ABUSE OF DOMINANCE IN INDIA – A NOTE

Edited by – Tirtharaj Basu Ray


This article is written by Sampoorna Chatterjee, a law student at Amity University, Kolkata.


INTRODUCTION

The term ‘dominance’ is quite self-explanatory, it implies a position of strength enjoyed by a certain someone/something over others. However, when this predomination starts to be detrimental to the interests of others (abuse), it calls for scrutiny, as it is against the very spirit of a competitive market.

In a bid to stand out and establish one’s market presence and enhance its market share, firms often indulge in practices, intentionally or unintentionally, which may have some unpalatable consequences.

While mere dominance does not cause any violation of the stipulated provisions of the Act, an abuse of the same using predatory pricing, limitation on production or supply or technology, refusal to deal etc calls for intervention by the concerned regulatory watchdog.

Thus, it is with the enactment of the Competition Act, 2002 (herein referred to as the ‘Act’) and the resultant establishment of the Competition Commission of India (CCI) that the Indian regulatory space has become more conducive and propitious for the betterment of the economy and the consumers, a vision entailed in the Preamble of the Act.

The article, in its eventual run, shall primarily focus and demystify the concepts of:

  • Relevant Market
  • Establishment of Dominance
  • Abuse of Dominance

RELEVANT MARKET

The term relevant market has been defined under various statutes of the world; however, restricting the interpretation of the same to a theoretical definition would be futile – a fact based interpretation coupled with thorough statistical and economic analysis would be needed, which is why every case yields a different reading of the textual definition.

Section 2 (r) of the Act defines relevant market as a market which is the sum total of the product market, S. 2 (t) and the geographic market, S. 2 (s). To put it simply, it refers to a place where buyers, sellers, manufacturers, retailers etc interact and exchange and where competition thrives.

The purpose of delineating the relevant market is to outline the scope within which the conduct of an enterprise is to be assessed – determine dominance and abuse thereof. Therefore, accurate analysis of the same is imperative.

The Commission tries to define the relevant market in as narrow and niche a manner as possible, as against the contentions put forth by the alleged abusers who accord for a broader definition of the same. For instance, in the Ola-Uber[1] saga, the informants defined the relevant market to be that of ‘radio taxi services’ and the Opposite Parties (Ola and Uber) contended the same to be all modes of public transportation, as well as private transport. Uber further submitted that the relevant market should also include ‘markets for driving services for three and four wheelers.’

However, CCI defined the relevant market to be that of ‘radio taxi services.’

This is done as ‘assessment of market shares’ is one of the criteria to determine the dominance of an enterprise (although not exclusive), and a broader market definition would consequently imply a lesser market share of the concerned enterprise.

Relevant Geographic Market

One of the facets of relevant market is geographic market – Section 2 (s) of the Act defines relevant geographic market. Section 19 (6) of the Act lays down the factors that need to considered while establishing the relevant geographic market.

While assessing the relevant geographic market, two essential conditions that need to be taken into account are –

  • Homogeneous condition of competition

·       Distinct condition of competition from the neighbouring areas

In the Coal India Case[2], the CCI opined that while establishing the relevant geographic market, the relevant geographic market has to be India or a part of its territory and in no case can be global. The same was mirrored in the case of Google.

In the case of Amit Mittal v/s DLF Limited & Others[3], the Commission opined that if cities in NCR like Noida or Ghaziabad or Faridabad are compared with Gurgaon, as per the criteria entailed in Section 19 (6), it becomes apparent that the conditions of competition in these cities are not homogenous as Gurgaon had its brand image, which other cities did not have. Hence, these cannot be grouped as one geographic market.

Relevant Product Market

A relevant product market is defined as a congregate of all products and services which are substitutable or interchangeable by the consumer because of its attributes, the intended use and its prices. The concept has been entailed under Section 2 (t) of the Act and the factors that need to be considered while demarcating the relevant product market are all contained in Section 19(7).

It primarily refers to two kinds of substitutability

  • Demand substitutability – a situation where the market player does not benefit from an increase in price, no matter how minimal it is, as the consumer has a choice of substituting the product(s)/service(s) with another product/service.

 In the case of Surinder Singh Barmi Vs BCCI[4], the relevant market was decided based on demand substitutability of Cricket as a means of entertainment.

  • Supply substitutability – a situation where the market player increases the supply of a certain product/service, therefore nullifying the effect of a price increase.

 In the case of M/s. Schott Glass India Pvt. Ltd. vs. CCI & Ors.[5], it was the unique attributes of the Neutral Borosilicate USP-I Borosilicate Glass Tubes manufactured by the Appellant that made it a non-substitutable product. 
In Bharti Airtel Limited v Reliance Jio Infocomm Limited[6], the CCI, while determining the relevant product market, did not consider separate media transmission administration markets dependent on innovation and technology, for example, 4G or 3G, in addition to other things, taking into account the fact that any new entrant in the tele­communication market would probably take on the most cutting edge innovation accessible at that point and later overhaul its system to more up to date advancements.

ESTABLISHMENT OF DOMINANCE

Under the provisions of the Act, dominance has been defined as a position of strength enjoyed by an entity, whereby it can operate autonomously of the market forces and affect the competitors or the consumers or the relevant market in its support.

The factors which need to be taken into consideration while assessing dominance are enlisted in Section 19 (4) of the Act.

One of the most well known criteria for assessing dominance is that of ‘market share’. However, with the advent of time, the CCI has held that neither the list nor the said criteria are exhaustive or conclusive when it comes to assessing the market power of an enterprise.

The same was upheld in the case of Mr Ramakant Kini v Dr L H Hiranandani Hospital, Powai, Mumbai[7] and Meru Travels Solutions Pvt Ltd v CCI[8] – CCI, in these cases, held that the market shares of an enterprise/firm is only one of the criteria to ascertain its dominance or market power and not a conclusive proof of the same.

Again, in M/s ESYS Information Technologies Pvt Ltd v Intel Corporation &Ors.[9], the Commission did not only take into account Intel’s market share but also considered factors like – intellectual property rights of Intel, consumer preference owing to its brand image, the scale of operations etc.

In one of the recent cases, the factor was that of the presence of competitors, which was upheld in the Amazon-Flipkart Case[10]

ABUSE OF DOMINANCE

Section 4 (2) of the Act enlists the actions that can amount to an abuse of dominance, some being – directly or indirectly influencing the prices/purchase/sale of goods and services, impinging market access, limiting technical/scientific development etc.

However, one of the prerequisites for the imposition of this Section is the establishment of dominance.

Although it is not explicitly stated, the section covers both exploitative as well as exclusionary practices.

  • Exploitative practices – The discriminatory or unjust practices that dominant firms undertake against consumers or other firms in the market.
  • Exclusionary practices –The practices undertaken by the dominant firms in excluding competition, i.e., they have a biased approach while dealing.

In the case of Shri Shamsher Kataria v Honda Siel Cars India Ltd & Ors (2014)[11], the CCI found out that 14 car manufacturers had engaged in exploitative and exclusionary practices by compelling the consumers to buy spare parts and diagnostic tools from their respective car manufacturers or authorized dealers. They were also guilty of charging excessive prices on the same.

Predatory Pricing

Predatory pricing refers to the practice of selling goods/services at prices which are below the production cost, with the objective of reducing or eliminating competition in the market.

In the case of M/s. Transparent Energy Systems Pvt. Ltd. v. TECPRO Systems Ltd.[12], the Commission held that three conditions have to be fulfilled to decide whether the operations of a dominant firm results in predatory pricing-

  • The price of the offered service or product ought to be lower than the average cost of production of the service or the product
  • Such pricing was done with the objective of wiping out contenders from the market.
  • A substantial plan exists with the aim of recovering the losses by such pricing strategy – increase the price in the future.

PENALTIES

The commission upon coming across a case of abuse of dominance has the following powers –

  • Section 27 (a) – The commission, under this provision, has the power to direct the organization in question to halt such actions that amount to an abuse.

In the case of Shri Shamsher Kataria v Honda Siel Cars India Ltd & Ors (2014)[13], the CCI ordered the organizations to cease such operations that contravene the provisions of Section 4 of the Act.

  • Section 27 (b) – ­Impose a penalty of up to ten percent of the average turnover for the three preceding financial years.
  • Section 28 – The Commission can also order for the division of the dominant enterprise found abusing its dominance.

CONCLUSION

 The main aim of the Act is to ensure that free and fair competition thrives in the market, which would ensure the welfare of the consumers and the market at large.

CCI, with time, has thus, emerged as a regulator that has become a watchdog for organisations indulging in abusive conduct. Lack of awareness about the law is also one of the factors contributing to the rise in cases of abuse of dominance.

A shift of focus from ‘dominance’ being a prerequisite to the very application of Section 4, to a check on non-dominant firms abusing their position, in whatever capacity it is that they can, is the need of the hour.

Another point of observation would be the concept of  ‘collective dominance’, which is something that is yet to recognised and acknowledged by the law at hand, any recognition of the same would be interesting to watch out for in the near future.


[1] Competition Commission of India, Meru Travel Solutions (Pvt.) Ltd vs ANI Technologies (Pvt.) Ltd, Case No. 25-28/2017

[2] Competition Commission of India , Bijay Poddar v Coal India Case, Case No. 59/2013

[3] Competition Commission of India, Amit Mittal v/s DLF Limited & Others, Case No. 73/2014

[4] Competition Commission of India, Surinder Singh Barmi Vs BCCI, Case No. 61/2010

[5] Competition Commission of India, M/s. Schott Glass India Pvt. Ltd. vs. CCI & Ors, Case No. 22/2010

[6] Competition Commission of India, Bharti Airtel Limited v Reliance Jio Infocomm Limited, Case No. 03/2017

[7] Competition Commission of India, Mr Ramakant Kini v Dr L H Hiranandani Hospital, Powai, Mumbai, Case No. 39/2012

[8] Supra note 1

[9] Competition Commission of India, M/s ESYS Information Technologies Pvt Ltd v Intel Corporation &Ors., Case No. 48/2011

[10] Competition Commission of India, Delhi Vyapar Mahasangh v Flipkart Internet Private Limited and Another, Case No. 40/2019

[11] Competition Commission of India, Shri Shamsher Kataria v Honda Siel Cars India Ltd & Ors, Case No. 03/2011

[12] Competition Commission of India, M/s. Transparent Energy Systems Pvt. Ltd. v. TECPRO Systems Ltd, Case No. 9/2013

[13] Supra Note 10


Written By:

Author Name – Sampoorna Chatterjee

Published on – 28/07/2020