the fact that BCCI was the de facto monopolist regulator of cricket in India and it undertook a commercial venture in the form of IPL to the exclusion of other leagues constituted sufficient proof in the mind of CCI to hold that competition had been affected.