CCI Imposes Over ₹6 Lakh Fine On Publishers & Booksellers Body And Former Office-Bearers For 'Controlling & Limiting' Book Trade

These practices included the FPBAI fixing foreign currency exchange rates of import/export of books/journals higher than prescribed RBI rates, capping discounts which may be offered by members to libraries/institutions, prescribing terms and conditions with respect to credit period, interest rate and verification of prices of a mandatory nature, and issuing advisories to libraries, booksellers and institutions to purchase books only from FPBAI approved vendors.

Finding such practices to have an appreciable adverse effect on competition, the CCI held,

“… fixation of conversion rates imposed upon the rest of members of the book industry has resulted in higher prices to the end consumers where such rates were accepted by the procuring libraries/ institutions. Needless to mention that non-acceptance of GOC rates by the procuring institutions resulted in gains to the importer booksellers at the cost of the remaining bookseller members. Therefore, either ways, one community or the other had to face the brunt. Moreover, circulation of approved vendor lists along with the monthly circulars coupled with non-withdrawal of earlier advisory (pertaining to deal with members only) has the potential to foreclose opportunity for non-member booksellers, thereby distorting level playing field, thus resulting in entry barriers for new entrants as well as the risk of driving existing competitors out of the market.”

Section 3 explains what anti-competitive agreements are. Section 3(3)(a) includes an agreement entered into between enterprises or associations or persons or a decision by them, where they are engaged in identical or similar trade of goods or provision of services, which  "directly or indirectly determines purchase or sale prices". Section 3(3)(b) states an agreement which limits or controls production, supply, markets, technical development, investment or provision of services. 

Section 3(1) states that no enterprise or association of enterprises or person shall enter into any agreement for production, supply, distribution, storage, acquisition or control of goods or provision of services, which causes an appreciable adverse effect on competition within India.

Facts

Upon a complaint filed by one Pranav Gupta (informant), CCI framed a prima facie case against FPBAI and referred the matter to the Director General (DG) for investigation.

The DG's report highlighted that the Good Offices Committee (GOC), a subsidiary of FPBAI, fixed foreign exchange rates for book imports which were 3-5% higher than the prescribed bank rates, thereby amounting to price fixation and benefiting a few importer booksellers. It also highlighted the FPBAI's failure to withdraw discount-related circulars and to sensitise members of the CCI order in M/s International Subscription Agency v. FPBAI, where it was held that discount control by FPBAI was in violation of Sections 3(3)(a) r/w Section 3(1) of the Act. Further, the report observed that GOC circulars prescribing terms and conditions effectively controlled the book-trade market. Lastly, the report stated that FPBAI's failure to withdraw earlier appeals urging libraries to deal only with its members created entry barriers for non-members and distorted fair competition.

Submissions of the Parties:

The FPBAI and its members submitted that fixation of GOC conversion rate was a 'legacy practice' which was merely 'suggestive' and not 'mandatory. It entailed no punitive consequences and members were free to choose prices as per their commercial strategies. It was further argued that such rates do not create entry barriers as they impact an insignificant portion of price. With respect to conversion rates being followed in libraries, they submitted that many libraries do not follow the rates and the decision of some libraries to follow the same reflects their independent commercial decision. Lastly, it was submitted that FPBAI had no obligation to intimate members that the discount clause does not apply anymore and neither is it duty-bound to publicly withdraw the earlier appeals.

Contrary to this, the informant submitted that FPBAI used its platform to incentivise cartel-like behavior among its members by fixing GOC conversion rates and supply terms. He also argued that membership certificate mandated members to follow terms “fixed by GOC,” which established that the circulars were not merely advisory. Highlighting discrepancies in the DG's report, he submitted that the DG limited the investigation to FPBAI only and ignored key affiliated parties and individuals, who were not properly examined and some relevant statements and documents were also excluded from the DG's report.

Findings

At the outset, CCI noted that the plea taken by FPBAI that fixation of GOC rates was a 'legacy practice' cannot absolve them from the penal consequences of indulging in anti-competitive practices. CCI referred to multiple testimonies from stakeholders, including the informant, which highlighted that booksellers were often compelled to adhere to GOC conversion rates and non-compliance could lead to cancellation of membership.

With respect to the argument that fixation of GOC conversion rates does not amount to determination of price and GOC conversion rates constitute an insignificant proportion of the overall price, the Commission said:

“For instance, a book with the price 100 GBP, with GOC conversion rate of 1 GBP = INR 104, will cost INR 10,400 to the consumer, while with bank conversion rate of 1 GBP = INR 101, the same book will cost INR 10,100 to the consumer. As can be seen, the quantum of impact of GOC conversion rate is also directly proportional to the book value; higher the book price, larger the impact of GOC conversion rate will be. Therefore, the Commission does not find any substance in the plea taken by FPBAI that fixation of GOC conversion rate does not amount to price fixation and it constitutes an insignificant proportion of the price of the book/ journal.”

Thus, the Commission held that publication of conversion rates higher than RBI rates amounts to price fixation and violates Section 3(1) r/w 3(3)(a) of the Act.

Regarding the issue of declaration of discounts to be offered by members, CCI noted that despite its ruling in International Subscription Agency, similar allegations of discount control by FPBAI resurfaced. Circulars from November and December, 2021 were examined from the website of FPBAI which suggested that it continued to engage in discount control, with no public clarification by FPBAI withdrawing such policies. Against this backdrop, CCI concluded that FPBAI did not take requisite measures to withdraw discount-related circulars and to intimate its members about the anti-competitive nature of discount control as highlighted in International Subscription Agency.

Moreover, CCI also referred to the terms and conditions of GOC circulars, which included an obligation on suppliers to necessarily provide for 60-days or 90-days credit period for making payments, and held that the spirit of the terms and conditions did not appear to be recommendatory.

Noting that such stipulations restrict commercial liberty, CCI further held,

“… the Commission finds the act of prescribing such terms and conditions by FPBAI in GOC circulars which are not only circulated to all its members, member state associations, but also followed by book industry in general, having the effect of limiting or controlling the market for book trade, in contravention of the provisions of Section 3(1) read with Section 3(3)(b) of the Act.”

Lastly, regarding the issue of urging libraries, booksellers and institutions to purchase books only from FPBAI approved vendors, CCI held,

“… presence of an appeal/advisory asking procurer to purchase only from FPBAI or other national/ regional booksellers' association's members and circulating a list of approved members subsequently, has the effect of sending an indirect message and such conduct of FPBAI distorts the level playing field and tilts it in the favour of the approved vendors/ members of FPBAI by foreclosing participation of non-members. The Commission therefore, finds such conduct to be in contravention of the provisions of Section 3(1) read with Section 3(3)(b) of the Act.”

Case Details:

Case Title: Pranav Gupta v. Federation of Publishers' and Booksellers' Association in India

Case Number: Case No. 38 of 2021

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