Class Discussion on 19 - 01- 2018

Since it was the first class, the discussion revolved around the layman-understanding of
Competition Law with the help of some concepts and respective examples. After a few random
concepts (part I), a hypothetical situation regarding the competition in a market of homogenous
products was analyzed which helped understanding, through application of fundamentally
rational reasoning, some important economic principles which govern competition between two
or more players in any market (Pat II).

Part (I)

Some of the concepts which were discussed are as follows:

 Abuse of Dominance- Some businesses attain dominance over the market of a particular
product or service by invariably driving off others from the market.
eg. Two biggest competing businesses of Cab service across the country—Ola and Uber.
 Cartelisation- It takes place where competing businesses enter into an agreement to
control prices or exclude entry of a new competitor in the market.
eg. Pepsi and Coca Cola
This type of agreement can take place between two businesses situated at same or
different levels in the market. (Horizontal and Vertical Cartelization)
 Comparative Advertisements- This practice can be easily witnessed with advertisements
comparing the value or worth of any two homogenous products especially in terms of
value for money of the consumers.
eg. Rin and Tide (Washing powder)
 Entry Barrier- Used as a tool for eliminating competition.

Part II

The hypothetical Situation:

Since he is aware of the demand of tasty food among college students as well as faculty, Azad
wants to start a Sandwich shop outside TNNLS. At this point, he is faced with the first dilemma
i.e. where to LOCATE his shop. After a well thought plan, he decides to locate his shop right
opposite the entrance of the “University” to maximize the number of consumers and names it
“Escape…From the Mess”. The shop does justice to its name and Azad hosts an overwhelming
number of regular consumers of sandwiches including the Vice Chancellor of the University. But
soon, the second problem of COMPETITION arises.

A month after the opening of Escape and seeing the demand of sandwiches going up, Deepika
grabs the opportunity and decides to open a sandwich shop of her own named “Freedom… From
Kurma”, next to Azad’s shop. As a result, the profits of Azad are minimized and are now
divided between him and Deepika as the consumers have two options to choose from.

Through the above example, few questions can be sought to be answered:

 Why are businesses selling homogenous (or almost similar) products, situated in close
vicinity of each other? (Why did Deepika choose to place her sandwich shop right next to
Azad’s?)
 What effect does location have in setting up and deriving consequent profits out of any
business? (Had Deepika opened her sandwich shop a kilometer away from Azad’s shop,
would she have been able to attract as many customers as she does, now?)
 Does there exist any possibility among the competitors to negotiate terms regarding rules
to be followed while marketing homogeneous products? (Or, Can Azad ask Deepika to
NOT to compete with him because he is entitled to all the profits as he was the first
person to start such a shop?)