This article has been written by Shubhangi Solanki pursuing a Diploma in International Contract Negotiation, Drafting and Enforcement course from LawSikho.

This article has been edited and published by Shashwat Kaushik.

Introduction

The Competition Act in India was passed in 2002 and it received assent from the President on January 13, 2003. It didn’t become enforceable at once. Section 4 of the Act, which talks about “abuse of dominant position,” came into force on May 15, 2009. This law is a breed of Anti- Trust Law, which is prevalent to protect:

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  • Consumers at macro level, and
  • Small and medium business from the abuse of the dominant position of large enterprises.

The Act promotes competition because lack of competition in the marketplace can lead to arbitrary increase in prices by producers to increase their profits , leaving consumers with no choice than to accept these prices and it will stagnate the market.We all are consumers of some goods or services, so welfare of consumers is welfare of people and welfare of people should be supreme law of the land (Salus populi suprema lex esto).

Having dominant position in the marketplace is not prohibited by Competition Act, 2002 (hereinafter : The Act), but abusing such position is against the provision of the Act.

Historical background

Monopolies Restrictive and Trade Practices Act, 1969 (hereinafter: MRTP) is regarded as the first legislation to talk about competition policies in independent India. 

India experienced an economic crisis toward the end of 1990 and had to open its domestic market for foreign players. The MRTP Act was unfit for this new situation. So a committee headed by Mr. S.V.S. Raghavan was formed by the Government of India during October, 1999. Committee submitted its report known as the “Raghavan Committee report” on May 22, 2000. Based on this report, Parliament passed the Competition Act, 2002 and MRTP Act was repealed in accordance with Section 66 of The Competition Act,2002.

Constitutional basis of prohibition of “abuse of dominant position” 

Part Ⅲ of Indian Constitution provides Fundamental Rights to people. Article 19(1)(g) of the Constitution provides every citizen of India the right of freedom to carry out any occupation, trade or business. But there are some reasonable restrictions provided by the Constitution to this right. Article 19(6)(ii) empowers the State to make any law relating to state monopolies. Article 39(c) imposes a duty on the State that they shall direct its policy “in a way” that “it” ensures operation of an economic system that does not result in the concentration of wealth and means of production to the common detriment. We can say that the provision regarding prohibition of Abuse of Dominant Position is based on the above mentioned provision of Indian Constitution because “abuse of dominant position” does lead to concentration of wealth.

Abuse of dominant position

In a general sense, “dominant position” means having a superior position over others. Here, it means the capacity of an enterprise to control production, output or both, independently of its consumers or its counterpart.

The Competition Commission of India (hereinafter: CCI) held in the case of Shri Neeraj Malhotra, Advocate vs. North Delhi Power Ltd. & Ors. that “Holding of a dominant position in a relevant market place in itself does not fall foul on Competition Act. It is not dominance, but its abuse, which is prohibited in law.”

Section 4 of the Act talks about “abuse of dominant position.” Sub- section (1) of section 4 prohibits the abuse of a dominant position by any enterprise or group. “Enterprise” is defined under section 2(h) of the Act.

CCI determines abuse of dominant position by an enterprise by following the below mentioned steps:

  • By identifying a relevant market
  • By determination of dominant position
  • By identifying the abusive conduct

Relevant market

To determine if an enterprise enjoys a dominant position, the first thing CCI needs to recognise is the relevant market. In the definition of “dominant position” provided under explanation (a) of section 4 of the Act, it is stated that if an enterprise is capable of affecting the relevant market, then it will be considered to be in a dominant position. Market means a place where trade happens or service is provided. Traditionally there used to be only physical marketplaces, but nowadays online marketplaces are also very relevant.The boundaries of relevant market must be defined precisely by CCI in each case.The Act does provide the definition of “relevant market” under Section 2(r) and it talks about two types of relevant market-

  1. Relevant Geographic Market [Section 2(s)]
  2. Relevant Product Market [Section 2(t)]

Relevant geographical market

It means a marketplace where circumstances of competition for supply or demand of goods or services are homogenous and distinct from other places.

Factors which may be considered by CCI while determining relevant geographic markets are:

  • what are the local specification required for the local market 
  • trade barriers which exist in a particular area, 
  • National procurement policies,
  • preference of locals/consumers, 
  • distribution facilities, 
  • transportation,
  •  language,
  • Need for secure or regular supplies or rapid after sale services
  • Nature of goods or services
  • cost

In the case of Competition Commission of India vs. Co- Ordination Committee of Artists and Ors. (2017), the Supreme Court held that all those places where a buyer or consumer can find or is willing to find a substitute for the said product will be considered the relevant geographic market.

Relevant product market

The provision that defines “relevant product market” was substituted by Act No. 9 of 2023. Earlier, to consider some products or services to be part of the same relevant product market, the only requirement was that they must be regarded as interchangeable or substitutable by consumers, but now, after amendment, the definition is widened. Now it also includes the products or services whose production or supply can be considered interchangeable or substitutable by the supplier.

Factors which may be considered by CCI while determining relevant product markets are:

  • Characteristics of goods or nature of service,
  • Price,
  • Preference of consumers,
  • Exclusion of in-house production,
  • If specialised producers exist or not,
  • Classification of industrial products,
  • Costs associated with switching demand or supply
  • Categories of customers.

Determination of dominant position

Determination of the dominant position of an enterprise or group is the next important aspect which is to be fulfilled by CCI. List of factors which CCI may consider while doing so is provided by the Act itself in sub-section (4) of Section 19. They are:

  • Market share of the enterprise or group,
  • Size and resources of enterprise or group,
  • Size and importance of competitors,
  • Economic power of enterprise or group,
  • Vertical combination or integration,
  • If the consumers are dependent on the enterprise,
  • If the status of monopoly or dominant position is result of being a government company, a public sector undertaking, or a statute,
  • If there are any kind of barriers for the enterprise to enter the marketplace,
  • Countervailing purchasing power,
  • Structure and size of market,
  • Social obligation and social costs,
  • If the enterprise or group enjoys relative advantage over its competitors, which might result in an appreciable adverse effect,
  • CCI can consider any other factor that it may deem fit.

Ways by which an enterprise or group can abuse its dominant position

Now that CCI have recognised the dominant position of an enterprise, it will determine whether said enterprise is abusing its dominant position or not. Sub-section (2) of Section 4 lists down circumstances/actions by enterprise or group which will come under the purview of abuse of dominant position.

  1. Unfair or discriminatory imposition of condition or price(including predatory price) in sales or purchase of goods or services whether directly or indirectly.
  2. Limiting or restricting the production of goods or scientific/technical developments regarding goods or services that will be beneficial for consumers.
  3.  Denial of market access to other enterprises or groups 
  4. Applying conditions that have no relation to subject matter of contract.
  5. Using their dominant position in one market to enter into another market.

In the recent case of Umar Javed vs. Google LLC, the Competition Commission of India (CCI) imposed a penalty of Rs. 1337.73 crores on Google for abusing its dominant position in various markets of the Android Mobile Device Ecosystem. The CCI found that Google’s mandatory pre-installation of the entire Google Mobile Services (GMS) suite under the Mobile Application Distribution Agreement (MADA) amounted to the imposition of unfair conditions on device manufacturers. This contravened Section 4(2)(a)(i) of the Competition Act, which prohibits the imposition of unfair or discriminatory conditions in the purchase or sale of goods or services.

The CCI also found that Google’s conduct amounted to prima facie leveraging of its dominance in the Play Store to protect its relevant markets, such as online general search. This contravened Section 4(2)(e) of the Competition Act, which prohibits the use of a dominant position in one market to protect or strengthen a position in another market.

The CCI’s findings in this case are significant because they demonstrate the growing scrutiny of digital platforms by competition authorities around the world. The case also highlights the importance of ensuring that digital platforms do not abuse their dominant positions to stifle competition and harm consumers.

In addition to the penalty, the CCI also directed Google to take several steps to address its anti-competitive practices. These steps include:

  • Allowing device manufacturers to pre-install competing app stores on their devices.
  • Allowing users to uninstall pre-installed Google apps.
  • Providing users with more information about the data that Google collects and how it is used.

These measures are expected to level the playing field for competing app developers and provide users with more choice and control over their devices.

The CCI’s decision in this case is a landmark ruling that could have a significant impact on the global digital economy. It is a sign that competition authorities are increasingly willing to take action against digital platforms that abuse their dominant positions.

Who can approach CCI in case of abuse of dominant position

Section 19 empowers CCI to inquire into cases of alleged contravention of Section 4. It can take cognizance of information received in any of the following ways:

  • Information by any person.
  • Information by any consumer.
  • Information provided by any association or trade association of consumers.
  • References made to CCI by Central Government, state government or statutory authority.
  • Suo moto.

The period of limitation for approaching CCI is three years from the date such cause of action arose. The Commission may condone delay if it is satisfied that the informant had sufficient cause for not filing information or reference within the prescribed time.

Procedure for equiry

According to Section 26, if the commission feels that the information received by them have merits and a prima facie case exists, then it shall ask the Director General(‘DG’) to investigate in the said case.And if commission thinks otherwise then it can close the case.

Recent Amendment of 2023 inserted sub-section 2A in section 26 which prohibits the multiplicity of proceedings. It stated that if CCI has already decided a certain matter, the same matter may not be entertained by the commission.

Whenever the DG is asked by CCI to undertake an investigation, it is his/her duty to perform the investigation and submit its report within prescribed time. The Commission may direct DG to investigate further after the submission of the report by him. 

If the report submitted by DG suggests that there is no contravention of any provision of Act, the commission must ask the concerned parties to file objections, if any.

Orders by Commission after inquiry

CCI may pass any or all of the following orders if it find there is abuse of dominant position:

  • Direct discontinuance of dominant position (Section 27)
  • Impose penalty of maximum 10% of average of turnover of last three preceding financial year (Section 27)
  • Pass any order as it may deem fit
  • Section 28 empowers commission to order division of an enterprise enjoying dominant position.

According to Section 33 of the Act, CCI may temporarily restrain any party from committing abuse of dominant position during inquiry. Such order will be in force till the conclusion of inquiry.

International perspective of abuse of a dominant position 

The abuse of a dominant position, also known as monopoly abuse, occurs when a company with significant market power engages in anti-competitive behavior that harms consumers and competitors. This can include charging excessive prices, limiting production, or engaging in predatory pricing to drive competitors out of the market.

The abuse of a dominant position is a serious concern from an international perspective, as it can have a negative impact on trade and economic growth. For example, if a company with a monopoly in a particular industry charges excessive prices, this can make it difficult for foreign companies to compete in that market. Similarly, if a company engages in predatory pricing to drive competitors out of the market, this can reduce competition and lead to higher prices for consumers.

The international community has taken a number of steps to address the problem of the abuse of a dominant position. For example, the World Trade Organization (WTO) has a number of rules that prohibit anti-competitive behavior, such as Article 82 of the Treaty on the Functioning of the European Union (TFEU). In addition, many countries have their own competition laws that prohibit the abuse of a dominant position.

Despite these efforts, the abuse of a dominant position remains a problem in many countries around the world. This is because it can be difficult to prove that a company has abused its dominant position, and because companies often have the resources to delay or even block enforcement actions.

There are a number of things that can be done to address the problem of the abuse of a dominant position. These include:

  • Strengthening competition laws and enforcement mechanisms.
  • Promoting competition in key sectors of the economy.
  • Educating consumers about the dangers of monopoly abuse.
  • Supporting small businesses and entrepreneurs.

By taking these steps, we can help to create a more competitive and fair marketplace for all.

In addition to these laws and regulations, there are a number of other measures that can be taken to address the issue of dominant positions. These measures include promoting competition, encouraging innovation, and educating consumers about their rights. By taking these steps, we can help to ensure that markets remain competitive and that consumers have access to a wide range of affordable and high-quality products and services.

Categories of abuse of dominant positions under Competition Act of 2000

The Competition Act of 2000, which aims to prevent anti-competitive practices and promote fair competition in the Indian market, identifies several categories of abuse of dominant positions. Here is an elaboration and expansion of the input text:

  1. Refusal to deal: A dominant firm may refuse to deal with certain customers or suppliers, thereby limiting their access to the market. This can have several adverse effects, including:
    • Restricted market entry for new competitors.
    • Reduced consumer choice.
    • Higher prices are due to limited supply.
    • Stifling of innovation and competition.
  2. Exclusive dealing: A dominant firm may require its customers or suppliers to deal exclusively with it, preventing them from transacting with competitors. This can lead to:
    • Foreclosure of competitors from the market.
    • Reduced market competition.
    • Higher prices for consumers.
    • Limited product variety and innovation.
  3. Tying and bundling: A dominant firm may tie the sale of one product or service to the purchase of another, or may bundle products in a way that limits consumer choice. This can result in:
    • Higher prices for consumers.
    • Reduced consumer choice.
    • Less competition in the tied product market.
    • Slower market entry for new competitors.
  4. Predatory pricing: A dominant firm may engage in predatory pricing by selling products below cost with the intent of driving competitors out of the market. This can have several negative consequences, including:
    • Reduced market competition.
    • Lower quality products or services.
    • Market dominance by a single firm.
    • Higher prices once competition is eliminated.
  5. Excessive pricing: A dominant firm may set excessively high prices for its products or services, exploiting its market power to extract higher profits. This can result in:
    • Reduced consumer welfare.
    • Limited market access for competitors.
    • Slower market innovation and growth.
  6. Discriminatory pricing: A dominant firm may charge different prices to different customers for the same product or service, without any justifiable reason. This can lead to:
    • Unfair treatment of customers.
    • Reduced consumer choice.
    • Market distortions and inefficiencies.
  7. Limit on production or supply: A dominant firm may restrict the production or supply of its products or services, artificially creating scarcity and driving up prices. This can result in:
    • Higher prices for consumers.
    • Reduced consumer choice.
    • Slower economic growth and development.
  8. Market allocation: A dominant firm may allocate markets or customers among different competitors, thereby reducing competition. This can lead to:
    • Reduced market competition.
    • Higher prices for consumers.
    • Limited market access for new competitors.
    • Reduced market innovation and growth.

Punishment

In cases where an undertaking is found to have abused its dominant position in the market, the Competition Commission possesses the authority to impose various punitive measures. These actions aim to rectify the anti-competitive behaviour and restore fair competition. Here are some of the measures that the Competition Commission can take:

  1. Cease and desist orders: The Competition Commission can issue cease and desist orders, directing the undertaking to immediately cease engaging in the abusive conduct. This measure aims to halt any ongoing anti-competitive practices and prevent further harm to competition.
  2. Divestiture: In cases where the abuse of dominant position involves the acquisition of assets or merger of entities, the Competition Commission can order the undertaking to divest certain assets or unwind the merger. This action is intended to restore the pre-existing competitive landscape and create a more level playing field for market participants.
  3. Structural remedies: The Competition Commission may also impose structural remedies, such as the separation of divisions or the creation of independent entities. These remedies aim to alter the structure of the undertaking to reduce its dominance and promote competition.
  4. Behavioural remedies: Behavioural remedies involve imposing specific conduct requirements on the undertaking. These requirements can include restrictions on pricing, output, or market behaviour. The objective is to modify the undertaking’s conduct to ensure that it aligns with competitive principles.
  5. Fines and Penalties: The Competition Commission has the authority to impose substantial fines and penalties on undertakings found guilty of abusing their dominant position. These financial sanctions serve as a deterrent against anti-competitive behaviour and compensate for the harm caused to consumers and competitors.

The penalties for abuse of a dominant position can include:

  1. A fine of up to 10% of the average turnover of the entity for the preceding three financial years
  2. A direction to cease and desist from the anti-competitive conduct
  3. Divestiture of assets or businesses
  4. Break-up of the entity

In addition to the above penalties, the CCI can also recommend to the government to take appropriate action, such as amending the relevant laws or regulations, to prevent further abuse of the dominant position.

  1. Compliance monitoring: The Competition Commission may appoint independent monitors to oversee the undertaking’s compliance with the imposed remedies. The monitors regularly assess the undertaking’s conduct to ensure adherence to the prescribed requirements.

The Competition Commission’s actions in punishing undertakings that abuse their dominant position are crucial for maintaining a competitive market environment. By taking these measures, the Commission aims to protect consumers, promote innovation, and safeguard the overall health of the economy.

Landmark case laws

Ajay Devgn Films vs. Yash Raj Films Pvt. Ltd. & Ors. (2012)

In this case, Ajay Devgn Films (informant) is a company engaged in distribution of films. Informant approaches CCI claiming that Yash Raj Films (opposite party) has allegedly abused their dominant position The informant’s allegations were that the opposite party released a film Ek tha tiger on 15th August 2012 and at the same time they were planning to release film Jab tak hai jaan at the time of diwali. Opposite party included a condition on the contract for single theatres that if they want distribution rights for  Ek tha tiger, they have to agree to exhibit  Jab tak hai jaan at the time of its release and because Ek tha tiger was a mega starrer film which was bound to become super hit, most of the single screen theatre agreed to this condition.In the present case the informant failed to provide evidence that ‘film industry in India’ is the relevant market which they claimed.The counsels of the informant argued that the opposite party is dominant because it was a big banner production house and had a big name. CCI held that no enterprise can be considered dominant because of ‘big name’. Dominance has to be determined by the law using factors listed down in Section 19(4) of the Act and there was no prima facie contravention of Section 4 by the opposite party.

Together We Fight Society vs. Apple Inc. ＆ Anr. (2021)

In this case, Together We Fight Society (“Informant”) a non-government organisation approached CCI claiming that Apple Inc. (‘OP-1’) and Apple India Private Limited (‘AIPL’) have allegedly contravened the provisions of section 4 of the Act. Informant has averred that Apple lets app developers reach users in their devices only if app developers go through ’App Store’ controlled by Apple. Furthermore, if an app developer wants to sell in-app content, the consumers have to use a single payment processing option offered by Apple, which has a 30% commission(which is more than other payment services). CCI was of the opinion that smart device ecosystem of Apple (based on iOS) is a major ecosystem and app developers would not like to exclude this ecosystem. It is also convenient for consumers to have certain popular apps available in all of the ecosystem. CCI stated that Apple does holds a monopoly in the relevant market and that Apple has violated provisions of Section 4(2)(a), 4(2)(b), 4(2)(c), 4(2)(d) and 4(2)(e) of the Act. It directed Director General to hold an investigation regarding this issue

Conclusion

The object of the Act is to promote competition in the marketplace. If an enterprise or group of enterprises enjoys a dominant position, it is not prohibited by the Act but abuse of such position is against the law.  Competition in the market is beneficial for everyone as we all are consumers of one or other thing. 

References

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