Indian cricket board's granting of IPL franchise rights on the basis of perpetual agreements creates barriers to potential entries, adversely impacting competition, fair trade regulator CCI has said.
The Competition Commission of India, which keeps a tab on anti-competitive practices across sectors, has slapped a penalty of Rs. 52.24 crore on cricket board BCCI for alleged anti-competitive practices.
"The perpetual franchise agreements undoubtedly create barrier to potential entries in the market," CCI member R Prasad has said in the supplementary order.
"Also, the agreements for the longer term promote market power of the enterprises in terms of being better placed to judge the similar investment opportunity in future (as actually into the business)," Prasad said.
Both the majority as well as supplementary orders were passed on February 8, posted on CCI site late last week. The majority order said that BCCI abused its dominant market position, which violates fair competition norms.
According to Prasad, these perpetual agreements deny certain potential benefits to the consumers like innovation in the game format and benefit of more competition in the sport.
Perpetual franchise agreements for the Indian Premier League (IPL) - a 20:20 cricketing format - cause appreciable adverse effect on competition, he noted.
Prasad said that franchise agreement, entered between the BCCI and franchise winners are for perpetuity – violates the Competition Act 2002 and requires modification.
"... in the franchise agreements, the franchisees have been given licence till the IPL tournament continues. Therefore, the agreements so made will have the effect infinitum, until and unless a breach of terms of the contract takes place," the supplementary order said.
Further, no more franchisees - at present there are 10 - are contemplated in future. Therefore, no future teams can be selected or the number of playing teams can be enhanced, it added.
On February 8, when the majority order came, BCCI had said it was planning to seek legal recourse and appeal against the decision.
Meanwhile, another CCI member ML Tayal has said that BCCI did not violate competition rules.
In his dissenting order dated February 8, Tayal said that BCCI and the franchisee holders are not competitors or persons engaged in identical or similar trade of goods or provision of services.
"Consequently no bid rigging arrangements may be held to exist among such entities," Tayal said in the order.