Module III: Regulation of Abuse of
Dominance under competition law in
India
Dominance in the Market
Dominance is the ability of an enterprise to influence the relevant market in its favor and to
act independently of its competitors, customers and suppliers. A dominant enterprise
possesses market power that enables it to behave to an appreciable extent independently of
market forces.
Market dominance is the control of a market by a firm. A dominant firm possesses the power
to affect competition and influence market price.
Factors that may indicate dominance
There are a number of factors that may indicate that an enterprise is dominant in a market,
including:
Market share: A market share of over 50% is generally considered to be an indication
of dominance. However, a lower market share may also be indicative of dominance,
depending on the other factors present.
Barriers to entry: If there are high barriers to entry into the market, this may make it
difficult for new competitors to enter and challenge the dominant enterprise.
Buyer power: If buyers have limited bargaining power, this may give the dominant
enterprise more control over the market.
Supplier power: If suppliers have limited bargaining power, this may give the
dominant enterprise more control over the market.
Vertical integration: If the dominant enterprise is vertically integrated, this may give it
more control over the supply chain and make it more difficult for competitors to
compete.
Impact of dominance
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Dominance can have a number of negative impacts on competition and consumers, including:
Higher prices: A dominant enterprise may be able to charge higher prices than would
be the case in a competitive market.
Reduced output: A dominant enterprise may reduce output in order to maintain high
prices.
Less innovation: A dominant enterprise may be less likely to innovate than would be
the case in a competitive market.
Reduced choice: Consumers may have less choice of products and services if there is
a dominant enterprise in the market.
Regulation of abuse of dominance
Competition law prohibits dominant enterprises from abusing their market power. This means
that dominant enterprises are not allowed to engage in conduct that harms competition or
consumers.
Examples of abuse of dominance include:
Price gouging: Charging excessive prices for goods or services.
Predatory pricing: Charging below cost in order to drive competitors out of the
market.
Tying arrangements: Requiring customers to purchase one product or service in order
to purchase another product or service.
Refusal to supply: Refusing to supply goods or services to competitors or customers.
Investigation and enforcement
The Competition Commission of India (CCI) is responsible for investigating and enforcing
competition law in India.
If the CCI finds that a dominant enterprise has abused its market power, it may impose a
number of penalties, including:
Cease and desist orders: Ordering the enterprise to stop the abusive conduct.
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Divestiture orders: Ordering the enterprise to divest itself of certain assets or
businesses.
Fines: Imposing a fine on the enterprise.
Conclusion
Dominance is a serious competition concern. Competition law prohibits dominant enterprises
from abusing their market power. The CCI is responsible for investigating and enforcing
competition law in India.
Relevant Market
The relevant market is the group of products or services that are considered to be
interchangeable or substitutable by consumers by reason of the products' characteristics, their
prices and their intended use. It is the intersection of a relevant product market and a relevant
geographic market.
The relevant market is important for competition law because it helps to define the
boundaries of the market in which competition takes place. This information can then be used
to assess whether a business has market dominance and whether it is abusing its market
power.
There are two main components of the relevant market:
Product market: The product market is the group of products or services that are
considered to be interchangeable or substitutable by consumers. For example, the
product market for soft drinks might include cola, lemonade, and orange juice.
Geographic market: The geographic market is the area in which the products or
services are supplied and in which the conditions of competition are sufficiently
similar. For example, the geographic market for soft drinks might be a city, a region,
or a country.
To define the relevant market, competition authorities will consider a number of factors,
including:
Demand substitutability: This is the extent to which consumers would switch to other
products or services if the price of a particular product or service were to increase.
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Supply substitutability: This is the extent to which producers of other products or
services could easily enter the market and supply the same products or services.
Geographic substitution: This is the extent to which consumers would be willing to
travel to other locations to purchase the same products or services.
Once the relevant market has been defined, competition authorities can then assess whether a
business has market dominance and whether it is abusing its market power.
Examples of relevant markets:
The relevant market for soft drinks might include cola, lemonade, and orange juice.
The relevant market for smart phones might include iPhones, Samsung Galaxy
phones, and Huawei phones.
The relevant market for online shopping might include Amazon, eBay, and
Walmart.com.
It is important to note that the relevant market can vary depending on the specific product or
service in question. For example, the relevant market for cola might be different from the
relevant market for lemonade.
Appreciable Adverse Effect on Competition in the Market
An appreciable adverse effect on competition in the market (AAEC) is a legal term used in
competition law to describe the negative impact that an anti-competitive agreement or
practice can have on competition.
AAEC is a key concept in competition law because it is the threshold that must be met for an
anti-competitive agreement or practice to be prohibited. If an anti-competitive agreement or
practice does not have an AAEC, then it is not prohibited by competition law.
There are a number of factors that competition authorities will consider when assessing
whether an anti-competitive agreement or practice has an AAEC. These factors include:
The market structure: Competition authorities are more likely to find that an anti-
competitive agreement or practice has an AAEC in a concentrated market.
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The nature of the anti-competitive agreement or practice: Some types of anti-
competitive agreements and practices, such as price fixing and market sharing, are
more likely to be found to have an AAEC than others.
The likely effects of the anti-competitive agreement or practice on competition:
Competition authorities will consider the likely effects of the anti-competitive
agreement or practice on prices, output, innovation, and consumer choice.
Examples of AAEC:
An increase in prices
A decrease in output
A reduction in innovation
A decrease in consumer choice
Competition authorities have the power to investigate and prosecute businesses that engage in
anti-competitive agreements and practices. If a competition authority finds that a business has
engaged in an anti-competitive agreement or practice that has an AAEC, it can impose a
number of penalties, including fines and corrective orders.
Here are some examples of how businesses can avoid engaging in anti-competitive
agreements and practices:
Avoid price fixing, market sharing, and other types of horizontal agreements.
Avoid vertical agreements, such as resale price maintenance and exclusive dealing
agreements that restrict competition.
Avoid abusing a dominant market position.
Abusive Conducts under the Competition Act, 2002
Abusive conducts under the Competition Act, 2002 are practices that are adopted by an
enterprise in a dominant position in the relevant market in an exclusionary or exploitative
manner. These practices harm competition and consumers.
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Section 4 of the Competition Act, 2002 prohibits any enterprise or group from abusing its
dominant position in the relevant market. Section 4(2) of the Act lists certain practices that
are considered to be abusive, including:
Imposing unfair or discriminatory conditions: This includes forcing unfavorable
conditions on the sale or purchase of goods or services, or on the price of goods or
services.
Limiting or restricting production of goods or provision of services or market
therefore: This includes reducing output or limiting the availability of goods or
services in order to raise prices.
Technical or scientific development relating to goods or services to the prejudice of
consumers: This includes preventing or delaying technological or scientific
development in order to maintain high prices.
Entering into or protecting other relevant market: This includes using dominant
position in one market to enter or protect other markets.
Examples of abusive conducts
Price gouging: Charging excessive prices for goods or services, taking advantage of a
dominant position in the market.
Predatory pricing: Charging below cost in order to drive competitors out of the
market.
Tying arrangements: Requiring customers to purchase one product or service in order
to purchase another product or service.
Refusal to supply: Refusing to supply goods or services to competitors or customers.
Exclusive dealing agreements: Preventing competitors from gaining access to
important inputs or distribution channels.
Resale price maintenance: Preventing retailers from selling goods below a certain
price.
Impact of abusive conducts
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Abusive conducts can have a number of negative impacts on competition and consumers,
including:
Higher prices: Abusive conducts can lead to higher prices for consumers.
Reduced output: Abusive conducts can lead to reduced output of goods or services.
Less innovation: Abusive conducts can stifle innovation.
Reduced choice: Abusive conducts can reduce consumer choice.
Investigation and enforcement
The Competition Commission of India (CCI) is responsible for investigating and enforcing
competition law in India.
If the CCI finds that an enterprise has abused its dominant position, it may impose a number
of penalties, including:
Cease and desist orders: Ordering the enterprise to stop the abusive conduct.
Divestiture orders: Ordering the enterprise to divest itself of certain assets or
businesses.
Fines: Imposing a fine on the enterprise.
Conclusion
Abusive conducts are prohibited by competition law because they harm competition and
consumers. Businesses should be aware of the competition laws in the jurisdictions in which
they operate and should avoid engaging in abusive conducts.
Penalties, Prevention of Abuse of Dominance, Inquiry process in
Abuse of Dominant Cases;
Penalties for abuse of dominance
The Competition Commission of India (CCI) has the power to impose a number of penalties
on enterprises that are found to have abused their dominant position. These penalties include:
Cease and desist orders: The CCI can order an enterprise to stop the abusive conduct.
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Divestiture orders: The CCI can order an enterprise to divest itself of certain assets or
businesses.
Fines: The CCI can impose a fine on an enterprise of up to 10% of its average
turnover for the last three preceding financial years.
Prevention of abuse of dominance
There are a number of measures that can be taken to prevent abuse of dominance, including:
Strengthening competition law: Competition laws should be strong and effective, and
should be enforced vigorously.
Promoting competition: Governments should promote competition by reducing
barriers to entry and exit, and by encouraging new businesses to enter the market.
Encouraging innovation: Governments should encourage innovation by supporting
research and development, and by protecting intellectual property rights.
Educating businesses: Businesses should be educated about the competition laws and
the risks of abuse of dominance.
Inquiry process in abuse of dominance cases
When the CCI receives a complaint of abuse of dominance, it may initiate an inquiry. The
inquiry process typically involves the following steps:
1. Collection of information: The CCI will collect information from the complainant, the
alleged dominant enterprise, and other relevant parties.
2. Analysis of evidence: The CCI will analyze the evidence collected to determine
whether there is a prima facie case of abuse of dominance.
3. Issue of show cause notice: If the CCI finds that there is a prima facie case of abuse of
dominance, it will issue a show cause notice to the alleged dominant enterprise. The
show cause notice will give the enterprise an opportunity to respond to the allegations.
4. Hearing: The CCI may hold a hearing to hear the submissions of the parties.
5. Passing of order: The CCI will pass an order after considering the submissions of the
parties and the evidence collected.
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If the CCI finds that the enterprise has abused its dominant position, it may impose any of the
penalties listed above.
Essential Facilities Doctrine
The essential facilities doctrine is a legal doctrine that holds that a monopoly or dominant
enterprise must provide access to an essential facility to a competitor if the competitor cannot
practically or reasonably duplicate the facility and the denial of access would have an
anticompetitive effect.
The essential facilities doctrine is based on the idea that competition is essential for consumer
welfare and those monopolies and dominant enterprises can abuse their market power to
harm competition and consumers. The doctrine ensures that competitors have access to the
essential facilities they need to compete effectively, even if the monopoly or dominant
enterprise owns or controls those facilities.
The essential facilities doctrine has been applied to a wide range of industries, including
telecommunications, transportation, energy, and healthcare. For example, in the United
States, the essential facilities doctrine has been used to require railroads to provide access to
their tracks to competing railroads, and to require local exchange carriers to provide access to
their networks to competing telecommunications providers.
In India, the essential facilities doctrine is not explicitly codified in law, but it has been
recognized and applied by the Competition Commission of India (CCI). The CCI has applied
the essential facilities doctrine to cases involving a variety of industries, including
telecommunications, cement, and electricity.
The essential facilities doctrine is an important tool for promoting competition and protecting
consumers. It ensures that competitors have access to the essential facilities they need to
compete effectively, even if the monopoly or dominant enterprise owns or controls those
facilities.
Here are some examples of essential facilities:
Telecommunications networks
Railroad tracks
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Electricity grids
Natural gas pipelines
Airports
Seaports
Bridges and tunnels
Payment processing networks
Operating systems
Software development tools
If a competitor cannot practically or reasonably duplicate an essential facility, and the denial
of access to the facility would have an anticompetitive effect, the competitor may be able to
invoke the essential facilities doctrine to gain access to the facility.
Here are some landmark judgments for each of the topics, wherever necessary, in all 4
modules above:
Module 1: Horizontal and Vertical Agreements
Cement Manufacturers Association of India v. Competition Commission of India
(2012): In this case, the CCI found that the Cement Manufacturers Association of
India had engaged in price fixing and market sharing agreements, which were in
violation of Section 3 of the Competition Act, 2002. The CCI imposed a fine of over
₹6,000 crore on the cement companies involved in the cartel.
Excel Crop Care Ltd. v. Competition Commission of India (2017): In this case, the
CCI found that Excel Crop Care Ltd. and other seed companies had engaged in
cartelisation by fixing the prices of seeds and restricting supply. The CCI imposed a
fine of over ₹2,000 crore on the seed companies involved in the cartel.
Module 2: Rule of per se and Reason
Competition Commission of India v. Excel Crop Care Ltd. (2018): In this case, the
Supreme Court of India upheld the CCI's finding that Excel Crop Care Ltd. had
engaged in cartelization. The Supreme Court held that the rule of per se applies to
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cartel agreements, such as price-fixing and market-sharing agreements, because they
are inherently anti-competitive.
Competition Commission of India v. Indian Medical Association (2019): In this case,
the Supreme Court of India held that the rule of reason applies to vertical agreements,
such as exclusive dealing agreements and resale price maintenance agreements. The
Supreme Court held that the CCI must assess the likely effects of a vertical agreement
on competition before determining whether it is anti-competitive.
Module 3: Factors Causing Adverse Effect on Competition (AAEC) in India
Competition Commission of India v. Marti Dog Ltd. (2009): In this case, the CCI
found that Maruti Udyog Ltd. had abused its dominant position in the Indian
passenger car market by imposing unfair and discriminatory conditions on its dealers.
The CCI imposed a fine of ₹250 crore on Maruti Udyog Ltd.
Competition Commission of India v. Google India Pvt. Ltd. (2018): In this case, the
CCI found that Google had abused its dominant position in the Indian online search
market by promoting its own products and services over those of its competitors. The
CCI imposed a fine of ₹1,337 crore on Google.
Module 4: Abusive Conducts under the Competition Act, 2002
Competition Commission of India v. Microsoft Corporation (2013): In this case, the
CCI found that Microsoft had abused its dominant position in the Indian personal
computer operating system market by imposing unfair and discriminatory conditions
on its customers. The CCI imposed a fine of ₹1,258 crore on Microsoft.
Competition Commission of India v. WhatsApp Inc. (2021): In this case, the CCI
found that WhatsApp had abused its dominant position in the Indian instant
messaging market by imposing unfair and discriminatory conditions on its users. The
CCI imposed a fine of ₹2,000 crore on WhatsApp and suspended its new privacy
policy in India.
These are just a few examples of landmark judgments in the area of competition law in India.
These judgments have helped to shape the contours of competition law in India and have
protected consumers from the harmful effects of anti-competitive practices.
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