Unfair business practices in FM Radio Licensing

CCI orders investigation under section 26(1) against Prasar Bharati for alleged abuse of dominance – unfair business practices with regard to Phase III FM Radio Policy.

The informant / Next Radio (engaged in Frequency Modulation (FM) Radio broadcasting services) alleged contravention of section 3 and section 4 of Competition Act against Prasar Bharti (Government of India entity providing infrastructure facilities to the Radio and FM operators) and the Ministry of Information and Broadcasting, in regard to FM radio licensing agreement.

The PSBT imposed unfair or discriminatory conditions such as :

Increase in license fee in the draft agreement (for open space, covered space and other facilities) by 5% per year on the last license fee paid against the existing rate of 10% after two years in an arbitrary manner even without affording any opportunity of hearing to Informant (Next Radio) and refused to consider the request of the Informant thereby abusing its dominant position and violating the principles of natural justice.

Increase in license fee for tower aperture at 5% every year on the last license fees paid against the existing rate of 2.5%

l in the event of default in payment, the rate of interest to be paid is 18% whereas, as per the existing agreement it is @ SBI PLR +2% p.a.

Licensee has to keep provisions for meeting the future requirements of Prasar Bharati for increasing the power of its own transmitters and/ or adding a new channel/ transmitter using CTI chain.

Licensee to pay taxes, present or future, as may be levied by the municipality on account of any infrastructure constructed for the purposes of CTI within the premises of Prasar Bharati.

Prasar Bharati will have power to disallow the use of licensed infrastructure without paying any penalty/ damages whereas the licensee shall continue to be liable to pay annual license fee to the licensor for the period of non-use.

The authority to nominate the sole arbitrator lies with Prasar Bharati

Reasoning given by CCI :

Even though these kind of terms and conditions are standard term of contracts that are provided to the counterpart, a dominant player should be more careful with such terms of the contract to see that such conditions remain fair, reasonable and justified. The Commission also observed that no opportunity was accorded to the Informant i.e. Next Radio Limited by Prasar Bharati to negotiate the aforesaid terms of the draft agreement. Thus, the Commission is of the view that by imposing the aforesaid one-sided unfair terms and conditions on the Informant and other private FM radio broadcasters through the draft agreement Phase III FM Radio Policy, Prasar Bharti prima facie abused its position of dominance in the relevant market in contravention of the provisions of Section 4 of the Act.

Anupam Sanghi Associates Comment:  Earlier CCI has levied fines on authorities and government companies namely-

BCCI – with a penalty of Rs.55 Cr. for abusing their power as defacto regulator

Coal India – with a penalty of Rs.1773 Cr for one sided fuel supply agreements

These matters are in appeal before the Supreme Court, challenging the decisions & penalties levied.