Meaning of Dominance
Dominance refers to a position of economic strength enjoyed by an enterprise that enables it to:
operate independently of competitive forces, or
affect competitors, consumers, or the market in its favor.
Dominance itself is not illegal. What is prohibited is the abuse of that dominant position.
Determining Dominance
Dominance has been traditionally defined in terms of market share of the enterprise or group of
enterprises concerned. However, a number of other factors play a role in determining the
influence of an enterprise or a group of enterprises in the market. These include:
Market share
Size and resources of enterprise
Size of competitors
Economic power
Vertical integration: control over multiple levels of supply chain.
Example: Manufacturer owns: raw material source, production unit, distribution
network
Dependence of consumers
Entry barriers
Countervailing buyer power
Important: High market share alone ≠ dominance. It is only one indicator.
Legal Basis
Under Section 4 of the Competition Act, 2002, abuse of dominant position is prohibited.
The law has two steps:
1. Determine whether the enterprise is dominant: 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 taken into account by the Commission while defining the relevant market.
(a) Relevant Product Market: Products/services regarded as interchangeable by
consumers based on price, use, quality, consumer preference
Example: Jio and Airtel may be in same product market.
(b) Relevant geographic market: 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”.
2. If dominant, examine whether its conduct amounts to abuse: Has the firm used its
dominance in a way that distorts competition or harms consumers?
What is Abuse of Dominance?
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.
Types of Abuse
A. Exploitative Abuse: This occurs when a dominant firm uses its power to exploit customers
unfairly because it takes advantage of consumers who have no alternative suppliers. Examples:
Excessive pricing: Charging prices far above competitive levels without justification.
Unfair terms: Dominant company forces unfair contract clauses.
Price Discrimination: Charging different customers very different prices without valid
reason.
Limiting Supply to Increase Price: Company intentionally reduces production so price
rises.
B. Exclusionary Abuse
When firm harms competitors or prevents market entry.
Examples:
Predatory pricing: Selling below cost to eliminate competitors, then raising prices later.
Refusal to supply: Dominant company refuses to supply essential inputs to competitors.
Exclusive dealing: Dominant firm forces retailers or distributors to sell only its product.
Tying arrangements
Raising barriers to entry: Creating artificial obstacles so new companies cannot enter
market.
Section 4 (2) of the Act specifies the following practices by a dominant enterprises or group
of enterprises as abuses:
(i) directly or indirectly imposing unfair or discriminatory condition in purchase
or sale of goods or service;
(ii) directly or indirectly imposing unfair or discriminatory price in purchase or
sale (including predatory price) of goods or service;
(iii) limiting or restricting production of goods or provision of services or market;
(iv) limiting or restricting technical or scientific development relating to goods or
services to the prejudice of consumers;
(v) denying market access in any manner;
(vi) making 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;
(vii) using its dominant position in one relevant market to enter into, or protect,
other relevant market
Inquiry Into Abuse of Dominance
Under Section 19 of the Competition Act, 2002, the Competition Commission of India is
empowered to investigate whether an enterprise is misusing its dominant market position, which
is prohibited under Section 4. An inquiry into abuse of dominance is the statutory process
through which the Commission examines whether a firm holding a dominant position in a
relevant market has misused that power.
Initiation of Inquiry: The CCI may initiate an inquiry on information filed by any person,
consumer, enterprise, or trade association, on a reference from the Government or a statutory
authority, or suo motu.
Prima Facie Opinion: At the initial stage, the Commission forms a prima facie opinion as to
whether sufficient material exists. If no prima facie case is found, the matter is dismissed; if one
exists, the Commission directs the Director General to conduct an investigation.
Investigation by Director General: The Director General collects evidence, examines
witnesses, and analyzes agreements and market conditions, and thereafter submits a report to the
Commission.
Determination of Dominance: The Commission determines whether the enterprise is dominant
by evaluating factors under Section 19, such as market share, economic strength, entry barriers,
consumer dependence, and competitive constraints.
Determination of Abuse: Only after dominance is established does the Commission assess
whether the conduct constitutes abuse, including unfair pricing, discriminatory conditions, denial
of market access, tying arrangements, or limitation of production.
Hearing Stage: Both parties are granted full opportunity to present evidence and arguments in
accordance with the principles of natural justice.
Final Decision: Upon consideration of all material, the Commission may dismiss the case if
abuse is not proved or pass appropriate orders if violation is established, such as cease-and-desist
directions, modification of agreements, monetary penalties, or structural remedies in serious
cases. The objective of such inquiry is not to penalize mere size or success but to ensure that
market power is not exercised in a manner that harms competition or consumers.
Appeal: Orders of the Commission are appealable before the National Company Law Appellate
Tribunal and thereafter before the Supreme Court of India.
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
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.
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.