A case for prosecuting the prosecutors
Regular readers of Moneylife, and others, will recall an article called “Who Will Guard the Guardians?” “Quis custodiet ipsos custodies.” In that piece, we had mentioned that a public prosecutor, though convinced that the complaint filed against our clients was false, was too scared to stop the prosecution. He felt that an enquiry would be instituted against him.
The good news is that our clients, half a dozen, were acquitted, some time back. But they had to attend court 33 times, over six years. One of them was a double law graduate and all of them stood firm against bribes. The complainant, worried about being exposed in court, simply did not turn up for cross-examination. But does their acquittal solve the problem? After all, the accused ranged in ages from 60 to 85 years. Is there any recourse? Yes, there is. It lies in prosecuting the complainant for malicious prosecution.
Did the clients opt for that? No. People are wary of courts. Each of us expects the other to fight for him. We, as a people, want to have our rights handed to us on a platter. And protected by the sweat of others.
You be the judge.
One may well ask why we did not ask our clients to take the matter forward. The truth is, as advocates, we cannot ask people to file cases, even pro bono. But the surprising thing is that, it’s not just the layman who shies away. Even Supreme Court judges act similarly.
Last week, a leading newspaper carried a lead article featuring a retired judge’s complaint, about a corrupt judge, having fallen on deaf ears. While no names are mentioned and a lot of it is hearsay, one fails to understand why the complaining judge himself did not act more decisively when on the bench. The author is a very small man but, faced with such a situation, his choice would have been to resign. It’s no great shakes to leave the bench.
But there are other cases, too, where judges show more spunk. A common tactic to avoid an unfavourable order is to ask for another judge to be assigned to the case. It’s not easy. Cogent reasons need to be given. More often than not, if the judge has an interest in the case, however minor, he recuses himself. But what of outright accusations?
Recently, if one read between the lines, one of the parties in court, obviously fearing the worst, wanted a change of scene. Rather stupidly, it accused a judge of corruption, hoping that the judge would give up the matter. This judge, fortunately, was made of sterner stuff and refused to budge asking the complainant to seek relief further up the hierarchy. The judge said the case would go on till orders came from above. The complainant had to apologise; but we hope it is not the end of the matter.
At Moneylife seminars, we have often stressed the fact that too many cases are filed by the crooked. They seek the court’s backing for their nefarious activities. They clog the system with frivolous litigation. They have the money to spend. The other side is dragged to court and peeled alive of all he has. Even the shirt on his back. Can nothing be done? As stated above, the solution lies in a counterattack for either frivolous litigation or malicious prosecution. The process requires the court’s permission; but it can be procured. Once the perpetrators realise that filing false complaints can lead them into hot waters, very hot waters with hefty fines, the pressure on the courts will drop. And justice will be delivered faster.
The Competition Commission penalised 14 carmakers for restricting sale of genuine spare parts only through their authorised dealers. But what about mobile, TV, fridge, washing machine, oven and laptop makers which are doing the same?
Last week's ruling by the Competition Commission of India (CCI) about carmakers abusing their dominant position is surely an eye opener, coming from for the so-called global players, who apply different practices in India. Although the CCI slapped a penalty of Rs2,545 crore on 14 carmakers, the question is will the Commission take suo moto action against similar practices in the electronic and white goods market as well?
Take for example, Panasonic. I am required to contact authorised service centre of Panasonic every time, including for replacing a small part like a fuse in my fridge because it is simply not available in the open market. Same goes for the 'legendary' Apple. You simply cannot buy any 'genuine' Apple accessory or spare part to replace something that has stopped working properly. In addition, the quality of these so-called 'authentic' spares and accessories warrant a special article. Ask any iPhone or Mac-book user and s/he will tell how the wires and cables start wearing off even with a normal usage or even with delicate handling. In addition, these can’t be replaced with ordinary cables. You need to buy expensive Apple cables only.
Same is the case with Sony. You will not find a single spare part from Sony in the open market. Even your next door repair guy would tell you to give your Sony brand TV or mobile to the 'authorised service centre' as they only have “genuine” or “original” spare parts. All these 'authorised service centres' do not sell any 'genuine' or 'original' spares or parts to local technician or repairer, who they consider outsider. They even refuse to sell genuine spares or parts directly to the customer and often insist on sending their own technician to fix it for a hefty fee.
The majority of these companies refuse to supply genuine spare parts and technological equipment for providing maintenance and repair services in the open market and in the hands of the independent repairers.
What troubles customers more is the typical working time or shifts of these authorised service centres. Majority of them are open during office hours only and have weekly off on Sundays. So, in case you need to repair your device, you either have to bunk or take a leave from your office. On the other hand, the local repair guy is available as per your convenience. He even offers to pick up the device from your home, unlike the authorised service centres, which plainly ask you to visit their place with the device.
Another important point, (as mentioned by the CCI in its ruling) is cost. All the spares and parts sold by the company's authorised service centre are costlier compared with similar quality products (if available) in the open market. Take for example, a battery for your mobile. Let's say,you want to replace the battery for your Samsung mobile. There are two options. Either you buy it from an authorised service centre at whatever price they quote or search online or offline and buy the same or similar quality product at much lower rates. Another example is the cover for mobile phones. You can buy a similar type of cover from any roadside stall or vendor, which is three times cheaper than that of the authorised dealer or showroom. Normally, covers for almost all the mobiles need replacement after 12 months. So if you are getting similar quality cover for less money, why not buy it from your next door mobile shop or street seller. Also, remember covers for most of the mobile phones are sold at Rs100-200 by roadside vendors. Not to forget your option to bargain with the vendor.
Now, let's see what the CCI has said in its order. It said, “...the Commission’s primary objective is to correct the distortions in the aftermarket, to provide corrective measures to make the market more competitive, to eradicate practices having foreclosure effects and to put an end to the present anti-competitive conduct of the parties. The aim of the Commission is to provide more freedom to original equipment suppliers (OESs) in sale of spare parts, and more choice to consumers and independent repairers. The Commission considers it necessary to (i) enable the consumers to have access to spare parts and also be free to choose between independent repairers and authorized dealers and (ii) enable the independent repairers participate in the aftermarket and provide services in a competitive manner and to have access to essential inputs such as spare parts and other technical information for this purpose, as part of a more competitive eco-system, which is equally fair to the Ops (carmakers) and their authorized network also.”
“...the anti-competitive conduct of the opposite parties (carmakers) has restricted the expansion of spare parts and independent repairers segment of the economy to its full potential, at the cost of the consumers, service providers and dealers. It is also noted that despite the fact that most attractive markets for the automobile manufacturers and some OPs (carmakers) have made consumer-friendly commitments in other jurisdictions like Europe, they have failed to adopt similar practices in India which would have gone a long way in significantly diluting their present anti-competitive conduct. This makes their conduct even more deplorable," the Commission said.
Why the CCI took such a strong and laudable step to highlight the 'malpractices' by carmakers? The reason can be found in the report submitted by the director general (DG) of CCI who investigated the matter.
While determining the relevant product markets, the DG took into account the technical difference between the various primary market products, which leaves the customers with limited choice in complimentary products or services compatible with the primary product. This in the opinion of the DG implies that once the primary product has been purchased, consumer choice is confined to the aftermarket products or services which are compatible with that primary product. Hence, consumers are to a greater or lesser extent ‘locked’ into certain aftermarket suppliers.
After investigating whether a consumer could switch to the spare parts produced by another original equipment manufacturer (OEM), the DG concluded that, based upon the submissions of the OEMs, most of the spare parts other than a few generic spare parts like tyres, batteries were manufactured specifically for the respective models of the cars. Moreover, even within the models of the same OEMs interchangeability of spare parts was limited. Hence substitutability of spare parts across OEMs is drastically diminished, the report said.
The DG further found that for spare parts that are manufactured in-house by the OEMs there is almost nil interchangeability and for those body parts that are procured from local OESs and other overseas suppliers, there is limited substitutability. In this context, the DG noted that the practice of the OEMs to consider only those spare parts as genuine, which are purchased from the OEMs or the OESs specified by them and which bear the OEMs logo or trademark that further diminishes the possibility of a consumer, including the authorized dealer, purchasing spares from sources other than the OEMs or their specified vendors.
It was also observed that, the OEMs also impose adverse implications on validity of warranties in using parts sourced from other channels. Based upon the above facts, the DG concluded that it is impossible for a consumer to switch to spare parts manufactured by another producer (OEM) as interchangeability between the spare parts manufactured by different OEMs is almost nil.
While checking the possibility of consumers to switch to another primary product (to avoid a price increase on the spare parts market), the DG concluded that due to high switching costs and the fact that post-registration the residual value of a new car is lower than the price of a pre-registration new car, the owner of a car may only shift to another product in the primary market after incurring substantial financial loss. Thus, in the opinion of the DG, a purchaser of a product in the primary market is to a great extent locked in with the primary product and the feasibility of switching to another primary product to avoid a price increase in the secondary market of spare parts or repair services is limited.
In his report, the DG concluded that the spare parts market for each brand of cars (each OEMs), comprising of vehicle body parts (manufactured by each OEMs, spare parts sourced from the local OESs or overseas suppliers), specialised tools, diagnostic tools, technical manuals for the aftermarket service formed a distinct relevant product market as defined under section 2(t) of the Act.
Isn't this a common practice with most of the manufacturers, especially those who sell consumer products? Can the Competition Commission take note of such malpractices rampant in electronics market and aftermarket services?
The uptrend is strong and may get reversed only if Nifty goes below 7,900.
We had mentioned in our Tuesday closing report that Nifty may try to rally but it is likely to be muted. Ahead of August futures and options expiry indices had an all-time high opening after which it moved in a range except for a minor setback in the last hour of the session when it hit its day’s low. But it fully recovered within minutes.
The S&P BSE Sensex opened at 26,553 and moved in the range of 26,493 and 26,599 and closed at 26,560 (up 117 points or 0.44%) while CNX Nifty opened at 7,934 and moved between 7,917 and 7,947 and closed at 7,936 (up 31 points or 0.40%). NSE recorded a volume of 75.55 crore shares. India VIX fell 6.04% to close at 13.0625.
Among the other indices on the NSE, the top five gainers were CPSE (1.35%), Auto (0.91%), Smallcap (0.73%), IT (0.68%) and PSE (0.67%) however the only five losers were Realty (1.40%), Media (0.77%), Infra (0.45%), Pharma (0.11%) and Metal (0.09%).
Of the 50 stocks on the Nifty, 32 ended in the green. The top five gainers were IndusInd Bank (3.27%), Jindal Steel (3.12%), HCL Technologies (2.96%), ONGC (2.61%) and ICICI Bank (2.45%). The top five losers were DLF (4.49%), Bhel (1.72%), Sesa Sterlite (1.39%), IDFC (1.36%) and NMDC (1.14%).
Of the 1,616 companies on the NSE, 852 companies closed in the positive, 694 companies closed in the negative while 70 companies closed flat.
Central Board of Trustees of the Employees' Provident Fund Organization has decided against investing in equities and exchange traded funds. The finance ministry had suggested EPFO to invest in equities to enhance returns for subscribers.
Department of Industrial Policy and Promotion DIPP) on Tuesday notified increase in foreign direct investment (FDI) limit to 49% from 26% in the defence sector. The composite ceiling of 49% includes all kinds of foreign investments such as FDI, foreign institutional investors (FIIs), foreign portfolio investors (FPIs), non-resident Indians (NRIs), foreign venture capital investors (FVCI) and qualified foreign investors (QFIs).
Portfolio investment by FPIs, FIIs, NRIs, QFIs and investments by FVCIs has been capped at 24% of the total equity of the investee or joint venture company. One such player in the sector, Bharat Electronics (20%) was the top gainer in ‘A’ group on BSE.
Havells today again hit a new 52-week high and was among the top two gainers (8.27%) in ‘A’ group on the BSE.
Uco Bank (8.24%) was the top loser in ‘A’ group on the BSE. The government has ordered limited forensic audit into some of its non-performing accounts to find out any irregularities in sanction of loans.
ONGC (2.31%) was the top gainer in Sensex 30 pack. The oil ministry proposes to rationalise the subsidy-sharing mechanism for state-run oil producers, a move that is expected to reduce the burden on ONGC and Oil India Ltd as well as raise income for oil-bearing states such as Gujarat and Assam.
Sesa Sterlite (1.67%) was the top loser in Sensex 30 stock. After the recent ruling of Supreme Court on the coal allocation being illegal, market anticipates this stock to be one among the others to be worst hit.
US indices closed in the positive on Tuesday. Bookings for goods meant to last at least three years climbed by a record 22.6% in July after a 2.7% gain in June that was bigger than previously reported, data from the Commerce Department in Washington showed.
The Conference Board's US consumer confidence index rose to 92.4 in August, the highest since October 2007.
Except for Hang Seng (0.62%) all the other Asian indices closed in the green. Taiwan Weighted (0.98%) was the top gainer.
European indices were showing mixed performance while US Futures were trading marginally higher.