The Competition Act, 2002 follows the philosophy of modern competition laws and aim at fostering competition and at protecting Indian markets against anti-competitive agreements, abuse of dominant position by enterprises and regulates combinations with a view to ensure that there is no adverse effect on competition in India.
What is Dominance?
The Competition Act, 2002 defines dominant position in terms of a position of strength enjoyed by an enterprise, in the relevant market in India, which enables 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 behave/act independently of the market forces that determines its dominant position. In a recent case, Fast Track Call Pvt. Ltd. & Menu Travel Solutions Pvt. Ltd. v. ANI Technologies Pvt. Ltd., CCI elaborated the concept of dominant position and started dominant position as a economic strength enjoyed by the enterprise in the relevant market, which enables it to operate independently of competitive forces prevailing in the relevant market or affect its competition or consumer or the relevant market in its favour.
Relevant Market (Section-2(r))
Dominance has significance for competition only when the relevant market has been defined. The relevant market means “the market that may be determined by the commission with reference to the relevant product market or with reference to both the markets”. The act lays down several factors of which any one or all shall be taken into account by the commission while defining the relevant market.
In its order Maharashtra State Power Generation Ltd. v. Coal India Ltd. & Ors., the CCI noted that defining a global market as the relevant market was contrary to the express provisions of the Act. Since the Act indicated that a ‘dominant position’ is a position of strength enjoyed by an enterprise in the relevant market in India.
Factors to determine Dominant Position (Section-19(4))
Dominance has been traditionally defined in terms of market share of the enterprise or group of enterprise concerned. However, a number of other factors play a role in determining the influence of an enterprise or a group of enterprise in the market. these includes:
- Market Share
- The size and resources of the enterprise
- Size and importance of the competitors
- Economic power of the enterprise
- Vertical integration
- Dependence of consumers on the enterprise
- Market structure and size of the market
- Extent of entry and exit barriers in the market; countervailing buying power
- Source of dominant position viz. whether obtained due to statute etc.
- Social costs and obligations and contribution of enterprise enjoying dominant position to economic development.
The commission is also authorised to take into account any other factor which it may consider relevant for determination of dominance.
Abuse of Dominance
Dominance is not considered bad per se but its abuse is. 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 dominant position and, therefore, are prohibited. Such practices shall constitute abuse only when adopted 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 committed by a dominant enterprise. Such acts are prohibited under the law. Any abuse of the type specified in clauses (a) to (e) of sub section (2) of Section 4 by a dominant firm shall stand prohibited.
Section 4 (2) of the Act specifies the following practices by a dominant enterprises or group of enterprises as abuses:
- directly or indirectly imposing unfair or discriminatory condition in purchase or sale of goods or service;
- directly or indirectly imposing unfair or discriminatory price in purchase or sale (including predatory price) of goods or service;
- limiting or restricting production of goods or provision of services or market;
- limiting or restricting technical or scientific development relating to goods or services to the prejudice of consumers;
- denying market access in any manner;
- making conclusion of contracts 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;
- using its dominant position in one relevant market to enter into, or protect, other relevant market.