I.

Chicago School of Thought:

The Chicago School is known for asserting that economic efficiency and consumer welfare is and
should be the only purpose of antitrust law. It believes in a self-correcting market and advocates for
minimal government interference.

In this subject, we protect the competition and not the competitor. Competition law comes into the picture
not only when there is an existence of legal injury but also when fair competition ins hindered.

II. Origin of Competition Law - Mogul Steamship Co Ltd v McGregor, Gow & Co [1889] LR
23 QBD 598
Facts:

The plaintiffs were independent shipowners who sent their ships to the cargo port to obtain cargo. An
association (the defendants), also in the business of owning cargo ships, sent more ships down to the port
and reduced their freights so low that the plaintiffs were unable to make a profit. They further threatened
to dismiss any agents who loaded the plaintiff’s ships. The plaintiff brought action alleging a conspiracy
to injury and requested damages.

Issues:

Whether the defendant’s actions were unlawful and deemed an indictable offence by way of a conspiracy.

Held:

The defendants had acted in an effort to protect their own profits and trade which was considered to be a
lawful objective. No unlawful acts had taken place to warrant any wrongdoing, so therefore the plaintiffs
had no cause of action. To prove that a conspiracy constituting an indictable offence occurred, a “matter
contrary to law” would have to be shown to have occurred. Lord Halsbury found it impossible to suggest
that there had been any malicious intention to injure rival traders, except in the sense that they intended
their competitors to withdraw from trade. The defendant’s actions were therefore considered to be actions
taken to support their own business interests. Further, unlawful acts would have to involve obstruction,
violence, interference or molestation to meet the definition. None of those occurred. The appeal was
upheld and no cause of action was available for the plaintiffs.

III. Anti-trust:
US had a lot of trusts growing in every sector which led to these trusts controlling businesses. So to curb
the unbridled power of trusts, anti-trust law was brought in but it should be called anti-trusts law.

IV. Constitutional Foundations of Competition Law

Art. 38 and 39 lies at the heart of competition law policy in India in a manner so as to make the market
not only conducive for private investment but make the private players socially responsible. We needed to
strike a fine balance between the interests of the common people and interests of the private players
because we had a bad experience with East India Company.

Entry 21 of the 7th schedule is not part of the union list but still competition law was brought by the centre
as they felt the need for this because states had also not come up with their own laws.

1
38. State to secure a social order for the promotion of welfare of the people.—1 [(1)] The State shall
strive to promote the welfare of the people by securing and protecting as effectively as it may a social
order in which justice, social, economic and political, shall inform all the institutions of the national life.
2 [(2) The State shall, in particular, strive to minimise the inequalities in income, and endeavour to
eliminate inequalities in status, facilities and opportunities, not only amongst individuals but also
amongst groups of people residing in different areas or engaged in different vocations.

Profit maximisation or wealth maximisation is not abhorred but it cannot be the only purpose of the
industry rather it should be that due to their actions the inequality in the society would be reduced.

On article 38 there was a fierce debate as there were communist people saying that state should have
largest ownership in the companies and all the companies must be run by the state so that these companies
don’t fool or rob people. The measure of 38 is to remove inequality, but this is one part and the other is
given in 39.

39. Certain principles of policy to be followed by the State.—The State shall, in particular, direct its
policy towards securing— (a) that the citizens, men and women equally, have the right to an adequate
means of livelihood; (b) that the ownership and control of the material resources of the community are so
distributed as best to subserve the common good; (c) that the operation of the economic system does not
result in the concentration of wealth and means of production to the common detriment; (d) that there is
equal pay for equal work for both men and women; (e) that the health and strength of workers, men and
women, and the tender age of children are not abused and that citizens are not forced by economic
necessity to enter avocations unsuited to their age or strength;

V. Why is competition law so cherished?

 Allocative efficiency, optimal efficiency and optimal availability of resources is the essence of
competition. Efficiency and protection of competition are the two objectives of the competition
law.

Monopsony- one buyer multiple seller Eg. Railway, there are many companies making tracks but only
railway will buy them. Monopoly- one seller, many buyers.

When the constitution says that there shouldn’t be concentration of wealth, then why is Railway not
privatised? Under the competition law, you can have a position of power as a seller but you shouldn’t
abuse that power. Railways is the reason for the Shearmen act in the US. Railway was doing good but
they started dictating the prices. Similar acts were seen in industries like oil and sugar industries.

1. United States v. Trans-Missouri Freight Association, (U.S., 1897)

In 1889, 18 railroad companies west of the Mississippi River formed the Trans-Missouri Freight
Association (TMFA) to set rates and schedules for their members. The US government charged the
companies with violating the Sherman Act, which prohibits restraints of trade. The Supreme Court held
that the Sherman Act prohibited all such combinations, irrespective of the purpose. The railroad
association was price fixing under the per se approach. Competition should determine the reasonable rate,
not agreements between companies. The court further held that congressional debate could not be used to

2
decipher legislative intent due to the complex and often varying opinions on what the act means for
different legislators.

SCOTUS said that the Shearman Act was not limited to trusts and extended to railroads as well. The
Supreme Court came in and rooted the jurisprudence of the Shearman act. It did so in cases like Addyston
Pipe and Steel Company v. US, etc. it has 7 sections only but is the best one in the world. Court said that
they won’t interfere into the contracts but they will see the impact of contract in the natural flow of trade
in the economy. Business said that its nothing but judicial tyranny and you don't have any right to barge in
and say that the contract is nothing but restraint of trade. The courts would see that the nature of the
contract and check if such contract is going to restraint trade. Absolute restraint is not allowed in law, but
partial restraint is allowed.

Restraint of trade was devised as anti-competitive practices by various cases by the SCOTUS. The
stance of courts was highly criticised as the US is mercantile based society.

The SCOTUS through various cases gave two yardsticks to measures what is anti-competitive and
what's not:-

a. Rule of reason- if the positives of any act is more than the negatives then the agreement in
question won't be considered anti-competitive and vice-versa.
b. Per se rule- the act in itself is believed to be anti-competitive in nature and hence, is considered
against the statute of competition itself. This presumption is always rebuttable. This presumption
is only for the parties to rebut the presumption.

Both these will check only whether any agreement is anti-competitive or not. How to decide
when to employ which rule?

Competition acts in agreements can be used or misused. So it is a sword and shield at the same
time.

Cartel in the shorter run makes the best of results. But in the longer run it's not the same thing and
it turns ugly and bad. The effect of the transaction is so pernicious that its considered bad from the
beginning only unless it's rebutted.

There are vertical and horizontal agreements. So every market is nothing but a chain of suppliers, like
at the last level is the manufacturer of raw material from whom furnished raw material is procured
and the chain goes on until the product is purchased by the consumer. Eg. when Hyundai get steel
sheets from steel company like arson mittal to make any product then its a vertical agreement as the
business is vertically placed starting from raw material with mittal and Hyundai purchasing it.
Horizontal is when two parties are positioned at same level in the supply market, so a car dealer is
asked to either sell hyundai or maruti and not both.

But if hyundai and maruti get into anti-competitive agreement then it will injure the customers more
than the agreements between hyundai and maruti and their respective dealers (vertical agreement). So,
anticompetitive horizontal agreements between parties at same level is worse. Hence, a horizontal
agreement is presumed to be anti-competitive.

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Rule of reason cannot be applied to horizontal agreements and per se rule cannot be applied to vertical
agreements.

Bundling and tying come under general vertical agreements.

2. Standard Oil Co. of New Jersey v. United States (U.S., 1911)

Standard Oil Company, a major oil conglomerate in the early 20th century, violated the Sherman Antitrust
Act through anticompetitive actions, i.e. forming a monopoly, and ordered that the company be
geographically split.

landmark U.S. Supreme Court decision in which the Court ruled that John D. Rockefeller's petroleum
conglomerate Standard Oil had illegally monopolized the American petroleum industry and ordered the
company to break itself up. At the same time, the Court also held that U.S. antitrust law banned only
"unreasonable" restraints on trade, an interpretation that came to be known as the "rule of reason". [ONLY
CASE WHERE A COMPANY WAS SPLIT]

3. United States v. E. C. Knight Co. (1895, U.S.)

In 1892, the American Sugar Refining Company gained control of the E. C. Knight Company and several
others, which resulted in a 98% monopoly of the American sugar refining industry. U.S. President Grover
Cleveland, in his second term of office (1893–1897), directed the national government to sue the Knight
Company under the provisions of the Sherman Antitrust Act to prevent the acquisition. The question the
court had to answer was, "could the Sherman Antitrust Act suppress a monopoly in the manufacture of a
good, as well as its distribution?"

The Court held "that the result of the transaction was the creation of a monopoly in the manufacture of a
necessary of life"[1] but ruled that it "could not be suppressed under the provisions of the act."

4. Addyston Pipe & Steel Co. v. United States (1899, U.S.)

The defendants were pipemakers who were operating in agreement. When municipalities offered projects
available to the lowest bidder, all companies but the one designated would overbid, guaranteeing the
success of the designated low bidder if no bidder outside the group submitted a bid.

The government argued that some antitrust violations, such as bid rigging, were such egregious anti-
competitive acts that they were always illegal (the so-called "per se" rule). The defendants asserted that it
was a reasonable restraint of trade and that the Sherman Act could not have meant to prevent such
restraints.

Court held that for a restraint of trade to be lawful, it must be ancillary to the main purpose of a
lawful contract. A naked restraint on trade is unlawful; it is not a defense that the restraint is reasonable.

VI. Facets of CL

a. Public enforcement:- if any entity violates any provision of the competition law then such
entities will face a penalty in the form of fines. In India there is no criminal punishment
mentioned in the competition act, but in the US it is criminal.

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 When DG investigates and presents a report to the CCI and the CCI is of the opinion that so and
so provision is infringed then this is called public enforcement. And when such an infringement is
established then the claim for private enforcement rises.

b. Private enforcement:- when a private injury results in enforcement of a public law. No consumer
welfare or public interest is involved, just as one individual is affected hence, such a law is
brought.

In the US private enforcement is open for arbitration unlike our country. CCI looks after the public
enforcement and NCLAT looks after private enforcement.

Herein we are challenging a policy which affects the public interest at large. So such an agreement stifles
innovation, competition and injures public interest and hence such a matter will go before the CCI.
[These are the characteristics for any dispute to go before the CCI]

In competition disputes we talk of strategies affecting larger interests and not individual interests.

1. Case:- Neeraj Malhotra v. Deutsche bank.

An unknown lawyer said that foreclosure loan is wrong and he filed a case before the consumer forum
and the CCI (said that its abuse of dominant position of the bank and an anti-competitive agreement). CCI
gave 180 page order saying that as its a general practice, we cannot do anything.

VII. Economic concepts or principles underlying competition law policy:

There are 2 authors:

1. Masimo Mota : His work is based on econometrics

2. Geeta Gauri has written a primer on competition law, work is bad but one chapter is good which
covers the different models of economics like Nash equilibrium. She writes how a person will
react to a competitors’ actions. For example: VI and IDea had to join hands only to survive when
Jio started its onslaught of reducing prices. They practiced predatory pricing. [Besides the
reading, read for Nash Equilibrium, https://www.concurrences.com/en/dictionary/bertrand-nash-
equilibrium , also read Stackleberg model, https://xplaind.com/594955/oligopoly-models ]

Can a competition policy be overtly in favour of the consumers? No, as this cannot be sustainable. An
example is the sri lanka economy is consumer based and they dont care about quality and the price cap is
decided by an elected official. This exposed the economy to political lobbying where the companies
lobbied and corrupted individuals to get higher prices approved and further they also made profit by
keeping quality very low where the cost of R&D is kept low to ensure high margins. A similar case was
seen in India where Reliance Petroleum was able to get the petroleum minister in UPA changed because
he was not allowing them to price a new natural gas field as per them.

Positives of this are that the consumers would be able to have low prices and would be happy in the short
run. However, diminishing marginal utility comes into action where after every additional unit your

5
 satisfaction keeps on getting lesser. Initial few years are good but you start disliking the product and there
will be growing dissatisfaction.

More negatives of an overtly consumer centric policy is that suppliers will leave the market and black
market will happen. So, whenever we discuss about competition policy we discuss about 2 things:

1. Allocative efficiency: Example is if anand sir is asked to teach labour law because the teacher
left. This is required but this is allocative inefficiency and there would be dissatisfaction even
though the production is happening. He would have been better producing corporate papers.
2. Productive efficiency: Now lets say there is an order where Mess is said to be 24x7. The
productivity will go haywire and the cost of maintaining the mess would be extremely high
compared to a system where certain time limit is there.

These two things should be ensured and harmonized to create a successful competition policy.

What if seller centric competition policy is there? In South korea the competition policy is accused of
being favourable to seller due to low taxes and easy credit. In such a case there could be too much
inflation as there was too much money to be spent on all services as they will want to buy more services
as your consumption appetite. When the price of a product increases, the no. of sellers will also increase
and lead to services also being more. So, inflation will happen due to increased circulation of money.
There will be more employment ND business but everyday commodities will be expensive.

In this situation the sellers are dominant but they will be easily replaceable. Here unlike sri lanka where
the seller is powerful, the seller will be less powerful but only in the short run. There will be
productive and allocative efficiency for short run but after a bit of time there will again be diminishing
utility. So, there is not a good policy

Thus CONSUMER WELFARE + SELLER WELFARE= ALLOCATIVE AND PRODUCTIVE

EFFICIENCY

● Masimo Mota thus said the policy shouldnt care about the price paid by consumers and should
care about allocative efficiency.
● Seller centricism should also not be there.

VIII. Marginal Cost and Marginal Return, COURNOUT, BERTRAND AND STACKLEBERG
MODELS, NASH EQUILIBRIUM AND PRISONER’S DILEMMA

Marginal cost is the cost of producing an additional unit. Marginal cost reduces after every production of
every other unit. However, after a point of increase in production the marginal cost will increase.
Competition policy is nothing but an interplay of market forces of demand and supply. If a seller is able to
keep his business independent of these market forces then you are called a dominant player and said to be
abusing the dominance. When you operate independent of market forces, you dictate prices and limit
production then you function in contravention of competition policy.

The producers thus need to determine this.

6
Bertrand Model

Nash Equilibrium:- Nash equilibrium is a game theory concept where optimal outcome is when there is
no incentive for players to deviate from their initial strategy. A film is made on this called “Beautiful
Mind”. In this movie there are 4 girls, who go to a bar and Mr. Nash says that if everyone will go after
that one beautiful girl amongst them then how will things work.

Cournad Model:- The Cournot economic model addresses competition between firms that provide
identical or nearly identical products. They independently determine the quantity they'll produce in
anticipation of what they believe their opponent firms will do.

This model answers the question, why the water price doesn't rise or fall in summer and winters
respectively? The companies will make more bottles than their competitors in the market after doing a
study and hence, ………….

Prisoner’s Dilemma:- when you are put in a different room than your accomplice then how should you
answer carefully in order to save both. Both people will get the same set of questions. There could be
three scenarios:-

a. Where both give statements against each other

b. Where none speaks anything

c. When they say they don't know anything

CCI went about saying that the taxi market is at a nascent stage and hence let the market take its course
and we will not interfere into it. But we saw a price surge after OLA and Uber won the case before CCI.

So if the CCI plays a mute spectator's role then the intermediaries like OLA and UBER will definitely get
the first mover advantage. CCI said that it's nothing but creative destruction meaning to create something
new you need to destroy the old things to make space. So if the entire market dynamics is going through a
change due to change in technology then the state shouldn't save them as it's an exercise of creative
destruction.

This philosophy was used by the CCI for its initial 10 years as they thought that their intervention would
be seen as interference.

IX. Assessment of Market Power and Relevant Market – SECTION 3 AND 4

SSNIP TEST AND CELLOPHANE FALLACY- https://www.linkedin.com/pulse/market-definition-
hayden-green/ , https://learneconomicsonline.com/blog/archives/1218#:~:text=Another%20large
%20detraction%20of%20the%20SSNIP%20test%20is,the%20scope%20of%20the%20market%20until
%20this%20occurs.

7
When to say that an entity has become most powerful in any sector?

➔ There are the following criteria to measure the market power:-

1. Market power can be assessed from different perspectives
2. Market power of an entity should only be measured by its ability to act independently
from the market forces of demand and supply (meaning if the entity can afford to dictate
the price as per their whims and fancies then it shows how powerful one is in the
market, this test is called Small but significant non-transitory increase in price
(SSNIP)) to be said to be powerful in the market. So things like high capital, influence
etc. will not be the criteria to assess.
3. Whichever entity is more visible in the market, it doesn't mean that such an entity is also
powerful in the market. This is as per the competition law.

Hypothetical monopolist is nothing but the seller being examined under any test. We put a question to this
seller, which is that “if the price of your product is to increase by 5% whether the customer will switch
to another seller”

Only two possible answers are there:-

1. My customers will not switch with the increase- this tells that the product sold by him is a
product which does not face any competition. So no deterrence is there to the seller’s abilities to
unilaterally increase the prices of the product.
2. My customers will switch- if the person switches then it means that there is deterrence there to
the seller’s abilities to unilaterally increase the prices of the product. Eg. If by increasing the price
of butter, the customers switch to MArgarnien then the seller’s market power is closely limited by
the availability of Margarine sellers. Herein, Margarin would become an alternative to butter.

Eg. in NLUJ Suresh is someone who will face no deterrence from anyone as there is no
competitor here selling his products’ alternatives although there are alternatives available to his
products but no other seller is present in NLUJ selling such alternatives.

More the number of sellers selling alternatives, lesser will be the power of the entity in the
market.

This is called the definition of market.

Will the presence of single malt in the market make deterrence to the unilateral ability of the
seller of another whiskey to raise the prices?

If the answer is yes, then it means that both these whiskies are close alternatives.

How to see whether two products are substitutable to each other or not?

a. Consumer preference
b. Utility, purpose and intent of the product

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 c. Price:- has to be very close in price. Eg. ACs and dehumidifiers are close substitutes
unlike ACs and Coolers.

In China there is a change in SSNIP to SSNQ wherein the shift is from price to quality.

There is also a fallacy to the SSNip test called Cellophane fallacy.

https://www.cbflnludelhi.in/post/the-precondition-of-dominance-under-section-4

http://www.iclr.in/assets/pdf/ICLR%20Issue%202%20(Souvik%20Chatterji).pdf

Cournot model:-

Bertrand model:- lose focus on volume and put focus on the second part of multiplication which is price.

Income= Volume × Price

Marginal cost = marginal revenue is only hypothetical. If one player reduces prices then the others will as
well and there will come a point where marginal cost of producing is equal to marginal revenue. As no
one will sell their product at a price lower than the cost of production or even equal, such a case is not
possible and this model relies on a hypothetical goal which is a fool's Paradise.

If we start a price war then it means we are following the Bertrand model. But the problem is that it will
give benefits only in the initial stage as later the market will take such a change that they will have to sell
at a price lesser than the cost of production.

Cournot model says, leave the pricing on the market. It says that if there are two companies and they
have no means to know how much the competitor is making then they will make the bottles as per the
demand. The demand ensures that the market will itself find a best pricing equilibrium.

If a company finds out that the market demand is of 5000 water bottles and that is being made by the
competitor then that company will make 500 more bottles than the competitor and as supply is more than
demand then the competitor will start reducing the number of units being produced as without this the
prices will go down. In this model the prices will never come close to marginal cost.

In Bernard you inculcate a habit which is not sustainable for a long term. In this model one takes losses
just to make sure that the other competitors lose on their market share also and then eventually you gain a
monopoly. The question is how can you sustain this much loss, because you are getting profits from other
businesses and herein the competition law kicks in.

None of the models are complete in isolated self. If you rely only on the cournard model then you will
face losses and if you rely only on the Bernard model then you will lose money.

The Cournard model tends to serve the interest of the seller as it keeps them away from the marginal
revenue.

Bernard is not effective at maintaining price competition. Cournard is also not effective for the same.

One transaction, three different names

Nash equilibrium, prisoners dilemma, game theory.

9
Prisoner's dilemma :- When you don't know whether the partner will speak up or not, then just speak up
as it's not about that you will not be caught or he will be caught, rather it's to make sure that you have
company in jail.

If I reduce the prices of my products then the competitor will have to let go of his temptation to increase
the price and reduce the price. This will strain the price he has with his supplier.

Eg. The best example is of Airline, wherein if you search for flight tickets many a times then the prices
surge across all platforms like mmt, easemytrip etc. this lead to CCI investigation and they found a hub
( that there is an algorithm used by all these companies which gives a signal when there is a lot of traffic,
and hence the prices increase)

But CCI let go of these people as they found human intervention on the part of Air India in changing
these prices. The air india employees would sit and change the prices manually and hence, the
investigation closed.

Any business starts with the aim of gaining profit, but what such a person has to be worried about is who
all are the competitors and what market share they have. The primary concern is how to price the
products. For decision making we have read the three models

OUTPUT VARIABLE FIXED TOTAL COST MARGINAL COST MARGINAL

COST COST (TC of next year - REVENUE
(TC)
TC of previous
year)

0 0 20 20 No marginal cost as No marginal revenue

nothing produced

1 12 20 32 12 30

2 22 20 42 10 30, its one more unit .

marginal revenue for
additional items will
be the same i.e. 30

3 27 (at this stage 20 47 5 30

more hands on
the deck are
needed and
hence more
salary might
have to be given)

10
 After this the
moment you go
to the 4th unit the
profits will
decline

4 40 20 60 13 30

5 60 (producing 20 80 20 30
beyond your
capabilities)

Economies of scale and economies of scope [a proportionate saving gained by producing two or more
distinct goods, when the cost of doing so is less than that of producing each separately.]

Machinery requires maintenance, more salary, stretch your working hours, efficiency reduces, optimal
production is reduced. Should not produce more merely because you can produce it.

Bernard and turnard both models applied. Usually, prices will also come down. Ideally, MC=MR. This is
the idea of perfect competition – many sellers, selling same homogenous product and none has power to
have more market power than others.

With every extra unit produced, the cost of production is reducing.

Market price prevalent for any product is Rs. 30 on the day of manufacturing.

Beyond a particular point, increasing the number of units the efficiency dip will kick in.

A perfect condition is a market wherein marginal cost is equal to the marginal revenue. So numerous
sellers sell the homogenous products and all the seller’s are equally strong. But such a market can never
be there, although we still strive for this.

There are few kinds of markets only that exist:-

a. Monopoly:-
b. Oligopoly-less players, but strong players. Eg. telecommunication, aircraft, petroleum market.
c. Monopsony- one buyer is only there. Eg. Indian railways.

Average variable cost:- how much total money is incurred in making all the products.

Why is it important?

To understand how much profit margin is there and how much market power is there with any seller to be
able to operate without depending on the market forces. Like if the demand dips and supply is high then

11
the pieces should go down, but if it doesn't dip then it means that the business is independent of demand
and supply.

Case:- Sony Ericson Case

In this there were certain IP rights. Phones are important as they have some good softwares in them for
which Standard Essential PPatents (SEP). There could be some conditions wherein the person holding
these SEPs sets high prices of royalty and harsh conditions for royalty. Can a case be brought? If yes, then
before whom? CCI or Patent office?

Frand Terms:- every patent owner is duty bound to give the patent on :-

a. Unbiased basis
b. Fair prices
Patent law says that if any one is found to violate it then compulsory licensing order can be passed against
them.

In this case the case went to CCI and the patent office as well. Can CCI ask the patent office or give
themselves a compulsory licence order?

Under the competition act, for abuse of dominance a twofold inquiry would be there, the threshold for this
is wrt you being dominant in market and then abusing your position. But was this an abusive practice by
ericson?

Competition law is a functional economic law, it means that the competition law only has the objective to
control those entities which perform economic activities. So, a trust, NGO, society whose existence is
only to help the poor, disabled etc. and it doesn't earn revenue then such entities won't be regulated by the
competition law.

Section 32 of the CCI talks of extra-territorial jurisdiction of CCI. Effects doctrine in SS Lotus case – if
effects felt in any other country, then jurisdiction of the country applies.

In SS Lotus case there is an Effect doctirne which says if any transaction happened outside the territory
of the country but it has affect on the doemstic market then the CCI has the right to regulate such
transactions.

This case gives conditions to uphold extra-territorial validity of law.

X. Three limbs of competition law

The commission will not be able to investigate behaviour if it is not an enterprise. There are 3 limbs of
competition law:

1. Anti-competitive agreement
2. Abuse of dominant position (Section 4): Most layered as the commission has to delineate a
market. So, a seller of Kanchipuram saree can be in south or north both and to delineate the
market, geography will also have to be seen. The Commission has gone on to say that market
conditions also matter and market conditions of Gurgaon and NOida are also different. We have
to have various layers and after delineating the market we have to see whether there is an entity
involved or not. Agreements can be done by individuals also and even if it is executed through

12
 corporations. Thus, under section 3 the commission does not need to examine whether an entity is
an enterprise or not. Unless and until you are in an activity that generates money, you cannot be
an enterprise and enterprise includes a Person as well.
3. Combinations (Section 5): Mergers, amalgamations etc.

XI. STEP 1: Meaning of enterprise [Section 2(h)]

1. Arshia Rial v. Ministry of Railways, CCI
- talks about whether Railways is sovereign function or not

2. Kiratpur sahib truck operator association case

A person was in central government service. He was transferred and hence wanted to hire mover and
packer. He went to a truck driver who said that they take the orders only though an association. He
booked the deal with the association and then got his things transferred. The person went to file a case
saying that the association is abusing its power and is against the interest of the people.

The association said that its a trade union which looks after the interests of the constituents and hence
they are not enterprise. The CCI said that as you charge money for maintenance then it means that your
transaction is commercial and hence you are an enterprise.

A similar thing happens in case of RWA of the societies, if their transactions are commercial and generate
revenue then as per the functional test they would be considered an enterprise.

3. In re indian exhibition industry association and ministry of commerce and industry case no.
74 of 2012 (aka Pragati Maidan ITPO case)
In this the pragati maidan comes under ITPO. The Pragati maidan was given on rent. The organisers said
that the ITPO is abusing its dominance. The CCI went on to say that any entity (even HUF) will become
an enterprise if their activity leads to generation of revenue.

4. Resident Welfare Association case

– RWA is an enterprise as well – generation of revenue happening.

The definition of enterprise speaks about various activities and what if someone can do this
without earning; for eg: Govt. Depts distributing condoms would be a commercial activity or not and
since a govt. Dept is there then would that be sovereign function. Eg: HUDA allotment plots is
commercial activity or not.

Collective bargaining also comes into mind where trade unions claim exemption and would they qualify
as enterprises. If the trade unions make it hard for the members to function independently then would it be
considered as abuse of dominant position?

5. Shivam enterprise v. Kiratpur Sahib case and iJustice v. CLAT Committee case
In Shivam enterprise v. Kiratpur Sahib case, the commission went on to identify 4 factors of
enterprise:

1. The Society is getting contracts executed through its members in its name.

13
 iJustice v CLAT: the petitioner said that there is too high a fee and other colleges take admission
through this CLAT scores and they pay CLAT to get access to these scores. This way CLAT was
accused to have become a dominator in the market of 5 year LLBs and any new college will have
to pay CLAT to take students through the ranks. The commission said that it was an MOU and
was thus not an enterprise.

2. Customer makes payment to the society for the service and not directly to the person and the
money is routed through the society
3. The society passes the payment to the member after retaining a small amount as administrative
charge for itself. In this case it was Rs. 50 – stationery, pencils, pens – even though no monetary
benefit. This charged amount was considered sufficient
4. The customer has no control over various members of the society.

6. CJD Logistics v. Dumper and Dumper Truck Union Limestone

Same issue was raised in the Jaisalmer case of CJD Logistics v. Dumper and Dumper Truck Union
Limestone where a contractor was stopped from taking stone away from jaisalmer without using drivers
from trade union. When DG went to ask, the trade union did not come ahead to argue if they are
enterprise or not and the DG on the basis of Shivam enterprises case found them to be enterprise. So, the
commission assumed this and found them to be abusive of the dominant position but then said that DG
was not able to submit evidence as to enterprise and thus we cannot pass order. 2022 CCI Order). READ
THIS ORDER. Shivam Enterprise conditions not followed.

7. CCI Order in the case of IRCTC - UOI v. CCI (2012)

The Delhi HC examined what would qualify as sovereign function. The Delhi HC said that primary,
inalienable and non delegable functions are sovereign. So, in addition to the five functions mentioned in
the definition of an enterprise]. Welfare obligations are not sovereign functions and running of railways
will fall within commercial.

8. Dept. of Agriculture and farmer welfare v. CCI

Department performing sovereign functions or not. CCI said no. also analysed the definition of ‘services’.
Combined reading of services and enterprise – everything else apart from the functions mentioned.
Litmus test is commercial test + generation of revenue (twin test)

Certain functions of dept. were exempted from the CCI as it was sovereign. The court looked at definition
of enterprises and said that the litmus test is commercial + Generation of revenue. Being a govt. Entity
does not exempt you.

9. HUDA case
making plots in welfare scheme and selling for free. But they were charging convenience fee.

Allotment of plots was being done and claimed as sovereign function. A convenience fee was charged and
hence, it was considered to be an enterprise.

For any entity to be covered under section 4, it has to be an enterprise so if you are accused of abusing
your position then the entity must pass the test of enterprise.

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 10. CCI v. Coordination committee of artist and technicians of West Bengal Film and Television
industry, 2017.
Anti-competitive agreement may not be between companies when they are dividing the market area
among themselves. In one judgement, SC had an embarrassing moment in West Bengal Cine Artists case
– SC said that evaluation of enterprise is required in section 3 as well but two years later they issued a
rejoinder. LATER PASSES A CLARIFICATORY ORDER AFTER ONE YEAR.

Definition of person – section 2(l)

Digital Competition Bill is pending – digital marketing, trickle down effect is too high. Initially, CCI said
digital market is not a different market but only a different channel. That was oversimplified
understanding, From there to now Digital Competition Bill – long journey.

Currently we need to see that the concepts of competition will be valid even when the digital market bill
will come into effect. In the initial days the CCI said that the digital market is just a different channel and
not an alternative market as they said that at the end of the day it's just a market where customer and seller
meet.

Entire world is divided into two groups:-

a. One says that CCI should be changed and improvised to cater the digital market
The old regime should be replaced with something new in order to cater to the digital market.

XII. STEP 2: Relevant Market

● Relevant market in the CCI has a two pronged definition:- first is of relevant geographical market
and Relevant product market.
Section 2(r) defines relevant market, Section 2(s) defines relevant geographical market and section 2(t)
defines relevant product market.

Section 19(7) CC Act

(7) The Commission shall, while determining the “relevant product market”,
have due regard to all or any of the following factors, namely:—

(a) physical characteristics or end-use of goods;

(b) price of goods or service

(c) consumer preferences;

(d) exclusion of in-house production;

(e) existence of specialised producers;

(f) classification of industrial products.

15
We are reading this as an enterprise that is selling some product, is a dominant seller and is abusing that
status.

Criteria to determine the relevant product market:-

● Interchangeability and substitutability for consumers.

● Characteristics of product
● Prices of the product
● Intended use
Every product has a substitute for the consumers. This will be decided on the basis of characteristics,
prices and intended use. Eg. is a leather ball a substitute for a Vikki ball? The characteristics of red balls
are very different from vikki balls. The use will define whether its a substitute or not, if we talk about
international tournaments then definitely both are different, but in gali cricket as everyone just wants to
play with a ball, so they will play with any of them. The EU Banana case mentions that in order to
determine the relevant product market the pedigree of customers will have to be understood like,
whether the ball is for gali cricket players or for international cricket players.

There are 2 types of substitutability:

A. Demand side (if price increases will consumer switch); If at all there is a demand for a product then
the consumer will have an alternative in his mind and if there is a breach of price ceiling then the
consumer will shift to the alternative. Eg: if milk is expensive, then you will buy powder but if it becomes
expensive then you buy soya milk. So, its the ability to keep them in the same market and So, packeted
milk, raw milk (Chahte ka doodh) and milk powder can be kept in the same category. Hence, they are
substitutable products.

Section 19(7): The Commission shall, while determining the "relevant product market", have due regard
to all or any of the following factors, namely:-

(a)physical characteristics or end-use of goods [or the nature of services];

(b)price of goods or service;

(c)consumer preferences;

(d)exclusion of in-house production;

(e)existence of specialised producers;

(f)classification of industrial products.

(g) costs associated with switching demand or supply to other goods or services;

(h) categories of customers.

Under competition act the definition of relevant market also happens when inquiry on combination
matters is done by the CCI.

Combination is when two competitors come together to exploit the opportunity together so as to not let
other entities grow much. CCI is interested as it would want to assess the anti-competitive nature of this

16
new entity, this would happen when the entity so made is so big that other players won't be able to
survive.

In relevant product market a new thing has been added giving formal recognition to the CCI to be mindful
of Supply side substitutability. This puts our law at par with other countries’ law.

● Discounted cash value method: CCI has opened itself to the idea to not limit itself only to
consumer choices, intended use, price etc. but to also think of the cost of switching over. Meaning
if one seller can switch to your profession at a low cost, it will be a restraint.

CASES: Demand side substitutability

1. Matter of verifone mobile technologies ltd. (2013)
The CCI distinguished between Electronic ticketing machine (ETM) and point of sale terminus (POS) on
the factor of physical characteristics and intended use as well. ETM gave other information as well,
whereas POS only told about transaction amount. So both are such that cannot be substituted with each
other.

Prices and impact of products has a big role in considering characterisitcs and intended use:-

2. GHCL ltd. Coal india Ltd. (2014)

In this case coal india procured a lot of coking coal. They brought in some changes in their agreement.
Abuse of dominant position was argued before the CCI. The CCI said that there is a price difference due
to difference in characteristics and if the price is very high then it will have a different market.

3. Faridabad Industrial association v. Adani Gas Limited (2012)

Adani supplied natural gases to different people. The allegation was of abusing dominant position. CCI
said that there are different set of consumers for the same natural gas, and hence all these four different
sets of consumers are not substitutable. Eg. gas used by cab is for transport, gas used at home is for
cooking. So, difference in intended use and the different price being charged makes the categories non-
substitutable to each other.

4. no 61 of 2010
Zee said that the BCCI is abusing its dominant position and they have hijacked all the stadiums and it's
not available for us. CCI said that there is consumer preference is there for a particular product then it will
also help in determining the relevant product. The physical characteristics and intended use might be the
same but as the consumer preference is different than the relevant product will also differ.

5. EC Banana case
The EU banana case says that we should not look at a consumer who is not decided of his choices and
extreme loyalists should also not be considered .

6. Coal India Case (2012)

Coal India was using a certain quality of coal and had brought a tender for it. The tender was given and
the supplier said after giving supply for some time that we cannot give at this price and please increase
the price or change the product. Coal India refused and the vendor went to the CCI and said that Coal
India is the only procurer and therefore, Coal India was in a dominant position. It said that coal india was

17
abusing the dominant position. Coal India said that they were not dominant as the relevant market was
coal and therefore, there were many manufacturers. However, CCI said that coking coal had no substitute
and coking coal was to be a separate relevant market. Therefore, coal india was found to be in a dominant
position. Coal india wanted the relevant market to be wide so as to show no dominance whereas the
commission wanted to show the market to be narrow so as to hold coal india liable. Hence, coal india was
found to be liable.

Another example can be google which has a monopoly for advertisement. A case came where people were
searching and there was a showing of certain specific results of BharatMatrimony. So, a case is going on
challenging this. A similar case is also going on against google for showing such recommendations on
Maps.

7. Matrimony.com LTd. v. Google LLC (2018):

The relevant product market was as said to be online general web search services and google was found
to be dominant.

8. Bellair v. DLF limited (2010)

Here commission defined demand side substitutability and supply side substitutability. DLF constructed
multiple apartments and promises were made but delay was there. The owners were shifted sometimes
from 7th floor to 17th floor etc and no consultation was done. DLF said relevant market be Flats in NCR.
CCI said that the product in question is high end residential apartments and this was considered to be a
separation by the CCI. Only those flats similar price range would be in one category. To gauge the actual
market power was necessary.

Secondly, they wanted the geographical limitation to be in Gurgaon only and not NCR. They said market
conditions of Gurgaon and Noida are not homogeneous. (at that time Noida was not so developed)

9. Emaar MGF Land Ltd. Case no. 1/2014:

the cci said that the market was flats above 2cr.

10. Poonam gupta v. Unitech limited Case no. 4/2020

B. Supply side (can consumer choose another seller): If the demand of one product is really high then
whether there are that many sellers to enable a consumer to switch. This will impact the delineation of
relevant market. If there is only one option then that seller will be classified as to be in a dominant
position.
11. Hiranandani Hospital case [SSS]
Hiranandani Hospital case to be read where supply side substitutability was used.
https://www.technoarete.org/common_abstract/pdf/IJSEM/v4/i12/Ext_51497.pdf

Dream of a normal seller is to not have any competitive restraint. Anything which puts restraint in pricing
of his product and selling of his product as per his wish.

18
The competitive restraint is put due to availability of alternate products and no. of competitors in the
market. So the business strategy would revolve around two things, first, how to reduce the availability of
alternate products and how to stop the entrance of any new competitor.

These two things also help one measure the market power of any business. Like if many alternatives are
there, so even if the prices are increased slightly the customers will switch to another product. If lesser
competitors are there and market conditions are such that the options available to any seller to switch into
my domain of business is very easy, then the competitive restraint for me would be quite high.

For example, in markets like ice cream, momos etc. there is seasonal employment due to the convenience
of any seller to get into this market. In one season, he will sell ice cream and in another he will sell
momos.

If the prices of ice cream surges, then as the cost of entry is not much, an average seller will get into this
market so the abuse of dominance by the dominant player will come to an end as many new sellers will
increase hindering the dominant player’s ability to control the prices. So the supply side substitutability is
a competitive restraint.

But the competition constraint made by the demand side is much more than the supply side
substitutability. Why? As when sellers increase in the market then definitely my ability to control the
prices will come down but after sometime, not instantly. But consumers have a lot of options, like if OLA
is not available then Uber, hence, immediate switching due to convenience of switching. This is demand
side substitutability.

So having many options decreases the market power, due to the wider market and vice-versa.

Ice cream makers' ability to price their products is very low in summer due to many other options
available.

12. Shri Sonam Sharma v. Apple Inc. Ltd. (2011) [SSS]

Guy filed a case against apple saying that apple has become dominant due to nokia’s market share
dropping heavily. At that time in 2011 there was an apple lock service. It would say that the handsets of
apple would work only on gsm sims. So anyone who had a cdma sim card, his sim will not work in apple
handsets. This was challenged on the grounds that you are a phone manufacturer and hence how can you
tell me which sim to buy.

The argument was also that Apple is abusing its dominant position in the Indian market as they are
categorically saying that they will not make phones compatible with cdma sim.

CCI denied the arguments and said that both gsm and cdma are very different and hence, it's very difficult
for any brand to switch to production of a different sim card mobile phone. So the CCI applied the supply
side substitutability.

In India we use DSS, as it's a good indicator of the market and it also helps in consumer welfare. In US
generally SSS is used more rather than DSS.

13. In re Cupid Ltd (Manforce) (2018)

Concept of Supplier’s side substitutability was discussed. Information was given to CCI that an enterprise
is making condoms and lubricant and this enterprise has been supplying these condoms to ministry of

19
health and family welfare. The ministry had a department under it which would do procurement. This
department was called central medical services society (CMSS).

There were certain changes brought about in the procurement agreement by CMSS. the commission had
to see whether the society is a society or not as the argument laid by the ministry was that they do it as a
sovereign function. Also, no revenue generation is being done and its done only to make people aware
and control the population. The society said that we are working in a different market as its not
commercial purpose and hence we shouldn’t be treated at par with the other firms. The CCI said that
society is a purchaser and is at the demand side of the market whereas the informant enterprise is on the
supplier side and this is nothing but a classical case of abuse of buyer’s power.

The information said that the society changed the terms and conditions unilaterally and hence they are
abusing their dominant position. It was said that the condoms so made are made particularly for the
society only and as the society knows about its market position and that if we are not going to give it to
them, we cannot use them anyways, hence they are abusing their dominant position.

CCI held the society as an enterprise as they procure and distribute condoms and this leads to some
revenue generation as you give it to distributors to distribute and they will give some amount, creating
some revenue. This is as per functional test.

Should only demand side substitutability be seen?

As if its only about demand, then the customer may not go for this free condom and go for an alternative
brand and buy it. In this case the market size will be really big leading to lesser market power. The CCI
also went into the SSS and said that if supplier is stopped from supplying it to any particular entity, can it
go and supply it to any other alternate market and whether the other enterprises immediately come into
this market and start selling this product.

The CCI wanted to measure the market power of the society and for that they went to see whether
monopsony market is there or not, i.e. only one buyer who is so strong that you cannot sell anywhere else.
CCI said “demand side substitutability test to be applied inversely and we have to assess the
substitutability for suppliers and not customer, i.e. whether other procurers are available apart from the
society and their ability to switch to alternative sales opportunity both in terms of product and geography.
Applying this test the commission concluded that manforce has other markets also as currently they are
working in the social market. They have other markets like open market, export market etc. so just
because the order was placed and now it has been changed doesn’t mean that it is abuse of dominant
position by the CMSS because other markets are also there.

CCI said that we will not look at the fact that Manforce is giving condoms only to CMSS rather we will
consider the whole Indian market. Hence, by this reasoning CMSS becomes one of the procurers and they
don’t have the dominant position to abuse.

14. Cases on buyers power abuse

a. Shri rajat Verma v. PWD, govt of Haryana, Case 70 of 2014
b. Adcept technologies pvt ltd. bharat coking coal ltd. case 80 of 2015
c. VE commercial vehicles ltd v. UPSRTC, case 80 of 2015

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XIII. Relevant Geographical market
Once you find out all the products which are called substitutes, then you need to see exactly where the
markets of these products are. Ex. the relevant geographical market for laptops, phones would be a brick
and mortar shop and e-commerce. Are these two channels or two geographical markets?

Check the competition framework of Sri Lanka, Pakistan. See how they embrace the idea of competition.

Section 2(s) “relevant geographic market” means 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 neighbouring areas.

Section 19(6) The Commission shall, while determining the “relevant geographic
market”, have due regard to all or any of the following factors, namely:—

(a) regulatory trade barriers;

(b) local specification requirements;

(c) national procurement policies;

(d) adequate distribution facilities;

(e) transport costs;

(f) language;

(g) consumer preferences;

(h) need for secure or regular supplies or rapid after-sales services.

For eg: Kanjivaram saree can be bought by person in Kolkata and Delhi both. There are scooters and
snow scooters and you are more likely to get snow scooters in hilly areas and if you are to talk of
behaviour of a snow scooter manufacturer you'll not keep the geographical market pan india but only the
hilly areas. Another eg: is golf cart which earlier was limited to only the golf courses but now it is in
societies, schools, airports etc. everywhere and hence, you’ll keep the market pan india.

Another eg: is that HR vehicles are cheaper than DL no. so their markets would be very different when it
comes to geographical market as the conditions are very different.

It also matters where the after sales service station of a car is as it will impact your choice.
So, we have to see if the areas are emitting similar marketing conditions in terms of factors like
transportation, tax etc.

1. CCI v. SAIL
The SC said that the CCI has to only see whether all the conditions of market are homogenous.

2. Adani Natural Gas case

Haryana said that natural gas is required in large quantities for Faridabad unlike other districts and thus
for stability we needed a single supplier thus, making the market conditions very distinct from other
districts as regulatory barriers are there. [ this is in reference to point (a) of the requirements)

21
The COMPAT looked at the local specification requirement in the DLF Belair case. They said that
employees of firms came and they upped the price and the local requirements like how will i find mode of
transport, time of travel to office etc. These all clubbed together formed the local specification meaning
yaha ke hisab se kya chal raha hai. Local conditions prevalent have to be taken into consideration.

3. DLF v. CCI
the SC went to lengths to decide on the length of geographical market.

After market also plays an important part. For eg: refinancing of loans if interest rates come down. This
refinancing does not have a primary market and it is for only for someone who has already taken the
primary product i.e. the bank loan. Another example is the sale of car in second hand market. [this is in
reference to point h of the Requirements]

4. Case: In Reference to Indiabulls Housing Pvt ltd

this case also refers to onikra case.

[LIKE PRODUCT TEST IN ANTI DUMPING TO BE READ

SNAPDEAL CASE ON RELEVANT MARKET – READ CASE FILE]

XIV. Dominance Test

Elzinga Hogardi Test & SSNIP Test are the two tests to judge dominance.

Section 19(4): The Commission shall, while inquiring whether an enterprise enjoys a dominant position
or not under section 4, have due regard to all or any of the following factors, namely:—

(a) market share of the enterprise;

(b) size and resources of the enterprise;

(c) size and importance of the competitors;

(d) economic power of the enterprise including commercial advantages over competitors;

(e) vertical integration of the enterprises or sale or service network of such enterprises;

(f) dependence of consumers on the enterprise;

(g) monopoly or dominant position whether acquired as a result of any statute or by virtue of being a
Government company or a public sector undertaking or otherwise;

(h) entry barriers including barriers such as regulatory barriers, financial risk, high capital cost of entry,
marketing entry barriers, technical entry barriers, economies of scale, high cost of substitutable goods or
service for consumers;

(i) countervailing buying power;

(j) market structure and size of market;

(k) social obligations and social costs;

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(I) relative advantage,by way of the contribution to the economic development, by the enterprise enjoying
a dominant position having or likely to have an appreciable adverse effect on competition;

(m) any other factor which the Commission may consider relevant for the inquiry.

DEFINITION OF DOMINANCE: Section 4 Explanation.—For the purposes of this section, the

expression— (a) “dominant position” means a position of strength, enjoyed by an enterprise, in the
relevant market, in India, which enables it to—

(i) operate independently of competitive forces prevailing in the relevant market; or

(ii) affect its competitors or consumers or the relevant market in its favour.

There are two factors or criteria mentioned to help us understand what is dominance, first is to operate
independently of the market forces of demand and supply. Second is affecting the competitors or
consumers or relevant market in its favour.

“Absence of competitive restraint either from the market forces or from the competitors is the true test
of dominance” - Supreme Court

1. Arshia Rail infrastructure ltd. v. Ministry of Railways

2. Tandrol Raahee technologies ltd. v. DMRC
3. Mr. Ramakant Kini v. Dr. LH Heeranandani Hospital Mumbai [ ELZINGA HOGARTY
TEST]
4. HNG Floatbass India Ltd.v. Saint Gobain Glass India Ltd [Kapoor Short Glass case]
exclusive supply agreements

just because volume is more in sales, its not conclusive proof of dominance, other things also have to be
seen. Market share is merely indicator not a conclusive proof.

A few articles are being given by sir for us to understand the interpretation of dominance in US and
europe.

General agreement between scholars and practitioners that dominance is absence of competitive restraint.

5. Meru case (Uber/Ola case)

Uber had launched its services in India and they gave heavy discounts. Meru went to CCI saying how
much discounts are given by Uber to those owners who maintain their car fleet with Uber. meru said that
before Uber the market was such that such incentive couldnt be given to anyone and after Uber came in,
the price per km of ride has come down from Rs. 13 to Rs. 9. Meru also said that 2.5 to 3 lakhs is given as
discount by Uber which is very high. Meru said that its blatant abuse of dominant position and this
completely indicates predatory pricing.

Problem of CCI was how to define Dominance and what all factors to see while assessing someone’s
dominance. In this case although Uber was found dominant, CCI said that mere high market share is
indication of dominance but not conclusive proof to say that yes, it is dominance. Meru argued that Uber

23
is a subsidiary of a company registered outside India and they are sitting on a lot of money and hence, the
focus point should be that how come they are able to give so much discount. The matter also went to the
SC and they said that this case deserves some sort of detailed investigation.

Meru also argued that they are giving this much discount just to seep into the market and later they will
increase the price. The SC said that it could be that there are efficiency gains in the market brought by
Uber and that's why it's giving such rich dividends, if it is true then we cannot penalise it.

uber was found dominant, commission said high market share is only an indication of dominance but not
a conclusive proof. Uber is a subsidiary of a foreign company with deeper pockets. This is a factor
mentioned in section 19. SC said DG is making a detailed investigation but we agree with COMPACT’s
opinion – this case deserves scrutiny. Network effect – if more drivers, more business from consumers –
like whatsapp, if everyone is using whatsapp, you will also use it. They are subsidiaries to a cash rich
company, incurring loses at early stage, disrupt market, once they have established dominance, they will
increase their prices.

Either this can be market disruptive act or it could be that they are bringing in better efficiency. If
efficiency gain has been brought about by uber, they it should not be penalized.

Need to understand the decisional practice on section 19 factors, refer to ppt as well.

Define dominance: documents shared.

1. Annika Kalden – definition of dominance within the meaning of article 182 of EC

2. ICN report on merger guidelines – chapter 2 – April 2004 “market definition”

6. CCI v. Dhanraj Pillai

7. Surendra singh barmi v cci
8. Hemant sharma v all india chess federation
fide imposing restriction on us. Protest – points seized. Entirely dependant on federation for their careers.

In all of these cases, two relevant markets delineated.- primary and ancillary + primary

Public interest – Doordarshan also got broadcasting rights apart fromm BCCI

Professors and lawyers – not allowed.

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 9. Ramesh v. Chandigarh Housing board (CHB)
Allegations of dominance made against CHB. CHB had brought scheme to disburse land parcels and they
imposed some conditions. Ramesh was successful but he could not pay his installments and thus his
allotment was cancelled by CHB. He said i will give you interest rate and correct it. CHB said we will
charge 30% penal interest rate. Furthermore, the CHB was also not able to deliver the land on time.
Ramesh approached commission saying the conditions are arbitrary and they are dominant. CHB said
there are many private bodies.

Commission said you are statutory based and different from private AND you have 85% market share.
Furthermore, these arbitrary conditions also further establish your dominance. The CCI referred to the
market share, some clauses of the contract and how private players were being insolvent in last 5 years
even though CHB profits increased. This as per the cci, showed that even in declining trends you
increased profits meaning thereby their dominance.

10. Bookmyshow v. Showtyme

exclusive distribution agreements violative of section 3 and 4. Data exclusivity and high commission +
high market share. Position of strength. This shows dominance. Changed stance in MRF Tyres case, Asian
Paints – not held non-competitive.

Showtyme was a new entrant and said that Bookmyshow had exclusive agreements with PVR and other
multiplexes which meant that there was no way a new entrant could make his presence felt. In this case,
the cci also saw as to what kind of sources or reports can be produced to prove the market share or
anything. THe problem is bigger as this can only be secondary documents. The CCI looked into
documents and said they had at least 75% market share but that was only a indication of dominance.
THey further looked into the agreements and bookmyshow was allowed to have exclusive access to data
of movies shown by the multiplex. Further, bookmyshow were allowed to book more than 50% tickets
even though an order of the telangana govt had come allowing for only sale of 50% TICKETS over
internet and not through counters. Had . Further, the multiplexes would have to deposit an interest free
deposit as security. This particular clause was said to be exploitative as multiplexes giving this money
would not give it to any other entrant.

Bookmyshow said that we are new and it is not that they are the only player and the market is dynamic,
anyone can have dominance anytime. The bookmyshow counsel said that the telangana govt. Can charge
them for not obeying laws but not CCI. The cci said that the fact that you could get the multiplexes to
agree is dominance coupled with the high market share goes on to show that bookmyshow is not only

25
dominant but also exploitative. The CCI highlighted the fact of data exclusivity as being dominant as
well. The market share was also no way close to the second guy in the market.

The CCI has changed its stance on these things on a case to case basis and therefore, nothing is concrete.
For example in the Lamborghini case it said agreements to sell your product only through recognized
dealers is allowed and is to protect self interest, however, this was said to be not allowed in the case of
MRF tyres. They gave reasons that the difference is due to there being no niche in the MRF product
compared to lamborghini.

11. NSE v. Multi commodity exchange, case 13 of 2009 (landmark case)

12. Case against Ministry of Railways and IRCTC
IRCTC  Base price is 421 – if pushing to 425  this is anti-competitive. This company goes
unaccounted for. Whatever penalty amount is used is not accounted for. Why charging next higher
multiple?

IRCTC gave out explanations: entity and dominance test satisfied. The window of IRCTC cannot be
ignored or bypassed. Question – whether they are abusing dominance in railway ticketing? In both
markets, physical and online ticketing. The online market is 10% of physical market. The reason IRCTC
cited is logistical convenience, we do not differentiate between online and physical ticketing, we don’t
have enough manpower to monitor. Possible in online mode but not in physical mode. Should this be
waived for online tickets but IRCTC says this will create price discrimination. Online will become
cheaper, people not having access to technological resources so this discriminatory pricing cannot be
allowed. But every differential treatment does not become discriminatory treatment. Example:
demonetization – paytm received pushed after this, we cannot say cash transactions have been completely
removed. Instead, cash transactions have been increased. IRCTC said we don’t discriminate and this
discrimination will lead to exploitation of poor – this is a presumption.

Second, social cost of running railways in social welfare state inn which motives of entrepreneurial entity
will not be solely governed by profit motive. This is not done intentionally. There is social obligation.

Third, we had revised the rates last 10-15 years before. The policy should be seen having examined these
expects.

Fourth, uniform price and Fifth, convenient and small price.

CCI said this is an executive policy, tabled in parliament we don’t have a problem, but a cautionary note
introduced – every policy issued by the parliament will not be compliant with competition law. Extra

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revenue generated was only 0.48% of the total revenue so small amount. But we know that small amount
violation is also a violation. The CCI was at pains when this happened.

Similarly, Aditya Birla – Vodafone thing. Necessity of time allowed the takeover. We should follow
Chicago school of thought – protect competition and not competitor. State shouldn’t be doing as per pre-
1990.

13. Indian National Ship Owners’ Association v. ONGC

ONGC hired certain offshore ship vessels’ services. This was hired through an international bidding
process. The bid doc had many things, like GCC, SCC etc. They hired the services and after getting a
CAG report which was tabled in the parliament, they cancelled the services of these 11 ship owners. Is
this justiciable, and whether its abuse of dominance? These were the issues before the CCI?

Whether this violated Section 4(1)(a)(2)?

CCI said the fact that such conditions were put into the contract shows how there is a difference in
bargaining power between ONGC and the ship owners, dominant ONGC is, how dire the need is of the
vessels as they are specialised and can only be used for oil drilling and area in which ONGC has 80%
market share.

The DG applied reverse side substitutability test, which is that if one buyer is not available then which
other buyer is there. This was a case of abuse of buyer power and not seller power and hance the
application of reverse test. In relevant product market, the same vessels were considered and in relevant
geographical location the economic zone was argued to be considered but it was said that its nature is not
same as other markets.

The primary question was whether the termination clause put in the contract which is the termination for
convenience contract is valid or not. In US you can have this clause but it can be used only in case of
changed circumstance (material change) and bona fide intention without even an iota of bad faith. In the
UK, you can do it if its in black and white, it doesn’t matter that there is a change or difference in
bargaining power, just because you knew it and have signed it so it can be triggered even unilaterally. But
if its not written then it cannot be used. The DG saw that none of the jurisdictions analysed this as being
an exploitative practice of competition law and it was only seen from contract point of view. In India SC
said that even you can do this here, but the clause must be in good faith, reasonable, fair and parties must
have equal bargaining power. DG said that as both parties are commercial entities so SC judgement wont
apply here as such contracts are always in business area. But the real reason for ONGC’s step was that
CAG told ONGC that after 2014 there has been a drop in oil prices and the contracts ONGC has currently

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are very high priced and hence it cannot go like this as prices of crude oil prices and vessels hiring cost
are directly proportional, hence, if prices are down then these ships wont be hired that much as drilling
will be lesser as well. CAG wanted novation of contract and use of other ways, but ONGC went on to
terminate the contract and ONGC never floated the novation idea in front of the vessel owners. CCI
conceded to the fact that central inland case applies, but NGC and these offshore vessels have equal
bargaining power and due to drop in crude oil prices, on ground of public interest a private contract was
terminated. Even ONGC was held to be an enterprise and a dominant enterprise but it was not accepted
that they abused their position. They said that even thought you have lesser opportunities from ONGC but
you still have some power, you do have countervailing power as others still own 20% market in this area
despite ONGC having 80% market share.

XV. HHI TEST - Herfindahl-Hirschman Index

Effect of the test is important despite the test being irrelevant. We are the only country in the world to
have this test prescribed in the legislation. In one of the requirements in the form, there is a clause for
market share. The burden lies on the company to tell its market share. There is the test of HHI which says
that the acquirer plus the target’s market share has to be seen, this market share is to be seen before and
after the combination. The regulation of anti competitive agreement under section 3 and the one under
section 4 is to be seen after the action is taken, unlike Section 5 and 6 wherein the action’s impact is to be
seen before taking the action.

HHi helps us understand about the market share in case a combination were to take place. So at times the
market share in the dominant position is also seen using the HHI test.

Let us take a relevant market with five players, a,b,c,d,e. A has 20% market share, B has 10, C has 30, D
has 10 and E has 30. B and A are going to have a merger in order to exploit the market to its full potential.
This test says that whatever is the percentage of the market share, we will square all the individual market
shares to finally add them up all. The result will be fluctuating between 0 and 10000, why? As 10000 is
the square root of 100% market share which will be there in case of monopoly. But the market share
cannot be zero, it can be near to zero and the closer we are to zero, the better market it is because in such
a market the competitors are not able to influence the market and the consumers in their favour.

A score closer to zero is indicative of a healthy market and that there is restraint on the ability of the
seller to abuse its power. But if the number of sellers is less, then the score would be higher.

On calculating the HHI of the example so taken, the score comes out to be 2400. But is it a good number?
CCI had difficulty in deciding good and bad numbers as well. For ex. In the case of Thomas cook they
said that lets give some indicative list to tell whether its heavily concentrated, mildly concentrated or least

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concentrated. 2400 indicates oligopoly and its the strength of the market before the merger has taken
place. Lets merge A and B, after they merge one entity will be less in the market, now A becomes 30
(20+10), for others it remains the same. Now the score comes to 2800 (plus by 400) and it was said in
Thomas case that any increment beyond 150 points is not good and is beyond the tolerance limit and
beyond 150, the merger should be stopped.

By the logic of tolerance limit, some mergers must have been stopped, but since its inception CCI has not
refused a single merger. The maximum they have done is that they have asked to restructure the merger.
The HHI test is used to assess the market power. This test will lose value as per the digital competition
bill.

Assessment of combination – prescription by Indian law.

Form 1 and Form 2: submit this form to cci and once approved combination can be approved. One of the
criteria is market share. HHI – acquirer and target’s market share should be revealed. We will look at the
market scenario before and after the combination. Section 3 and section 4 are expost regulation. Whereas
section 5 and 6 which regulate the combination are ex-ante, even before there has been an injury. In US,
two authorities DOJ and FTC manage their competition law, shearman act in usa and state laws.

HHI is a simple tool which helps you understand market share in case a combination will take place. The
dominance test also uses in HHI – (DLF v. Belare case). Lawyers argued HHI has lost efficacy, market
has changed.

Take a relevant market with 5 players. Let’s assign them market share. A- 20, B-10, C- 30, D&E – 10 and
30. B and A are going to have a merger. Commission will make you to calculate competitors market share
as well. This test says make a square of individual market shares. The result will fluctuate between 0-
10,000. Closer we are to zero – market is healthy in terms of competition. None has sizeable market
power. No one is able to inflict any injury to other competitor nor influence the decisions of other
consumers. This puts competitive restraint on a single competitor. If score is high, then it becomes a
problem

A- 400
B- 100
C- 900
D- 100
E- 900

Total = 2400.

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Thommas cook, ssn sollyford something case – DLF – belare – number not an issue, let them merge,
completely went over HHI test

commission laid down an indicative list (least, moderately, highly concentrated) in Thomas Cook.

2400 – OLIGOPOLY

After merger,

A= 900

C=900

D=100

E=900

Total = 2800

If increment is 150+ you should not allow the merger, but restructure the entire deal. Market moved to
10,000 by 400 points.

Korea – two piano companies divested, same in Australia (deny mergers and impose penalties). In india,
no merger has been refused in 14 years of commission’s existence. Want to become developed economy,
else foreign investors will not be attracted. May ask to restructure their deals. American tobacco, standard
oil – divested into 72 different units. But Indian competitive authorities are put on a backfoot.

Amazon – Bigbazaar case: CCI fooled. This test is also used in assessment of market power.

HHI has lost its value with the new digital competition act.

XVI. STEP 4: Abusive Conduct

Types:-

a. Exploitative :- for ex one seller sells one particular thing and no one else sells it so any price that
he wants can be fixed
b. Exclusionary:- behaving in a manner that the fellow competitors will not survive in the market.
An example of this is predatory pricing. Under this you try to sell your product below the average
variable cost, thereby incurring losses, with the only intention to push other competitors out of
business. The moment others get out of the market, he will surge the prices. So one party has a
lot of money and hence, he or she doesn't mind incurring losses as it has other places from where
money is coming.

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 In this case a new player could come into the market and give a good competition to the dominant
player, but it doesn't happen, why? As once the competitors go out then the suppliers would be in
shock and as no one else is there so they will go to the dominant player as they know that the
market is controlled by the dominant player now. So now the suppliers would stick to the
dominant player as they want to rise with him as they know his strength in the market and hence,
they will not support the new entrants as then this supplier’s loyalty will be under question.

Same thing would be with the Banks, as they have seen such a massacre in the industry and they
know that the dominant entity is still there in the market so if they give money to the new entrants
and they face a similar fate then the Banks will have to face a huge loss.

This abuse can only be done by a dominant enterprise in a relevant market.

When your competitors fail naturally to catch up with you then the CCI won't interfere in such a matter as
it's not that the dominant player has done anything.

We don't say that the person is guilty of abusing the dominant position because the competitor is getting
affected, its because the consumer interest is getting hampered, we say that there is abuse.

Cases on exclusionary conduct to be discussed now.

In exclusionary prices, the entity strikes the competitors to have their own customer base and hegemony
in the market in order to become a monopoly in their market. But sometimes the survival of the already
existing competitors becomes really difficult due to some tactics/tools used by an entity.

Eg. Zero pricing strategy; like WhatsApp giving its services for free. In this way they can earn revenue
from other parties if they attract a lot of customers.

Similar thing is for Instagram, which cannot be replaced as it has become an integral component.

So what kind of business strategies should be examined to say that this thing proves exclusionary
conduct. Predatory pricing is an attempt by any dominant entity to sell their products below the average
variable cost.

A CCI regulation is there which helps us determine the average variable cost. But commission said that it
has not been invoked much. The example of Bharti v. Jio can be considered. As per CCI any entity will
be dominant only if it is the only dominant player, so it has to be number 1 in the relevant market and then
only CCI will consider them to be dominant and hence go ahead with the case.

1. Vaibhav Mishra v. Spin India Pvt. Ltd. (2022)

Allegations under section 4 were made against shoppee as they were selling things at heavy discount, for
example a badminton racquet being sold at Rs. 5. CCI said that what shoppee is doing is classical

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predatory pricing but we cannot do anything as they are not dominant player, i.e. not number 1 in the
relevant market. CCI through its decisional practice makes it clear than dominance is a numerical
position, so you need to be number 1 only, even number 2 will not make you a dominant enterprise. The
thing to be considered should be relative dominance, i.e. they are one amongst the top 2 or 3 entities in
the relevant market. This is a debate.

2. In Re Lifestyle equities CV v. Lifestyle licensing

3. Transparent energy systems pvt. Ltd. V. Tech Pro Systems Ltd. Case 9 of 2013
In this case only four factors for establishing predatory pricing were given by the CCI.

I want to ask you what is the brand value of Nike yeah so much money should you be paying to acquire
nike?

How will you decide the price?

Ans.

1. Inventory, revenue etc. But how will you measure goodwill

The luxury over here with the CCI would be the peer valuation and if you have a comparative analysis
and what value they put them you arrive at a price. But what do you do when they don’t have any
competitors or meaningful competitors. You cannot value of Google by value of Yahoo. Thus this
regulation speaks about average variable value and not net value.

In predatory pricing the commissions have tough task as there is a person who is selling something
extremely cheap and you have to decide whether that pricing has been arrived due to technological or
administrative activity or is it just predatory and also they have to make a future call as to if the pricing
will be increased or not in the future.

So, they have to know whether he is doing this just to hurt the competition. My ability to take losses is
directly linked to ability to profit in other industries and this factor is sometimes looked at and sometimes
not.

4. MCX v. NSE
There was a new type of derivatives where you had to guess whether the dollar will go up or down
compared to the rupee. The pricing for this was low by MCX so NSE to counter this, kept pricing at 0.
When MCX went to Cci, the NSE made a defense that this is for meeting competition and the
commission should not intervene as the market is new and they should employ same strategy as OlA uber
case where CCI allowed the industry to develop before the intervention. CCI rejected and intervened in
favour of MCX.

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REFERENCE to transparent energy systems pvt ltd v. Techpro. Case

There was to be a bidding and techpro gave a price so low that it was considered to be impossible as per
as the informant and they claimed that this was possible since a Chinese company had come into JVa and
was pumping money. The informant asked to give the appropriate price by the CCI but informant refused.
Informant said that in past years the company won every bid as lowest price.

The CcI REJECTED the informant as the person was not giving up correct information even though they
were accusing. Thus it was not held to be dominant. This was the first case where the CCI gave some
small inclined interpretation of factors needed to be seen for predatory pricing :

1. Predatory pricing cannot be based on projected figures and we need actual figures. a competition
commission cannot be allowed to dictate how much profit is reasonable profit. The difference
between the cost and selling price. The figures do not refer to profit margin as there may not be
profit anytime. If the selling price is less than cost then there is only an inclination towards
predatory pricing and not conclusive proof. This gives a concept where the CCI only looks at the
pricing strategy which would infact disallow companies from coming up as some companies
don’t earn profits in the starting. They want tangible proof for future profits, but how can
someone give that. So, this would create barriers to entry. In this case the CCI did not try to look
at the actual cost of production and selling and could have asked DG to look at the case but just
because the Evidence was not available

Summary: they gave out principles that we should look at pricing strategy but in the current case they did
nothing because of lack of info. This pricing strategy approach is also criticised and in mature
jurisdictions the approach is “predatory strategy “ and not predatory pricing where they look at other
factors as well.

Read para 20,21,22,23,24 of judgement.

Sir, says that the CCI is ignoring the dominance in most cases and this becomes problematic as the fact
that a foreign company is coming and pumping money and disrupting the market. cCI says that we do not
know whether the company will earn benefits in the future or not and thus we focus only on the pricing
strategy as there are accurate figures and not projected. Sir says this is bad as this is just lethargy on part
of the CCI. Only focus on pricing strategy is bullshit and there are many red flags visible. Any reasonable
company will not continue in a market if they take money from a foreigner and continue in loss in the
market.

5. IOCL v. CCI
IOCL said we are lowering Price because we need to survive the competition.

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 6. Jio v. Bharti Airtel
Read article in nls evolving principles of dominance, revisiting jio v. Airtel.
https://repository.nls.ac.in/cgi/viewcontent.cgi?article=1255&context=nlsblr

In this case as well Airtel wrote about lowering prices to meet competition

7. Hindustan coca cola v. CCI

Allegation was cola engaged in predatory pricing

Group dominance- A parent company having many subsidiaries, then if these subsidiaries have a
position of dominance then it will be recognised. But our law doesn’t talk about different companies not
under same parent company, like Amazona and Flipkart, to be dominant in one sector.

If one is given certain rights in Amazon and Flipkart, that allows him or her to control certain operations
in these two companies, like not allowing them to not compete against each other. This is common
ownership and the problem arising out of this has led to thinking about the concept of collective
dominance or group dominance.

Common investors is the link between Flipkart and Amazon. So having ownership and control in both of
these, could be problematic and against competition. Jurisdictions like US and EU have said that if there
is any common set of investors in a few companies, then it should mean that these companies are group
companies which might have group dominance.

This thing has been figured out but there is no international platform for all the jurisdictions in the world
to come together and discuss. Competition law is mostly domestic in nature.

These fallacies and limitations in our current framework that has forced our legislators to come up with
something new.

Section 4(2)

Read it

Meeting the co petition and efficiency gains are different. If you say that you have done something to
meet the competition then its different. So, like something started by an entity not dominant and copied
by the dominant entity then it could be something to meet the competition. Ex. Bharti Airtel had to slash
prices after Jio.

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 First mover advantage:- particular vacuum in any industry, leading to loss, then if one entity moves in to
fill that gap then it will be called first mover advantage.

There is first mover disadvantage also in Competition law. Like Pepsi and Coca-Cola don’t decide on not
using plastic bottles, due to first mover disadvantage. If either of them changes, then what is the guarantee
that the other will shift.

That’s why these companies are extremely reluctant to make the first move as the losses might have to be
incurred only by the one which changes to any other kind of bottle.

In abuse of dominance the meeting of competition defence is ridiculous as anyways its not available to
the dominant entity except for some conditions.

8. Case:- Dhruv Suri v. Mundra SEZ, case 18 of 2009

Mundra is the largest private port in India. One part of this is run by Adani and the other part is run by the
MITC under the aegis of the GoI. Both of these are in extreme competition. The GoI said that a lot of
discounts are given by the Adani. DG investigated that this is a common practice in many ports in India.
The defence of meeting the competition is not available to the dominant enterprise unless it can be proven
that other entities are also doing it.

XVII. SECTION 3: ANTI COMPETITIVE AGREEMENTS

Section 2(b) - “agreement” includes any arrangement or understanding or action in concert,—

(i) whether or not, such arrangement, understanding or action is formal or in writing; or

(ii) whether or not such arrangement, understanding or action is intended to be enforceable by
legal proceedings;

Section 2(c) - “cartel” includes an association of producers, sellers, distributors, traders or service
providers who, by agreement amongst themselves, limit, control or attempt to control the production,
distribution, sale or price of, or, trade in goods or provision of services; [INCLUDES INCREASES AND
CONTROL]

3. Anti-competitive agreements. -

(1)No enterprise or association of enterprises or person or association of persons shall enter into any
agreement in respect of production, supply, distribution, storage, acquisition or control [PSDSAC] of
goods or provision of services, which causes or is likely to cause an appreciable adverse effect on
competition within India.

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(2)Any agreement entered into in contravention of the provisions contained in sub-section (1) shall be
void.

(3)Any agreement entered into between enterprises or associations of enterprises or persons or

associations of persons or between any person and enterprise or practice carried on, or decision taken by,
any association of enterprises or association of persons, including cartels, engaged in identical or similar
trade of goods or provision of services, which-

(a) directly or indirectly determines purchase or sale prices;

(b) limits or controls production, supply, markets, technical development, investment or provision
of services;

(c) shares the market or source of production or provision of services by way of allocation of
geographical area of market, or type of goods or services, or number of customers in the market
or any other similar way;

(d) directly or indirectly results in bid rigging or collusive bidding, shall be presumed to have an
appreciable adverse effect on competition:

Provided that nothing contained in this sub-section shall apply to any agreement entered into by way of
joint ventures if such agreement increases efficiency in production, supply, distribution, storage,
acquisition or control of goods or provision of services.

[Provided further that an enterprise or association of enterprises or a person or association of persons

though not engaged in identical or similar trade shall also be presumed to be part of the agreement under
this sub-section if it participates or intends to participate in the furtherance of such agreement.]

Explanation. - For the purposes of this sub-section, "bid rigging" means any agreement, between
enterprises or persons referred to in sub-section (3) engaged in identical or similar production or trading
of goods or provision of services, which has the effect of eliminating or reducing competition for bids or
adversely affecting or manipulating the process for bidding.

(4)[Any other agreement amongst enterprises or persons including but not restricted to agreement
amongst enterprises or persons] at different stages or levels of the production chain in different markets,
in respect of production, supply, distribution, storage, sale or price of, or trade in goods or provision of
services, including –

(a)tie-in arrangement;

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 (b)exclusive [dealing] agreement;

(c)exclusive distribution agreement;

(d)refusal to deal;

(e)resale price maintenance, shall be an agreement in contravention of sub-section (1) if such

agreement causes or is likely to cause an appreciable adverse effect on competition in India.

[Provided that nothing contained in this sub-section shall apply to an agreement entered into between an
enterprise and an end consumer.]

Explanation to section 3(4) - For the purposes of this sub-section,-

(a) "tie-in arrangement" includes any agreement requiring a purchaser of goods or services, as a
condition of such purchase, to purchase some other distinct goods or services;

(b)"exclusive dealing agreement" includes any agreement restricting in any manner the purchaser or the
seller, as the case may be, in the course of his trade from acquiring or selling or otherwise dealing in any
goods or services other than those of the seller or the purchaser or any other person, as the case may be;]

(c) "exclusive distribution agreement" includes any agreement to limit, restrict or withhold the output or
supply of any goods [or services] or allocate any area or market for the disposal or sale of the goods [or
services];

(d) "refusal to deal" includes any agreement which restricts, or is likely to restrict, by any method the
persons or classes of persons to whom goods [or services] are sold or from whom goods [or services] are
bought;

(e) "resale price maintenance" [includes, in case of any agreement to sell goods or provide services, any
direct or indirect restriction] that the prices to be charged on the resale by the purchaser shall be the prices
stipulated by the seller unless it is clearly stated that prices lower than those prices may be charged;

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