India: Abuse Of Dominant Position: Contours Changed

Last Updated: 4 April 2019
Article by Priti Suri

1. Introduction

The Competition Act ("Act") prohibits "abuse of dominant position" and section 4 of the Act lists the criterion on the basis of which behavior is considered to be an abuse in the relevant market. In other words, no dominant organization can engage in anti-competitive business practices in order to maintain or increase its position in the market. Ever since the Competition Commission of India ("CCI") was established it has, through a plethora of cases, assessed what conduct constitutes abuse and in findings of abuse of dominant position, has imposed significantly large fines. For example, Google was fined over USD 20 million in 2018 over its search bias in online web search and online search advertising markets. After a detailed inquiry, CCI took the view that Google was "leveraging its dominance in the market for online general web search, to strengthen its position in the market for online syndicate search services." To be clear, the law does not look down on dominance per se, but prohibits its abuse. Effectively, any dominant entity has a special obligation to ensure that it does not stifle competition. Rather, the actions, practices and conduct of a dominant enterprise have to be examined in light of specific facts and circumstances to determine whether or not an abuse of dominance has occurred in terms of section 4.

This newsletter provides a high-level overview of the legal framework and the recent body of jurisprudence which may potentially be changing the contours of assessment of abuse of dominance.

2. The Legal Framework

The statute prohibits the following acts. A dominant organization cannot (a) impose unfair or discriminatory condition or price in sale (including predatory price)1 and purchase of goods or services; (b) limit or restrict production of goods or services or related technical or scientific development to the prejudice of consumers; (c) indulge in practice resulting in denial of market access; (d) execute contracts subject to acceptance by other parties of unrelated obligations i.e., those which have no nexus with the subject of the contract; (e) use its dominant position in one market to enter into another relevant market. The section further explains that a dominant position means a position of strength, enjoyed by an enterprise in the relevant market in India which enables it to either operate independently of competitive forces in the relevant market or affect competitors, consumers or relevant market in its favor.

CCI has the power to inquire into any alleged contravention of abuse of a dominant position volitionally or when an informant notifies it or by a reference of central or state government or a statutory authority. In such situations, it is pivotal to assess whether the organization accused of impugned conduct is dominant in the relevant market. Here, it is crucial to analyze what is the relevant market. Section 2(r) of the Act defines it to be one determined by CCI with reference to the relevant product2 or geographic3 markets or both. The Act provides detailed methodology to further evaluate the determination of the relevant product or geographic markets. These are covered in sections 19(6) and (7) of the Act. In order to determine the "relevant product market" CCI has to carefully consider all or any of the following factors i.e., physical characteristics or end-use of goods, price of goods or service, consumer preferences, exclusion of in-house production, existence of specialized producers and classification of industrial products. And, for the "relevant geographic market" it is essential to assess all or any of regulatory trade barriers, local specification requirements, national procurement policies, adequate distribution facilities, transport costs, language, consumer preferences and need for secure or regular supplies or rapid after-sales services. It is safe to state that a dominant enterprise engages in abusive conduct when it exploits opportunities arising on account of its dominant position to reap benefits which would not have existed had competition was allowed to flourish without restricting market access.

Footnotes

1 Predatory price means sale of goods or services below cost with a view to reduce competition or eliminate competitors

2 This is when market comprises of all those products or services regarded as interchangeable or substitutable by the consumer, by reason of characteristics of the products or services, their prices and intended use

3 This means the area where the conditions of competition for supply or demand of goods or services are distinctly homogenous and can be distinguished from the conditions prevailing in the neighboring areas

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