“Competition Law.

Prohibition of Abuse of Dominant

Position
 Definition of 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:
 operate independently of the competitive forces prevailing in the relevant
market ; or
 affect its competitors or consumers or the relevant market in its favour.

 It is the ability of the enterprise to 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 or not.
 Section 4 in the Competition Act, 2002
 4. Abuse of dominant position.—(1) No enterprise shall abuse its dominant position.
 (2) There shall be an abuse of dominant position under sub-section (1), if an enterprise,—
(a) directly or indirectly, imposes unfair or discriminatory—(i) condition in purchase or
sale of goods or services; 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 services referred to in sub-clause (i) and unfair or
discriminatory price in purchase or sale of goods (including predatory price) or service
referred to in sub-clause (ii) shall not include such discriminatory conditions or prices
which may be adopted to meet the competition; or
 (b) limits or restricts—(i) production of goods or provision of services or market
therefor; or
 (ii) 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; 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
 Relevant Market

 Meaning of Relevant Market

 sec 2 (r) In order to ascertain whether an enterprise has a dominant position it is
to be determined on what the relevant market is. There are two kinds of relevant
market 1.
 Relevant product Market : sec 2 (t) On the demand side, Relevant product
market include all the close Substitutes to which the consumer will shift to, if the
price of the product increases. On Supply side, Relevant product market include
all the producers who can produce substitutes with the existing production
facility.
 Relevant Geographical Market : sec 2 (s) The geographic dimension within
which competition can take place in the relevant market can be local , National,
International or global depending upon the product, Here pattern of
consumption, Transportation are important factors
 Relevant Market

 The Act lays down the factors any one or all of which shall be taken into account
by the Commission while defining the relevant market. The relevant product
market 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. 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 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.
 Abuse of Dominance
 Dominance is not considered per se bad. 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
dominance position and, therefore, stand prohibited. Such practices shall
constitute abuse only when engaged in by an enterprise enjoying dominant
position in the relevant market in India.
 Abuse of dominance is judged in terms of the specified types of acts engaged in
by a dominant enterprise alone or in concert, and shall remain prohibited. 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
Act by a dominant firm shall stand prohibited.
 Actions that shall be considered as Abuses under this
Act

(a) Imposing unfair or discriminatory conditions or price (including predatory

pricing) as an abuse of dominant position [Section 4 (2) (a)]
A dominant enterprise has been prohibited from limiting production, market or
technical development to the detriment of consumers. The Act requires a dominant
enterprise to act fairly.
According to this, abuse of dominant position happens when an enterprise or group
directly or indirectly imposes discriminatory conditions on the sale of goods or
rendering of prices or price in sale or purchase of predatory price of goods or
services
 Actions that shall be considered as Abuses under this
Act

(b) Limiting or restricting production, market, technical or scientific

development relating to goods or services as abuse of dominant position
[Section (4) (2) (b)]
 A dominant enterprise has been prohibited from imposing directly or indirectly
any unfair or discriminatory conditions in purchase or sale of goods or services.

 Limiting or restricting production of goods or provision of services or market

thereof, technical or scientific development relating to goods or services to the
prejudice of customers, shall be treated as abusive.

 An abuse of dominant position happens in the market where an enterprise or

group directly or indirectly imposes conditions that limit the production of the
goods or technical or scientific development resulting in the production of the
goods or services.
 Actions that shall be considered as Abuses under this
Act

(c) Practice(s) resulting in denial of market access as abuse of dominant position

[Section (4) (2) (c)]
 A dominant enterprise shall not indulge in any practice or practices resulting in denial of
market access in any manner. Any practice by the dominant enterprise which forecloses
the market access to other market players or deter entry to new players shall be
considered as abuse of dominant position by the Commission.
(d)(Conditional contracts as abuse of dominant position [Section (4) (2) (d) (Imposition
of supplementary obligations)
 Conditional contract by a dominant enterprise shall be abuse of dominance if conclusion
of that contract is 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.
 when an enterprise makes the conclusion of contracts subject to an acceptance of
supplementary obligations by other parties, and those obligations are such that by their
very nature or according to commercial usage in that field, they have no connection with
the subject-matter of the contract
 Actions that shall be considered as Abuses under this
Act

(e) Using dominant position in one relevant market to enter other relevant
market as abuse of dominant position [Section (4) (2) (e)]
An enterprise using its dominant position in one relevant market to enter into, or to
protect, other relevant market(s) shall be treated as having abused its dominant
position.

The relevant product market as defined under sec. 2(t) of the Act, should
compromise of all those products which are regarded as substitutable by the
consumer, by reason of their characteristics, prices and intended use
 Factors to determine dominant
position

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.
 Factors to determine dominant
position
 Market Share: An enterprise holding high market shares does not necessarily
enjoy dominant position. Different parameters are employed to measure market
share depending upon the nature of sector and the issue under investigation. As
the Raghavan Committee reported, “a firm with a low market share of just 20
per cent with the remaining 80 per cent diffusedly held by a large number of
competitors, may be in a position to abuse its dominance, while a firm with say
60 per cent market share with the remaining 40 per cent held by a competitor
may not be in a position to abuse its dominance because of the key rivalry in the
market. Specifying a threshold or an arithmetical figure for defining dominance
may either allow real offenders to escape or result in unnecessary litigation.
Hence, in a dynamic changing economic environment, a static arithmetical
figure to define “dominance” will be an “aberration.” The Competition Act,
2002, therefore does not state a percentage of market share as the measure of
dominance. However, a high market share usually indicates limited ability of the
customer to shift to other undertakings.
 Factors to determine dominant
position
 size and importance of competitors;:Not only the size and value of the
enterprise but also the size and importance of its competitors are crucial when
determining dominance. The largest firm’s market share should be evaluated
relative to its competitors; the smaller the shares of the competitors, the largest
firm is more likely to have dominance
 dependence of consumers on the enterprise; Customers have a bargaining
power and influence the pricing and conditions of the market. If in the relevant
market, the dependence of consumers on the enterprise is high for example a
specific medicine that is non-substitutable; the enterprise providing that
medicine will be determined as dominant. Likewise, a consumer of electricity in
India, at present, does not have a choice of supplier
 Factors to determine dominant
position
 extent of entry and exit barriers in the market; :Barriers to entry, exit or
expansion and durability to market power have been identified as very important
factors in the assessment of dominance. If entry barriers faced by the rivals are
low, the undertaking which have high market share may not be able to continue
with significant market power for long. The barriers could be structural,
regulatory or strategic one. Common barriers to entry a specific markets includes
legal patents as well as first mover strategic advantages.
 countervailing buying power: In a market, the buyer also has bargaining power
which affects the price of a product. A strong buyer affects the dominance of an
enterprise just as much as a strong competitor.
 market structure and size of the market: Market structure can be
characterised by a sole supplier of goods/services either on stand-alone basis or
by virtue of common ownership.
 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).

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:
• 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, will be defined in the regulations to
 Essential Facilities Doctrine (EFD)

Barrier to entry of new enterprises into the relevant market is a major restraint on
the working of competition. When an enterprise with dominance 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 essential facilities doctrine should satisfy the
following:
 Essential Facilities Doctrine (EFD)
- 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, 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.
 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.

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.
 Consequences of Abuse of Dominance
Section 27 of the Act deals with orders by the Commission after inquiry into abuse
of dominant position. The Commission may pass all or any of the following
orders, namely, -
may direct an enterprise with dominant position which has contravened Section 4
to discontinue such abuse of dominant position;
may impose penalty not exceeding ten percent of the average turnover of last three
preceding financial years, upon a dominant enterprise contravening Section 4.

In addition, the Competition Appellate Tribunal can be approached for award of

compensation to be paid by any dominant enterprise for any loss or damage shown
to have been suffered by any applicant as a result of any contravention of the
section 4 by such enterprise, if established by the Commission.
The Act also provides for direction to the dominant enterprise concerned to
comply with such other orders and directions, including payment of cost, if any.
 Consequences of Abuse of Dominance

DIVISION OF ENTERPRISE ABUSING DOMINANT POSITION

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 RELIEF
The Commission may, during the pendency of an inquiry into abuse of dominant
position, if the conditions of Section 33 of the Competition Act, 2002 are met,
temporarily restrain any party from carrying on the offending act until conclusion
of the inquiry or until further orders.
 Case Laws

 Mr. Vilakshan Kumar Yadav vs Ani Technologies Private, 2016 SCC

OnLine CCI 45, decided on 31st August, 2016
 While dealing with case relating to predatory pricing allegations against ANI
Technologies Private Limited (Opposite Parties), the Commission held that no
case could be made out against the ANI Technologies Pvt. Ltd. under the
provisions of Section 4 of the Competition Commission Act, 2002.
 In the present case, the Informants are drivers of auto rickshaws and taxis who
are currently plying their vehicles in Delhi whereas the Opposite Party is a
Mumbai based company providing radio taxi services in various States/cities in
India under the brand name ‘OLA’ and ‘Taxi For Sure’. It is stated to be
holding a dominant position in the market for auto rickshaw and city taxi
services collectively referred to as the ‘Paratransit Services’.
 Case Laws

 It is alleged that the Opposite Party has been contravening the provisions of
Section 4 of the Act by paying more money to the drivers than it collects from
the passengers. As per the Informants, it is driving out existing players from the
market and preventing new players from entering the market. With regard to
abuse, the Informants have also contended that the Opposite Party provides
huge discounts to the riders (consumers) and offers incentives per trip to the
drivers. The fare charged by it from its riders is alleged to be abysmally low and
is claimed to be less than one-third of the government prescribed rates. Based
on the foregoing, the Informants have, prayed before the Commission for a
direction to the Opposite Party to stop indulging into predatory pricing.
 Case Laws

 The Commission after thorough analysis and deliberation observed that auto
rickshaws and taxis, despite offering similar services, are different from each
other by virtue of their basic characteristics, consumer preference, prices etc.
Within a city, consumers can travel/commute by local or private buses, taxis,
auto rickshaws, etc. However, owing to the difference in comfort, time taken by
various modes of transportation, buying power of the consumer (rider) etc., these
different alternatives do not qualify to be substitutes for each other. Thus, these
are not substitutable in terms of the factors provided under the Act and cannot be
categorized as part of the same relevant market. Auto rickshaws and taxis may
be serving the same intended use but owing to different perception they hold in
the eyes of the consumers in terms of convenience, prices and facilities etc., they
fall under different relevant product markets. Hence, the Opposite Party held not
to be dominant in radio taxi services market in Delhi.
 Case Laws

 The Commission with regard to the market for auto-rickshaws in Delhi and
contention of the Informants that there are approximately 16,000 auto rickshaws
under the Opposite Party’s network in Delhi noted that as per the information
available on the website of Government of NCT of Delhi (Economic Survey
2014-15, Planning Department), the number of auto-rickshaws in Delhi was
around 81,000 in 2014-15 and assuming that this number has not increased
substantially, the market share of Opposite Party would be around 19.75%.
Though market share is not the only factor to assess dominance, it is one of the
key factors in determining the position of dominance. It seems implausible that
with such a low market share, the Opposite Party would be in a dominant
position in the market for auto rickshaws in Delhi. Therefore, the Commission
held that no case under Section 4 of the Act is made out against the Opposite
Party in any of the relevant markets.
 Case Laws
 The CCI in its order observed that radio taxis like UBER and Ola Cabs form a
separate product compared to regular auto rickshaws, “kaali-peeli” taxis and
city taxis, due to customer preferences and their operating models. Within a
city, consumers can travel/commute by local or private buses, taxis, auto
rickshaws, etc. However, owing to the difference in comfort, time taken by
various modes of transportation, buying power of the consumer etc., these
different alternatives do not qualify to be substitutes for each other and cannot
be classified as part of the same relevant market. This is in accord with the
CCI’s decisions in the past where, it has consistently held that radio taxis form a
distinct market. The CCI, while prima facie defining the relevant product
market as “radio taxi services”, took into consideration factors like:
convenience, point-to-point pick and drop, pre-booking facility, ease of
availability even at obscure places, round the clock availability, predictability in
terms of expected waiting/ journey time, etc. One of the relevant product
markets, therefore, has been defined to be the “market for provision of radio
taxi services”.
 Case Laws
 The CCI, however, duly noted Ola Cabs’ presence in auto rickshaws. The CCI
finally drew up two relevant product markets; first, the market for radio taxis;
and second, the market for auto rickshaws. As regards the geographical market,
after giving due consideration to practicality and various heterogeneous factors,
the CCI found the city of Delhi to be the appropriate market in contrast to NCR
as contended by the informants.
 The CCI in the first product market, i.e., the radio taxi market, found that the
competition between UBER and Ola Cabs is highly competitive and there seems
to be no dominant player. It therefore found the requirement to answer the
question of abuse unnecessary. In the market for auto rickshaws the CCI found
that Ola Cabs operates 16,000 auto rickshaws in comparison to a total number of
approximately 81,000 autos operating in Delhi. The CCI found that this number
is too low to enquire further as to whether Ola Cabs is dominant in this market.
Therefore, in both product markets, the CCI found that there is no dominance by
Ola Cabs.