Supreme Court upholds CCI order, clears NSE of anti-competitive practices in co-location case

New Delhi: The Supreme Court on Tuesday upheld the Competition Commission of India's order refusing to order a probe against the National Stock Exchange on allegations that it indulged in anti-competitive practices by granting preferential market access to select brokers through co-location facilities.

A bench comprising Justices JB Pardiwala and Vijay Bishnoi said the court found no grounds to interfere with the National Company Law Appellate Tribunal's February order that also upheld the competition regulator's ruling.

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The appellate tribunal held that mere dominance does not amount to abuse.

"Merely being a dominant player is not bad in itself, unless it has resulted into abuse of its dominant position resulting into AAEC (appreciable adverse effect on competition)," the tribunal had observed. "The abuse can occur when a dominant enterprise like the NSE in the present case exploits its position by imposing unfair or discriminatory conditions of price or limits or restricts its services or product. If such elements are not present, then obviously such dominance cannot be presumed to be abusive."

The complainant had accused the NSE of causing disadvantage to the rest of the market through information asymmetry, enabling select brokers to access tick-by-tick data faster and gain an unfair trading advantage. These practices violated the Competition Act, according to the complaint.

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In June 2021, the CCI closed the case holding that no prima facie case of abuse of dominance was made out. The competition body observed that co-location facilities are globally recognised services that improve liquidity and market efficiency. On appeal, the NCLAT upheld the CCI's order, holding that Sebi itself had not prohibited co-location services and that the Securities Appellate Tribunal had also overturned findings regarding violations.

The appellate tribunal held that the complainant could not make any concrete case as to what harm co-location facilities or even the access to secondary servers caused to investors or consumers. It said co-location facilities were exclusively meant for trading members of the NSE and not for investors.