The National Company Law Appellate Tribunal (NCLAT) on Friday dismissed an appeal challenging a Competition Commission of India (CCI) order closing allegations of abuse of dominance against the National Stock Exchange of India Ltd (NSE) in relation to its co-location services. (Manoj K Sheth v. Secretary, Competition Commission of India)
A coram of Judicial Member Justice (retd) Faizal Alam Khan and Technical Member Naresh Salecha dismissed the appeal.
A copy of the order is yet to be made available.
The appeal arose from a complaint alleging that NSE had granted preferential and discriminatory access to select brokers through its co-location facility, thereby distorting competition in the securities market. The CCI had earlier closed the matter under Section 26(2) of the Competition Act, 2002, holding that no prima facie case of abuse of dominant position was made out.
The original complaint, filed by investor Manoj K Sheth, alleged that the architecture of NSE’s data dissemination system resulted in information asymmetry, enabling select brokers to access tick-by-tick data faster and gain an unfair trading advantage.
The informant relied on whistleblower complaints, media reports, forensic audits and findings of the securities regulator to contend that NSE’s conduct violated Sections 4(2)(b)(ii) and 4(2)(c) of the Competition Act.
In its 2021 order, even as the CCI found that NSE appeared to be dominant in the relevant market, it ruled that dominance by itself is not prohibited under competition law.
The CCI held that the provision of co-location services could not, by itself, be characterised as anti-competitive, particularly as such services are offered by major stock exchanges globally and are recognised by the sectoral regulator. It further observed that NSE’s choice of technology at the relevant time was a bona fide commercial decision and that the technology complained of had been phased out years earlier.
In the absence of any finding of fraud or collusion by the securities regulator, the CCI concluded that NSE’s conduct did not amount to abuse of dominance and closed the case at the threshold stage.
Upholding the CCI’s approach, the NCLAT dismissed the appeal, agreeing that no prima facie case warranting investigation under the Competition Act was made out against NSE.
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