Atos
Worldline India Private Ltd v. Verifone India
Parties
1. Atos
Worldline India Private Limited
Atos Worldline India Private
Ltd provides end-to-end services for electronic transactions in India. It
focuses on electronic payment services for banks, merchants, and government
institutions. The company offers acquiring managed services including merchant
signup and activation; point-of-sale (PoS) terminal procurement, supply, and
installation; and merchant training. Additionally, it provides credit, debit,
and prepaid cards application, issuance, and transaction processing; currency
conversion, fraud and risk management, and Internet and mobile payment
services. The company caters to banking, financial services, energy, utilities,
retail, hospitality, transport, and healthcare sectors.
VeriFone
India
2. VeriFone India is
subsidiary of Verifone US. VeriFone is an American multinational corporation
headquartered in San Jose, California that provides technology for electronic
payment transactions and value-added services at the point-of-sale. VeriFone
sells merchant-operated, consumer-facing and self-service payment systems to
the financial, retail, hospitality, petroleum, government and healthcare
industries. The company’s system solutions consist of POS electronic payment
devices that run its own operating systems, security and encryption software,
and certified payment software, and that are designed for both consumer-facing
and unattended environments.
POS
Machine
A point of sale (POS) terminal
is credit card or debit card swipe machine. A merchant can use to perform
transactions with a bank card.
Software Development Kits
(SDKs) are used to enable the basic functionality of the POS Terminals.
For the provision of VAS, it
is extremely important for the Atos Worldline to have access to the core POS
Terminal applications and their crucial enhancements/updates along with SDKs.
Withholding of such
enhancements/updates and SDKs by the POS Terminal manufacturers will negatively
impact the growth of the TPP and VAS markets.
As per standard industry
practice, core POS Terminal applications and SDKs are provided along with the POS
Terminals and the costs of the same are built into the price paid for the POS
Terminals.
Between September, 2010 and
December 2011, the Verifone India continued to provide SDKs to the Atos
Worldline along with the POS Terminals and core terminal applications without
any restrictions on the use of SDKs.
The Verifone India also used
to provide training to the Informant’s engineers to enable the Atos Worldline to
render VAS to its customers.
Atos Worldline in September,
2010 alleging breach of Source Code License Agreement (SCLA) which was signed between them in July, 2009
for a particular model of a POS Terminal.
As per the Informant, despite
issue of the said termination letter, the Verifone India continued to supply
POS Terminals along with its core applications, SDKs and training to its
engineers for the use of SDKs.
In
January 2012, the Verifone India sent a proposed draft SDK agreement to the Atos
Worldline stating that the same is not open to any negotiations, amendments or
changes and that the Atos Worldline has to insert certain details in the said
draft SDK agreement and to counter-sign it.
Citing
Reserve Bank of India’s Payment System Vision Document, 2012-15, the Atos
Worldline stated that in the POS Terminal manufacturing industry in India, Verifone
and Ingenico are the two prominent players.
By
virtue of being almost an exclusive supplier of POS Terminals in India, the Verifone
India exercises significant control over the supply of hardware and software
solutions.
The
Atos Worldline has also stated that there appears to be no objective
justification for imposing unreasonable and unfair terms in the draft SDK
agreement.
These
terms would effectively eliminate the Atos Worldline from the downstream market
and would support the Verifone India‟s interests by
eliminating competition in the market.
The
Atos Worldline has alleged that Verifone India, by imposing restrictions in the
draft SDK agreement, is aiming to strengthen its position in the VAS market.
Relevant
Market
The market for POS Terminals as the relevant product market.
DG has found that the clauses
of the SDK license agreements are unfair. The DG noted that the Purpose Clause‟
under which the licensee can develop VAS and use the same only on the licensor’s
products and the restrictive clauses prohibiting TPP to assist or
develop the applications were found to be in violation of section 4(2)(a)(i),
4(2)(b)(i), 4(2)(b)(ii) and 4(2)(e) of the Act.
Alternative
Technologies
MPOS such as
Ezetap and Mswipe achieve the same end result
CCI is of the view that DG has
segregated the upstream market for POS Terminals which also includes core
applications such as Kernel, Operating System, Source Code and SDK and the
downstream market like TPP (terminal management services), VAS (application development
services) and after sales services (repairs and maintenance), etc.
The Commission is of the same
view as that of the DG in this regard that upstream market for POS Terminals as
stated above is different from the downstream market of VAS and after sales
services. It is so because POS Terminals require services such as terminal
management, application development, repairs and maintenance, etc.
CCI found Verifone
dominant abusing its dominance in the relevant market.
Having regard to
the above, the Commission decides to impose a penalty on the Verifone India at
the rate of 5% of its turnover based on the financial statements filed by the Verifone
India.
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