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Abuse of Dominant Position

The Competition Act, 2002 focuses to sustain competition, protect the interests of the consumers and ensure freedom of trade in markets in India. It enables a healthy competitive culture that inspires the business to be fair, competitive and innovative. This enhances consumer welfare and supports economic growth.

Dominant Position (under Section 4 Competition Act, 2002)
Dominant Position has been defined as a position enjoyed by an enterprise whereby enables it to:
  1. operate independently of competitive forces prevailing in the relevant market; or
  2.  affect its competitors or consumers or the relevant market in its favour
i.e. according to the act:
Section 4(2) of the Act provides that there shall be an abuse of a dominant position if an enterprise or a group:
  • directly or indirectly imposes unfair or discriminatory conditions or prices in the purchase or sale of goods or services;
  • restricts or limits production of goods or services in the market;
  • restricts or limits technical or scientific development relating to goods or services to the prejudice of consumers;
  • indulges in practices resulting in a denial of market access;
  • makes the conclusion of contracts subject to acceptance by other parties of supplementary obligations, which, by their nature or according to commercial usage, have no connection with the subject of such contracts; or
  • uses its dominance in one market to enter into or protect its position in other relevant markets (i.e, leveraging).

In Dhanraj Pillay & Ors v Hockey India (2013), the CCI balanced anti competitive effects against the defendant’s justifications. The CCI held that the Act was not violated where allegedly abusive contractual restrictions were not disproportionate to a sporting organisation’s legitimate regulatory goals.

In the case of, Shri Neeraj Malhotra, Advocates v. North Delhi Power Ltd., the CCI observed that Section 4 of the Competition Act does not prohibit an enterprise from holding a dominant position in a market, it does place a special responsibility on such enterprises, in requiring them not to abuse their dominant position. The CCI further held that Section 4 does not contain an exhaustive list of activities that would amount to contravention of its provisions. The actions, practices and conduct of an enterprise in a dominant position have to be examined in view of the facts and circumstances of each case.

Judicial Approach
Through a catena of cases, the Competition Commission of India has identified as to what constitutes abuse of dominant position to fall under the purview of anti-competitive practices.
Zero pricing by a dominant player amounts to annihilating or destructive pricing being beyond the parameters of promotional or penetrative pricing.

By providing free services cannot by itself raise competition concerns unless the same is offered by a dominant enterprise and shown to be tainted with an anti-competitive objective of excluding competition/ competitors.

In a competitive market scenario, where big players are already operating in the market, it would not be anti competitive for an entrant to incentive customers by giving attractive offers and schemes.

Providing services below the average variable cost unless it coupled with abuse of dominant position does not amount to predatory pricing in contravention to the Competition Act (Section 4).
Market share is one of the indicators for assessing dominance, but the same cannot be seen in isolation to give a conclusive finding.

No restriction affecting the entry or expansion of other entrants into the market in indicative of lack of abuse of dominant position.

The narrow interpretation of the concept of dominance would mean that an entrant armed with a new idea, a superior product or technological solution that challenges the status quo in a market and shifts a large consumer base in its favor would have to be erroneously held dominant.

The interpretation of the Competition Act, 2002, does not allow more than one dominant player.

What is relevant market?
‘Relevant market’ is one of the primary concerns while determining dominant position as well as abuse of dominant position by an enterprise.

Section 2(r) of the Competition Act renders an exclusive definition for the term ‘relevant market’. It states that it means the market which may be determined by the Commission with reference to the relevant product market or the relevant geographic market or with reference to both markets.

Relevant product market is defined as a market comprising all those products or services which are regarded as interchangeable or sustainable by the consumer, by reason of characteristics of the products or services, their prices and intended use.

Relevant geographic market refers to a market comprising the area in which the conditions of competition for supply of goods or provision of services or demand of goods or services are distinctly homogenous and can be distinguished from the conditions prevailing in the neighboring areas.

On account of sound economic positions, the enterprises may exercise such dominant position to restrict competition preventing other entities to evolve and carve out their place in the market. The Competition Act, 2002 monitors such unfair trade practices preventing sound market approach.

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