ABUSE OF DOMINANCE IN INDIA

Avaantika Kakkar

Khaitan & Co.

Advocates, Solicitors, Notaries, Patent & Trademark Attorneys

Copyright Khaitan & Co.

Abuse of Dominant Position : Indian Law

Dominance is no crime But it could spell trouble when the CCI finds that an enterprise or group:
Condition in purchase or sale of goods or service; Price in purchase or sale (including predatory price) of goods or service;

Directly or indirectly imposes unfair or discriminatory-

Limits or restricts production or provision of goods or services / technical development relating to goods or services to the prejudice of consumers; Indulges in practices resulting in denial of market access [in any manner]; 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; Uses its dominance in one relevant market to enter into or protect, other relevant market.

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Abuse of Dominant Position : Overview

Broad range of practices including tie-in arrangements, refusal to deal, exclusive supply & distribution arrangements

The formalistic approach no or limited analysis of actual effects on the market appreciable adverse effect standard seems limited to Section 3 cases (market practice)

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What is Dominant Position?

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. (Section 4)

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Again, what is Dominant Position?

Section 19(4)
Market share of the enterprise Size & resources of the enterprise Size & importance of competitors Economic power of the enterprise including commercial advantages over competitors Vertical integration of the enterprises or sale or service network of the enterprises Dependence of consumers on the enterprise Monopoly or dominant position whether acquired as a result of any statute or by virtue of being a Government company or a public sector undertaking or otherwise Entry barriers including barriers such as regulatory barriers, financial risk, high capital cost of entry, marketing entry barriers, technical entry barriers, economies of scale, high cost of substitutable goods or service for consumers Countervailing buying power Market structure and size of market Social obligations and social costs Relative advantage, by way of the contribution to the economic development, by the enterprise enjoying dominant position having or likely to have an appreciable adverse effect on competition; Any other factor that the CCI considers relevant.

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Relevant Market & Market Share

Relevant Product Market
a market comprising all those products or services which are regarded as interchangeable or substitutable by the consumer, by reason of characteristics of the products or services, their prices and intended use;

Relevant Geographic Market

means a market comprising 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 neighboring areas;

There is no firm guidance on the magic number that would suggest dominance within the relevant market under Indian law

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Is there any scope for arguing out of an abuse of dominance allegation?

Section 4 lists practices / activities that shall amount to an abuse of dominance

Section 4(2)(a) lists a clear defense in the Explanation: practice adopted to meet the competition The rest of the Sections 4(2) (b), (c), (d) & (e) allow room to play with the presentation of facts Burden of proof dominant enterprise Likelihood of success - ?

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Section 4 & the Philosophy underlying Competition Law in India

In principle, the focus of the Indian Competition Act is also on 2 types of abusive behavior:
Exploitative abuses harm consumers Exclusionary abuses that harm competitors

The DLF case is an instance of exploitative abuse

Ultimate/end consumer not a market player

The NSE case is an instance of exclusionary abuse

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Of Consequences
Cease & desist Penalty of not more than 10% of the average turnover of the preceding 3 financial years Division of enterprise enjoying dominant position:
Transfer or vesting of property, rights, liabilities or obligations; Adjustment of contracts either by discharge or reduction of any liability or obligation or otherwise; The creation, allotment, surrender or cancellation of any shares, stocks or securities; The formation or winding up of an enterprise or amendment of charter documents or other instruments regulating the business of the enterprise; The extent to which & the circumstances in which, provisions of the order affecting an enterprise may be altered by the enterprise & the registration thereof; Any other matter necessary to give effect to the division of the enterprise.

Damages / Third Party Claims

Original Jurisdiction with COMPAT

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Risk Management
Internal documents can destroy the case for the defense! Beware! Unhappy Vendors! Consciously create paper trails backing decisions & strategy Realistic & objective assessment of market presence would help prepare companies for the road ahead Start with a diligence exercise & simultaneous training of operations staff / management too much is often not enough!

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THANK YOU!

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