ABUSE OF DOMINANT POSITION UNDER THE COMPETITION LAW

 

1. INTRODUCTION:

 

The race to achieve the top position in any place of exchange is often accompanied by huge hurdles. To tackle them, resorting to actionable ways many a time seems like the only option. It is where the law comes into play and tries to maintain a safe harbor for everyone. But sometimes, legal contingencies develop such a relationship with one another that gives birth to long-running conflicts. Methods to counter the same are necessary. But what if these so-called corrective measures only lead to a disagreeable resolution? At these junctures, what may be embraceable are equitable or sound calculations.

This article seeks to elucidate this situation more briefly in the context of abuse of dominant position and IPR. In simple terms ‘dominant position’ means something in a superior position as compared to others based on some factors. This concept of dominance was, however, prevalent in the Indian society itself, where one “caste” was considered to be superior to others. However, staying in a better-off position doesn’t harm anyone, unless an individual is exploiting such power.

Therefore, having a dominant position cannot be considered bad per se. However, abusing such a position based on its superiority is considered inadequate. Abuse of a dominant position occurs when a dominant firm in a market, or a dominant group of firms, engages in conduct that is intended to eliminate or discipline a competitor or to deter future entry by new competitors, with the result that competition is prevented or lessened substantially.

An enterprise in dominant position performs any of the following acts: directly or indirectly, imposes unfair or discriminatory practices, limits or restricts production of goods or provision of any services in any form.

Once the dominance of an enterprise is established, the next step is to examine the conduct of the dominant enterprise and to see whether that falls under the categories of abuse mentioned under the Act. An abuse of dominant position may be generally categorized into ‘exclusionary’ (an upstream dominant enterprise supplies the input to its downstream affiliate at lower cost than its downstream rival leading to price squeeze, causing a competitive disadvantage to the downstream rival, for e.g., if the input cost charged to the downstream affiliate is Rs. 100 to the downstream rival it is Rs. 130, thus there is an inherent competitive disadvantage of Rs. 30 to the rival firm) and ‘exploitative abuses’ (dominant player charges excessive price from consumers or exploits them due to its dominance). However, the Competition Act in India does not make such distinction, though a reference was made by Raghavan Committee.

An undertaking with a dominant position in a market can have both incentives and the ability to make it difficult for competitors to compete effectively. If an undertaking is dominant, competition in the market will already be weakened. Behavior in the market that further restricts competition could harm consumers through higher prices, lower quality, less choice or less innovation. Dominant position as being created when one or more undertakings in a particular market use their position in that market to determine economic parameters such as price, supply, the amount of production and distribution, by acting independently of their competitors and customers.

A firm is in a dominant position if it has the ability to behave independently of its competitors, customers, suppliers and, ultimately, the final consumer. A dominant firm holding such market power would have the ability to set prices above the competitive level to sell products of an inferior quality or to reduce its rate of innovation below the level that would exist in a competitive market.

Under EU competition law, it is not illegal to hold a dominant position, since a dominant position can be obtained by legitimate means of competition, for example by inventing and selling a better product. Under the present system of competition laws in India, the dominance per se is not bad, what is bad is the abuse of this dominant position. This module would enable the learners to enumerate the conduct which would be termed as abuse under Competition Act, 2002. Explain the concept of ‘unfair and discriminatory’ condition in purchase and sale of goods or services. Explain the concept of ‘predatory pricing’. Explain the concept of ‘leveraging’.

Competition is crucial to the functioning of markets. It stimulates innovation and brings vitality and vigor to the economy. It challenges a firm to operate efficiently and deliver greater variety of good quality products to consumers lest it loses out to its competitors. But at the same time competition fuels rivalry and in a bid to sweep more profits and outdo each other, the competing firms, more than rarely, resort to unfair trade practices. To ensure a healthy competitive environment, governments of various countries, worldwide, have subjected competition to legal restrictions. The rules and regulations made to ensure that all players get equal platform to operate in the markets, to protect consumers` interests and to penalize those who misuse their power, come under the general term of competition law. Competition law is known by different names like antitrust law in USA, anti-monopoly law in China, competition law in EU and India etc. The provisions of these laws vary from country to country since they are framed to suit their domestic requirement.

 

2. EVOLUTION OF COMPETITION LAW:

 

We know that competition exists in every field. Numerous companies or firms in every market compete with each other to reach a large base of consumers. Some of them indulge in illegal and unjust practices to achieve this. It gives an unfair rise to monopoly, which in turn threatens the position of other competitors. Thus, a law that regulates such practices is necessary. It is this general understanding that led to the emergence of the concept of competition law. After independence, India adopted the mixed-economy model (a combination of the capitalist and socialist economy model) to accelerate the growth of the Indian economy and promote social justice.

However, despite being operational for more than a decade, the results that it produced were undesirable. Worried by the same, the Central Government set up the Mahalanobis Committee in 1960 to look into its causes. On the recommendation of the committee, the government then appointed the Monopolies Inquiry Commission in 1964. The commission, after making all the inquiries, found out that most of the economic power had been accumulated in the industrial sector.

 

The Parliament then passed the Monopolistic and Review Trade Practices Act, 1969 to deal with these issues. With the advent of privatization and liberalization in India, the government came across a need for change in the existing competition law.

 

The MRTP Act was no longer appropriate concerning prevailing circumstances. It restricted competition, which the economy sorely needed. The government then appointed the Raghavan Committee to develop an adequate framework for the competition law. Thus, the Competition Act, 2002 came into being.

 

The Competition Act seeks to provide a legal structure to the competition amongst various firms and companies in a market and ensures no unfair practices in the trade. It encourages free and fair competition and secures the interests of consumers. It also keeps at bay the uncalled-for monopolies. The Competition Commission of India (CCI), set up on 14^th October 2003, enforces and promotes the Act throughout the country.

 

3. CONCEPT OF DOMINANT POSITION AND ABUSES:

 

In simple terms ‘dominant position’ means something in a superior position as compared to others based on some factors. This concept of dominance was, however, prevalent in the Indian society itself, where one “caste” was considered to be superior to others. However, staying in a better-off position doesn’t harm anyone, unless an individual is exploiting such power. Therefore, having a dominant position cannot be considered bad per se. However, abusing such a position based on its superiority is considered inadequate.

 

A. DOMINANT POSITION:

 

Overriding or influential are the dictionary meanings to the term Dominant. Predatory in this sense on the other hand means dominating exploitation for acquiring financial purpose or gains. An undertaking holding a position which is “dominating” is only possible if it has the ability to behave independently or separately without the fear of its competitors, customers, suppliers and, the ultimate consumer. Market being held by such power of the dominating undertaking gives it the control of manipulating the price as per its wishes or needs. This will enable them to sell products or services of lower quality or lower cost of innovation below the level in which it actually exists in a competitive market.

 

Dominant position has two major aspects:

 

Firstly, dominant enterprise’s position such as it enables it to operate independent of competitive forces generated by its rivals. This is important because healthy competition among competitors promotes productive and allocate efficiencies and optimizes consumer surplus. So, if an enterprise takes measures with intention to create entry barriers, drive out existing rivals, control output or price, it causes concerns.

Secondly, the aspect of dominance given in explanation (a)(ii) to section 4 of the Act relates to the ability of an enterprise to affect its competitors or consumers or the relevant market. In sense, this is 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 competitor, or to capture or bind consumer or to create a market environment that would deter newer completion, both in terms of competing enterprises or rival product.

 

B. ABUSE OF DOMINANT POSITION:

 

The idea of the concept of ‘abuse’ is very objective as it relates to the behavior of the undertaking placing itself into the dominant position so as to influence the structure of a market. This results in the presence of the dominant entity in the market and the degree of competition is weakened by the recourse of methods undertaken by the entity which is different from those conditions which are generally normal in competition of products or services transactions of commercial operators. This has an effect which hinders the maintenance of a healthy degree of competition which is still existing in the market and the growth of that competition.

 

The whole idea behind keeping a regulation or Act for the fare competition in the market is that a situation of monopoly on the face of it is not against public welfare policy but to use the same status in which it operates to the advantage of its full potential and in front of the actual competitors. The Act does not prohibit the undertakings to become the ‘dominant’ player or having a ‘dominant’ position. There is no physical control preventing the undertaking from becoming dominant or superior.

 

The moral and goal of the Act is to prohibit the ‘Abuse’ of the dominant position. The Act on the face of it prohibits ‘abuse of dominance’ not ‘dominant position’. The ‘hugeness’ of few undertakings is very natural and even essential, as because of this hugeness there is a need or requirement for industrial efficiency and innovation in marketing and production. The provisions of the Competition Act will interfere in market situations where the size of the undertaking effects the fair competition.

An oligopolistic market needs these provisions under Section 4 to prevent these big undertakings from swiping out the independent and comparatively small businesses from the market and from dictating prices. An undertaking is said to have ‘abused its dominant position’ when it directly or indirectly carries out unfair, bias and discriminatory market conditions, hence eliminating its competitors. It strengthens its position by abiding to unfair means which is outside the circle of a healthy competition driven market and equality.

 

C. ASCERTAINING THE DOMINANT POSITION- STATUTORY GUIDES UNDER THE COMPETITION ACT, 2002:

 

In the enforcement of Section-4, the first step is to establish that an enterprise against which the complaint of abuse is made enjoys a dominant position within the meaning of the second Explanation to Section-4, which is substance means that the enterprise’s behavior in the market is not constrained by market forces. This has to be proved by facts. Section-19(4) list the factors that the Commission shall consider in an inquiry as to whether an enterprise enjoys a dominant position or not.

 

In Hoffmann La-Roche case it has been discussed that commercial advantages that would help in building up a dominant position are access to raw materials, exclusive use of locations, etc. Similarly, vertical integration of a manufacturer with the only supplier of raw materials would promote a dominant position. If there are barriers to entry, in the form of high costs of investment that a new entrant may not or would not be willing to incur immediately, or there are statutory regulations preventing new entry it would help existing enterprise is to reach a dominant position. An existing enterprise may itself create barriers to entry through exclusive distribution and retail arrangements with itself.

 

D. CASE LAWS PERTAINING TO ABUSE OF DOMINANT POSITION:

 

There are several instances in which many IPR holders have taken unfair advantage of their dominant position. The CCI has the jurisdiction to hear all such cases. Following are some of the important case laws in this respect:

 

In Shri Shamsher Kataria v. Honda Siel Cars India Ltd. & Ors. case no. 03/2011, the complainant alleged that three automobile companies violated the provisions of the Competition Act. They had created a contract that imposed unfair prices on the selling of spare parts of vehicles. It also put restrictions on the free availability of these products. As a result, the Original Equipment Suppliers were unable to make sales to independent car buyers. Further, these companies did not provide any information to resolve the engineering defects of the vehicles. Thus, the complainant asserted that restricted trade activities were taking place. The CCI ordered the three companies to abstain from indulging in anti-competitive activities and imposed a penalty of two percent of their total revenue in India. It also held that the three giants may mention provisions required to protect their IP rights in contracts.

 

In Telefonaktiebolaget LM Ericsson v. Competition Commission of India, the complainant, in this case, claimed that Ericsson demanded unfair royalty and threatened to take the matter to SEBI (Security Exchange Board of India) if the former fails to pay the amount. The CCI decided in Favour of the complainant. Ericsson then filed a writ petition in the Delhi High Court against the decision of the CCI. But the Court reiterated what the commission upheld. Thus, Ericsson was guilty of violating Section 4 of the Competition Act.

 

In Monsanto Holdings Pvt. Ltd. and Ors. v. Competition Commission of India and Ors., the petitioners filed a writ petition challenging the CCI’s order in a dispute concerning some private companies and themselves. The petitioners had developed a technology that they sought to license to the manufacturers. The latter, unsatisfied with the amount of royalty demanded by the former, approached the CCI. The commission ordered an investigation into the alleged unfair practices conducted by the petitioners. The petitioners claimed before the Court that the CCI had no jurisdiction to make such orders. But the Court decided to not interfere in this matter.

 

4. THE RAGHAVAN COMMITTEE REPORT OF 2000:

 

Clearly the Raghavan Committee envisages and effect-based approach in the application of Section-4 of Competition Act, 2000. This approach takes into consideration the fact that many business practices may have different effects in different circumstances like that distorting competition in some cases and promoting efficiencies and innovation in others. A competition policy approach that directly confronts this duality will ensure that consumers are protected while promoting overall increased productivity and growth. By focusing on the effect of a firm action rather than on the form that these actions may take an economic based approach makes it more difficult for companies to circumvent competition policy constraint by way of attempting to achieve the same end result through the use of different commercial practices. At the same time this approach provides a more consistent treatment of practices, since any specific practices is assessed in term of its outcome and two practices leading to the same result will therefore be subject to a comparable treatment.

 

Abuse of dominant position contravention requires competition authorities to show the presence of significant anti-competitive consumer harm, while the dominant firm should bear the burden. of establishing credible efficiency arguments. Competition Authorities when applying the law have to be careful that statutory provisions do not unduly thwart pro-competitive strategies. Developing a consistent theory of consumer harm provides a logically consistent approach to the assessment of any impugned anti-competitive conduct.

 

5. FACTORS TO DETERMINE THE DOMINANT POSITION:

 

Under Sections- 27 & 28 of the Competition Act, 2002, the Competition Commission of India has provided some criteria or factors to determine the dominant position. Dominance has been customarily characterized as far as the part of the market share of the enterprise or group of undertakings are concerned. In any case, various different elements assume a role in deciding the impact of an undertaking or a group of endeavors in the market. These includes:

•       i.         A market shares.
•     ii.         The size and assets of the undertaking.
•   iii.         Size and significance of contenders or competitors.
•    iv.         The financial intensity of the undertaking.
•      v.         A vertical combination or integration.
•    vi.         A reliance on customers on the undertaking or undertaking.
•  vii.         Degree of section and exit barriers in the market.
• viii.         countervailing purchasing power
•    ix.         Market structure and size of the market.
•      x.         A source of dominant position viz. regardless of whether acquired because of resolution or statute and so on.
•    xi.         Social expenses and commitments and commitments of big business getting a charge out of the prevailing situation to financial improvement.

 

The Competition Commission of India is additionally approved to consider whatever other factors which it might think about applicability for the assurance of dominance.

 

6. RELEVANT MARKET:

 

The first thing to be resolved in quite a while of supposed abuse of dominant position is the ‘relevant market’ in which the accused party has a predominant position. The reason served by depicting a relevant market is to characterize the degree inside which the situation of an endeavor is to be tried for strength and misuse thereof. The ‘relevant market’ is characterized as ‘product’ and ‘geography’, in other words, the applicable market recognizes the specific item/administration or class of items created or benefits rendered by an enterprise(s) in a given geographic territory.

 

A. Relevant Market Product.

 

A market comprises all those products or services that are interchangeable or are substituted by the consumer. Factors determining the relevant product market are:

•       i.         Physical characteristics or end-use of goods.
•     ii.         Price of goods or services
•   iii.         Consumer preference
•    iv.         Exclusion of in-house producers.
•      v.         Existence of specialized producers.
•    vi.         Classification of Industrial products.

 

In the case of Atos Worldline v Verifoneindia, Case No. 56 of 2012, the Competition Commission of India (CCI), held that the relevant product market is to be looked at from both demand and supply perspective based on the characteristics of the product, its price and intended use.

 

Similarly, in the case of Surinder Singh Barmi v The Board of Control for Cricket in India (BCCI), Case No. 61/2010, it was held that the relevant market was settled on the thought of demand substitutability of different types of amusement or entertainment. It was held that a cricket match couldn’t be held to be substitutable by some other game dependent on neither qualities nor the intention of the person watching the cricket match.

 

B. Relevant Geographic Market:

 

A market comprising the area in which the condition of competition for supply or demand of goods or services are distinctly homogeneous and can also be distinguished from conditions prevailing in the neighboring areas. Factors determining the relevant geographic market;

•       i.         Regulatory trade barriers.
•     ii.         Local specialization requirements.
•   iii.         National procurement policies.
•    iv.         Adequate distribution facilities.
•      v.         Transport cost.
•    vi.         Language.
•  vii.         Consumer preference.
• viii.         Need for secure or regular supplies or rapid after-sales service.

 

In the case of Bijaya Poddar v. Coal India Ltd, Case No. 59 of 2013, it was held that these are territories or areas where demand and supply of products of administrations can be said to be homogenous and discernible from markets in neighbouring regions.

 

Similarly, in the case of Atos Worldline v Verifoneindia, Case No. 56 of 2012, it was held that naturally, a few factors at that point, as regulatory trade barriers, local detail necessities, national acquirement approaches, satisfactory conveyance offices, transport costs go under the domain of thought. Consequently, if every such factor were uniform all through the nation versus an item, the entire nation would be the relevant geological region.

 

7. IDENTIFICATION OF ABUSIVE USE OF DOMINANT POSITION:

 

There are five kinds of abusive use of dominant position as provided under Section-4(2) of the Competition Act,2002, these are as follows: 

•       i.       Unfair or biased trade practices: According to this, abuse of dominant position happens when an undertaking or gathering legitimately or in an indirect way forces prejudicial conditions on the sale of goods or rendering of costs or cost in deal or acquisition of ruthless cost of products or administrations.
•     ii.         Limiting creation or specialized or scientific improvement: An abuse of dominant position occurs in the market where an endeavour or group legitimately or in an indirect way forces conditions that limit the creation of the merchandise or specialized or logical advancement bringing about the creation of the products or administrations.
•   iii.         Denial of access to showcase, barriers to entry and development: Any condition that makes forswearing access to the market in any way will comprise an abuse of the dominant position.
•    iv.         The imposition of beneficial commitments: when an undertaking makes the finish of agreements subject to an acknowledgment of advantageous commitments by different parties and those commitments are to such an extent that by their very nature or as per business use in that field, they have no association with the topic of the agreement.
•  v.         Protection of different markets–when an enterprise utilizes its situation in a significant market to go into another market, at that point there is an abuse of dominant position.

 

Thus it can be stated that Section 4(2) of the Act indicates the accompanying practices by a dominant enterprise or group of endeavor’s as misuses are straightforwardly or in an indirect way of imposing out of line or oppressive condition in the sell or purchase of goods or administration; straightforwardly or in an indirect way of imposing an unjust or prejudicial cost in buy or deal (counting ruthless cost) of products or administration; constraining or confining the creation of products or arrangement of administrations or market; constraining or confining specialized or logical improvement identifying with merchandise or administrations to the partiality of buyers; denying market access in any way; making the finish of agreements subject to acknowledgment by different groups of beneficial commitments which, by their temperament or as per business use, have no association with the subject of such agreements; and using its dominant situation in one important market to enter into or ensure other applicable markets.

8. TYPES OF DOMINANT POSITION:

 

There are two types of domination:

 

I. Exploitative Practices: Exploitative activities are those where the prevailing body abuses its strength by forcing biased or potentially low conditions on different firms or shoppers.

 

a. Directly or indirectly imposing unfair or discriminatory prices in purchase or sale of goods or service.

•       Discriminatory pricing: Price discrimination occurs when customers in different market segments are charged different prices for the same good or service, for reasons unrelated to costs.

 

Example: Suppose Delhi is divided into two parts and both the areas are inaccessible to one another. Suppose firm X is dominant in the market of tyres. Since it can easily segregate the market, it may charge higher prices in one part and lower prices from other consumers for the same tyre in spite of its cost being same in both the markets.

•       Predatory pricing: selling a product or service below cost to drive competitors out of the market or create barriers to expansion for such competitors or to create barriers to entry for potential new competitors.

 

Example: Enterprise A, a manufacturer of pens is a dominant enterprise in the pen market. Earlier it used to charge a price of INR 10 per pen. However, it has recently started selling its pen at a loss-making price of INR 6 knowing that its competitors will not be able to match its price as their cost of production is higher than Rs. 6. As a result of this, A's competitors would be forced to exit the market, after which, A, as a monopolist, would be free to charge any price that it wants. This is an example of a monopoly abusing its dominance by indulging in predatory pricing.

•      Excessive pricing: charging excessive prices due to lack of competition. Since the firm has no competition, it can charge higher prices.

 

b. Directly or indirectly, imposes unfair or discriminatory condition in purchase or sale of goods or service.

 

The imposition of unfair or discriminatory condition has a negative effect on the consumer welfare.

 

Example: XYZ abused its dominant position in the market of 'high end' residential accommodation, in Mumbai by imposing unfair and one-sided conditions in agreement, say by changing the layout plan without buyer consent. Imposition of such conditions is violation of section 4 of the Act.

 

In the case of, Pankaj Agarwal v. DLF, Case No. 13 & 21 of 2010 and Case No. 55 of 2012, where, for a situation relating to the distribution of apartment, the agreements drafted singularly by Delhi Land and Finance (DLF), empowered them to be discretionary about the designation of super-area, secretive about data pertinent to the buyer, like the number of the apartment on the floor, and to drop portions and relinquish booking sums. The Commission held the agreements to be exploitative against purchasers, and consequently, it was one-sided and abusive.

 

II. Exclusionary Practices: Exclusionary activities are those in which the dominant body utilizes its strength to confine entry of competition into the relevant market.

 

c. Limiting production of goods or provision of services or limiting or restricting technical or scientific development: the dominant firm can restrict the production of its goods and services in order to create artificial scarcity in the market. As a result of which demand will be greater than supply and hence the price of the product would increase. Moreover, the dominant firm can also restrict scientific and technical innovations as it has no incentive to indulge in it. Other competitive companies innovate to achieve dominance but this is not the case with dominant firm as it might have no or very less competition.

 

d. Indulges in practice or practices resulting in denial of market access: A dominant firm in order to maintain its dominance may indulge in practices which results in denial of market access to its competitors.

 

For instance: it can create entry barriers like by pricing below cost (predatory pricing). It can also indulge in lobbying with government to create/modify regulations which may restrict new entry. Denial of market access by the dominant firm has a negative impact on consumer welfare as it limits competitive prices and product choices.

 

e. Imposing conditions which are irrelevant to the contract entered into According to it, a dominant firm imposes conditions which impose an unnecessary onus on the other party to the contract which may be completely irrelevant.

 

 

f. Using its dominant position in one relevant market to enter into, or protect, other relevant market According to it, a dominant firm would condition the purchase of the product by the consumer with another product. The two products would have different relevant markets.

 

In the case of Re Shri Shamsher Kataria v Seil Honda, Case No. 03/2011, where there already existed agreement between the dominant entities and the Overseas Suppliers of unique vehicle parts which kept the Overseas Suppliers from providing parts to free repairers, such understandings were held to be anti-competitive as they limited passage of new firms.

 

9. COMPETITION LAW NEW AMENDMENTS:

 

The Ministry of Corporate Affairs announced the Competition (Amendment) Bill in February 2020, which seeks to bring about significant changes to the Act. Based on the report made by the

 

Competition Law Review Committee (CLRC), one of these is the insertion of a Section-4a just after Section-4. This section grants protection to all IPR holders who cannot exercise their rights in such ways that lead to abuse of their dominant position. It states that Section-3 (prohibition of Anti-competitive agreements) and Section 4 shall not restrict any person from imposing any such reasonable conditions and from restraining any infringement necessary to protect their intellectual property rights.

 

In simple words, in the name of safeguarding their rights, IPR holders are free to indulge in anti- competitive behaviour. The main reasoning that supports this statement is that the term ‘reasonable conditions’ creates a sort of ambiguity as to what amounts to the same. The Bill provides no clarity in this regard. Its applicability thus, has become a matter of deep contemplation for the judicial system and the CCI.

 

However, the CLRC suggests that they should interpret this provision narrow-mindedly while keeping in mind the principles of international jurisprudence. It also advises that the only way to achieve stability between the competition law and IPR is to use the doctrine of exceptional circumstances.

 

Laid down in the case Radio Telefis Eireann (RTE) and Independent Television Publications Ltd (ITP) v. Commission of the European Communities, the doctrine states that – IPR holders will be said to have abused their dominant position if any of the following factors have their presence in a case in question:

•       i.         Unavailability of a substitute good;
•     ii.         Hindrance in the creation of a new good due to denial of information supply.
•   iii.         Denial without a justified reason.
•  iv.      Keeping away from competition in another market and using that market for benefiting themselves.

 

Apart from this, the committee welcomes any approach that is correct and reasonable in its dealings with the above stated issues.

 

10. PROHIBITION OF ABUSE OF DOMINANT POSITION:

The competition laws of the countries focus on all activities be it multilateral activity or unilateral activity i.e., abuse of dominant position in the market. The extent of dominance can be defined as the position of strength enjoyed by an undertaking that enables it to operate independently of the competitive pressure in the relevant market and also affects the relevant market, competitors and consumers by its action. The impact on the market including barriers to new entrants is to be taken into account. Dominance relates to a position of economic strength enjoyed by an undertaking, which enables it to prevent effective competition being maintained on relevant market by giving it the power to behave to an appreciable extent independently of its competitors, customers and ultimately of its consumers. Dominance means acquisition of significant market power, which enables the enterprise to increase the price or limit production independently of competitors as well as customers. Dominant position has to be determined in the relevant market and the factors for such determination are provided in the Act. Dominance is not treated bad per se; it is the abuse of dominant position which is prohibited. The anti-competitive business practices in which a dominant firm may engage in order to maintain or increase its position on the market. Competition law prohibits such behaviour, as it damages true competitions between firms, exploits consumers and makes it unnecessary for the dominant undertaking to compete with the other firms on the merits.

 

In Hoffman La Roche & Co.AG vs. Commission of the European Communities, it was observed that existence of dominant position may derive from several factors, which taken separately, are not necessarily determinative but among these factors a highly important one is the existence of very large market shares and that substantial market share as evidence of the existence of the dominant position is not a constant factor and its importance varies from market to market according to the structures of these markets, especially as far as production, supply and demand are concerned.

In United States vs Microsoft, it was observed that together the proof of dominant market share and the existence of substantial barriers to effective entry create the presumption that Microsoft enjoys market power.

 

12. ROLE OF COMPETITION COMMISSION OF INDIA TO PREVENT THE ABUSE OF DOMINANT POSITION:

 

To an enterprise who is held to be abusing its dominant position, the Commission can do several things under Sections-27 & 28 of the Competition Act, 2002, and the Competition Commission of India plays the following roles:

 

Firstly, it can direct the undertaking or enterprise to discontinue or stop such actions that may amount to abuse. For example, the use of this power by the CCI can be found in cases like In Re Shamsher Kataria and Atos in which the dominant parties were ordered to end and discourage the enterprises form involving in activities which had been found to be against Section-4.

 

Secondly, to Impose penalties of up to 10% of the average of the turnover for the last three preceding financial years. There has been a lot of concern about the provision as it provides no calculation but just the upper limit for the penalty, CCI is yet to formulate any guidelines on this issue.

 

Presently the CCI has overall discretion in calculation and assessment of penalties which needs to be imposed upon such persons or undertaking who are parties to such kind of abuse. The COMPAT (The Competition Appellate Tribunal) has put some prohibitions on the CCI in relation to awarding penalties which are related to it. COMPAT in the one instance has also admonished CCI for its action of awarding large penalty without explaining any reason for the same and recommended that it needs to be calculated on the basis of the relevant turnover. So even in a case of where the abuse is done against a multi-product company, the turnover used to calculate the penalty against it would be the turnover from the kind of product or services which is in the contention, and not the overall turnover.

 

However, this irregularity is very rampant in this condition, when we talk about of the functioning of the CCI and the Appellate Authority, as for COMPAT has itself failed to adhere its own precedent of relevant turnover in M/s DLF Limited v Competition Commission of India & Ors. COMPAT did not restrain itself from assessing the penalty on the basis of DLF Limited’s turnover which arose from the residential segment, regardless of the relevant market in the present case for 'high-end residential accommodation'. COMPAT withheld the penalty which the CCI collected on the basis of DLF's turnover pertaining to its entire business (i.e., the development of residential, office and commercial properties).

 

Lastly, the Commission can pass any relevant order that it deems to cause the division of the dominant enterprise such that does not abuse its dominant position.

 

A. INQUIRY INTO THE ABUSE OF DOMINANACE BY THE CCI:

 

In exercise of powers vested under Section-19 of the Act, the commission may ask into any supposed negation of Sectiion-4(1) of the Act that states about the abuse of dominant position. Section-19(4) gives a detailed list of elements that the Commission will consider while asking into any claim of abuse of dominance. A portion of these components is the market share of the endeavour, size, and assets of the venture, size, and significance of the contenders, reliance of buyers, passage obstructions, and social commitments and expenses in the pertinent geographic and item showcase.

 

The Commission, on being fulfilled that there exists an at first sight instance of abuse of dominant position, will guide the Director-General to cause an examination and outfit a report. The Commission has the forces vested in a Civil Court under the Code of Civil Procedure in regard to issues like summoning or authorizing the participation of any individual and examining him on the pledge, requiring revelation and creation of records and accepting proof on an affidavit. The Director-General, to complete an examination, is vested with forces of the civil court other than forces to lead search and seizure.

 

B. POWERS OF THE COMMISSION:

 

After request, the Commission may pass inter-alia any or the entirety of the following orders under Section-27 of the Act:

• a.     direct the parties to suspend and not to reappear into such an understanding;
• b.    direct the endeavour or enterprise concerned to alter or change the agreement.
• c.     direct the enterprise concerned to submit to such different requests as the Commission may pass and conform to the bearings, including payment of expenses, assuming any; and
• d.    pass such different orders or issues such directions as it might esteem fit;
• e.   can force such punishment as it might consider fit. The punishment can be up to 10% of the normal turnover for the last three preceding financial years of endless supply of such people or ventures which are parties to bid-rigging or collusive bidding.

Section-28 enables the Commission to coordinate the division of a venture or enterprise appreciating the prevailing situation to guarantee that such an undertaking doesn’t showcase an abuse of dominant position.

Thus, the available remedies are, when the abuse of dominant position has been built up, the competition specialists can take certain measures for the same:

•       i.         A restraining order.
•     ii.         The penalty which might be 10% of yearly turnover.
•   iii.         Direct the enterprise to make a move which the authority regards fit.
•    iv.         Give any other request which it might think fit.
•     v.         Divide the prevailing endeavor.
•   vi.      In the instance of allure to the Competition Appellate Tribunal, the Tribunal may arrange for payment to the party bearing misfortune.

 

13. PENALTIES, PUNISHMENTS AND SANCTIONS IMPOSED ON THE ABUSER DOMINANT POSITION:

 

To an undertaking held to the abuse of dominant position, the Commission can do following several things on its parts as sanctions:

•       i.         Direct the undertaking to suspend such acts that add up to misuse. Occasions of such uses by the Commission can be found in cases like in Re Shri Shamsher Kataria v. Honda Siel Cars India Ltd, Case No. 03/201, and, also, in Atos Worldline v. Verifoneindia, Case No. 56 of 2012, where the overarching parties were mentioned to stop it from getting a charge out of activities that had been viewed as in invalidation of Section-4.
•     ii.      impose disciplines of up to 10% of the ordinary of the turnover for the last three preceding financial year.

There has been some concern about this arrangement, however, as far as possible, it gives no rules for the count of punishments. The Commission, as well, is yet to concoct rules of its own. Thus, starting at now, the Commission has total tact in figuring punishments to be endless supply of such individuals or ventures which are gatherings to such maltreatment or abuse of power. Be that as it may, the COMPAT has put a few conditions on the Commission undoubtedly. For a situation, COMPAT advised CCI for CCI’s act of granting huge punishments without giving any thinking to the equivalent.

 

Besides, in a similar case of M/s Excel Crop Care Limited v. Competition Commission of India, 2017, COMPAT held that punishments are to be determined based on the ‘significant turnover’. So, for a situation of maltreatment against a multi-item organization, the turnover used to compute the punishment would be the turnover from the specific product(s) in conflict and not the general turnover.

 

Be that as it may, an anomaly is wild right now the working of the Commission and the Appellate Authority, for the COMPAT itself neglected to follow its point of reference of ‘pertinent turnover’ in the case of M/s DLF Limited v Competition Commission of India & Ors., 2018, COMPAT didn’t confine the figuring of the punishment based on DLF Limited’s turnover emerging just from the private fragment, in spite of the significant market all things considered being the market for ‘very good quality private settlement’. COMPAT maintained the punishment demanded by the CCI, which was determined based on DLF’s turnover relating to its whole business i.e., the advancement of private, office and business properties.

 

The Commission also can pass the following orders as punishment against the abuser of dominant position:

 

i. Interim Order:

 

 Under Section-33 of the Act, during the pendency of an investigation into abuse of dominant position, the Commission may incidentally control any party from duration with the alleged offending act until the completion of the order or until further order, without giving out to such gathering, where it esteems fundamental or necessary.

 

ii. Appeals:

 

The Competition Appellate Tribunal (COMPAT) is set up under Section-53A of the Act, to hear and discard claims against any course given or a choice made or order passed by the Commission underdetermined or specific sections of the Act. An appeal must be documented inside 60 days of receipt of the order or direction or choice of the Commission. Lastly, the Commission can pass a request to cause the division of the prevailing venture with the end goal that doesn’t manhandle its predominant position.

 

14. CONCLUSION:

 

Thus, with the increasing use of abuse of dominant position, our implementation of statutory laws relating to the Competition Act also became relevant. The reason behind such a law is to ensure the independence of business and also to have an unstigmatized economic outlook without any fear of the dominant position of any other in the economy. Therefore, in the market, there should be an equal opportunity and equal opportunity to all who want to do the business. However, competition should prevail as long as it is healthy and as long as it helps the entire society to grow but it becomes disastrous when one starts to overpower the other in their own ways of business. The new kind of competition issues faced by the authorities which invariably are faced by developing countries where infrastructure development is an ultimate priority. Abuse of dominance remains a main thrust area in view as there is a close link between essential facilities and infrastructure facilities. Infrastructure facilities tend to qualify as very essential facilities for the application of competition Law in view of the lumpy investment involved and the long gestation lag in creating infrastructure.

 

Besides, Dominance is to be determined by the Commission based on a number of factors which are either structural or behavioural in nature. The Act provides an exclusive list of abuses. It also takes cognizance of abuse by a group having dominant position in the relevant market. The Indian law provides for effective and enforceable remedies against use of abuse of dominant position.