Advertising Agencies Guild vs DAVP & Ors. (Part 1)

Advertising Agencies Guild I nformant Vs. Directorate of Advertising and Visual Publicity & Anr. ... Opposite Parties

ORDERUNDERSEC TkD IM 261flOFTHE COMPETITION ACT20O2

The information was filed by Advertising Agencies Guild ('the informant') under section 19(1)(a) of the Competition Act, 2002 ('the Act') against the Directorate of Advertising and Visual Publicity (OP.1) and the Union of India, through Ministry of Information and Broadcasting (OP.2) alleging inter alia contravention of section 3 (1), section 4(2)(a)(ii) and section 4(2) of the Act. 2. The informant is an association of small and medium sized advertising agencies in the private sector, registered under the Societies Registration Act, 1860. According to the informant, the OP.1 is the nodal agency under OP.2, created to undertake advertising and publicity for various Ministries and Departments of the Government of India, making it the' largest buyer of advertisement space in the market across several formats. Because of the enormous budget to be spent on advertisements by OP.1 and OP.2, the print media provides special rates for advertising space to the OP.1.

3. According to information, the OP.i was the dominant and sole supplier of advertising services to the Government of India and was directly in competition with the infc.rmant association members. Further, the OP.2 issued a ci.;i whereby all Government Ministries/Departments/Attached & Subordinate Offices/Field Offices were asked to route their advertisements through the OP.1. Further, the circular is open ended and does not provide for any exit clause which may be used to exit the c -o'."'.r This circular, according to the informant, was an anti-competitive act and likely to cause appreciable adverse e?C oI capatton, Further, the circular not only limits the supply of advertising services to its customers but also forecloses competition between OP,1 and other private advertising agencies in violation of provisions of the Act.

4. The informant alleged that the OP.1 was providing services at prices much below the prices offered by any other competing advertising agency which amounted to predatory pricing and thus, contravened section 4 explanation (b) of the Act. The OP.1 was offering its customers a discount, which is actually the commission the other advertising agencies receive from the newspapers and magazines on booking advertisements with them. This commission is normally the sole revenue of advertising agencies unless they are entrusted the job of designing and conceptualizing the advertisement. Further, all advertising agencies are accredited with Indian Newspaper Society (INS) which does not allow the agencies from passing the commission they receive from publications to its clients. The OP.1 is not registered with INS and therefore, not bound by the restriction. This conduct of OP.1, according to the informant, amounted to imposing unfair and discriminatory price in sale of service and therefore, violative of section 4(2)(a)(ii) of the Act.

5. The informant submits that the OP.1 has a turnover of more than Rs. 700 crams making it a dominant player. The circular not only established the dominance of the OP.1 but also created entry barriers for new entrants and foreclosed the market for existing competitors in violation of section 4 of the Act.

6. While examining the contravention of section 4 of the Act, the dominance of the party has to be examined. The total advertising market is worth Rs. 8,000 crores and with a turnover of Rs. 700 crores, the share of OP.1 in advertisement market is not even 10%. Further, it is seen that the OP.1 is one of the many entities engaged in the act of providing advertising services and there exist more than 500 agencies in the country.

7. It may he noted that the informant's grievance is about Gv'ment's advertisements being routed through OP.1 and not about entire market. The advertising agencies about 500 in number are providing services to a large number of private companies and others. The Government advertising and the private advertising are

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;, htUtObi' ntei chanahi and Cannot be placed in separate compartments in exclusion Of each other. The relevant market in the present matter is purchase of advertising space and time in print and electronic media. OP.1 acts as a purchase department of OP.2 for purchase of advertising space and time. As a bulk purchaser, OP.2 has a right to have its own purchase department to save costs Saving costs on commission or striking a bargain is right of every bulk purchaser. NO issue of predatory pricing or abUse of dominance arises, if the purchase department of Government or an enterprise passes on the entire commission it gets on purchase of material, to the parent organisation.

8. In light of the above discussion, it is concluded that the G1r-.1 prima fade does not enjoy a position of strength, in the relevant market in India, enabling it to operate independent of the competitive forces prevailing in the relevant market; nor it affects its competitors or consumers or the relevant market in its favour. Hence, the dominance or-abuse thereof by OP.1 prima fade is not established.

9. It is a fit case for closure Linder section 26(2) of the Act and is hereby closed.

The Sc;cretary is directed to inform all concerned, accordingly.

Sd!-

Sd!- Member (C Member (GG)

Sd!- Sd!- Sd!- Member (AG) Member (T) Member (1))

Sd!- Chairperson

Certified TrUE

FAMESH Cl-AN Asstt. Director Commission of India titiOfl overflment of India New Delhi