top of page

ABUSE OF DOMINANT POSITION & UNDERSTANDING OF LAW

Introduction

‘Dominance per se is not illegal, but the abuse of the position of dominance is illegal’.[1]


According to this statement, organizations that hold a dominant position in the relevant market are not unlawful, but malfeasance is leveraging that position of dominance for personal gain.

A company that has a dominant position in the market is one that operates autonomously and has an impact on its customers or rivals.

Abuse is essentially exploiting their dominant position in the market in a way that excludes and takes advantage of others.[2]

  1. Imposing discriminatory and unethical terms and prices is one example.

  2. denying access to market

  3. Creating barriers to entry

  4. Development , production , technology limitations.


Section 4(2)(a) to (e) constitutes practices of AoD and prohibition of dominant position .


Brief History

How did the Indian Competition Act,2002 come into effect?

The Monopolies and Restrictive Trade Practices Act[3] was created to combat the rise in monopolistic practices and the concentration of wealth in a limited number of hands, however it was later revoked in September 2009. The Competition Act, 2002 supplanted the previous law.

This act is a pivotal factor for enforcing some competition regulations, as well as for preventing and penalizing corporate businesses' anticompetitive business activities and needless government meddling in the market.


About the act

In accordance with this Act (Section 4), there are various definitions, one of which is "abuse of dominant position," which is defined as any unfair acts carried out by a corporation or an individual that have the potential to harm competition and the expansion of the market.

If there is any indication of this, authorities will conduct an investigation.


Identification of abuse of dominant position[4]-

To identify whether it is an abuse of dominant position the commission should determine certain factors according to Section 19(5) of the Act , by giving appropriate consideration to the relevant market which constitutes the relevant product and relevant geographic.


Relevant Market- According to section 2(r), a relevant market is one where a certain good or service is offered for sale. It is the point where a relevant geographic market and a relevant product market converge.

As stated above the relevant market is categorized into two -

Relevant Product Market- Section 2(t)

Depending on the characteristics, pricing, and purpose of the products, consumers may view certain goods or services as interchangeable or substitutable.

Depending on the buyer's personal preferences as well as other elements like:

● The physical characteristics of the products.

● Cost of goods and services.

● Existence of any specialized producers.

● Classifications of products such as industrial products , the relevant comes into existence.


Relevant geographic Market-

According to Section 2(s) ,The region in which the businesses engaged supply goods or services and the competitive environment are consistent.

There are various factors in the determination of geographical market:-

● Trade impediments

● Local or consumers personal requirements

● National policies

● Distribution facilities being sufficient

● Transportation expenses.


As a result, the competition exists in the relevant market.

Identification of abuse of dominant position can be broken down into a three step process :

a) Determine the relevant market.

b) Determine dominance in the relevant market

c) Determine the abuse of dominant position.



Section 4(2)(a)(ii) states what is predatory price - to reduce competition or eliminate competitors companies that hold a dominant position sell goods or services less than the actual cost , as determined by the regulations.This is known as the ‘below-cost pricing strategy’.

‘Predatory’ - According to the established standard, a firm's behaviour can be characterized as predatory if it seeks to exclude competitors on grounds other than efficiency.


The antitrust laws that have been established in many nations to safeguard consumers from predatory businesses and unfair competition make it illegal in many countries[5]. This is a challenge because it's not always facile to provide evidence for it.


★ Dhanraj Pillai & Ors v. Hockey India[6]

Facts:

World Series Hockey issued a statement , and the Nimbus sport then began contacting participants to sign them up for the league.

Hockey India adhered to FIH rules on sanctioned and unsanctioned events, and the code of conduct was revised in light of provisions regarding sanctions for involvement in un-sanctioned events.

Along the lines of the projected WSH, Hockey India also announced plans to introduce their own professional hockey league.

Six Olympians who represented Indian hockey and contributed glory to the nation , filed charges against Hockey India for abusing its position of dominance in the field of hockey .


Judgement:

The CCI cleared Hockey India of all claims that it had entered into anti-competitive contracts and used its dominant position improperly. Hockey India has been instructed to set up a strong internal control mechanism to make sure that its regulatory authority is not exploited in any way when it is evaluating and making decisions about any issues pertaining to its commercial or economic activity.

Section 19(1)(a) of the act[7] -’Inquiry into certain agreements and position of enterprise.’

The Competition Commission of India (CCI)[8] established the following criteria to ascertain the predatory pricing policy:

1) Set price would be less than the cost price.

2) To eliminate competition, prices are reduced below their cost.

3) The business anticipates recovering the losses substantially once the market recovers.

4) The existing competition is eliminated.


These factors were established in the case - Transparent Energy Systems(P) Ltd. v. TECPRO Systems Ltd.

Predatory pricing typically goes through two distinct phases for an enterprise:

Sacrifice phase - It is the stage where the business experiences significant losses as a result of the predatory pricing it has used to drive out competitors from the market.


Recoupment phase - Now that a business has suffered losses, it is necessary for it to make up for them, therefore normally during this phase, it makes up for the losses she suffered during the sacrifice phase.


Types of Abuse of dominant position[9]-

Along with predatory pricing there are various forms of abuse by dominant firms -

Tied selling -

It arises when a supplier needs a consumer to buy another good from them before providing a good or service.

It also occurs when a supplier demands that a dealer refrain from using or disseminating any other goods in addition to the supplies that are not of the brand name.


Prize squeezing -

It's a situation when the dominant firms impose inflated or unfair purchasing prices on independent dealers with whom they are in competition through an affiliate company.

As a result, the derived market experiences restrictions on competition.


Exclusionary[10] -