ABUSE OF DOMINANT POSITION

SECTION 4

By

Ms. ANUSHA PATNAIK

ASSISTANT PROFESSOR
Sathyabama School of law

Sathyabama Institute of Science & Technology

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 ABUSE OF DOMINANT POSITION

WHAT IS DOMINANCE:

Dominant Position

In a competitive market, the balance of power among companies influences consumer welfare, market
growth, and fair trading practices. When one entity holds significant power, or a “dominant position,” it
has the potential to either enhance market growth or abuse its position to stifle competition.
The Competition Act, 2002, particularly Section 4, addresses this issue of “abuse of dominant position”
in the Indian market. This article will explore the legal provisions surrounding dominant positions, how
dominance is determined, and how its abuse is regulated to maintain healthy market competition.

What is Dominant Position in Competition Law?

The concept of a “dominant position” is integral to competition law. In simple terms, a company is said
to have a dominant position if it possesses significant market power, allowing it to act independently
of competitors, suppliers, or consumers in a particular market. It can dictate terms or exert control
over pricing, product output, or quality due to a lack of effective competition.

In the Competition Act, 2002, Section 4 targets the misuse, not the existence, of dominance. Dominant
market power is permissible under Indian competition law unless abused to restrict competition or harm
consumers.

For example, a company that uses its dominance to limit the entry of new firms, exploit consumers, or
impose unfair trade conditions would be seen as violating the law. This regulation is crucial as it
protects small and medium-sized enterprises and ensures consumers have access to affordable goods and
services without fear of monopolistic practices.

Section 4 of the Competition Act: Prohibition of Abuse of Dominant Position

Section 4 of the Competition Act is a key legal provision that prohibits enterprises from misusing their
market dominance. The section doesn’t aim to restrict or penalise companies simply for holding a
powerful market position. Instead, it prohibits conduct that leverages this position to obstruct market
access, distort competition, or exploit consumers.

Section 4 specifically addresses behaviours like:

 Imposing unfair or discriminatory prices

 Engaging in predatory pricing

 Restricting market entry or technical development
 Enforcing unrelated conditions in contracts
 Leveraging dominance in one market to gain advantages in another

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These actions are examples of how dominant companies might use their position to limit competition
and maximise their power over consumers and competitors alike.

Key Elements of Section 4 of the Competition Act

To determine whether a company has breached Section 4 of the Competition Act, it’s essential to
understand its key components. Section 4 identifies two main factors for violation:
 Existence of a Dominant Position
First, the enterprise must hold a dominant position within a relevant market. Market dominance
isn’t judged solely by a company’s size but by the extent of its influence on prices, consumers,
and competitors.
 Abuse of Dominance
Holding dominance is not unlawful unless the position is abused. The section prohibits actions
that restrict competition, exploit customers, or impose conditions that make it difficult for
competitors to enter or thrive in the market.

By targeting the misuse of power, Section 4 of the Competition Act aims to create a fair competitive
environment. However, it does not penalise market power alone—only its abuse.

Determining Dominant Position in Competition Law

Dominant position in competition law is often determined by considering the “relevant market,”
which includes both the relevant product market and the relevant geographic market. The relevant
product market encompasses products that consumers consider interchangeable or substitutable.
For example, if one detergent brand monopolised the market, consumers might turn to other brands if
prices rise. However, if that brand has no substantial substitute, its power is significant. The relevant
geographic market, on the other hand, pertains to the area where conditions of competition are
homogenous. Factors like consumer behaviour, distribution networks, and regulatory restrictions help
define the geographic market.

Once the relevant market is identified, Section 19(4) of the Competition Act outlines the factors that
determine dominance, including:
 Market share: The enterprise’s share in the relevant market

 Size and resources: Financial and operational capabilities of the enterprise

 Barriers to entry: Challenges faced by new firms attempting to enter the market
 Economic power: The enterprise’s ability to influence pricing, supply, and consumer demand
 Dependence of consumers: Whether consumers have alternatives or are highly dependent on
the enterprise
These factors allow the Competition Commission of India (CCI) to evaluate whether an enterprise holds
a dominant position in a particular market.

Abuse of Dominance: Practices Prohibited under Section 4

Once dominance is established, the CCI examines if this position has been misused.

Here are key forms of abuse of dominant position prohibited under Section 4 of the Competition Act:
Unfair or Discriminatory Pricing
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Dominant firms might charge exorbitant prices or engage in price discrimination to exploit their
consumers or gain advantages over competitors. Price discrimination occurs when a company charges
different prices to different buyers for the same product or service without reasonable justification.
Predatory Pricing
Predatory pricing is when a dominant company sets its prices below production costs, intending to drive
competitors out of the market. After competitors exit, the dominant firm may raise prices, exploiting
consumers and recovering initial losses. This tactic is particularly dangerous as it restricts competition
and monopolises the market.
Limiting Production or Market Access
A dominant player might limit the supply of goods or hinder market entry for potential competitors.
This is done by creating artificial shortages or controlling production, allowing the dominant player to
maintain high prices and retain control over the market.
Imposing Unrelated Conditions on Transactions
Some dominant firms might require customers to fulfil additional obligations unrelated to the main
transaction. For example, a mobile operating system provider might mandate the use of its own app
store as a condition to use the system, limiting consumer choice and stifling competition.
Leveraging Dominance in One Market to Enter Another
Dominant firms may exploit their position in one market to gain an advantage in a different but related
market. For instance, a company dominant in the smartphone operating system market could use its
position to promote its proprietary apps over competitors.

Landmark Cases on Abuse of Dominant Position in India

Several significant cases have clarified the interpretation of abuse of dominance competition
law under Section 4 of the Competition Act. These cases highlight how the CCI enforces this section
to maintain fair competition:

Google LLC Case

One prominent case involved Google LLC, where the CCI imposed a substantial penalty for abusing its
dominant position in the Android mobile operating system market. Google mandated that manufacturers
pre-install its suite of apps, stifling competition from alternative app providers.
The CCI held that this practice limited competition and mandated corrective steps to enhance user
choice. This landmark ruling emphasised that using a dominant position to gain an advantage in
another market (in this case, mobile applications) constitutes a breach of Section 4.

Ajay Devgn Films vs. Yash Raj Films

In another significant case, Ajay Devgn Films alleged that Yash Raj Films abused its dominance by
requiring single-screen theater owners to screen their movie “Jab Tak Hai Jaan” if they wished to screen
“Ek Tha Tiger.” The CCI found no evidence of market dominance, citing that competition among
Hindi-language films and multiple alternatives in the industry precluded Yash Raj Films from holding a
dominant position.

Fast Track Call Cab vs. ANI Technologies (Ola)

In a dispute between Fast Track Call Cab and Ola, Fast Track accused Ola of predatory pricing

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practices. Ola allegedly offered discounts and incentives to drivers to monopolise the cab service market
in Bengaluru. The CCI, however, ruled that Ola’s conduct did not breach Section 4, as it could not
conclusively determine that Ola was the dominant player at the time. This case illustrates the need for
clear evidence of dominance to invoke Section 4.

Intellectual Property Rights and Abuse of Dominance

Intellectual Property Rights (IPRs) are legally granted exclusive rights to exploit innovations or
creative works. However, when IPR holders dominate a market, they must avoid practices that prevent
competition. Section 4 applies to IPR holders if they misuse their market position, such as enforcing
excessive royalties or blocking competitors through patent rights. The CCI ensures a balance between
protecting intellectual property and preventing its misuse to restrict competition.

Consequences of Abuse of Dominant Position

Violations of Section 4 competition law are taken seriously, with the CCI imposing penalties and
corrective orders to ensure fair market practices. The CCI can order a cease and desist from abusive
conduct, impose penalties up to 10% of average turnover, and, in severe cases, order divestiture of
assets. In cases where abuse impacts market access or consumer choice, the CCI has shown a
willingness to enforce stringent penalties, deterring other firms from similar behaviour.

International Perspective on Abuse of Dominance

Global regulatory bodies share similar views on abuse of dominance, as monopolistic behaviours
negatively impact consumers and competitors. The European Union, under Article 102 of the Treaty on
the Functioning of the European Union (TFEU), has extensive provisions addressing dominant
positions, focusing on pricing, output restrictions, and market entry barriers. The United States enforces
similar provisions under its antitrust laws, prohibiting monopolistic practices that limit competition.
The World Trade Organisation (WTO) also supports anti-monopoly regulations to foster international
trade. Many countries, inspired by these frameworks, aim to safeguard consumer interests and promote
healthy competition, emphasising that dominance itself isn’t an issue—abuse of dominance is.

Balancing Innovation with Regulation

Competition law must strike a balance between allowing market leaders to grow and preventing abuse.
For instance, companies with innovative products and patents hold a competitive edge, which can attract
customers. However, when they use this edge to exploit consumers or restrict new players, intervention
becomes essential. Regulation should aim to protect the market’s integrity without stifling the growth
and creativity that come with market success.

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Two signs of a dominant company:

1. Acting independently: This company can pretty much do what it wants

without worrying much about its competitors. For example, they might raise
prices without customers easily switching to another brand.

2. Influencing the market: The company can potentially control or affect

things like:

a) Prices for consumers

b) How competitors operate

c) The overall market conditions

Perfect Competition vs. Reality:

 The law acknowledges that most markets are not perfectly competitive
(where everyone has equal power).

 In a perfect market, no single company would have this much

dominance.

How they decide dominance:

 Since perfect markets are not real, the law considers various factors to
decide if a company is dominant, like:

a) Market share: How big is the company compared to others?

b) Barriers to entry: How easy is it for new companies to enter the market
and compete?

c) Other factors: These might include things like the company's access to
resources or its influence on suppliers and distributors.

Perfect competition is an economic concept that describes a theoretical market structure

characterized by a high degree of competition. It is important to understand that perfect
competition is not likely to exist in a real-world market, but it serves as a useful
benchmark for analysing how markets function.

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Here are the key features of perfect competition:

 Many Buyers and Sellers: There are numerous buyers (consumers) and
sellers (firms) in the market. No single buyer or seller has a large enough
market share to influence the market price.

 Homogeneous Products: All firms sell identical products or services.

Consumers perceive no difference between the offerings of various sellers.

 Perfect Information: All participants in the market, both buyers and sellers,
have full and complete information about the product, pricing, and market
conditions. This includes things like production costs and competitor
offerings.

 Free Entry and Exit: There are no barriers for new firms to enter the market
or for existing firms to exit if they become unprofitable. This ensures that firms are
constantly motivated to be efficient and offer competitive prices.

 Price Takers: Firms cannot set their own prices. Instead, the market price is
determined by the equilibrium point where supply and demand intersect. Each firm
is a price taker, meaning they have to accept the market price and adjust their
production levels accordingly.

Basically, the law wants to prevent companies from using their size and power
to unfairly control the market.

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ABUSE OF DOMINANT POSITION (SECTION 4)

 Under MRTP Act there was no specific provision regarding the abuse
of dominant position.
 Section 4 is in line with international practices.
a) Section 4 prohibits abuse of dominance by enterprises.
b) This is a core principle in competition law around the world.
c) Jurisdictions like the US and EU have similar laws to prevent anti-
competitive behaviour by dominant firms.
d) The Competition Act itself was drafted with an eye towards
international best practices. India's economic reforms in the 1990s
involved aligning regulations with global standards.

The provisions relating to abuse of dominant position are similar to the law in the EU.
Section 4(1) of the Competition Act prohibits abuse of dominant position by an
‘enterprise’ or ‘group’.

Here, “group” refers to two or more enterprises that are interconnected in a way
that the activities of one enterprise affect or are likely to affect the activities of
the others.

 It is important to keep in mind that the Competition Act does not frown on
dominance itself but prohibits abuse thereof.
 Section 4 gives an exhaustive list of actions/activities which amount to
abuse of dominant position.
 Unlike anti-competitive agreements, it is not necessary for the CCI to
prove that the conduct has caused any adverse effect on competition.
 The CCI needs to prove the following:

a. The concerned party is a dominant player in the relevant market; and

b. The concerned party has abused its position of dominance.

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(1) No enterprise or group shall abuse its dominant position.

 This section prohibits any enterprise or group from misusing their

powerful market position (dominant position) to harm competition.

 The Competition Act does not provide an exhaustive list of abusive

behaviours. However, some examples include:

a) Predatory Pricing: Selling goods or services below cost to drive

competitors out of the market.

b) Imposing unfair conditions: Forcing unfair terms on customers or

suppliers, like demanding exclusive purchase agreements.

c) Limiting production or market access: Restricting output or

preventing competitors from entering a particular market.

Real-world example:

Imagine a company controls a significant portion of the bottled water market (dominant
position). Section 4(1) would prevent them from using this power to:

 Sell water below cost to drive out smaller competitors.

 Force retailers to stock only their brand, excluding competitors.

(2) There shall be an abuse of dominant position [under sub-section (1), if an

enterprise or a group].

(a) directly or indirectly, imposes unfair or discriminatory—

(i) condition in purchase or sale of goods or service; or

(ii) price in purchase or sale (including predatory price) of goods or service.

Explanation.— For the purposes of this clause, the unfair or discriminatory condition in
purchase or sale of goods or service referred to in sub-clause and unfair or
discriminatory price in purchase or sale of goods (including predatory price) or service
referred to in sub-clause shall not include such discriminatory condition or price which
may be adopted to meet the competition; or

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(b) limits or restricts— production of goods or provision of services or market therefor;
or technical or scientific development relating to goods or services to the prejudice of
consumers; or

(c) indulges in practice or practices resulting in denial of market access

[in any manner]; or

(d) makes conclusion of contracts subject to acceptance by other parties of

supplementary obligations which, by their nature or according to commercial
usage, have no connection with the subject of such contracts; or

(e) uses its dominant position in one relevant market to enter into, or protect,
other relevant market.

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—

operate independently of competitive forces prevailing in the relevant market; or affect

its competitors or consumers or the relevant market in its favour.

(b) “predatory price” means the sale of goods or provision of services, at a price which
is below the cost, as may be determined by regulations, of production of the goods or
provision of services, with a view to reduce competition or eliminate the competitors.

(c) “group” shall have the same meaning as assigned to it in clause (b) of the
Explanation to section 5.

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Section 4(1):

This clause is a straight forward statement: “No enterprise or group shall abuse its
dominant position.” This means that any company or group of companies who hold
a dominant position in a specific market (relevant market) are prohibited from using
their power unfairly.

For reference, clause (b) of the Explanation to section 5 defines a "group" as two
or more enterprises where one enterprise has a certain level of control over the others.

This control can be through:

 Owning at least 26% (or a higher percentage if specified) of the voting

rights in the other enterprise.

 Appointing more than half of the board of directors in the other enterprise.

Here are some additional examples to illustrate the concept of “abusing a

dominant position”:

1. Exclusive Dealing: Imagine a dominant beverage company “Mega Fizz” requires

all restaurants and cafes to exclusively stock their drinks. This makes it difficult for
smaller beverage companies to compete, as they lose access to a significant portion
of the market.

2. Refusal to Supply: A dominant supplier of raw materials “MonoMine” might refuse

to sell their materials to a new competitor in the market, hindering their ability to
operate.

3. Tying Arrangements: A dominant printer manufacturer “Print All” might force

customers to purchase their ink cartridges in order to use their printers. This restricts
consumer choice and potentially inflates ink prices.

4. Leveraging Power: A dominant online retailer “Megamall” might charge higher

fees to sellers who also advertise on competing platforms. This leverages

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their market dominance in online retail to influence behaviour in another market
(advertising).

e.g., If you sell your products in Amazon & Flipkart who is the dominant position
will charge higher.

5. Predatory Pricing : A dominant taxi service “Quick Cab” might deliberately offer
ridiculously low prices for a sustained period, causing smaller competitors to go out of
business. Once the competition is eliminated, they can then raise prices significantly.

This basically says a big company cannot be unfair to you when you buy something from
them (good or service). There are two ways this can happen:

(i) Unfair conditions: Imagine a company forces you to buy something extra you do
not want to get the thing you actually need. That is unfair!

(ii) Unfair prices: This can be super high prices, or crazy low prices. Super high prices
are just unfair to you. Crazy low prices might seem good at first, but they are often a
trick to drive competitors out of business. This is called predatory pricing.

Section 4(2)(a):

(a) directly or indirectly, imposes unfair or discriminatory—

(i) condition in purchase or sale of goods or service; or

(ii) price in purchase or sale (including predatory price) of goods or service.

This clause specifies certain actions that are considered abuse of dominant position if
they are done by a dominant enterprise or group:

(i) Imposing unfair or discriminatory conditions: This could include setting

different terms or requirements for different customers without valid
justification. For example, a dominant online marketplace might charge higher
fees to some sellers compared to others without a reasonable reason.

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e.g., The “All or Nothing” Deal: A dominant gym chain requires customers to sign
up for a year-long membership with a hefty upfront fee, while smaller competitors
offer more flexible monthly options. This unfairly disadvantages those who might not be
able to commit to a full year or prefer a pay-as-you-go approach.

The “Forced Bundling”: A dominant printer company sells its printers at a low
price but requires customers to purchase expensive ink cartridges from them
exclusively. This unfairly limits consumer choice for replacement cartridges and
potentially inflates overall costs.

(ii) Imposing unfair or discriminatory pricing: This includes setting unfair

prices for goods or services, specifically predatory pricing.

Predatory pricing is when a dominant company sets artificially low prices for its products
or services, often below their cost of production, with the sole intention of driving
competitors out of the market. This allows the dominant company to gain even greater
market share and ultimately raise prices later on.

This section of the Competition Act, 2002 of India deals with preventing abuse of
dominance in the market.

The Main Idea:

 This section says that if a company or a group of interconnected companies

(explained earlier) has a very strong position in the market (dominant position),
they cannot misuse that power by:

a) Imposing unfair or discriminatory conditions

b) Setting unfair or discriminatory prices

Focus: Unfair or Discriminatory Conditions

This part focuses on situations where a dominant company makes it unfair or

unequal for others to do business with them.

 Unfair: The conditions put someone (customers or competitors) at a

disadvantage compared to others.

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  Discriminatory: The company treats some customers or competitors
differently without a valid reason.

Examples:

 A company that provides internet service offers a discount to customers who bundle
their internet with their TV service, but does not offer the same discount to
those who only want internet. This could be unfair if there is no real cost
justification for bundling.

In the context of the Competition Act, setting unfair or discriminatory prices refers to a
dominant company (or group of companies) misusing their market power to manipulate
prices in a way that harms competition and consumers. Here is a breakdown of what it
means:

Focus: Unfair & Discriminatory Prices:

 Predatory Pricing: This is a common tactic where a dominant company

intentionally sells products or services below cost for a sustained period to
drive competitors out of the market. Once the competition is gone, the
dominant company can raise prices significantly, harming consumers.

 Excessive Pricing: This occurs when a dominant company sets prices that are
unreasonably high, exploiting their lack of competition. Consumers have
limited options and are forced to pay inflated prices.

Discriminatory Prices:

 Unjustified Price Differences: A dominant company might charge different

prices to different customers without a valid reason. This could be based on
factors like location, purchase quantity, or negotiating power.

 Price Squeezing: This happens when a dominant company, like a wholesaler,

buys goods from suppliers at very low prices or sells to retailers at very high
prices, squeezing profit margins for those in between.

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The Bottom Line:

The Competition Act aims to prevent dominant companies from setting prices that:

 Stifle competition: By driving out smaller players through predatory

pricing.

 Harm consumers: By forcing them to pay excessively high prices due to a lack
of choice.

Examples:

 A dominant ride-hailing app might offer deep discounts for a limited time to
undercut smaller competitors. Once the competition is gone, they raise prices
significantly.

 A dominant online retailer offers substantial discounts to bulk buyers but

charges significantly higher prices for individual customers, making it
difficult for smaller businesses to compete on price.

Explanation to Section 4(2)(a):

This clarifies that discriminatory conditions or prices are not considered abusive if
they are implemented to “meet the competition.” This means a dominant company can
adjust its prices or conditions to respond to similar offerings from competitors, as long
as it is not done solely to eliminate competition unfairly.

Abuses as specified in the Act fall into two broad categories:

Exploitative (excessive or discriminatory pricing) and

Exclusionary (for example, denial of market access).

Exclusionary Practices: These actions aim to limit competition by keeping new

players out of the market or making it difficult for them to compete effectively.

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PREDATORY PRICE:

 The “predatory price” under the Act means “the sale of goods or provision of
services, at a price which is below the cost, as may be determined by regulations,
of production of goods or provision of services, with a view to reduce competition
or eliminate the competitors” [Explanation (b) of Section 4]
 Predation is exclusionary behaviour and can be indulged in only by
enterprises(s) having dominant position in the concerned relevant market.

The major elements involved in the determination of predatory behaviour are:

Establishment of dominant position of the enterprise in the relevant

market.
Pricing below cost for the relevant product in the relevant market by the
dominant enterprise.
[‘Cost’, for this purpose, has been defined in the Competition Commission
of India (Determination of Cost of Production) Regulations, 2009 as
notified by the Commission.]

What the Regulations Likely Define as Cost:

 Average Variable Cost (AVC): This is the minimum cost per unit of
production incurred to keep the business operational. It includes expenses
directly linked to producing each unit, like raw materials, direct labour, and
variable overheads.
 Possible Consideration of Other Costs: In specific situations, the CCI might
consider additional costs beyond AVC, depending on the industry and market
dynamics. This could include fixed costs or a reasonable profit margin.

Intention to reduce competition or eliminate competitors This is traditionally

known as the predatory intent test.

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PREDATORY PRICING:

Barrier to entry of new enterprises into the relevant market is a major restraint on
the dynamics of competition.

When a dominant enterprise in the relevant market controls an infrastructure or a

facility that is necessary for accessing the market and which is neither easily
reproducible at a reasonable cost in the short term nor interchangeable with
other products/services, the enterprise may not without sound justification refuse to
share it with its competitors at reasonable cost. This is known as the essential
facility doctrine (EFD).

Imagine this scenario:

 Town with a Single Bridge: A small town has only one bridge that connects
two sides of the river, allowing people and goods to travel freely.

 Delivery Company: A new delivery company wants to start operating in the

town, but they need to use the bridge to reach customers on both sides.

 Bridge Owner: The bridge is owned by a private company that charges a very
high fee for anyone to cross. This makes it difficult for the new delivery company
to compete with existing businesses who might already have deals with the bridge
owner.

EFD in Play:

 Essential Facility: The bridge is an essential facility because:

o It is necessary for effectively delivering goods across town.

o Building a new bridge would be very expensive and time-consuming.

o There is no alternative way to easily cross the river with vehicles.

 Dominant Position: The bridge owner holds a dominant position because they
control the only way to efficiently cross the river.

 Excessive Fee: Charging an unreasonably high fee could be seen as abusing

their dominant position.

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Potential Outcome:

If the new delivery company takes legal action citing the EFD, a court could order the
bridge owner to charge a reasonable fee that allows for fair competition. This would
make it easier for the new company to operate and potentially benefit consumers with
lower delivery costs or more options.

It has been recognized that any application of the EFD should satisfy the following:

The facility must be controlled by a dominant firm in the relevant market.

Competing enterprises/persons should lack a realistic ability to reproduce
the facility.
Access to the facility is necessary in order to compete in the relevant
market; and
It must be feasible to provide access to the facility.

Subject to such conditions being satisfied and consistent with established

competition law principles applicable to the specific case, the Commission may
under the provisions of Section 4 (2) (c) of the Act (relating to denial of market
access by a dominant enterprise) pass a remedial order under which the dominant
enterprise must share an essential facility with its competitors in the downstream
markets.

 A key point is that predatory pricing can only be applied against companies
with a dominant position in the market (as per Section 4 of the Competition
Act, 2002).

Landmark Cases:

MCX Stock Exchange v. National Stock Exchange of India Ltd (2011):

Here, the Competition Commission of India (CCI) established a two- pronged test
for predatory pricing:

 Prices below cost price.

 Intention to eliminate competition.

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Uber India Systems Pvt. Ltd. vs. Karnataka Taxi Operators Association (2020):
The Supreme Court took a more nuanced view, suggesting that predatory pricing itself
could be evidence of market dominance.

Challenges:

 New Entrants: The law might not apply to new players offering low prices to
gain market share. (e.g., Reliance Jio case)

 Penetrative Pricing vs. Predatory Pricing: Distinguishing between genuine

low prices to enter a market (penetrative pricing) and predatory pricing can be
difficult.

 The judgement on Shopee Pvt. Ltd. (2022) highlights the ongoing debate on
predatory pricing in the Indian context.

The judgement on Shopee Pvt. Ltd. (2022) adds another layer to the ongoing debate
about predatory pricing in India.

Shopee Pvt. Ltd., under the trade name "Shopee," is a Singaporean multinational
technology company specialising in e-commerce. It is a subsidiary company of Sea
Limited.

Shopee's Alleged Strategy: Shopee, a new entrant in the Indian e-commerce

market, offered products at extremely low prices, possibly below cost. This raised
concerns about predatory pricing tactics aimed at driving out established competitors.

 The Debate: The Competition Commission of India (CCI) dismissed the case
against Shopee.

o Dominant Position Missing: The CCI argued that Shopee was not
dominant enough in the market yet for its pricing to be considered
predatory. This highlights a key challenge – the law might not apply to
new players offering aggressive prices to gain a foothold.

 Debate Continues: This judgement sparked discussions about whether the

current legal framework effectively tackles predatory pricing by new

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 players. Some argue the CCI missed an opportunity to set a stronger precedent.

Essentially, the Shopee case shows the complexity of applying predatory

pricing laws in a dynamic market with new entrants. It highlights the need
for a nuanced approach that balances encouraging competition with
protecting existing players from unfair practices.

Transparent Energy Systems (P) Ltd. v. TECPRO Systems Ltd. (2018): This
case involved a dispute between two solar power companies. The CCI laid down four
factors to assess predatory pricing:

1. Prices set below the cost price.

2. Exclusion of competition as the sole purpose.

3. Likelihood of recoupment of losses after eliminating competitors.

4. Predatory intent as evidenced by internal documents or statements.

The Predatory Pricing case against Reliance Jio: Did CCI Miss an
Opportunity to Rejuvenate Indian Telecom Sector? (analysis): This analysis
discusses the case against Reliance Jio for allegedly predatory pricing in the telecom
sector. It raises questions about whether the CCI missed an opportunity to promote
competition.

These cases showcase the complexities involved in identifying and tackling predatory
pricing in India. They demonstrate the evolving legal landscape and the ongoing efforts
to balance promoting competition with preventing unfair practices by dominant players.

Reliance Jio's entry into the Indian telecom market in 2016 sparked a major
controversy regarding predatory pricing. Here is a breakdown of the case:

Reliance Jio's Strategy:

 Jio launched with aggressive pricing strategies, offering free voice calls,
mobile data, and other benefits for extended periods.

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  This significantly undercut the prices of established telecom operators like
Airtel, Vodafone, and Idea.

Predatory Pricing Allegations:

 Existing operators accused Jio of engaging in predatory pricing, aiming to

drive them out of the market by offering unsustainable low prices.

 They argued that Jio's pricing model was not commercially viable and was
financed by its parent company, Reliance Industries, to eliminate
competition.

Competition Commission of India (CCI) Investigation:

 The CCI investigated the allegations based on the definition of predatory

pricing in the Competition Act, 2002.

 This definition requires two key elements:

1. Prices below cost: The company must be selling below its cost of
production.

2. Intention to eliminate competition: There must be evidence

suggesting the company aimed to harm, not just compete with,
rivals.

Jio's Defence:

 Jio countered the allegations by arguing they were a new entrant in the market
and not in a dominant position, a requirement for the predatory pricing
provision to apply.

 They claimed their pricing strategy aimed to attract new customers and expand
the overall market size, ultimately benefiting consumers.

Indraprastha Gas Limited (Case No. 04 of 2010):

 Indraprastha Gas Limited (IGL) is a dominant player in the piped natural gas
(PNG) market in Delhi.

18
  The CCI received complaints that IGL was offering deep discounts to large
bulk consumers, making it difficult for smaller competitors to enter the
market.

CCI's Findings:

 The CCI found that IGL's pricing strategy, specifically the significant
discounts for large consumers, was predatory.

 This practice aimed to drive out competitors and ultimately establish a

monopoly in the market.

Outcome:

 The CCI found IGL guilty of abusing their dominant position through
predatory pricing.

 The company was directed to revise their pricing strategy and ensure fair
competition in the market.

19
RELEVANT MARKET: [sub-section (r) of Section 2]

Dominance has significance for competition only when the relevant market has been
defined. The relevant market means “the market that may be determined by the
Commission with reference to the relevant product market or the relevant geographic
market or with reference to both the markets”. The Act lays down several factors of
which any one or all shall be considered by the Commission while defining the relevant
market.

RELEVANT PRODUCT MARKET: [sub-section (t) of Section 2] is defined

in terms of substitutability. It is the smallest set of products (both goods and
services) which are substitutable among themselves, given a small but significant non-
transitory increase in price (SSNIP). The market for cars, for example, may consist
of separate ‘relevant product markets for small cars, mid-size cars, luxury cars etc. as
these are not substitutable for each other on a small change in price.

RELEVANT GEOGRAPHIC MARKET: [sub-section (s) of Section 2] is

defined in terms of “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”.

A relevant geographic market is the area where businesses selling the same product or
service compete with each other in similar ways. It is like drawing a circle around the
region where prices, choices, and competition are all pretty much the same for a
particular product.

Here is the breakdown:

 Distinctly homogenous: This means conditions for buying and selling are
similar across the area.

 Supply and Demand: This includes both how easy it is for businesses to sell
their product (supply) and how easy it is for customers to find it (demand).

20
  Distinguished from neighbouring areas: Prices, choices, and competition
might be different in nearby areas, so we want to draw the line where things
become noticeably different.

For example, imagine a local bakery. Its relevant geographic market might just be the
town it is in. In that town, all the bakeries compete with each other for customers,
and people generally have similar options and prices. But if you drive to the next
town over, there might be different bakeries, different prices, and maybe even a
specialty bakery that does not exist in the first town. So, the two towns would likely
be considered separate relevant geographic markets.

Relevant Market:

Imagine you are craving pizza. Your relevant market is not just all food; it is
specifically:

 Relevant product market: Pizza.

o While tacos and burgers might satisfy hunger, they are not considered
substitutes for pizza with a small price increase.

 Craving Pizza: This highlights the importance of consumer preference

in defining a relevant product market. People looking for pizza are not
likely to switch to tacos or burgers with a small price increase because
they have a specific desire for pizza.

 Substitutes: The key factor is the availability of close substitutes. In

this case, even though tacos and burgers can satisfy hunger, they are not
considered substitutes for pizza because they do not fulfil the specific
craving.

 Small Price Increase: The concept of a relevant product market

considers how a small but significant price change would impact
buying behaviour. If a price increase for pizza would not make most
people switch to tacos or burgers, then those items are not in the same
relevant product market.

21
  Relevant geographic market: Your local area where you can easily order
or buy pizza.

o Ordering pizza from a city far away would not be a realistic option due
to distance and cost, even with a slight price hike.

Dominance:

 In your local pizza market, there might be a dominant pizza chain with
several stores and a large customer base.

 This chain may have significant power because:

o They can potentially influence pizza prices in the area.

o They might be able to pressure suppliers for better deals, making it

harder for smaller pizzerias to compete.

However, if a new, popular pizza place opens with unique offerings, it could
potentially challenge the dominance of the existing chain, especially if it attracts a
significant portion of customers.

Company A, a dominant player in the outline food delivery market, intends to acquire
Company B, a leading competitor in a specific geographical region. Explain how the
concept of relevant market might be applied by CCI while reviewing this application?

The Competition Commission of India (CCI) will consider the concept of 'relevant
market' while reviewing the application for acquisition by Company A of Company B to
assess the potential impact on competition. Here is a breakdown of how it might apply:

1. Defining the Relevant Market:

 The CCI will likely define two relevant markets:

a) The national online food delivery market.

b) The online food delivery market in the specific geographic region

where Company B is a leading competitor.

22
2. Analying Market Power:

a) The CCI will assess Company A's dominance in the national market.

b) They will also evaluate Company B's strength in the specific geographic

region.

3. Evaluating the Impact on Competition:

 The acquisition's impact on competition will be assessed in both relevant

markets.

 In the national market, the CCI will consider if the combined market share
of Company A and Company B would significantly reduce competition.

 In the specific geographic region, the CCI will examine if Company A's entry
would lessen competition, despite Company B's current strength.

4. Potential Outcomes:

 If the CCI finds that the acquisition would harm competition in either
market, they might:

a) Block the acquisition.

b) Approve the acquisition with certain conditions, such as requiring

Company A to divest some of its assets in the specific region.

Why Relevant Market Matters:

Defining the relevant market is crucial because it determines the competitive

landscape considered by the CCI. A broader national market might suggest the
acquisition has a less significant impact than if only considering the specific region where
Company B is strong.

23
The Commission while determining the “relevant geographic market”1, gives due
regard to all or any of the following factors, namely:-

regulatory trade barriers;

local specification requirements;
national procurement policies;
adequate distribution facilities;
transport costs;
language;
consumer preferences;
need for secure or regular supplies or
rapid after-sales service.

In case of “relevant product market”2, the Commission gives due regard to all or
any of the following factors, namely:-

physical characteristics or
end-use of goods;
price of goods or service;
consumer preferences;
exclusion of in-house production;
existence of specialized producers;
classification of industrial products.

The Act applies only to abuse by the dominant firms because the presumption is that a
small firm will lose its customers to its competitors if it charges excessive prices.
Customers might have nowhere to turn if a dominant firm charges an excessive price.
The abuse of dominant position is broadly classified into exploitative and exclusionary
practices. The following are examples of abuse under each of the practices:

1 Section 19(6) of the Act

2 Section 19(7) of the Act
24
EXPLOITATIVE AND EXCLUSIONARY BEHAVIOUR

Exploitative Practices:

a. Directly or indirectly imposing unfair or discriminatory prices in

purchase or sale of goods or service

Discriminatory pricing: Price discrimination occurs when customers in

different market segments are charged different prices for the same good or service,
for reasons unrelated to costs.

Example: Suppose Delhi is divided into two parts and both the areas are inaccessible to
one another. Suppose firm X is dominant in the market of tyres. Since it can easily
segregate the market, it may charge higher prices in one part and lower prices from
other consumers for the same tyre in spite of its cost being same in both the markets.

Predatory pricing: selling a product or service below cost to drive competitors

out of the market or create barriers to expansion for such competitors or to create
barriers to entry for potential new competitors.

Example: Enterprise A, a manufacturer of pens is a dominant enterprise in the pen

market. Earlier it used to charge a price of INR 10 per pen . However, it has recently
started selling its pen at a loss-making price of INR 6 knowing that its competitors
will not be able to match its price as their cost of production is higher than Rs. 6. As a
result of this, A's competitors would be forced to exit the market, after which, A, as a
monopolist, would be free to charge any price that it wants. This is an example of a
monopoly abusing its dominance by indulging in predatory pricing.

25
 Excessive pricing: charging excessive prices due to lack of competition. Since the
firm has no competition, it can charge higher prices.

b. Directly or indirectly, imposes unfair or discriminatory condition in

purchase or sale of goods or service.

The imposition of unfair or discriminatory condition has a negative effect on the

consumer welfare.

Example: XYZ abused its dominant position in the market of 'high end' residential
accommodation, in Mumbai by imposing unfair and one-sided conditions in agreement,
say by changing the layout plan without buyer consent. Imposition of such conditions is
violation of section 4 of the Act.

Exclusionary Practices

c. Limiting production of goods or provision of services or limiting or

restricting technical or scientific development

The dominant firm can restrict the production of its goods and services in order to create
artificial scarcity in the market. As a result of which demand will be greater than supply
and hence the price of the product would increase. Moreover, the dominant firm can also
restrict scientific and technical innovations as it has no incentive to indulge in it. Other
competitive companies innovate to achieve dominance but this is not the case with
dominant firm as it might have no or very less competition.

d. Indulges in practice or practices resulting in denial of market access

A dominant firm in order to maintain its dominance may indulge in practices which
results in denial of market access to its competitors.

For instance: it can create entry barriers like by pricing below cost (predatory pricing). It
can also indulge in lobbying with government to create/modify regulations which may
restrict new entry. Denial of market access by the dominant firm has a negative
impact on consumer welfare as it limits competitive prices and product choices.

26
e. Imposing conditions which are irrelevant to the contract entered into

According to it, a dominant firm imposes conditions which impose an unnecessary onus
on the other party to the contract which may be completely irrelevant.

Example: Suppose Arun purchases a luxury flat from XYZ builders in a high-end
residential accommodation. Also, XYZ has a dominant position in the high-end
residential accommodation market. Further, XYZ imposes an unnecessary condition on
Arun that he cannot rent his flat to students but he can rent it to families. This condition
is completely irrelevant to the contract entered into and is hence a violation of section
4 of the Act.

f. Using its dominant position in one relevant market to enter into, or protect,
other relevant market

According to it, a dominant firm would condition the purchase of the product by the
consumer with another product. The two products would have different relevant markets.

Example: A printer manufacturer who is dominant in the printer market would force
the consumer to also buy ink toner from him. Since, printer and toner are different
products; they have a separate relevant market. Consequently, the competition in the
ink market gets affected as ink producers would lose their customers to the printer
manufacturer.

1. Exploitative Behaviour:

United Spirits Limited (Case No. 12 of 2010)

 United Spirits Limited (USL) is a major player in the Indian liquor

industry, holding a dominant position in several segments.

 The CCI received complaints alleging USL was charging excessively high
prices for some of its popular whiskey brands.

CCI's Findings:

 The CCI investigated and concluded that USL's pricing strategy

went beyond just recovering costs and earning reasonable profits.

27
  The Commission found that the prices were set unfairly high, taking
advantage of their dominant market position and harming consumers.

Outcome:

 The CCI found USL guilty of abusing their dominant position under
Section 4 of the Competition Act.

 The company was imposed a penalty and directed to modify their pricing
strategy.

Key Takeaways:

 This case highlights that even if a company makes a profit, it cannot use its
dominant position to charge excessively high prices that are not justified by
their costs or market conditions.

 This case showcases the CCI's role in protecting consumers from unfair pricing
practices by dominant companies.

2. Exclusionary Behaviour:

Mahindra & Mahindra Ltd. (Case No. 43 of 2010):

 Mahindra & Mahindra (M&M) is a leading company in the Indian tractor

market, holding a dominant position.

 The CCI received complaints from other tractor manufacturers alleging that
M&M was forcing its dealers to not sell tractors from other brands.

CCI's Findings:

 The CCI found evidence that M&M was exerting pressure on its dealers,
including threats and termination of contracts, if they dealt with competing
brands.

 This practice restricted competition in the market and limited consumer

choice.

Outcome:

28
  The CCI found M&M guilty of abusing their dominant position by
engaging in exclusionary practices.

 The company was directed to stop such practices and adopt fair dealing
terms with their dealers.

3. Cases with Both Elements:

Grasim Industries Limited (Case No. 18 of 2010): Background:

 Grasim Industries Limited is a dominant player in the caustic soda industry in

India.

CCI's Findings:

 The CCI found Grasim guilty of both exploitative and exclusionary

practices:

o Exploitative pricing: Charging excessively high prices for caustic

soda, leveraging their dominant position.

o Exclusionary practices: Pressuring distributors to not deal with its

competitors.

Outcome:

 The CCI concluded that Grasim had abused their dominant position on
multiple fronts.

 The company was penalized and directed to modify their pricing and
distribution practices to ensure fair competition.

29
Section 4(2)(b) limits or restricts

(i) production of goods or provision of services or market therefore; or

(ii) technical or scientific development relating to goods or services to the
prejudice of consumers; or

Limiting Production/Development:

i) Production/Services/Market:

This prohibits dominant companies from limiting or restricting the production, provision, or
market access for goods and services.

This could include:

Artificially limiting production to keep prices high.

e.g., Imagine a company that makes a popular medicine decides to limit how much is
produced each year. This can make the medicine harder to find and more expensive,
which affects the consumers.

Refusing to supply essential goods or services to certain customers

without justification.

e.g., A company that owns a lot of grocery stores might refuse to sell products from
competing food brands on its shelves. This limits consumer choice and can also lead to
higher prices.

e.g., Imagine Company X dominates the market for mobile operating systems. To
eliminate a smaller competitor, Y, Company X starts selling phones with its
operating system at a price far below its production cost. This predatory pricing
strategy forces Y to either sell at a loss or exit the market altogether. Consequently,
consumer choice for mobile operating systems is reduced, potentially leading to less
innovation and ultimately higher prices for X's operating system in the long run.

ii) Technical/Scientific Development:

This prohibits hindering technological advancements related to goods or services,

potentially harming consumers by limiting their access to better options.

30
 Technical/Scientific Development: This refers to any advancements or
improvements related to the production or functionality of goods and services.
Think of new features, more efficient processes, or entirely new ways of doing
things.

e.g., Apple might prioritize its own research and development (R&D) efforts on
features that benefit their existing products or lock users into their ecosystem,
rather than fostering innovation across the industry. This could slow down the
development of new technologies that could benefit all smartphone users, not just
Apple users.

 Prejudice of Consumers: The law prohibits dominant companies from

hindering these advancements in a way that harms consumers. This could
happen in a few ways:

a) Refusing to License Key Technologies: Imagine a company holds a

patent on a crucial technology for making a specific product. If they
refuse to license this technology to others at fair terms, it can slow
down the development of improved versions of that product.
Consumers lose out because they miss out on potentially better options.

e.g., The Case of Cardiac Stents:

 Dominant Player: Abbott Laboratories (along with other companies

like Boston Scientific) held patents on crucial technologies used in
cardiac stents, tiny mesh tubes inserted into arteries to keep them open.

 Refusal to License: Abbott was accused of refusing to license its

stent technology to competitors at fair rates. This limited the ability
of other companies to develop and market alternative stents,
potentially hindering innovation in stent design and functionality.

 Impact on Consumers: This alleged practice could have:

31
 Slowed down the development of stents with improved materials or drug
coatings that could benefit patients.

Led to higher prices for stents due to limited competition.

Restricted patient access to a wider variety of stent options that might

better suit their specific needs.

Outcome:

Regulatory bodies like the European Commission investigated these practices,

and some settlements were reached. However, the case highlights how a
dominant company's control over key technology can potentially restrict
innovation and harm consumers.

b) Suppressing Research: A dominant company might try to suppress

research into new technologies that could compete with their existing
products. This limits consumer choice and can also lead to slower overall
progress in that field.

e.g., Suppose Company Z is the leading manufacturer of a particular type of medicine.

To stifle competition and maintain its dominance, Z engages in predatory pricing for
the drug. This discourages other companies from investing in research and
development of improved versions of the medicine. Consumers are prejudiced because
advancements in the treatment or cure for the condition the drug addresses are slowed
down.

Examples of Practices Hindering Development:

 Predatory Pricing: Imagine Company X is the leading manufacturer of a

specific type of battery. To discourage research and development (R&D) by
potential competitors, X resorts to predatory pricing, selling batteries at a
significant loss. This discourages other companies from investing in
developing new battery technologies, ultimately slowing down advancements
in battery life, efficiency, or other functionalities.

 Exclusive Dealing Agreements: Company Y, a dominant player in the

medical device market, signs exclusive deals with hospitals, preventing

32
 them from using equipment made by competitors. This limits the market for
innovative medical devices developed by smaller companies, hindering their
ability to recoup R&D costs and potentially slowing down the pace of innovation
in the healthcare sector.

 Patent Thickets: Company Z strategically acquires a large number of patents

related to a particular technology, even if they do not intend to use them all.
This creates a "patent thicket" where competitors are discouraged from entering
the market due to the risk of infringing on these patents. This can stifle
innovation as new companies hesitate to invest in R&D for fear of legal battles.

33
Section 4(2)(c) indulges in practice or practices resulting in denial of market
access [in any manner];

Denial of Market Access:

This prohibits dominant companies from engaging in any practice that prevents
others from entering or competing in the market. This could include:

Exclusive dealing arrangements that force suppliers or distributors to only deal

with the dominant company.

 Making it difficult or expensive for new entrants to join the market.

Exclusive Dealing Arrangements: These are agreements between a dominant

company and a supplier or distributor that force the supplier or distributor to
only deal with the dominant company. This can shut out new competitors and
limit choices for consumers.

e.g., Imagine a company that owns a major chain of supermarkets signs exclusive
deals with all the big beverage companies. This could make it very difficult for
smaller beverage brands to get their products on store shelves, limiting consumer
choice.

Making Market Entry Difficult or Expensive: This covers a range of practices

that make it harder for new businesses to enter the market and compete with the
dominant company. Here are some examples:

e.g., Predatory Pricing: Selling products below cost to drive competitors out of
business. Once the competition is gone, the dominant company can raise prices
again.

Refusal to Deal: A dominant company might refuse to supply essential materials

or services to new competitors. This can make it very difficult for them to get
started.

e.g., Imagine Company A is the sole provider of a crucial component needed to

manufacture a particular type of machinery. Company A also manufactures its
own machinery using the component. A might deny access

34
 to the component to its competitors who want to make similar machinery,
effectively shutting them out of the market.

e.g., Company B controls the only distribution network for a specific type of
product. B might refuse to allow competing brands to use its distribution
network, hindering their ability to reach consumers.

Importance of Section 4(2)(c):

This section ensures a level playing field for competitors by preventing a dominant
enterprise from leveraging its control over essential facilities to unfairly exclude them.
This promotes healthy competition, benefitting consumers in the long run.

35
Section 4(2)(d) makes conclusion of contracts subject to acceptance by other
parties of supplementary obligations which, by their nature or according to
commercial usage, have no connection with the subject of such contracts;

This prohibits dominant companies from forcing customers to accept unrelated

conditions to buy or sell goods and services.

For example, a company cannot force you to buy a product you do not need as a
condition of purchasing something else.

Making contracts subject to unrelated supplementary obligations: This clause

prohibits a dominant company from forcing other parties (like suppliers or distributors)
to accept irrelevant conditions in a contract as a condition of doing business with them.
These irrelevant conditions are called "supplementary obligations".

For it to be considered an abuse, the supplementary obligations must have no connection

to the subject of the contract itself, according to the nature of the business or established
commercial practices.

Here is an example: A dominant company supplying essential raw materials to

manufacturers might require them to purchase unrelated products from them as well,
as a condition of getting the raw materials.

 Tying Arrangements: This refers to the practice of forcing a customer to buy

a product or service they do not necessarily need as a condition of purchasing
something else that they do want.

For instance, a company cannot require you to buy a printer ink cartridge of
their brand specifically to use with their printer.

 Bundling: This involves selling two or more products or services as a single

package, even if the customer only wants one of them. Section 4(2)(d)
restricts such bundling if the bundled items are unrelated.

36
 e.g., A software company forcing you to purchase antivirus software along with
their word processing program.

 Imposing Unnecessary Conditions: A dominant company cannot force

customers to accept irrelevant conditions that are not customary in the industry or
have no bearing on the core product or service being offered.

For example, an airline cannot make you sign up for their loyalty program as a
mandatory condition to book a flight ticket.

Benefits of Section 4(2)(d):

 Protects Consumer Choice: This section safeguards customers from being

pressured into buying unnecessary products or services. They have the freedom
to choose what they want to purchase without being tied to unrelated conditions.

 Promotes Fair Competition: By preventing dominant companies from

leveraging their position to impose unfair conditions, the Act fosters a more level
playing field for all businesses.

Examples of Permissible Practices:

It is important to note that Section 4(2)(d) does not prohibit all forms of bundling or
offering additional products/services with a purchase. For instance, a fast-food restaurant
offering a meal combo with a drink and fries at a discounted price would not be
considered a violation as these items are typically complementary.

Outright Ban on Certain

Feature Supplementary Obligations
Practices

Unrelated additional Direct prohibition of a

Definition
conditions in a contract specific business activity

Irrelevant to the core business Targets a specific harmful

Focus
practice

Restricts options, creates unfair Completely eliminates the

Impact
terms practice

37
Section 4(2)(e) uses its dominant position in one relevant market to enter into,
or protect, another relevant market.

This prohibits using dominance in one market to gain an unfair advantage in another.

For example, a dominant online retailer cannot force sellers to advertise exclusively
on their platform as a condition of selling on their website.

Ride-hailing App and Food Delivery:

 Dominant Company: Let's call them "RideCo," a dominant player in the

ride-hailing app market (Market A).

 Secondary Market: Food delivery services (Market B).

Scenario:

RideCo might leverage its dominance in the ride-hailing market (A) by offering
incentives to restaurants that exclusively list their delivery services on RideCo's platform
(B). This could involve:

 Higher commission rates for restaurants that use only RideCo for deliveries.

 Lower delivery fees for customers who order from restaurants exclusively using
RideCo.

 Priority placement for restaurants that use only RideCo deliveries in the app's
search results.

Potential Violation:

These practices might be considered a violation of Section 4(2)(e) because RideCo

leverages its dominance in ride-hailing (A) to gain an unfair advantage in the food
delivery market (B).

38
CASE LAWS:

1. Belaire Owners Association vs. DLF Limited (Case No. 19 of 2010)

Facts:

 The Belaire Owners' Association (BOA) filed a complaint with the

Competition Commission of India (CCI) against DLF Limited, a major real
estate developer.

 The BOA alleged that DLF had misused its dominant position in the Gurgaon
real estate market by imposing unfair and one-sided terms in the Apartment
Buyer's Agreements (ABAs) for their Belaire housing complex.

 These clauses allegedly included restrictions on maintenance service providers,

limitations on modifications to apartments, and other conditions considered
arbitrary and unreasonable by the homeowners.

Judgement:

 The CCI found that DLF did hold a dominant position in the relevant market.

 The CCI determined that certain clauses in the ABAs, such as restrictions on
service providers and limitations on modifications, were unfair and imposed
unnecessary obligations on the apartment buyers.

 These clauses were seen as a violation of Section 4(2)(b) of the Competition

Act, 2002, which prohibits the abuse of dominant positions.

Outcome:

 The CCI imposed a penalty of ₹6.3 billion (approximately 7% of DLF's turnover

at that time) on the company.

 The CCI also directed DLF to modify the unfair clauses in the ABAs for the
Belaire apartments.

39
  Imagine you live in a fancy apartment complex called Belaire. The company
that built it, DLF, is like the king of real estate in your city. They have so
much power, they can pretty much make their own rules.
 The Belaire homeowners (you and your neighbors) got upset because DLF put
unfair terms in the contracts you signed to buy your apartments. These terms
said things like you couldn't choose your own cleaning service or make
certain changes to your apartment, even if they were reasonable.
 The homeowners got together and complained to a powerful government
agency called the Competition Commission of India (CCI). They said DLF
was abusing their power because they were the biggest builder in town.
 The CCI listened and agreed! They said some of DLF's rules were unfair and
broke the law because they took advantage of their dominant position. DLF had
to pay a big fine and change the unfair parts of the contracts for everyone
living in Belaire.

2. In Anuj Kumar Bhati v Sony Entertainment Television (SET), it was alleged

that the opposite parties have duped the participants of T.V. Quiz Show 'Kaun Banega
Crorepati-4' (KBC-4) and are indulging in foul play in the selection of contestants.
The main allegation was that the opposite parties, being in dominant position, were
discriminating in selection of the contestants and adopting unfair practices in selection
of questions asked during the show, which is in violation of section 4 of the
Competition Act. The Competition Commission, on the basis of viewership rating
observed that compared to all other shows/programmes telecasted on T.V. in Hindi
during prime time in India, the share of viewers of KBC was not so much that on the
basis of which it could be said that it was dominating all other shows. The viewers had
many options to watch programmes during the prime time depending on the
demographic profile of the viewer, his tastes and preferences. The KBC show was
not adversely affecting any other programme as each programme has its niche
viewership. The Commission thus held that there was no violation of the provisions of
section 3 or section 4 of the Act and, consequently, the matter be closed under section
26(2) of the Act.

40
Anuj Kumar Bhati accused Sony Entertainment Television (SET) of cheating
contestants on the popular Indian game show "Kaun Banega Crorepati" (KBC-4).
Here is a breakdown of the case:

Allegations:

 Deception and Unfair Selection: Bhati claimed SET misled contestants and
rigged the selection process, favouring certain participants.

 Dominant Position Abuse: He argued that SET's high viewership gave

them a dominant market position, allowing them to unfairly choose
contestants and manipulate questions (violating Section 4 of the Competition
Act, which prohibits abuse of dominance).

Competition Commission's Decision (CCI):

 No Market Dominance: The CCI considered KBC's viewership share.

While popular, they did not find it dominant compared to other Hindi
prime-time shows.

 Viewer Choice and Program Diversity: The CCI acknowledged

viewers have options based on taste and demographics. Each show caters to a
specific audience, and KBC was not harming others.

 No Competition Act Violation: Based on these points, the CCI

concluded there was not enough evidence to suggest SET violated Section 3 or
4 of the Competition Act (prohibiting anti-competitive agreements and abuse
of dominance).

 Case Closed: The CCI used its authority under Section 26(2) to close the
investigation.

41
3. MCX Stock Exchange Ltd vs. National Stock Exchange (NSE) (Case No.
13 of 2009):

Background:

 This case involved a dispute between the MCX Stock Exchange (MCX)
and the National Stock Exchange (NSE), both stock exchanges in India.

Allegations:

 MCX alleged that NSE abused its dominant position in the stock exchange
market by offering free currency derivatives trading to investors.

 MCX argued that this practice was unfair and harmed competition, as they
could not compete with a free service.

Outcome:

 The CCI found NSE guilty of abusing its dominant position by offering free
services.

 They imposed a penalty of ₹55 crore on NSE for their unfair practices.

Key Takeaways:

 This case demonstrates how using dominant market power to strategically

undercut competitors can be considered an abuse.

 It emphasizes the importance of maintaining a level playing field for all

market participants.

INQUIRY INTO ABUSE OF DOMINANCE

In exercise of powers vested under Section 19 of the Act, the Commission may inquire
into any alleged contravention of Section 4 (1) of the Act that proscribes abuse of
dominance.

Investigating Company Power:

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  Section 19(4) outlines the factors the CCI considers when looking into whether a
company has too much power in a market (dominant position).

 These factors include:

o How big a share of the market the company has (market share).

o The company's resources and size compared to competitors.

o How reliant consumers are on the company's products or services.

o How easy or difficult it is for new companies to enter the market

(entry barriers).

Taking Action:

 If the CCI has a preliminary reason to believe a company is abusing its

dominant position ("prima facie" case), they can launch a formal investigation.

 The investigation is typically carried out by the Director General (DG) who has
the power to:

o Summon and question people under oath.

o Request documents and evidence from the company.

o Conduct searches and seizures (with proper legal authorization).

Similarities to Court Powers:

 The DG's investigative powers are similar to those of a civil court, allowing
them to gather information effectively.

Over-all Purpose:

 This process helps ensure companies with significant market power don't act
unfairly and stifle competition. This ultimately benefits consumers by promoting
a fair marketplace with a wider range of choices and potentially lower prices.

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Note: For the details of the procedures related to inquiry and investigations please
refer to Regulation No. 2 of 2009 dated May 21, 2009.

POWERS OF THE COMMISSION

After inquiry the Commission may pass inter- alia any or all of the following orders
under Section 27 of the Act:

1) direct the parties to discontinue and not to re-enter such agreement;

2) direct the enterprise concerned to modify the agreement.

3) direct the enterprises concerned to abide by such other orders as the Commission may
pass and comply with the directions, including payment of costs, if any; and

Dominance is not considered bad per se but its abuse is. Abuse is stated to occur when an
enterprise or a group of enterprises uses its dominant position in the relevant market in
an exclusionary or/ and an exploitative manner.

4) pass such other orders or issue such directions as it may deem fit.

5) can impose such penalty as it may deem fit. The penalty can be up to 10% of the
average turnover for the last three preceding financial years upon each of such persons or
enterprises which are parties to bid-rigging or collusive bidding.

In Excel Crop Care Limited v. CCI and Ors. (2017 (6) SCALE 241), the Supreme
Court of India (the “Supreme Court”) held that the CCI must consider the “relevant
turnover” of the contravening company when determining penalties.

6) Section 28 empowers the Commission to direct division of an enterprise enjoying

dominant position to ensure that such enterprise does not abuse its dominant position.

INTERIM ORDER

Under section 33 of the Act, during the pendency of an inquiry into abuse of dominant
position, the Commission may temporarily restrain any party from continuance with the
alleged offending act until conclusion of the inquiry or until further orders, without
giving notice to such party, where it deems necessary.

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Note: For the details of the procedures related to interim orders please refer to
Regulation No. 2 of 2009 dated May 21, 2009

APPEALS

The Competition Appellate Tribunal (COMPAT) is established under section

53A of the Act, to hear and dispose of appeals against any direction issued or decision
made or order passed by the Commission under specified sections of the Act. An appeal
has to be filed within 60 days of receipt of the order / direction / decision of the
Commission.

COMPENSATION [Section 53N]

A person may move an application to COMPAT to adjudicate upon claim for

compensation that may arise from the findings of the Commission.

COMPETITION ACT PENALTIES

The Competition Act provides only for civil consequences for breach of its provisions.

a) Penalties on companies:
 Section 27 of the Competition Act lays down the penalties for contravention
of Sections 3 and 4. In addition to issuing cease-and-desist orders, the CCI
may also impose a monetary penalty of up to 10 percent of an
enterprise’s turnover for the three financial years preceding the date of
the penalty order.
 In Excel Crop Care Limited v. CCI and Ors. (2017 (6) SCALE 241),
the Supreme Court of India (the “Supreme Court”) held that the CCI must
consider the “relevant turnover” of the contravening company when
determining penalties.
 For cartels, the CCI can impose a penalty of up to the higher of three times
the profit or 10 percent of the concerned enterprise’s turnover for each year of
the continuance of the cartel.
b) Individual liability:

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 Section 48 of the Competition Act provides for liability of individuals who are
actively or passively involved in the contravention of the Competition Act. Such
individuals are those who oversee the enterprise and are responsible for its
business.
 The CCI can impose a penalty of up to 10 percent of the individual’s
average income calculated per their personal financial statements. The
CCI’s decision to impose penalties on directors and managers may also lead to
their disqualification under the Companies Act, 2013.

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The Case of Cardiac Stents:

 Dominant Player: Abbott Laboratories (along with other companies like Boston
Scientific) held patents on crucial technologies used in cardiac stents, tiny
mesh tubes inserted into arteries to keep them open.

 Refusal to License: Abbott was accused of refusing to license its stent

technology to competitors at fair rates. This limited the ability of other
companies to develop and market alternative stents, potentially hindering
innovation in stent design and functionality.

 Impact on Consumers: This alleged practice could have:

o Slowed down the development of stents with improved materials or drug

coatings that could benefit patients.

o Led to higher prices for stents due to limited competition.

o Restricted patient access to a wider variety of stent options that might

better suit their specific needs.

Outcome:

 Regulatory bodies like the European Commission investigated these practices,

and some settlements were reached. However, the case highlights how a dominant
company's control over key technology can potentially restrict innovation and
harm consumers.

Deficient Services - Medical Negligence

 Scenario: A patient undergoes surgery at a reputed hospital but suffers

complications due to alleged negligence. The patient can file a complaint
under the CPA,2019 claiming:

o Deficiency in services (Section 2(1)(o)) - The hospital failed to provide the

promised standard of care.

 Case Law: Dr. Suresh Gupta vs. Mrs. Manju Rani (CP No. 407/2012)
- The National Consumer Disputes Redressal Commission (NCDRC) ruled

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 in favour of the patient, directing the hospital to compensate for medical expenses
and suffering.

 Remedies Available:

o Compensation for medical expenses and mental agony (Section 14(1)(d))

o Repair or replacement of the service (Section 14(1)(e))

Misleading Advertisements

 Scenario: A company advertises a weight-loss product with unrealistic claims

and hidden costs. Consumers who purchased the product based on the
misleading ad can file a complaint under the CPA claiming:

o Unfair trade practices (Section 2(1)(d)) - The advertisement deceived

consumers into purchasing the product.

 Case Law: Hon'ble Justice A.R. Lakshmanan vs. Mahindra & Mahindra
Ltd. (2019) - The Madras High Court ruled that the misleading advertisement
was an unfair trade practice and directed the company to compensate
consumers and publish a corrective advertisement.

 Remedies Available:

o Removal of the misleading advertisement (Section 19)

o Repayment of the price paid for the product along with interest (Section
14(1)(c))

o Removal of defect in the product or service (Section 14(1)(e))

Section 18 of the Competition Act mentions that it is the duty of the Commission to
eliminate practices having adverse effect on competition, promote and sustain
competition, protect the interests of consumers and ensure freedom of trade carried on
by other participants, in markets in India. Thus, here we can see that apart from
promoting competition in the market it is also the duty of the

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Commission to protect the consumers from anti – competitive practices. An enquiry can
be initiated by a consumer or a consumer association by giving information to the
commission accompanied by the required fees. Inquiry can also be initiated by any
enterprise in the same manner. Further CCI can initiate inquiry on its own motion or
on reference made to it by the central or state government or a statutory authority.

CCI while determining whether an agreement falls under the category of an anti-
competitive agreement (Section 19(3)9) will have due regard to factors like creation
of barriers to new entrants in the market, driving existing competitors out of the
market, accrual of benefits to consumers etc. Thus, here we see that CCI will
consider the total benefits of a consumer before tagging an agreement an anti-
competitive. This surely will protect the consumer, due to the fact that his interests
are being considered by the CCI in its course of action.

It was held by CCI in Shri Neeraj Malhotra, Advocates v. North Delhi Power Ltd. that it is
not the dominance, but its abuse, which is prohibited in law.

2. Section 4(2)

In Re M/s ESYS Information Technologies Pvt. Ltd. v. Intel Corporation (Intel Inc.) the
CCI in order to determine dominance of Intel acknowledged not only the market share of
Intel but also several other factors such as consumer preference due to the brand name, the
presence of high entry barriers in the relevant market, the significant intellectual property
rights of Intel and the scale and scope enjoyed by Intel.

3. In Dhanraj Pillay v. Hockey India, Hockey India which was a dominant body for private
professional hockey activity organization in India and hockey player facilities decided not
to add World Hockey Series to the list of sanctioned activities, thus preventing players
from participating in the event. CCI exonerated Hockey India from all the allegations of
abuse of dominant position and anti-competitive agreement and held that it is one of the

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 regulatory functions of the Hockey India to sanction events and cannot, per se, be said to
be violative of the competition laws. In making a further distinction between means and
ends, CCI held that it had to proven that Hockey India applied the contention clause in an
unjust or unequal or discriminatory manner.
4. Pankaj Aggarwal v. DLF Gurgaon Home Developers Private Limited– In this case DLF
unilaterally drafted contracts for allotment of apartment which allowed them to be arbitrary
about the allocation of super-area, secretive about information relevant to the buyers, to cancel
allotments, forfeit booking sums, etc. CCI held these one-sided agreements to be exploitative and
discriminatory against consumers.

5. In Shri Shamsher Kataria v. Honda Siel Cars India Ltd., CCI held car companies liable
for abuse of their dominant positions in the market by entering into such agreements with
the Overseas Suppliers (OS) which kept OS from providing spare parts to free repairers.
Hence, market access was denied to the competitors and also consumers were made to
purchase spare parts solely from the respective car manufacturers.

6. In the case of M/s Atos Worldline India Pvt. Ltd. v. M/s Verifone India Sales Pvt. Ltd.
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.

7. t was held in Surinder Singh Barmi v. BCCI, the relevant market was decided on the
basis of substitutability of different types of entertainment. It was held that a cricket
match cannot be held to be substitutable by any other game due to its characteristics and
consumer preference.

8. In Re M/s ESYS Information Technologies Pvt Ltd v. Intel Corporation (Intel Inc) &Ors, to
assess dominance, the commission has followed the method of looking at the evidences in
entirely. In addition to Intel’s market share, the commission acknowledged several other factors
such as customer preference due to the brand name, the presence of high entry barriers in the
market, Intel’s substantial intellectual property rights, and Intel’s size and reach.
9. Microsoft v. United States (1998)

Microsoft was found to have abused its dominance in the operating system market by requiring
computer manufacturers to pre-install Internet Explorer on their computers.

10. Google v. European Commission (2017)

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0
 Google was found to have abused its dominance in the search engine market by favoring its own
products and services in search results.

Future Trends

It is likely that the enforcement of competition law in the area of abuse of dominant
positions will continue to evolve in the future. Some potential reforms and changes in
legal frameworks include:

 A greater focus on the impact of anti-competitive behavior on consumers and the

economy

 A shift towards an effects-based approach to antitrust enforcement, rather than a form-

based approach

 The development of new tools and methodologies for assessing anti-competitive behavior
in the digital economy

 Increased cooperation between competition authorities in different jurisdictions

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