CCI rules out abuse of dominant position by NSE Amarchand represents NSE

The Competition Commission of India (CCI) has vide its order dated February 19, 2013 dismissed the complaint filed by UPSE Securities (Informant) against National Stock Exchange (Opposite Party/ NSE) alleging abuse of dominant position in the securities market. The CCI ruled that there was no prima facie case against NSE and therefore, dismissed the complaint..The Competition Commission of India (CCI) has vide its order dated February 19, 2013 dismissed the complaint filed by UPSE Securities (Informant) against National Stock Exchange (Opposite Party/ NSE) alleging abuse of dominant position in the securities market. The CCI ruled that there was no prima facie case against NSE and therefore, dismissed the complaint..Amarchand Mangaldas represented NSE. Amarchand Senior Partner Pallavi Shroff led the arguments and was assisted by Competition Law Partner Naval Chopra. The other team members included Principal Associate Designate Manika Brar and Associate Rohan Arora..The Informant, a Regional Stock Exchange (RSE), had acquired membership of NSE in 2009 by paying Rs. 2.71 crore ($ 0.49 million) to enable the members of UPSE to trade at NSE stock exchange as sub brokers. However, the Informant alleged that it was aggrieved by an “excessive and discriminatory” deposit structure imposed by NSE for membership upon subsidiaries of RSEs vis-à-vis other corporate members..Besides the higher deposit structure, the Informant also alleged the following discriminatory practices adopted by NSE: (i) restriction on subsidiaries in doing business in their own name/ account while other corporate members could do share trading on their own account (ii) restriction on subsidiaries from allowing ‘Authorized Persons’ to trade on its account unless such person was registered with Opposite Party stock exchange (iii) requirement of base minimum capital at the level of RSE and subsidiary for dual membership of sub-brokers of subsidiary (iv) right to trade, in case of a subsidiary, being restricted to only a sub-broker who himself was a member of the RSE..These conditions, according to the Informant, amounted to abuse of dominant position by NSE in the securities market..The CCI, however, held that the conditions imposed by NSE on RSE members (including Informant) were necessary for investors’ protection. It observed that the transactions between NSE and ordinary corporate members on one hand, and between NSE and RSE members on the other were not comparable. Hence, it held that there was no prima facie case under Section 4 of the Competition Act, 2002 and dismissed the case..A competition lawyer observed, “It is good to see that the CCI is not giving into the temptation of referring matters to the DG when in the past the same company has been held to have abused its dominant position. But then again, the last time the NSE was before the CCI, the CCI was headed by a different chairman with a different commission”..Earlier, the CCI had found NSE guilty of anti-competition practices and penalised it for abusing its dominant market position on a complaint filed by MCX-SX. The NSE appeal is now pending before the Appellate Tribunal, COMPAT..Another competition lawyer said, “This is a shot in the arm for the NSE which has appealed the MCX-SX decision before the COMPAT”.