Heavy penalty imposed upon Verifone India Sales Pvt. Ltd. for indulging in unfair trade practices

Competition Commission of India (CCI): While holding Verifone India Sales Pvt. Ltd. guilty of indulging in unfair trade practices and abuse of dominant market position in POS terminal market, CCI imposed a penalty of approximately Rs 4.5 crore on the Company. Verifone India Sales Pvt. Ltd. is a wholly-owned subsidiary of Verifone System Inc., headquartered in USA and has been engaged in the business of manufacturing, development and selling of hardware and software solutions such as mobile Electronic Ticketing Machines (ETMs), Point of Sale (POS) terminals, and related services and expertise that enable electronic payment transactions at POS terminals. POS machines are supplied along with core applications and Software Development Kits (SDKs). These are sold directly to the customers like banks and retail outlets or to the third party processors (TPPs) who act on behalf of acquiring banks and also render value added services (VAS) to develop and integrate applications into POS terminals. Complaint in this case was filed by Three D Integrated Solutions Ltd. against Verifone India Sales Pvt. Ltd. alleging contravention of provisions of Sections 3 and 4 of the Competition Act, 2002. It was alleged in the complaint that for the provision of VAS, it is important for third party processors like informants to have access to the core POS Terminal applications and their crucial updates along with SDKs but Verifone India Sales Pvt. Ltd. was imposing restrictive and unfair conditions on the usage of SDKs as well as abused its dominant position in POS terminal market to control VAS space. An investigation was conducted by the director general in the matter. After perusing the report of director general, CCI observed that, “From the DG investigation it is revealed that no other POS terminal vendor in India or outside India has been found to be imposing restrictions on development of applications or putting restrictive clauses similar to those found present in the SDK agreement of the Opposite Party (Verifone India Sales Pvt. Ltd.). The intent of the Opposite Party seems to be to exploit the VAS players by either restricting them or sharing their revenue because VAS market is highly profitable. Being in a dominant position in the relevant market, the Opposite Party appears to enhance its position in the downstream market by imposing restrictive clause in the SDK agreement and by refusing the VAS providers’ access to development tools like SDK on reasonable terms and conditions.” While noting that, “Through the SDK agreement, the Opposite Party has imposed unfair conditions on the Informant which are in contravention of Section 4(2)(a)(i) of the Act; restricted the provision of VAS services as well as limited/restricted the technical and scientific development of VAS services used in POS terminals in India which is in contravention of Section 4(2)(b)(i) and (ii) of the Act, ” CCI imposed penalty of over Rs 4.48 crore upon the Company which represents 5 per cent of the company’s average turnover. The Commission also directed the Company “to cease and desist” from anti-competitive activites. Three D Integrated Solutions Ltd. v. Verifone India Sales Pvt. Ltd., 2015 CCI 5, decided on 10.04.2015