Dominating the Market: Understanding the Abuse of Dominant Position and Its Determining Factors

Introduction

In this article, we are going to analysis about the abuse of the dominant position in the relevant market. It occurs when a dominating firm in a market, or a dominant group of enterprises, engages in behavior meant to displace or punish a rival or to discourage the admission of new rivals, with the end consequence being that competition is prohibited or significantly reduced. A company in a dominant position engages in any of the following actions, whether directly or indirectly: imposes unfair or discriminatory practises; limits or restricts the production of commodities; or offers any type of service. In India, this position regarding dominance is governed by  sec-4 of the competition act, of 2002. just the mere existence of the dominant position doesn’t mean the abuse of the dominant position

Dominant Position Determining Factors :

The market share of the involved company or group of companies has typically been used to define dominance. The impact of a company or a group of companies on the market, however, depends on a variety of other factors. Market share, the size and resources of the company, the size, and significance of competitors, the company's economic clout, vertical integration, the extent of entry and exit barriers in the market, countervailing buying power, the market's structure, and size, the source of the dominant position, such as whether it was attained through statute, etc., social costs and obligations, and the contribution of the company with the dominant position.

The C.C.I.  is also permitted to consider any additional criteria that it may deem important in determining dominance.

Analysis of Section 4

Section 4(1) talks about that no firm can monopolize the  market by using its dominant position in the market.

Section 4(2), talks about the factors which determines that whether there is any abuse of dominant position or not in the market.

In section 4(2)(a) says that if any enterprises directly or indirectly imposes the discriminatory or unfair practices on the firms which are not in the position to defend themselves, or enterprises who have the dominant position does not want any new player to enter into the market.

section4(2)(a)(i)directly or indirectly Conditions for the purchase, sale, or provision of goods or services ,

(ii) the cost of purchasing or selling the goods or services, including any predatory prices

section4(2)(b) (i)limits or restricts the market for such products, the provision of services, or their creation

Section 4 (2)(b)(ii) technical or scientific advancements pertaining to products or services that are detrimental to consumers engage in practice(s) that deny access to the market in any way;

Sec 4(2)(c)  indulges in practice or practices resulting in denial of market access;

Sec .4(2) (d) conditions the conclusion of contracts on the acceptance by other parties of supplemental obligations that, by their nature or in accordance with commercial usage, have no relation to the subject of such contracts;

Sec. 4 (2)(e) utilises its dominant position in one relevant market to enter into, or protect agreements, other relevant markets

(a)“dominant position” means a position of strength, enjoyed by an enterprise, in the relevant market, in India, which enables it to—

(i) operate independently of competitive forces prevailing in the relevant market; or

(ii) affect its competitors or consumers or the relevant market in its favour;

(b) “predatory price” means the sale of goods or provision of services, at a price which is below the cost, as may be determined by regulations, of production of the goods or provision of services, with a view to reduce competition or eliminate the competitors.

Examples of the abuse of the dominant position:

Regarding the requirement to demonstrate anticompetitive consequences, the CCI has studied and adopted an object-based approach while identifying abuse in some older cases (for example, the National Stock Exchange case).

However, in more recent instances, the CCI and COMPAT have used an effects-based strategy for assessing abusive behavior. The cases below serve as examples.

In the Schott Glass case, the COMPAT determined that in order to establish unlawful price discrimination, there had to be a showing of both I different treatment of equivalent transactions; and (ii) harm to competition or likely harm to competition in the sense that the buyers are at a disadvantage relative to one another, which causes competitive injury in the downstream market. The Supreme Court is hearing an appeal in this case.

The CCI emphasized in XYZ v. REC Electricity Distribution Company Ltd that establishing a denial of access required demonstrating an anticompetitive effect or market distortion in the market where the denial had occurred.

Legislation:

This post will explore the problem of misuse of dominant position as per S.4 of the Competition Act (the Act). The three processes for determining a violation of S.4 will be described in terms of the criteria the Commission used to evaluate each, and then the Commission's disciplinary authority will be examined.

1, Relevant Markets: Geography Markets and Product Markets

Identifying the dominating position

The Act defines a dominant position as a position of strength an organization has in the relevant Indian market that allows it to:

2. Operate without interference from rivals in the relevant market

3. Influence rivals, customers, or the relevant market in its favor.

The Competition Commission of India (the CCI) must take into account a number of factors, including market share, enterprise size, resources available to it, the importance of competitors, economic power, commercial advantages, vertical integration, consumer dependence, entry barriers, market structure, and size, when determining whether an enterprise holds a dominant position. These factors are listed in Section 19(4) of the Act.

Companies possessing a dominating position in a relevant market are prohibited from abusing their position under Section 4 of the (Indian) Competition Act 2002 (the Act). It stops any company or organization from misusing its dominant position. The Act also specifies situations in which a dominant position is abused. Acts that result in abuse of a dominant position are prohibited by Section 4(2) of the Act as follows:

1. impose unethical or discriminatory terms or prices while purchasing or selling products or services;

2. restrict or limit;

3. making products or rendering services

4. technical or scientific advancement of products or services that harms customers;

Landmark judgments:

1. MCX-SX VS N.S.E Stock Exchange :

In this case, the C.C.I. held nse liable for using it’s dominant position against its rival mcx-sx in the currency derivatives, MCX-SX, in a representation to the CCI in November 2009 had complained that NSE had misused its dominant position in the equity, equity derivatives and the wholesale debt market segment to its benefit in the currency derivatives segment by trying to protect its turf and introducing predatory pricing. The investigations department of the CCI found NSE guilty of this in December 2010 and deemed it fit to initiate penal action against the exchange.

2. Surinder singh bermi vs B.C.C.I. :

In this case the BCCI was held liable for using it dominant position in the cricket broadcasting market, organizing and conducting  the private professional cricket leagues in India.BCCI was found to violates the sec 4(2)(c) of the Indian competition act as BCCI’s submission article 9.1(c).1 of its IPL Media Rights agreement entered into with the broadcasters of the Indian Premier League (“IPL”) that “it shall not organize, sanction, recognize, or support another professional domestic Indian T20 competition that is competitive to the league. Which is a regulatory provision in the agreement, and this is the violation of sec-4(2)(c) of the Indian competition act.

Conclusion:

The Monopolistic and Restrictive Trade Practices Act, 1969 has been replaced by the Competition Act, 2003. Large alterations were made in it in 2007. Consequently, the prevailing competition law jurisprudence in India is only seven years old. Despite this, it is nevertheless a progressive piece of law that, unlike the MRTP Act, which had minimal tolerance for any form of dominance, acknowledges the shifting market conditions, does not specifically object to dominance, but yet sticks to its goal of maintaining market competition. The Act's preamble and Section 18 imply that one of its goals is to ensure fair competition in India.The norm is primarily economic in nature, with the goals of avoiding actions that significantly harm competition, fostering and maintaining competition in markets, and safeguarding consumer interests.

 

Article Compiled by:-

Utkarsh Kamal

(Law Faculty-Delhi University)

Article Reviewed by:-

Mayank Garg

LegalMantra.net Team

+91 9582627751

Disclaimer: Every effort has been made to avoid errors or omissions in this material in spite of this, errors may creep in. Any mistake, error or discrepancy noted may be brought to our notice which shall be taken care of in the next edition In no event the author shall be liable for any direct indirect, special or incidental damage resulting from or arising out of or in connection with the use of this information Many sources have been considered including newspapers, Journals, Bare Acts, Case Material. Charted Secretary etc.

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