Abuse of Dominance

Fairness and level playing field for the all the participants in the market is absolutely essential for for
it’s sustainability and development.
When there is a perfect competition in the market the consumer sovereign as his welfare is maximized
however in reality the markets are imperfect and the invisible hands not always favor the consumers
interest. Consequently we require an external regime to maintain contestability and fairness in the
market. Thus all modern competitions law contains specific prohibitions against anti- competitive and
monopolistic behaviour. The Sherman Act 1890, to which the origin of competition law can be traced
contains specific prohibition against monopolization, Article 82 of EU Treaty prohibits abuse of
dominance.
One of the most important objective of the competition Act 2002 like other competition regimes in the
world is to detect and prevent abusive conduct by dominant enterprises.

What is Dominance ?

Dominant Position [S.4(2)(a)] :

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

a) Operate independently of the competitive forces prevailing in the relevant market market ;
Or
b) Affects its competitors or consumers or the relevant market in its favour.

Dominant Position can be achieved by:

 Deep pockets
 Larger market shares
 Technology, etc.

A) Operate Independently of the competitive forces

Characteristics of a market is defined by the interplay of market forces of demand and supply. Which
are in turn affected by several forces including
 government policy and regulations
 Demographic factors;
 Natural conditions of land availability,etc.

We can refer the Porter’s 5 forces analysis, which attempts to analyze the level of competition within
an industry.

Porter’s 5 Forces

Horizontal Vertical

Substitutes Suppliers

Rivals Customers

New Entrants

When an enterprise is in such position that it is unaffected by these forces it is considered as

Dominant.
Eg.
Maruti Suzuki due to their strong brand loyalty and service network and higher resale value in the
used car market are relatively unaffected by competitive forces prevalent in the car market.

B) Affects its competitors or consumers or the relevant market

 An enterprise may have the capability to not only operate independently of the competitive forces
but may actually be in position to influence its competitiors or consumers or the relevant market
itself.
 This is a higher degree of strength where an enterprise may be freely able to adopt price or non
price strategy to overcome downward pressures on its profit from its competitors or to capture or
bind customers to create market environment that would deter new competition both in terms of
terms of competing enterprises or liable products
Is dominance Bad per se ?

 It is important to understand that being in a dominant position is not illegal per se and such
enterprises are entitled to receive the same benefits as other enterprises in the market.

 There are various natural monopolies which still exist in the market even today
For example:
Google in the market of internet searches

 However according to many cases decided by courts across various jurisdiction, it is clearly
established that the undertaking enjoying a dominant position has a special responsibility of not
allowing its conduct to impair genuine undistorted competition in the relevant market