In the current competitive world of business, success often breeds an intoxicating sense of power, and with that power comes the temptation to abuse it. The competition law in India aims to prevent such abuses, ensuring that even the mightiest corporations adhere to the principles of fair competition and maintain a healthy market. A crucial element of this framework is the concept of ‘abuse of dominant position‘ which acts as a safeguard against the monopolistic and abusive practices that stifle innovation, harm consumers, and distort the free market. Stretching from tech giants to industrial conglomerates, no organization is immune to the scrutiny of the Competition Commission of India (“CCI”) when it comes to maintaining a level-playing field.
Understanding dominant position
Before getting into the detailed aspects of abuse, it is essential to understand what constitutes a dominant position in the market. According to Section 4 of the Competition Act, 2002 (“Competition Act”), a ‘dominant position’ refers to the strength of an organisation in the relevant market in India to operate independently of the competitive forces or influence the competitors or consumers to its own advantage.
Under the Competition Act, ‘relevant market’ is associated with relevant product market, relevant geographic market or both, as determined by the CCI in depending on the nature of operations of the organisation. A relevant product market is a market comprising of products and services that a consumer would consider as viable alternatives to satisfy a particular need or demand. On the other hand, a ‘relevant geographic market’ refers to a specific geographical area where the conditions of competition for the supply or demand of goods or services are distinctly homogeneous and can be differentiated from those in neighboring areas.
The CCI has assessed abuse of dominance by observing factors as per section 19(4) of the Competition Act, which include factors such as market share, barriers to entry, countervailing buying power and the overall competitive landscape within the relevant market. Further, it will be pertinent to note that a significant market share does not automatically signify a dominant position. Additional factors for determining market shares include, presence of potential competitors, easy entry and exit conditions, bargaining power of customers, etc.
When does the dominant position become abusive as per CCI?
A dominant position becomes abusive when an organisation uses its market power to engage into practices with an aim to restrict competition, exploit consumers, or hinder innovation. Section 4(2) of the Competition Act details specific conditions under which dominant position is considered to be abusive:
1.Exploitative Pricing– In this scenario, an organization charges excessively high prices or adopts unfair pricing tactics, exploiting consumers who have limited or no alternatives of the product available in the market.
2.Exclusionary Conduct– Here, an organization engages into practices such as predatory pricing, exclusive dealing, or leveraging dominance in one market with the intention to exclude or limit the competitors’ ability to enter into the market.
3.Unfair Trading Conditions– In this scenario an organization imposes unfair or discriminatory trading conditions on suppliers, distributors, or customers, thereby restricting their ability to operate freely in the market.
4.Innovation Suppression– Here an organisation adopts methods to restrict innovation by obstructing the entry of new and innovative products or technologies into the market.
5.Refusal to Deal– In this scenario, an organisation refuses to supply goods or services to customers or competitors, thereby limiting consumer choice and competition.
6.Tying and Bundling– Here, an organization imposes conditions where buyers must purchase one product to obtain another, thereby restricting consumer choice and stifling competition..
Recent Developments and Enforcement Actions
2023 saw some significant developments in the realm of competition law in India, particularly in relation to the abuse of dominant position. The Competition (Amendment) Act, 2023 (“Amendment Act”) brought several crucial changes to the Competition Act:
1.Shift to Penalties Based on Global Turnover: The Amendment Act introduced a significant shift in penalty computation, moving from penalties based on relevant turnover to penalties based on global turnover derived from all products and services provided by an enterprise. This change significantly increases the potential exposure for companies, especially multinational conglomerates, to face larger penalties in cases of anti-competitive agreements or the abuse of a dominant position.
2. Commitments and Settlements: This amendment gives an opportunity for parties under investigation to settle their matters with the CCI. Notably, a party has the option to propose commitments to conclude an investigation at any point after its initiation, but prior to the completion of the investigation by the Office of Director General (DG) and the sharing of the investigation report with the involved parties. Conversely, a party can choose to settle the matter with the CCI following the sharing of the DG’s investigation findings, yet before the CCI issues its final order on the case.
The Way Forward
The recent developments in Indian competition law framework concerning abuse of dominant position signify a proactive approach in addressing anti-competitive practices and ensuring fair competition in the market. Introducing wider provisions, enhancing enforcement mechanisms, and emphasizing the assessment of relative market power, the regulators aim to promote fair competition, innovation, and consumer welfare.
To conclude, the effective prevention of abuse of dominant position is essential for promoting dynamic and competitive markets, safeguarding consumer interests, and fostering economic growth. The recent advancements in competition law, depicts the ongoing efforts to strengthen the regulatory framework and uphold the principles of fair competition, ultimately benefiting consumers and businesses alike.
Aumirah’s Opinion
Maintaining a balance between curbing abuse of dominance by powerful firms and allowing legitimate competition is crucial for protecting competition and consumer welfare in India. While large firms can leverage economies of scale, they should not be allowed to engage in anti-competitive practices such as bullying competitors or coercing consumers/ suppliers. CCI’s recent assertiveness in addressing such issues is a positive step; however, it needs to back its actions with strict monitoring and deterrent penalties. At the same time, the CCI must ensure that its interventions do not hamper fair competition or hinder the natural growth of successful firms into industry leaders. As India’s economy matures and markets consolidate further, striking the right balance will be pivotal. A fair and contestable market environment ultimately benefits both businesses and consumers in the long run.
