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] -

A dominating body's refusal to provide a competitor access to a market by using its power to prevent it from entering the relevant market.



What action can the commission take if it determines that a company is misusing its dominant position?[11]

➔ In this case, Shamsher Kataria v. Honda Siel Cars India Ltd[12], It is India's first case involving spare parts. The absence of genuine spare parts for these automobiles on the open market was claimed to be an example of anti competitive behaviour on the part of the automakers.

Instead, those manufacturers ran or oversaw approved workshops that offered after-sale maintenance services in addition to selling such spare parts.

As a result, only accredited workshops could charge more for maintenance services or spare parts sales.


It was argued that these actions constituted an abuse of dominance (s. 4) since they excluded independent repair businesses from the market, restricted the output of products or services, and used leverage. As it amounted to a "refusal to deal" and a "exclusive supply agreement" with a "appreciable detrimental effect on competition," the agreement between the manufacturer and the approved workshop was claimed to be anti-competitive.

The "relevant market" had to be identified in order to assess whether there had been an abuse of dominance. As spare components were not interchangeable between manufacturers, the CCI came to the conclusion that the relevant market was constrained to the autos of each manufacturer.


As a result, in this case, the dominant party was given an order to stop engaging in actions that section 4 had been found to prohibit.

➔ Impose fines that are up to 10% of the combined turnover for the previous three fiscal years.

➔ Grant parties compensation in accordance with the guidelines in section 34.

➔ Instruct the company in question to follow any instructions the commission may make, including paying any associated fees.

➔ The commission has the authority to issue an order causing the division of the dominating enterprise so that it does not violate section 28's prohibition against abusing a dominant position.


When it comes to imposing sanctions, the COMPAT has imposed some criteria on the Commission.


General case laws -

Uber gives the drivers and owners of the vehicles connected to its system excessively huge incentives that go above and beyond the fare collected from the passengers. One Uber-connected armada owner with four vehicles was given a summary of the driving forces.

The Competition Commission of India (CCI) rejected an allegation that Uber India Systems Pvt. Ltd. charged prices below cost and entered into exclusive contracts with drivers on July 14, 2021.


In their lawsuit under Section 19(1)(a) of the Act, Mineral Enterprises Limited sued the Ministry of Railways, the Union of India, and the Railway Board, alleging, among other things, that Section 4 of the Act had been violated.

The informant operates in the logistics, mining, and infrastructure activities. They transport iron ore via a railway service that is owned and controlled by the opposing parties.

The railway transport service was run by private parties prior to the Indian Railways Act, 1890, with government intervention in matters relating to coordination, regulation, and apportionment claims.


The law that was passed gives the central government the authority to set rates for commodities, passengers, and carriage, as well as to categorize and reclassify any item.

Any product could have its freight circulars prescribed by securing central government approval.

Rate adjustment instructions were included in the circulars that were published in 2003 and 2012.

The iron ore was charged at a lower rate for domestic use in the production of steel and iron, and at a higher rate for export. This reduced competition between the sectors, and the aggrieved party filed a suit with the commission charging abuse of dominant position under Section 4 of the Act.


Conclusion

The Monopolistic and Restrictive Trade Practices Act of 1969 has been replaced by the Competition Act of 2003 that had gone through alterations.

The competition act, in contrast to the previous act, does not explicitly contend with dominance but it also does not stray from its objectives.

Abuse of dominating position and other fraudulent business practices in the relevant market are closely monitored by the authorities. It takes the necessary steps and imposes penalties after the claims are proven.


Therefore, as abuse of dominant position became more prevalent, our application of legislative laws related to the Competition Act also became pertinent.


-- [1] Nikita Chatterjee, Analysis of Abuse of Dominance under competition act 2002 ,taxguru,02 December 2021 https://taxguru.in/corporate-law/analysis-abuse-dominance-competition-act-2002.html [2] Gazala Noor, Abuse of dominance under competition act legalserviceindia.com,https://www.legalserviceindia.com/legal/article-3928-abuse-of-dominance-under-competition-act.html#:~:text=Abuse%20of%20a%20dominant%20position,is%20prevented%20or%20lessened%20substantially. [3] Vinod Dhall,Abuse of dominance in competition law,economictimes.indiatimes,Apr 04,2007,03:19 AM IST https://economictimes.indiatimes.com/news/economy/policy/abuse-of-dominance-in-competition-law/articleshow/1853391.cms?from=mdr [4] Prashanti Upadhyay, A Comparative Study of Dominant Position, 3 . http://docs.manupatra.in/newsline/articles/Upload/49B54588-42DE-4173-A967-90790B35ED50.pdf [5] Will Kenton,Predatory Pricing , Investopedia,Jan 30th,2022 https://www.investopedia.com/terms/p/predatory-pricing.asp [6] Dhanraj Pillai & ors v. Hockey India , 2013 Indlaw CCI 37 [7] Devika Sharma ,Section 19(1)(a) of the Competition Act , scconline ,blog ,July 28th https://www.scconline.com/blog/post/tag/section-19-1a-of-the-competition-act/ [8] Shubham Gandhi and Tanish Gupta,Gauging the Scheme of Predatory Pricing: The case of Shopee Pvt.Ltd.,IndiaCorpLaw, April 26,2022 https://indiacorplaw.in/2022/04/gauging-the-scheme-of-predatory-pricing-the-case-of-shopee-pvt-ltd.html [9] https://www.ftc.gov.bb/library/2003-09-04_abuse_of_dominant_position.pdf [10] https://blog.ipleaders.in/abuse-dominant-position-competition-act-2002/ [11] Sarthak Sood, Abuse of Dominant Position in Indian Competition Law : A Brief Guide,cis-india.org,09 December,2015 https://cis-india.org/a2k/blogs/abuse-of-dominant-position-in-indian-competition-law-a-brief-guide [12] Shamsher Kataria v. Honda Siel Cars India Ltd., 2014 SCC OnLine CCI 95 [13] UBER systems private ltd v. CCI & Ors https://indianlawportal.co.in/uber-india-pvt-ltd-v-cci/ https://indiankanoon.org/doc/152787062/ [14] Mineral Enterprises Ltd v. Ministry of Railways , UOI & Ors. https://indiankanoon.org/doc/79134493/ https://www.casemine.com/judgement/in/574c15257de1a8779874c623



This article is written by K. V Sreeja of CMR School of Legal Studies.

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