DISCLAIMER

This quick guide is published as part of the advocacy

programme of the Competition Commission of India
(the Commission). Its contents should, in no way, be
treated as official views of the Commission. Readers
are advised to carefully study the Competition Act,
2002, as amended by the Competition (Amendment)
Act, 2007, and seek legal advice, wherever necessary.
 ABUSE OF DOMINANCE
INTRODUCTION

The Competition Act, 2002 as amended by the Competition

(Amendment) Act, 2007, (the Act) follows the philosophy of modern
competition laws and aims at fostering competition and at protecting
Indian markets against anti-competitive practices by enterprises. The Act
prohibits anti-competitive agreements, abuse of dominant position by
enterprises, and regulates entering into combinations (consisting of
mergers, amalgamations and acquisitions) with a view to ensure that
there is no adverse effect on competition in India.

This competition advocacy and awareness booklet addresses the

applicability of Section 4 of the Competition Act, 2002 relating to abuse of
dominant position (dominance) by enterprises.

Competition laws all over the world are primarily concerned with
the acquisition and/or exercise of market power and its abuse. The term
“market power” is variously known as “dominant position”, “monopoly
power” and “substantial market power”.

WHAT IS DOMINANCE?

The Act defines dominant position (dominance) in terms of a position

of strength enjoyed by an enterprise, in the relevant market in India,
which enables it to:

z operate independently of the competitive forces prevailing in

the relevant market; or
z affect its competitors or consumers or the relevant market in its
favour.

2 ΠCOMPETITION ACT 2002: PROVISIONS RELATING TO ABUSE OF DOMINANCE

 It is the ability of the enterprise to behave/act independently of the
market forces that determines its dominant position. In a perfectly
competitive market no enterprise has control over the market, especially
in the determination of price of the product. However, perfect market
conditions are more of an economic “ideal” than reality. Keeping this in
view the Act specifies a number of factors that should be taken into account
while determining whether an enterprise is dominant.

RELEVANT MARKET1

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.

The relevant product market2 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. A relevant product in a relevant geographic market
is what matters.

Relevant geographic market3 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”.

1 sub-section (r) of Section 2

2 sub-section (t) of Section 2
3 sub-section (s) of Section 2

COMPETITION ACT 2002: PROVISIONS RELATING TO ABUSE OF DOMINANCE Π3

FACTORS TO DETERMINE DOMINANT POSITION

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:
z market share,
z the size and resources of the enterprise;
z size and importance of competitors;
z economic power of the enterprise;
z vertical integration;
z dependence of consumers on the enterprise;
z extent of entry and exit barriers in the market; countervailing
buying power;
z market structure and size of the market;
z source of dominant position viz. whether obtained due to
statute etc.;
z social costs and obligations and contribution of enterprise
enjoying dominant position to economic development4 .

The Commission is also authorized to take into account any other

factor which it may consider relevant for the determination of dominance.

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.
The Act gives an exhaustive list of practices that shall constitute abuse
of dominant position and, therefore, are prohibited. Such practices shall
constitute abuse only when adopted by an enterprise enjoying dominant
position in the relevant market in India.

4 Sub section (4) of Section 19

4 ΠCOMPETITION ACT 2002: PROVISIONS RELATING TO ABUSE OF DOMINANCE

 Abuse of dominance is judged in terms of the specified types of acts
committed by a dominant enterprise alone or in concert. Such acts are
prohibited under the law. There is no need for any reference by the
Commission to the adverse effect on competition (in Indian markets).
Rather, any abuse of the type specified in the Act5 by a dominant firm
shall stand prohibited.

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 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.

EXPLOITATIVE AND EXCLUSIONARY BEHAVIOUR

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

exploitative (excessive or discriminatory pricing, including predatory
pricing) and exclusionary (for example, denial of market access).

5 Clauses (a) to (e) of sub section (2) of Section 4

COMPETITION ACT 2002: PROVISIONS RELATING TO ABUSE OF DOMINANCE Π5

 PREDATORY PRICING

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 exploitative 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:

z Establishment of dominant position of the enterprise in the

relevant market

z 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.]

z Intention to reduce competition or eliminate competitors.

This is traditionally known as the predatory intent test

6 ΠCOMPETITION ACT 2002: PROVISIONS RELATING TO ABUSE OF DOMINANCE

 ESSENTIAL FACILITIES DOCTRINE (EFD)

Barrier to entry of new enterprises into the relevant market is a

major restraint on the dynamics of competition. When an 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 has come to be known as the
essential facility doctrine (EFD). It has been recognized that any
application of the EFD should satisfy the following:

z The facility must be controlled by a dominant firm in the

relevant market

z Competing enterprises/persons should lack a realistic ability

to reproduce the facility

z Access to the facility is necessary in order to compete in the

relevant market; and

z It must be feasible to provide access to the facility.

Subject to such conditions being satisfied, the Commission may

under the provisions of Section 4 (2) (c) of the Act (related 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.

COMPETITION ACT 2002: PROVISIONS RELATING TO ABUSE OF DOMINANCE Π7

INTELLECTUAL PROPERTY RIGHTS (IPRs) AND ABUSE OF
DOMINANCE

While reasonable use of IPRs stand exempted from the rigours of

Section 3 related to anti-competitive agreements, no such derogation is
available in case of abuse of Intellectual Property Rights by right holders,
in respect of specified abusive acts.

IPRs AND ABUSE OF DOMINANCE

Intellectual Property Rights (IPR) involve grant of exclusive rights

to the right holders to exploit the results of their innovation so as
to provide incentive to innovate. Competition Act, 2002 exempts
the reasonable use of such rights by right holders from the
provisions of Sec. 3 related to agreements.

However, the actions by enterprises that shall be treated as abuse

(specified under Section 4 (2)) shall stand applicable equally to IPR
holders provided such rights are considered by the Commission to
render the holder a dominant player in the relevant market.

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. Section 19 (4) gives a
detailed list of factors that the Commission shall consider while inquiring
into any allegation of abuse of dominance. Some of these factors are
market share of the enterprise, size and resources of the enterprise, size
and importance of the competitors, dependence of consumers, entry
barriers, and social obligations and costs in the relevant geographic and
product market.

8 ΠCOMPETITION ACT 2002: PROVISIONS RELATING TO ABUSE OF DOMINANCE

 The Commission, on being satisfied that there exists a prima facie
case of abuse of dominance, shall direct the Director General to cause an
investigation and furnish a report. The Commission has the powers vested
in a Civil Court under the Code of Civil Procedure in respect of matters
like summoning or enforcing attendance of any person and examining
him on oath, requiring discovery and production of documents and
receiving evidence on affidavit. The Director General, for the purpose of
carrying out investigation, is vested with powers of civil court besides
powers to conduct ‘search and seizure’.

Note: For the details of the procedures related to inquiry and investigations please
refer to Regulation No. 2 of 2009 dated May 21, 2009(also available on the CCI
website [Link] )

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.

COMPETITION ACT 2002: PROVISIONS RELATING TO ABUSE OF DOMINANCE Π9

 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 contravention the offending
act until conclusion of the inquiry or until further orders, without giving
notice to such party, where it deems it necessary.

Note: For the details of the procedures related to interim orders please refer to Regulation
No. 2 of 2009 dated May 21, 2009(also available on the CCI website [Link])

APPEALS

The Competition Appellate Tribunal (CAT) 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.

ŒŒ

10 ΠCOMPETITION ACT 2002: PROVISIONS RELATING TO ABUSE OF DOMINANCE

COMPETITION ACT 2002: PROVISIONS RELATING TO ABUSE OF DOMINANCE Π11
 COMPETITION COMMISSION OF INDIA

Sh. Dhanendra Kumar

Chairperson,
E-mail: cci-dkumar@[Link]
Tel No. 91-11-26177175, 26701605,
Fax No. 26169278

Sh. H.C. Gupta Sh. R. Prasad Sh. P.N. Parashar

Member, Member, Member,
E-mail: cci-hcg@[Link] E-mail: cci-ratneshwarp@[Link] E-mail: cci-parashar@[Link]
Tel No. 91-11-26162110, Tel No. 91-11-26162085, Tel No. 91-11-26162097,
26701603 26701613 26701611
Fax No. 26103853 Fax No. 26103859 Fax No. 26162084

Dr. Geeta Gouri Sh. Anurag Goel Sh. M.L. Tayal

Member, Member, Member,
E-mail: cci-geetagouri@[Link] E-mail: agoel@[Link] E-mail: cci-tayal@[Link]
Tel No. 91-11-26162107 Tel No. 91-11-26162096 Tel. No. : 91-11-26107429
Fax No. 26162108 Fax No. 26162099 Fax No. : 91-11-26107428

Sh. S.L. Bunker, IDAS Sh. K.K. Sharma, IRS

Secretary, Director General,
E-mail: cci-bunker@[Link] E-mail: cci-kksharma@[Link]
Tel. No. : 26701619 Tel. No: 91-11- 26701680
Fax No. : 26162097 Fax No. 26172895

Dr. Seema Gaur, IES Sh. R.N. Sahay, IRS Sh. Amit Pradhan
Adviser (Eco) Adviser (Eco) Adviser (Law)
E-mail: [Link]@[Link] E-mail: cci-rns@[Link] E-mail: cci-amit@[Link]
Tel. No: 91-11-26102314 Tel. No. 91-11-26701695 Tel No. 91-11-26701630
Fax No. 26102313

REGULATIONS NOTIFIED BY COMPETITION COMMISSION OF INDIA

z The Competition Commission of India (Procedure for Engagement of Experts and
Professionals) Regulations, 2009; ( No. 1 of 2009)
z The Competition Commission of India (General) Regulations, 2009 ; ( No. 2 of 2009)
z The Competition Commission of India (Meeting for Transaction of Business) Regulations,
2009; ( No. 3 of 2009)
z The Competition Commission of India (Lesser Penalty) Regulations, 2009; (No. 4 of 2009)
z The Competition Commission of India (Determination of Cost of Production) Regulations,
2009; ( No. 5 of 2009)
z The Competition Commission of India (General) Amendment Regulations, 2009; (No. 6 of
2009)
Above regulations are available on the website of the Commission : [Link]