Competition Commission Orders Detailed Probe Against ONGC

Competition Commission ordered a probe against Oil and Natural Gas Corporation (ONGC) on Tuesday for alleged abuse of dominant position with regard to certain contractual provisions for hiring offshore support vessels.

After finding prima-facie evidence of violation of competition norms with respect to a clause in ONGC's 'Charter Hire Agreement', the watchdog decided to investigate the matter in detail.

Indian National Shipowners' Association had complained about Charter Hire Agreement (CHA) of the state-owned firm.

To support its offshore exploration and production activities, ONGC requires offshore support vessels. In this regard, it issues tenders with detailed technical eligibility requirements and special contract conditions (SCC), among others, that are collectively referred to as CHA.

The CHA sets out the terms and conditions which govern the contractual relationship between ONGC and the successful bidder. The complainant had alleged that one of the clauses about unilateral right to terminate the agreement is one-sided, unfair and abusive.

In a 19-page order, the CCI said it is of prima-facie view that ONGC has contravened Section 4 of the Competition Act. Section 4 pertains to abuse of dominant market position.

The Director General -- CCI's probe arm -- has been directed to carry out a "detailed investigation" into the matter, the order said.

"It is, also, made clear that nothing stated herein shall tantamount to an expression of final opinion on the merits of the case and the DG shall conduct the investigation without being influenced by any observations made herein," it added.

For the case, the Competition Commission of India (CCI) considered the market for charter hire of offshore support vessels (OSV) in the Indian exclusive economic zone as the relevant one.

According to the regulator, a plain reading of the clause regarding exclusive right to terminate the agreement, reveals that it is one-sided and onerous to the OSV suppliers.

Not only the OSV suppliers are without any right to terminate the agreement, ONGC "has an unfettered right to terminate the agreement without assigning any reasons", CCI said.

The regulator also noted that ONGC has invoked the clause by issuing de-hiring notices to various member companies of Indian National Shipowners' Association on April 28, 2016, without assigning any justification.

"The very stipulation of such one-sided clause, which gives an unfettered right to a dominant party to use it in its favour without giving any reciprocal right to the other party to the agreement, is prima facie abusive," CCI said.