This article has been written by Deyasini Chakrabarti from KIIT Law of School, Odisha. This article talks mostly about the basic concepts that are relevant to the abuse of a dominant position, various statutory provisions, procedures related to it, as well as the penalties and punishment along with the relevant cases.
In simple terms ‘dominant position’ means something in a superior position as compared to others based on some factors. This concept of dominance was, however, prevalent in the Indian society itself, where one “caste” was considered to be superior to others. However, staying in a better-off position doesn’t harm anyone, unless an individual is exploiting such power. Therefore having a dominant position cannot be considered bad per se. However, abusing such a position based on its superiority is considered inadequate.
Abuse of dominant position- Concept
Abuse is expressed to happen when an undertaking or a group of endeavors uses its prevailing situation in the significant market in an exclusionary or/and in an exploitative way. The Act gives a comprehensive list of practices that will comprise abuse of a dominant position and, in which circumstances these are disallowed. Such practices will establish misuse just when received by an endeavor getting a charge out of a prevailing situation in the pertinent market in India. Abuse of dominant position is decided as far as the predefined sorts of acts committed by a prevailing undertaking. Such acts are precluded under the law. Any abuse of dominant position indicated in the Act by a prevailing firm will stand denied.
As per explanation affixed to Section 4 of the Competition Act, 2002, dominant position implies the quality of an endeavor in the significant market in India which empowers the enterprise to work autonomously of serious powers winning in the market and to influence the customers or contenders or the market in support of it.
Factors to determine the dominant position
Dominance has been customarily characterized as far as the part of the market share of the enterprise or group of undertakings are concerned. In any case, various different elements assume a role in deciding the impact of an undertaking or a group of endeavors in the market. These include:
- a market share.
- the size and assets of the undertaking.
- size and significance of contenders or competitors.
- the financial intensity of the undertaking.
- a vertical combination or integration.
- a reliance on customers on the undertaking or undertaking.
- degree of section and exit barriers in the market.
- countervailing purchasing power.
- market structure and size of the market.
- a source of dominant position viz. regardless of whether acquired because of resolution or statute and so on.
- social expenses and commitments and commitment of big business getting a charge out of the prevailing situation to financial improvement.
The Competition Commission of India is additionally approved to consider whatever other factors which it might think about applicability for the assurance of dominance.
The first thing to be resolved in quite a while of supposed abuse of dominant position is the ‘relevant market’ in which the accused party has a predominant position. The reason served by depicting a relevant market is to characterize the degree inside which the situation of an endeavor is to be tried for strength and misuse thereof. The ‘relevant market’ is characterized as ‘product’ and ‘geography’, in other words, the applicable market recognizes the specific item/administration or class of items created or benefits rendered by an enterprise(s) in a given geographic territory.
Relevant Market Product
A market comprises all those products or services that are interchangeable or are substituted by the consumer. Factors determining the relevant product market are :
- Physical characteristics or end-use of goods.
- Price of goods or services.
- Consumer preference
- Exclusion of in-house producers.
- Existence of specialized producers.
- Classification of Industrial products.
In the case of Atos Worldline v Verifoneindia, Case No. 56 of 2012, the Competition Commission of India (CCI), held that the relevant product market is to be looked at from both demand and supply perspective based on the characteristics of the product, its price and intended use. Similarly, in the case of Surinder Singh Barmi v The Board of Control for Cricket in India (BCCI), Case No. 61/2010, it was held that the relevant market was settled on the thought of demand substitutability of different types of amusement or entertainment. It was held that a cricket match couldn’t be held to be substitutable by some other game dependent on neither qualities nor the intention of the person watching the cricket match.
Relevant Geographic Market
A market comprising the area in which the condition of competition for supply or demand of goods or services are distinctly homogeneous and can also be distinguished from conditions prevailing in the neighboring areas.
Factors determining the relevant geographic market:
- Regulatory trade barriers.
- Local specialization requirements.
- National procurement policies.
- Adequate distribution facilities.
- Transport cost.
- Consumer preference.
- Need for secure or regular supplies or rapid after-sales service.
In the case of Bijaya Poddar v. Coal India Ltd, Case No. 59 of 2013, it was held that these are territories or areas where demand and supply of products of administrations can be said to be homogenous and discernable from markets in neighboring regions.
Similarly, in the case of Atos Worldline v Verifoneindia, Case No. 56 of 2012, it was held that naturally, a few factors at that point, as regulatory trade barriers, local detail necessities, national acquirement approaches, satisfactory conveyance offices, transport costs go under the domain of thought. Consequently, if every such factor were uniform all through the nation versus an item, the entire nation would be the relevant geological region.
Identification of abusive use of dominant position [Section 4(2)]
There are five kinds of abusive use of dominant position-
- Unfair or biased trade practices: According to this, abuse of dominant position happens when an undertaking or gathering legitimately or in an indirect way forces prejudicial conditions on the sale of goods or rendering of costs or cost in deal or acquisition of ruthless cost of products or administrations.
- Limiting creation or specialized or scientific improvement: An abuse of dominant position occurs in the market where an endeavor or group legitimately or in an indirect way forces conditions that limit the creation of the merchandise or specialized or logical advancement bringing about the creation of the products or administrations.
- Denial of access to showcase, barriers to entry and development: Any condition that makes forswearing access to the market in any way will comprise an abuse of the dominant position.
- The imposition of beneficial commitments: when an undertaking makes the finish of agreements subject to an acknowledgment of advantageous commitments by different parties and those commitments are to such an extent that by their very nature or as per business use in that field, they have no association with the topic of the agreement.
- Protection of different markets–when an enterprise utilizes its situation in a significant market to go into another market, at that point there is an abuse of dominant position.
Thus it can be stated that Section 4(2) of the Act indicates the accompanying practices by a dominant enterprise or group of endeavors as misuses are straightforwardly or in an indirect way of imposing out of line or oppressive condition in the sell or purchase of goods or administration; straightforwardly or in an indirect way of imposing an unjust or prejudicial cost in buy or deal (counting ruthless cost) of products or administration; constraining or confining the creation of products or arrangement of administrations or market; constraining or confining specialized or logical improvement identifying with merchandise or administrations to the partiality of buyers; denying market access in any way; making the finish of agreements subject to acknowledgment by different groups of beneficial commitments which, by their temperament or as per business use, have no association with the subject of such agreements; and using its dominant situation in one important market to enter into or ensure other applicable markets.
Types of Dominant Position
There are two types of domination:
Exploitative such as excessive pricing
Exploitative activities are those where the prevailing body abuses its strength by forcing biased or potentially low conditions on different firms or shoppers. In the case of, Pankaj Agarwal v. DLF, Case No. 13 & 21 of 2010 and Case No. 55 of 2012, where, for a situation relating to the distribution of apartment, the agreements drafted singularly by Delhi Land and Finance (DLF), empowered them to be discretionary about the designation of super-area, secretive about data pertinent to the buyer, like the number of the apartment on the floor, and to drop portions and relinquish booking sums. The Commission held the agreements to be exploitative against purchasers, and consequently, it was one-sided and abusive.
Exclusionary such as a denial of market access
Exclusionary activities are those in which the dominant body utilizes its strength to confine entry of competition into the relevant market. For instance, in the case of Re Shri Shamsher Kataria v Seil Honda, Case No. 03/2011, where there already existed agreement between the dominant entities and the Overseas Suppliers of unique vehicle parts which kept the Overseas Suppliers from providing parts to free repairers, such understandings were held to be anti-competitive as they limited passage of new firms.
Procedure followed by the Commission
Inquiry into the abuse of dominance
In exercise of powers vested under Section 19 of the Act, the commission may ask into any supposed negation of Section 4(1) of the Act that states about the abuse of dominant position. Section 19(4) gives a detailed list of elements that the Commission will consider while asking into any claim of abuse of dominance. A portion of these components is the market share of the endeavor, size, and assets of the venture, size, and significance of the contenders, reliance of buyers, passage obstructions, and social commitments and expenses in the pertinent geographic and item showcase.
The Commission, on being fulfilled that there exists an at first sight instance of abuse of dominant position, will guide the Director-General to cause an examination and outfit a report. The Commission has the forces vested in a Civil Court under the Code of Civil Procedure in regard to issues like summoning or authorizing the participation of any individual and examining him on the pledge, requiring revelation and creation of records and accepting proof on an affidavit. The Director-General, to complete an examination, is vested with forces of the civil court other than forces to lead ‘search and seizure’.
Powers of the Commission
After request, the Commission may pass inter-alia any or the entirety of the following orders under Section 27 of the Act:
1) direct the parties to suspend and not to reappear into such an understanding;
2) direct the endeavor or enterprise concerned to alter or change the agreement.
3) direct the enterprise concerned to submit to such different requests as the Commission may pass and conform to the bearings, including payment of expenses, assuming any; and
4) pass such different orders or issues such directions as it might esteem fit.
5) can force such punishment as it might consider fit. The punishment can be up to 10% of the normal turnover for the last three preceding financial years of endless supply of such people or ventures which are parties to bid-rigging or collusive bidding.
6) Section 28 enables the Commission to coordinate the division of a venture or enterprise appreciating the prevailing situation to guarantee that such an undertaking doesn’t showcase an abuse of dominant position.
Thus the available remedies are, when the abuse of dominant position has been built up, the competition specialists can take certain measures for the same:
- A restraining order.
- The penalty which might be 10% of yearly turnover.
- Direct the enterprise to make a move which the authority regards fit.
- Give any other request which it might think fit.
- Divide the prevailing endeavor.
- In the instance of allure to the Competition Appellate Tribunal, the Tribunal may arrange for payment to the party bearing misfortune.
Under Section 33 of the Act, during the pendency of an investigation into abuse of dominant position, the Commission may incidentally control any party from duration with the alleged offending act until the completion of the order or until further order, without giving out to such gathering, where it esteems fundamental or necessary.
The Competition Appellate Tribunal (COMPAT) is set up under Section 53A of the Act, to hear and discard claims against any course given or a choice made or order passed by the Commission underdetermined or specific sections of the Act. An appeal must be documented inside 60 days of receipt of the order/direction/choice of the Commission.
Penalties and Sanctions
To an undertaking held to the abuse of dominant position, the Commission can do several things on its parts-
- Direct the undertaking to suspend such acts that add up to misuse. Occasions of such uses by the Commission can be found in cases like in Re Shri Shamsher Kataria v. Honda Siel Cars India Ltd, Case No. 03/201, and, also, Atos Worldline v. Verifoneindia, Case No. 56 of 2012, where the overarching parties were mentioned to stop it from getting a charge out of activities that had been viewed as in invalidation of Section 4.
- Impose disciplines of up to 10% of the ordinary of the turnover for the last three preceding financial year.
There has been some concern about this arrangement, however, as far as possible, it gives no rules for the count of punishments. The Commission, as well, is yet to concoct rules of its own. Thus, starting at now, the Commission has total tact in figuring punishments to be endless supply of such individuals or ventures which are gatherings to such maltreatment or abuse of power. Be that as it may, the COMPAT has put a few conditions on the Commission undoubtedly. For a situation, COMPAT advised CCI for CCI’s act of granting huge punishments without giving any thinking to the equivalent. Besides, in a similar case of M/s Excel Crop Care Limited v. Competition Commission of India, 2017, COMPAT held that punishments are to be determined based on the ‘significant turnover’. So, for a situation of maltreatment against a multi-item organization, the turnover used to compute the punishment would be the turnover from the specific product(s) in conflict and not the general turnover.
Be that as it may, an anomaly is wild right now the working of the Commission and the Appellate Authority, for the COMPAT itself neglected to follow its point of reference of ‘pertinent turnover’ in the case of M/s DLF Limited v Competition Commission of India & Ors., 2018, COMPAT didn’t confine the figuring of the punishment based on DLF Limited’s turnover emerging just from the private fragment, in spite of the significant market all things considered being the market for ‘very good quality private settlement’. COMPAT maintained the punishment demanded by the CCI, which was determined based on DLF’s turnover relating to its whole business (i.e., the advancement of private, office and business properties).
Lastly, the Commission can pass a request to cause the division of the prevailing venture with the end goal that doesn’t manhandle its predominant position.
Thus with the increasing use of abuse of dominant position, our implementation of statutory laws relating to the Competition Act also became relevant. The reason behind such a law is to ensure the independence of business and also to have an unstigmatized economic outlook without any fear of the dominant position of any other in the economy. Therefore, in the market, there should be an equal opportunity and equal opportunity to all who want to do the business. However, competition should prevail as long as it is healthy and as long as it helps the entire society to grow but it becomes disastrous when one starts to overpower the other in their own ways of business.
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