Competition Law - Whether spares and after sales services can be treated as relevant separate market, when consumers are able to determine total life cycle cost of product and OEMs are not charging exorbitant prices for spare parts: NO is answer
BY TIOL News Service
NEW DELHI, DEC 03, 2015: THE issue is: Whether spares and after sales services can be treated as relevant separate market, when the consumers are able to determine the total life cycle cost of the product and the OEMs are not charging exorbitant prices for spare parts. NO is the answer.
Facts of the case
The Trend Electronics ('Informant') is a partnership firm carrying on the business of selling computers, laptops and providing laptops, computers, servers and other IT equipments on hire/rental basis. Hewlett Packard India Sales Pvt. Ltd. ('Opposite Party' / ‘OP') was sales division of Hewlett Packard Company ('HP'), an American multinational corporation. It sells laptops, desktops, tablets, printers, monitors, ink and toners etc. It operates/authorises/regulates or otherwise controls the operations of various authorised service centres (ASC), which are in the business of replacement of parts for laptops besides rendering after sale services to laptops, computers etc. The information was filed by Informant against OP, alleging, contravention of the provisions of Section 4 of the Act. In relevant period certain laptops were purchased by the Informant from the authorized sellers of OP at certain consideration. The price of laptop factored the price of repair, maintenance and after sale services for a period of one year from its purchase subject to terms and conditions. Within a year of purchase, the Informant noticed few defects in the laptops. The Informant sent several emails to the OP informing the defects. Pursuant to the same, OP had provided certain replacements. Subsequently, OP via email informed that the case of the Informant was closed. In response, the Informant, sent email that the case could not be closed as replacement of balance laptops was yet to be received. Thereafter, the Informant also sent legal notices to the OP to pay damages for which allegedly OP did not take any action at its end.
The Informant alleged that genuine spare parts of laptops manufactured by OP were sold only through its ASC and the replacement parts were not available in open market. As a result, the independent repairers were denied market access to undertake repair, maintenance and after sale services in respect of laptops manufactured by OP. It was also submitted that the price of laptops included the cost of repair, maintenance and after sale services during warranty period. Therefore, the consumer had no other option but to approach the OP for repair & maintenance of its laptops, during the warranty period.
Decision
No case of contravention of Section 4 of the Act and the matter was ordered to be closed as per Section 26(2) of the Act.
Reasoning
1. For the purposes of examining case under the provisions of Section 4 of the Act, it is necessary to determine the relevant market and ascertain whether the OP enjoys a strength required to operate independent of the market forces in the same market. Although the Informant has submitted that the relevant market is the secondary market for repair, maintenance and after-sale services, no justification was provided for considering the secondary market as a separate and distinct relevant market.
2. The laptops purchased by the Informant were in the rage of INR 25000 to 35000/-. Considering the price of laptops and options available to resell used laptops, it did not appear to be a case that customers cannot switch to substitutable products without incurring substantial switching costs.
3. From the information available/accessible in public domain, it appears that a consumer purchasing laptop could reasonably ascertain the total cost that he is likely to incur during the life cycle of the laptop. Further, factors such as high rate of obsoletion and low-life span of laptops suggest that any unfair business strategy by the OEMs, in the after-sales services, likely to affect the sales of primary product. In the absence of factors/evidence such as (a) consumer being not able to ascertain the life time cost of the product at the time of its purchase and (b) the manufacturer of the primary product being able to substantially hike up the price of the spare parts in-spite of reputational concerns, it would not be appropriate to consider the secondary market for spares and after-sales services for laptops as a separate relevant market. As noted above, the attributes required to view the secondary market as a separate relevant market do not exist in the present case. Rather, the relevant market appears to a unified system market comprising laptops and its spares and after-sale services. Considering that the price and availability of laptops, spares and after-sale services are similar across India, the relevant geographic market appears to the entire territory of India.
4. Although HP seems to one of the leading players, other credible OEMs such as Lenovo, Dell, Sony, Acer etc. also supply laptops in India. With presence of other prominent brands, it appears that consumers in India have adequate choice and the OP does not enjoy a position of strength required to operate independent of market forces. Accordingly, OP did not appear to hold dominant position in the unified relevant market.
(See 2015-TIOL-13-CCI-CACT)
