Vide order dated 20th June, 2023, the Competition Commission of India (“CCI”) has dismissed the information filed by Perfect Infraengineers Limited (“PIL”) alleging contravention of Section 3 (anti-competitive agreements) and Section 4 (abuse of dominant position) of the Competition Act, 2002, as amended (“Act”), by LG Electronics India Private Limited (“LG”).
As per the information filed with the CCI, PIL introduced ‘Hybrid Thermal Solar’ (“HTS”) panels in India, which, when integrated with Variable Refrigerant Flow (VRF)/Variable Refrigerant Volume (VRV) Air Conditioners (“ACs”) reduce electricity consumption by 30-40%. Envirocare Labs Private Limited (“Envirocare”) had placed orders with PIL for integration of the HTS panels with LG’s ACs the permission for which was however not given by LG. Similarly, LG did not allow integration of PIL’s HTS panels with its ACs installed with the Delhi Metro Rail Corporation (“DMRC”), even though PIL undertook to repair the damage, if any, to the ACs free of cost and further undertook to indemnify LG. PIL submitted in its information that its HTS panels have been approved by various other AC manufacturers and are also certified by Intertek, which is an international energy consumption and saving certifying body. PIL alleged that disallowing integration of HTS panels with LG’s ACs has resulted in prejudice and hardship to Envirocare, DMRC as well as PIL and that such an act on part of LG amounted to contravention of Section 3 and Section 4 of the Act by LG.
LG, in its counter-submissions, submitted that the relevant market for the instant matter is “market for the sale of heating ventilation and cooling variables refrigerant flow air conditioner” in which Daikin is the market leader enjoying 44% market share in the last three years while LG had only 16% average market share during that period. LG contended that the test reports relied upon by PIL were biased and not verified by any third party. LG also submitted that its ACs had not been tested with the solar panels anywhere in India and installing solar panels or hybrid solar panels with ACs is not an industry practice. Further, LG submitted that its refusal for integration is based on bonafide technical reasons to save itself from possible claims and liabilities. LG further submitted that PIL has been a defaulter and has pending litigations with LG due to which PIL has been filing petitions at different forums to settle its personal scores with LG and to involve LG in unnecessary litigations.
The CCI, while examining the allegations pertaining to abuse of dominant position observed that VRF Heating, Ventilation, and Air Conditioning (HVAC) systems cleanse the air and delivers cool or warm air based on the user’s needs and thereby maintains varying temperatures simultaneously in different areas as per the user’s requirements by way of segregating indoor units. Further, the characteristics and advantages of VRF/VRV AC systems makes it better than traditional air conditioning systems and are therefore valued for their inverter technology-based principles of energy saving. Regarding the relevant geographic market, the CCI noted that the conditions of competition are homogeneous across India and accordingly, the whole of India was considered as the relevant geographic market and resultantly, the relevant market was prima facie defined as the “market for manufacture and sale of VRF HVAC Air conditioners in India”.
The CCI noted that there are number of VRF/VRV AC manufacturers and suppliers in India and based on the information available in the public domain on market share of the manufacturers, prima facie, concluded that LG did not appear to be dominant in the relevant market. The CCI observed that presence of large number of players makes the market contestable and provides several options for the consumers and therefore, acts as a competitive constraint for LG. Thus, in the absence of dominance, no case of contravention of the provisions of Section 4 of the Act was made out against LG. Further, in the absence of any information provided by PIL on the conduct of LG falling under the purview of Section 3 of the Act, the CCI also ruled out contravention of provisions of Section 3 (1) of the Act based on the market construct and the nature of allegations made.
By: Competition Team at Chitale & Chitale Partners
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