Collective Dominance

Collective-Dominance
An analysis of S. 4 as it exists and S. 4 as proposed by the amendment in
Competition (Amendment) Bill, 2012
(Dissertation prepared under the Internship programme of the CCI)
Submitted By: Under the guidance of:

SHASHANK AGARWAL Dr. K. D. SINGH
LC-1, Faculty of Law, Deputy Director (Law),
University of Delhi Competition Commission of India
Collective Dominance- An analysis of S. 4 as it exists and S. 4 as proposed by the Competition Bill, 2012
DISCLAIMER
This project report/dissertation has been prepared by the author as an

intern under the Internship Programme of the Competition Commission of
India for academic purposes only. The views expressed in the report are
personal to the intern and do not necessarily reflect the view of the
Commission or any of its staff or personnel and do not bind the
Commission in any manner.
This report is the intellectual property of the Competition Commission of
India and the same or any part thereof may not be used in any manner
whatsoever, without express permission of the Competition Commission
of India in writing.
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ACKNOWLEDGEMENTS
On the completion of this paper, I would like to place on record my
sincere gratitude towards all those people who have been instrumental in
its making.
I express my sincere gratitude towards Dr. K. D. Singh, Deputy Director
(Law), Competition Commission of India, for his guidance and excellent
insights which gave direction and focus to this paper. I thank him for
lending his precious time in making this project an authentic piece of
work.
I also put on record my gratitude towards the library staff, which has
provided me help and access to all the resourceful material for my
research.
I am indebted towards Competition Commission of India, for providing
me an opportunity to have a learning experience. During the internship, I
got the great opportunity to work with officials of the Commission
working in different divisions, which enhanced my knowledge about the
working and functions of the Competition Commission of India.
Shashank Agarwal
shashank.agwl@yahoo.in
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Table of Contents
Contents Page No.
1. Summary 5
2. Basis 8
3. TFEU and EUMR and Our Purpose 10
4. Issues, Methodology and the Limitations 11
5 Economic Theory and Competition Law & Policy 13-23
5.1 “Competition”- Defined 13
5.2 Competition Law and Policy 14
5.3 Need of Economic Theory 15
5.4 Perfect Market 16
5.5 Monopoly 18
5.6 Oligopoly 19
5.7 Theory of Oligopolist’s Interdependence 19
5.8 Theory of Prisoner’s Dilemma 20
5.9 Tacit Coordination and Prisoner’s Dilemma 22
5.10 Aim of the Competition Law & Policy 23
6. Understanding Collective Dominance 24-32

6.1 What is Collective “Dominance”? 24
6.2 How is Collective Dominance supposed to be interpreted? 26

How does the concept of Collective Dominance correlate to Tacit
6.3 30
Coordination?
7. Significance in India 33-43
7.1 Amendment proposed to amend Section 4 33
Why need it when we have provisions to control “Concerted Practices”,
7.2 “Cartelization”, and “Tacit Coordination” along with the regulation of 33
Mergers?
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7.3 Analyzing Section 3 34
7.4 Analyzing Sections 5 & 6 36
7.5 Analyzing Section 4 38
7.6 Comparing Sections 3, 4 and 5 39
7.7 Understanding post-amendment Section 4 w.r.t. Vertical Arrangements 41
8. Conclusion 44-45
9. Position in other Competition Law regimes 46-53
9.1 United States of America 46
9.2 Canada 47
9.3 UK 48
9.4 China 49
9.5 Mexico 50
9.6 Japan 51
9.7 South Africa 52
9.8 Conclusion 53
List of Abbreviations 54
Bibliography 55-57
I Statutes, Treaties and Legislations 55
II Reports and Articles 55
III Books 55
IV Case Laws 56
V Websites 56
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1. Summary
1.1 The questions this dissertation aims to answer are:

(1) What is Collective Dominance?
(2) How is collective dominance supposed to be interpreted?
(3) How does the concept of collective dominance correlate to tacit coordination?
(4) What is the relevance and the need of the proposed amendment and the issue of
“Collective Dominance” in India?
(5) How is it dealt with in the other countries?
1.2 Collective dominance can be described as a position of two or more independent entities
that together hold a position of joint dominance where they act or present themselves as one unit.
The market on which it is most likely for firms to achieve such position is on oligopolistic
markets.1
1.3 Economic theories have had a great impact on the development of collective dominance.
Economic theories provide tools to use when assessing whether firms on a market are likely to
coordinate their behavior and give rise to collective dominance. A comparison of the economic
characteristics of an oligopolistic market respective a perfect market and a monopoly provide
insight into the conditions for collective dominance to occur.2
1.4 The Competition Laws of India, the Competition Act, 2002, is largely modeled on the EU
Law and influenced by similar regulation in the US.3 Canada was the first country to enact a
competition law in 1889 followed by the United States of America in 1890. The number of
countries with Competition laws increased phenomenally in the past 25 years from 32 in 1980 to
105 in 20068. Many more countries are in the process of enacting competition laws and the
numbers are slated to increase further in the coming few years. Many countries have modernized
their competition regimes in the recent past and India belongs to the family of such nations.4
1
Karolina Rydman, Collective Dominance- how is it interpreted and how does it correlate with tacit coordination,
Stockholm University (can be found at: http://fr.slideshare.net/karolinarydman/collective-dominance-karolina-
rydman-13171127) , Page 3
2
Ibid
3
Suzanne Rab, Indian Competition Law- An International Perspective, 2012, at page 1
4
Report of the Working Group on Competition Policy, Planning Commission, Government of India, 2007,
paragraph 2.3.1
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1.5 Broadly, most competition laws seek to increase economic efficiency, enhance consumer
welfare, ensure fair trading, and prevent abuse of market power.5
1.6 The three areas of enforcement that are provided for in most competition laws are–
(i) Anti-competitive agreements
(ii) Abuse of dominance, and
(iii) Mergers which have potential for anti-competitive effect.6
1.7 Besides the aforementioned areas one more area has been discovered and analyzed by the
EU regime, the concept of “Collective Dominance”. However, this concept has been developed
through the case laws only.7 The concept was developed by defining the Article 102 (previously
Article 82) of the TFEU8.
1.8 In many of the Countries’ Competition Laws this concept is still missing. But, India, after
adopting the proposed amendment, can succeed to explicitly define and include this concept.
1.9 Presently, the Competition Act, 2002 has covered very well all the areas as mentioned
above in the following way:
(i) Section 3 - Anti-competitive Agreements
(ii) Section 4 - Abuse of Dominant Position
(iii) Section 5 & 6 - Combinations and their regulation (Merger Regulations, as
commonly known in the worldwide)
1.10 The Section 4 presently provides for the prohibition on “Abuse of Dominant Position” by
an enterprise or a group. Here “group” refers to two or more enterprises which are related to one
another in terms of controlling power or controlling stake, thus making them, in a way, one big
enterprise.
1.11 To this section the addition of the words “either jointly or singly” after the words
“enterprise or group” is proposed.9 The section 4 would then read as follows:
5
Report of the Working Group on Competition Policy, Supra n. 4, paragraph 2.3.2
6
Ibid, paragraph 2.3.3
7
Karolina Rydman, Supra n.1, page 19, paragraph 4.3.1
8
Treaty of Functioning of the European Union (“TFEU”)
9
Section 4 of The Competition (Amendment) Bill, 2012 (downloaded from:
http://www.prsindia.org/uploads/media/Competition%20%28A%29%20Bill,%202012/The%20Competition%20%2
8A%29%20Bill,%202012.pdf)
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“No enterprise or group, either jointly or singly, shall abuse its dominant position.”
1.12 With the addition of these words it is sought to prevent the mischief which had hitherto
went unnoticed. This checks in for bringing in keeping a check against “Collective Dominance”
which may be exercised by the major players of the industry in collusion with each other
irrespective of whether they have any kind of stake in any other of those enterprises.
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2. Basis
2.1 The concept of “Collective Dominance” in the EU regime has evolved through case laws
and is generally studied in relation to the Merger Control Regulations and the concept of “Tacit
Coordination” (or “informal understanding” or “implied agreement” as can be found in the
Indian Competition Act, 2002).
2.2 Tacit coordination is a way for the entities, holding a collective dominant position, to
coordinate their behavior. They can also coordinate their behavior explicitly but they tend to
avoid this since it is easier to detect and will, when detected, be punished through Article 101
TFEU. There is no provision in the EU legislation that prohibits tacit coordination. It is,
however, possible to prohibit mergers that likely will lead to collective dominance and tacit
coordination. Therefore, it is of significant importance to investigate whether the merger will
lead to such position and behavior.10
2.3 The European Union has its Merger Control provisions in the EUMR11 which prevent
changes in the market structure in the nature of merger or acquisition of two or more firms that
significantly impedes competition in the internal market. Such changes, which arise through
merging firms, could cause an increase in the market price of the products or services on the
relevant market.12
2.4 It is not only a creation or strengthening of dominance of the merging firms that might
significantly impede effective competition but a prospective merger of firms not already holding
dominant positions can also create or strengthen a collective dominant position in the relevant
market since it can increase the likelihood of coordination of behavior of the firms on the
relevant market.13
2.5 When the market structure enables firms to coordinate they might do this through an
agreement, concerted practice or tacit coordination. The similarities and differences among these
behaviors are not crystal clear. They seem to overlap.14
10
Karolina Rydman, supra n. 1, page 1
11
Council Regulation (EC) No 139/2004 of 20 th January 2004 on the control of concentrations between undertakings
(the EC Merger Regulations)
12
Karolina Rydman, supra n.1, page 4, paragraph 2.1;
13
Ibid
14
Ibid
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2.6 Article 101 of the TFEU (previously, Article 81) prohibits the agreements or concerted
actions or practices which can, either by object or effect, prevent, restrict or distort the
competition. However, tacit coordination is not prohibited explicitly as has been done in the
Indian Competition Act.
2.7 The Indian Competition Act in this regard has made things explicit by defining the
Merger Regulations in the same Act under Sections 5 and 6, and, by defining the term
“Agreement” in Section 2(b) so as to include implied agreements or “Tacit coordination” as well
for the purposes of section 3 which prohibits “Anti-competitive agreements”. The Act also
defines explicitly what would cause the “Abuse of dominant position” and by whom in section 4.
2.7 However, Article 102 TFEU prohibits “…abuse by one or more undertakings of a
dominant position”. This language raises the questions of when conduct by two or more entities
constitutes prohibited abusive conduct under Article 102 and how this interdiction relates to
Article 101, which is directed to collusive joint anti-competitive conduct. The Commission has
generally treated anti-competitive joint conduct by parties, including cartel activity, as a matter
to be addressed under Article 101. However, on occasions it has applied the notion of the
collective dominant position to be addressed by Article 102.15
2.8 And, therefore, dealing with the EU competition laws in this regard would be of great
help for our purposes, since, Indian competition law too has such provisions which might give
conflicting situations. Besides, since, nowhere else has this concept been used or defined, this
dissertation will be taking into consideration the concept of collective dominance as studied
under the EU regime.
15
Mark R. Joelson, An International Antitrust Primer, Kluwer Law International, 3rd Edition, Page 396-397
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3. TFEU and EUMR and Our Purpose
3.1 The EUMR does not explicitly mention that dominance held collectively by one or more
firms fit the concept of dominance as it is interpreted in the application of Article 102 TFEU.
3.2 Article 102 TFEU provides for the “Abuse of Dominant Position” which can be seen as the
EU Competition Laws counterpart of the Section 4 of the Indian Competition Act.
3.3 And, Article 2(3) EUMR is the provision which is used as assessing the situations of
“Collective dominance”. This Article reads as:
“A concentration which would significantly impede effective competition, in the common

market or in a substantial part of it, in particular as a result of the creation or strengthening
of a dominant position, shall be declared incompatible with the common market.”
3.4 In the EU regime, one cannot rely on the wording of any provision in the European Union
(EU) to prevent a merger for the reason that collective dominance might occur as a result of the
merger and that tacit coordination might be encouraged by such dominance. However, in a 1992 case
Commission had introduced that this would be the case. The view that EUMR applies to mergers
which results in collective dominance is affirmed by several judgments by the EU courts. The first
time that a merger was prohibited, given that it would create a collective dominance in the market,
was in 1996. 16
3.5 Since, again, Indian Competition Act has separate provisions in one Act for merger
regulations of the same nature and also for checking the Abuse of dominance, the purpose of this
dissertation would be to see how the proposed amendment can be put to use to check the “collective
dominance” even after having and utilizing the existing separate provisions unlike the ones provided
in the European regime.
16
Karolina Rydman, Supra n. 1, page 5
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4. Issues, Methodology and the Limitations
4.1 The main issues that would be handled in this dissertation relate to the significance of the
concept of “Collective Dominance” in relation to the Indian Competition Act, 2002.
4.2 To answer the questions that follow here, the legal dogmatic approach by systemizing
and interpreting legal rules, principles, judicial decisions and doctrines in relation to this concept
as have been applied in the EU regime and as apply to the Indian Competition laws, i.e. the
Competition Act, 2002, and as have been proposed in the amendment in the Competition Bill,
2012 and as have been applied elsewhere, has been followed.
4.3 Besides, economic literature has also been essential in finding the basic economic
theories in understanding the concept of “Collective Dominance”. In fact, economic literature is
always important to understand before one proceeds to analyze, discuss or understand any
Competition Law and Policy issue.
4.4 The questions that need to be understood for the purpose are:
(1) What is Collective Dominance?

Since, the concept is new to India the definition needs to be understood according to
the EU Competition Laws. Even in EU Laws this definition has been developed
through case laws. Hence, we need to study and understand the development of the
concept of “Collective Dominance”.
(2) How is collective dominance supposed to be interpreted?

To answer this, an investigation of the different parts that constitute “Collective
Dominance” needs to be done. This means that the concept of “Dominant position”
would first be needed to understand and how can it be applied in cases of collective
positions.
(3) How does the concept of collective dominance correlate to tacit coordination?
This can be answered in relation to the above question no. (2). Only after
understanding both the concepts separately a proper answer can be given to this
question.
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(4) What are the relevance and the need of the proposed amendment and the issue of
“Collective Dominance” in India?
This will be answered keeping in view the present provisions of the Indian
Competition Act and the amendment proposed in the Competition Bill, 2012 and also
keeping in view the economic factors that may be necessary to curb the anti-
competitive practices in the country.
(5) How is it dealt with in the other countries?

After having understood the India Competition Laws and the EU Competition Laws
and Policy it would be imperative to understand the Competition Laws and Policies
of various other countries like UK, US, Canada, China, etc. This would give an
insight as to how the Indian Competition laws are doing with respect to other nations.
4.5 This dissertation has tried to cover and understand the concept of “Collective
Dominance” in the context of EU Law. This has been the only limitation since the concept has
been developed in the European regime first and is new to the Indian domain.
4.6 The concept has not yet been applied, neither has been defined explicitly in the proposed
Competition Bill, 2012, but upon a true and fair interpretation of the words together we find the
concept has found its place in the Indian Competition Law regime.
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5. Economic Theory and Competition Law & Policy
5.1 “Competition”- Defined
5.1.1 The World Bank has given a broad definition of Competition as “a situation in a market
in which firms or sellers independently strive for the buyers’ patronage in order to achieve a
particular business objective for example, profits, sales or market share”.17
5.1.2 However, Competition is a word that is given many and different meanings. Stigler
(1957/1965, p. 237) finds five preconditions for competition in The Wealth of Nations:
1. The rivals must act independently, not collusively.

2. The number of rivals, potential as well as present, must be sufficient to eliminate
extraordinary gains.
3. The economic units must possess tolerable knowledge of the market opportunities.
4. There must be freedom (from social restraints) to act on this knowledge.
5. Sufficient time must elapse for resources to flow in the directions and quantities by
their owners.18
5.1.2 Harkening back to the classic organizing framework of industrial economics, the
structure-conduct-performance approach, competition has at times been conceived of in terms of:
 Structure: a market is competitive if there are a large number of equally efficient

active suppliers and/or if barriers to entry are low;
 Conduct: a market is competitive if suppliers behave in a rivalrous way;
 Performance: a market is competitive if equilibrium price is equal to marginal cost
(and/or equal to average cost).19
17
Link to this definition:
http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTINFORMATIONANDCOMMUNICATIONANDT
ECHNOLOGIES/0,,contentMDK:21035032~menuPK:282850~pagePK:210058~piPK:210062~theSitePK:282823~i
sCURL:Y,00.html#C
18
Manfred Neumann and Jürgen Weigand, The International Handbook on Competition, II Edition, 2013, page 5, 6
19
Ibid, page 45, 46
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5.2 Competition law and Policy
5.2.1 The Raghavan Committee Report20 had suggested that-
“2.1.1. Competition policy is defined as "those Government measures that

directly affect the behavior of enterprises and the structure of industry". The objective of
competition policy is to promote efficiency and maximize welfare. In this context the
appropriate definition of welfare is the sum of consumers' surplus and producers' surplus
and also includes any taxes collected by the Government. It is well known that in the
presence of competition, welfare maximization is synonymous with allocative
efficiency.”
5.2.2 This principle has ultimately been established in the preamble to the Competition Act,
2002, which reads as:
“An Act to provide, keeping in view of the economic development of the country,
for the establishment of a Commission to prevent practices having adverse effect on
competition, to promote and sustain competition in markets, to protect the interests of
consumers and to ensure freedom of trade carried on by other participants in markets, in
India, and for matters connected therewith or incidental thereto.”
5.2.3 Thus, the policies attached behind the Indian Competition Act, 2002, can be seen as:
- To prevent practices having adverse effect in competition;
- To promote and sustain competition in markets;
- To protect the interests of consumers;
- To ensure freedom of trade carried on by other participants in markets in India.
5.2.4 As has been seen in the preamble and as are the prevailing approaches behind the
competition law is that Competition laws should be created and used in the spirit of efficiency
and economic welfare along with protecting the interests of consumers.
5.2.5 The Raghavan Committee Report has also observed that “the ultimate raison d’être of
competition is the interest of the consumer. The consumer’s right to free and fair competition
cannot be denied by any other consideration.”21
20
Report of the High Level Committee on Competition Policy and Law, Government of India, 2000 (hereinafter
“Raghavan Committee Report”)
21
Ibid, paragraph 1.1.9
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5.3 Need of Economic Theory
5.3.1 Economic theory has a lot to say about firms’ diverse behavior in different markets.
Through economic theories one can observe the behaviors and understand the reasons why the
firms are acting in a certain way. In the case of predicting behavior on the market it can also be
of great importance to use economic theory.22
5.3.2 The behavior of firms within the market on which they operate is a subject which has
often been dealt with in economic theory. There is a sense in which imperfect competition can be
seen as part of the different strategies undertaken by firms to exclude a competitor from a
market.23
5.3.3 When used in the specific context of competition law, economics plays two main roles,
each of which is shaped by specific institutional and procedural factors. One is normative. In it,
economics supplies the content of legal norms. It provides the normative standards that are
applied to conduct in order to assess whether the conduct is deemed to violate law. In doing this,
it shapes the questions to be asked in competition law, supplying the concepts and categories that
are used in the process of assessing the lawfulness of conduct. Concepts and categories drawn
from economic science- such as, for example, ‘efficiency’- become operative standards of the
legal system. The other role is that of fact interpretation. Here, the role of economics is to specify
methods to be used in answering factual questions- questions about what has happened or what
the consequences of particular conduct are likely to be. Given that antitrust laws are designed to
prevent particular kinds of harm to the competition process, the issue is often ‘Did particular
kinds of conduct “cause” particular results?’ This may involve issues such as the assessment if
the market power of the enterprises involved, the characteristics of the markets in which they
operate and other purely factual issues. Economics can provide abstract models and testable
hypotheses for use in making these factual determinations, and it can supply methods for
analyzing them.24
5.3.4 In EU regime, Economic theory has come to aid to answer the questions where, why,
how and when a creation or strengthening of a collective dominance, followed by a merger, is
about to occur and when it can be assumed to be followed by tacit coordination. Economic
22
Karolina Rydman, Supra n. 1, page 9, paragraph 3.1
23
Ana Rosado Cubero, Barriers to Competition: The evolution of the debate, Number 3, 2010, page 20
24
Josef Drexl, Laurence Idot & Joel Moneger, Economis Theory and Competition Law, 2009, page 25
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theory shows that, by facilitating coordinated behavior in markets with an oligopolistic structure,
mergers may also lower welfare.25
5.3.5 The economic theory is, thus, a tool for analyzing:

- the behavior of firm(s) in the current markets;
- impact of the merger or combination on the post-merger market(s);
- the structure of the market;
- ability of the firm(s) to influence the rest of the market.
5.3.6 Before moving on to the concept of “Collective Dominance” it would be imperative to

understand the different types of market structures that may enable firms to hold a collective
dominant position. The different kinds of markets that are generally considered are:
- Perfect Market
- Monopoly
- Oligopolistic Market
5.3.7 For our purposes, we need to lay stress upon the Oligopolistic type of market more than
the other two. Oligopoly shows trait from both the perfect market structure and a monopolistic
market structure.
5.4 Perfect Market
5.4.1 In economic theory, perfect competition (sometimes called pure competition) describes
markets such that no participants are large enough to have the market power to set the price of a
homogeneous product.26
5.4.2 Perfect Market (or Perfect Competition or Pure Competition) is theoretically a free
market situation which is hardly a reality and more of a myth. The model of perfect competition
is the first economic model that most economists learn, but perversely it bears little relations to
reality.27 For such a market to exist, several conditions are required to be met:
1. The market price is considered as given by each player on the market;
25
Karolina Rydman, supra n.1, page 9-10, paragraph 3.1
26
http://en.wikipedia.org/wiki/Perfect_competition
27
Simon Bishop and Mike Walker, The Economics of EC Competition Law, Sweet & Maxwell, 3rd Edition, 2010,
page 22
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2. Buyers and sellers are too numerous and too small to have any degree of individual
control over prices;
3. The prices are determined on the basis of the market forces of supply and demand.
4. All buyers and sellers seek to maximize their welfare;
5. Buyers and sellers can freely enter or leave the market. This implies that there are no
costs, other than the normal costs, connected to the entrance on a market for a new
firm to produce or to leave the market if the earnings do not meet expectations;
6. All buyers and sellers have access to information regarding availability, prices and
quality of goods being traded;
7. All goods of a particular nature are homogeneous; hence, the products of all the firms
in a market are perfectly substitutable with one another.
5.4.2 Perfect Competition delivers both productive efficiency and allocative efficiency.
Productive efficiency occurs when a given set of products are being produced at the lowest
possible cost and if any firm that does not produce at the lowest possible cost will lose money
and exit the market. In perfect competition, economic profits for efficient firms are zero and so
inefficient firms must lose money. This leads to firms being productively efficient because the
pursuit of the maximum possible profits gives firms an incentive to reduce costs as far as
possible.28
5.4.3 Further, the eternal competition on the perfect market demands firms to innovate new
products to remain on the market. In this kind of market, the firms have very small incentives to
coordinate their behavior. This is because a firm in a perfect competitive market can produce to a
level that they chose without affecting the market price. Therefore, firms operating the same
market have no reason to consider other firms’ perspectives or behaviors but are able to focus on
the direction of their own work.29
5.4.3 A perfect market offers a variety of companies and products which provide multiple
choices for the consumers. In other words, it can be described as the exploitation of resources in
the most effective way of giving consumers the greatest benefit. 30 This can be called as
allocative efficiency feature of the perfect competition.
5.4.4 Now, what the Competition Laws across the countries try to achieve is a “Perfect
Market” situation. In Indian context too one can find in the Statement of Objects and Reasons
28
Simon Bishop and Mike Walker, supra n. 26, at page 25
29
30
Ibid, page 11
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and Preamble attached to the Competition Act, 2002, that the purpose is “…to prevent practices
having adverse effect on competition, to ensure and sustain competition in markets, to protect the
interests of consumers and to ensure freedom of trade carried on by other participants in
markets in India…”31
5.5 Monopoly
5.5.1 A monopoly is the total opposite of a perfect market. Markets with monopoly can show
different grades of monopoly, for example, there is monopolistic competition on markets when
there are more firms than one which are producing its own brand or version of a differentiated
product.32
5.5.2 For our purpose, it is enough to sketch the picture of the kind of monopoly called, the
pure monopolistic market. In such a market there is just one sole producer of the product i.e. the
monopolist is the market and can therefore totally control the output which is provided the
consumers. This situation gives the firm control over price and can set a price which does not
equal marginal cost but exceeds it. Thus, a monopolist can increase price by reducing the volume
of his own production. Through this behavior the consumers will be suspended from the
possibility to buy the goods and services that they would have liked to buy. The result of this is
that consumers will spend their money on things that does not really match their needs. Since,
the resources in this situation are not allocated in the most efficient way the economy can be
described as subject to a loss, also known as deadweight loss. Another problem with monopoly is
that the productive efficiency probably is lower than on other markets. This is because a
monopolist is not forced by competition to push the costs of production to the lowest level. In
other words, they do produce the right products, but they could have produced it more
efficiently. Furthermore, a monopolist is transferring wealth from the consumer to himself by
charging higher prices than he would do if the market was competitive.33
5.5.3 It is on these lines, various nations have various Merger Regulations which prohibit the
mergers which lead to a pure monopolistic market and will destroy all competition on the
market.
31
Preamble to the Competition Act, 2002
32
Karolina Rydman, supra n. 1, page 12, paragraph 3.3
33
Karolina Rydman, supra n. 1, page 12, paragraph 3.3
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5.5.4 Even in Indian Competition Act, Section 6 sub-section (1) provides that no person or
enterprise shall enter into a combination which causes or is likely to cause an appreciable
adverse effect on competition. And, sub-section (2) provides for the reporting of a proposed
merger or combination to the Competition Commission of India.
5.6 Oligopoly 34
5.6.1 In an oligopolistic market, there are only a few firms competing with each other. The
meaning of the expression oligopoly means “sale by few sellers”. However, it is not as simple to
direct the problem of oligopoly to the number of firms operating on the market. It is rather about
identifying dominance, or to be said in economic terms, market power. It is the market power of
the firms that will give them the possibility to cause effects that will impede the competition, for
example by raising prices. However, the firms operating on an oligopolistic market are often not
more than 3-5.
5.6.2 Perfect competition and monopoly are both situated as outliers on a scale of market
structures. The oligopolistic market lies in between those. There are barriers to entry to an
oligopolistic market but not as high as in monopolistic markets. Sometimes firms are active in
competing with each other in oligopolistic markets and the prices will be close to the level as in a
perfect market. In other cases, the firms in this kind of market will choose to coordinate and the
prices will be set above the competitive level to a price close to the level at a monopolistic
market.
5.7 Theory of Oligopolists’ Interdependence35
5.7.1 Since the leading firms in an oligopolistic market are few they know about each other and
are well aware of the impact that price setting and output have on the individual firms. In other
words, the firms are interdependent as their decisions depend upon how the other firms act.
According to this theory, the firms are often acting consciously through ‘parallel behavior’. This
is often seen in practice as similar prices of their products and that individual price adjustments
are followed by other players. The firms are acting in the same direction but without any explicit
coordination. The interest of each firm is to maximize their profit. Through independent
decisions, they are following the other's behavior to achieve this goal.
34
Ibid, page 12-13, paragraph 3.4 (as explained by her in her article)
35
Karolina Rydman, supra n. 1, paragraph 3.4.1 (as explained by her in her article)
- 19 -
5.7.2 This so called ‘parallel behavior’ is easier to arise when the quantity of the leading firms
on the market are less and when the products are homogeneous, the demand on the market is
falling, the market holds one dominant firm, competition which is not related to price are
unlikely and when the barriers to entry are high.
5.7.3 The situation of reciprocity between firms seems to be reserved to the oligopolistic
market. As explained above, it is not a situation of interdependence between the actors on the
perfect market since their output on the market does not affect the price i.e. they are price takers.
In a monopolistic market there is also no interdependence simply because of the lack of
competitors.
5.7.4 However, the theory of the oligopolistic interdependence has faced much criticism. It has
been accused of ignoring the complexity of the industrial market. The theory indicates that
interdependence between firms is strong when they are producing homogeneous products and
charging the same price. This situation is, according to the critics, not true since the conditions
on the markets are more complex which makes the conclusion of interdependence far from
reality. Proponents of this theory seem to be unable to explain why interdependence is not a fact
at every oligopolistic market. Another aspect of this theory that is criticized is that it does not
really explain how the decisions of the firms operating on the market, for example setting
constant parallel prices, can be made without cooperation.
5.8 Theory of Prisoners’ Dilemma36
5.8.1 This theory illustrates how rival firms could act to their disadvantage if they don’t get to
act to in collusion.
5.8.2 Two criminals, A and B, are arrested after committing a big bank robbery. However, the
evidence is not adequate to make the robbery charge stand unless one or both criminals confess.
Each suspect is interrogated in isolation so that there is lack of communication between the
suspects. Each has been asked to confess the crime. During the interrogation both the prisoners
have been told individually as follows:
(i) If both confess to each other’s crime, then each will go to jail for 10 years;
36
As explained by Dr. Deepashree in her book “Micro Economics-II” for University of Delhi, 2nd Edition, 2013 on
pages 4.14 – 4.16
- 20 -
(ii) If both do not confess to each other’s crime, then both will get 2 years sentence
each;
(iii) If A confesses that B has done the crime and B does not confess that A has done
the crime, then A gets the reduced sentence of 1 year and B gets 20 years
imprisonment.
5.8.3 Thus, each suspect has two strategies open to himself, to confess or not to confess and is
faced with the dilemma. The essence of the dilemma is that neither criminal knows whether his
accomplice will admit or deny the charge made against him. Each criminal must make his own
choice. Each prisoner faces uncertainty as to the loyalty of the other and prefers to adopt the
second strategy, i.e. to confess, so that both get a 10-year sentence. By confession, each prisoner
is attempting to make the ‘best’ of the ‘worst’ outcomes. But, this is a worse situation as
compared to the ‘no confession’ strategy in which both could get freedom. Thus, the decision to
‘confess’ or cheat, regardless of what the other does, ‘dominates’ the decision of neither cheating
nor confessing.
5.8.4 The Prisoner’s Dilemma model provides a good perspective on strategic behavior in an
oligopolistic market. The interdependence of the firms in an oligopoly is similar to the problem
faced by two individuals involved in a Prisoner’s Dilemma situation.
5.8.5 Considering a duopoly situation, each firm gets to decide the price to charge for its
product. Each firm is ignorant of the decision of the other firm. Depending on the price charged,
each will earn varying levels of profits. Relating to the Prisoner’s Dilemma situation, these firms
will face the following situation:
(i) If both firms charge a price of Rs. 10/-, each will earn a profit of Rs. 200/-;
(ii) If both firms raise their prices to Rs. 20/-, then each firm’s profits will increase to
Rs. 250/-;
(iii) If firm A raises its price to Rs. 20/- and firm B holds it constant at Rs. 10, then A
gets reduced profit of Rs. 100/- and B gets profit of Rs. 300/- and vice versa.
5.8.6 Thus, each firm has two strategies open to itself, to charge Rs. 10/- or Rs. 20/- per unit
and is face with dilemma. The actions are mutually interdependent.
5.8.7 If firm A increases the price and firm B does not, firm A loses and vice-versa. The
equilibrium strategy is a price of Rs. 10/-, but it is clear that if only they could communicate and
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reach an effective agreement to charge Rs. 15/-, they would earn higher profits. This type of
situation is known as “Prisoner’s Dilemma”.
5.8.8 A good deal of experiments have been done on the testing on Prisoner’s Dilemma
hypothesis in oligopoly theory by L. B. Lave37, J. L. Murphy38, Fouraker and J. W. Friedman39.
The evidences forthcoming from the above empirical studies conclude that:
(i) Joint profitability can be materially improved through collusion or cooperation;

and
(ii) The attitude of firms towards collusion would be colored by past experience of
price wars and the degree of uncertainty which they face.
5.9 Tacit Coordination and Prisoner’s Dilemma
5.9.1 Tacit Coordination, or Tacit collusion, literally means “understood or implied

coordination or action in agreement”. And, in economics means that firms behave in a parallel
way without corresponding with each other.
5.9.2 As can be seen from the Prisoner’s Dilemma model, firms in an oligopolistic market have
strong incentives to concert their behavior. This could be either through agreements, or concerted
practices, cartelization, or by tacit coordination.
5.9.3 There are conditions for tacit coordination to arise and be sustainable which can be
explained through these two following statements.40
1. The firms must have an incentive to avoid competing with each other
A basic incentive for the firms to coordinate their behavior is that the firms will
be better off in the case of not competing with each other than in a normal
competitive situation. The likelihood for tacit coordination increases when the
firms have common interests and when their strategic goals are unified enough.
37
L. B. Lave, An Empirical approach to the prisoner’s dilemma game”, Quarterly Journal of Economics, August
1962
38
J. L. Murphy, Quarterly Journal of Economics, May 1966
39
J. W. Friedman, An experimental study of co-operative duopoly, Econometrica, July-Oct, 1967
40
Karolina Rydman, Supra n. 1, pages 32, 33
- 22 -
2. Tacit coordination must be possible to achieve

The possibility of tacit coordination consists of several factors. One factor is that
the cost must be relatively low which means that the market should be fairly
stable. The likelihood of tacit coordination also decreases when consumers are
price sensitive, and when there are low barriers to market entry. For tacit
coordination to sustain it is also of great importance that deviations are easy for
other participating parties to detect and punish. If not so, tacit coordination will be
impossible to uphold. If a firm, participating in a tacit coordination will lower its
prices, the other firm will when detecting this, also lower their price and a price
war will emerge. Therefore, there will be no profits for the deviating firm. The
only outcome of this deviation is that the margins of the firms fall and that their
market shares are the same as before the deviation. This reasoning follows from
the theory of prisoners’ dilemma discussed above. The result in practice is that the
firms can sell their products at higher prices than at competitive prices. Thus, they
maximize their joint profit at the cost of the consumers.
5.10 Aim of the Competition Laws and Policy
5.10.1 Having understood the economic concepts of perfect market, monopolistic market,
oligopolistic market and the interdependence of firms in these markets especially by way of
coordination, either express coordination or tacit coordination, one can easily make out what
situation is the best situation for running a favorable economy. It becomes important for any
person, or nation for the matter, in order to run an economy in favor of its people and their
welfare that it avoids the situations of monopoly or coordinated oligopoly.
5.10.2 And, this is the reason why most of the competition law regimes have also concentrated
upon avoiding or regulating the coordinated oligopoly by way of “concerted actions”,
“cartelization”, or “Collective dominance” along with monopolistic situations.
- 23 -
6. Understanding Collective Dominance
6.1 What is Collective “Dominance”?
6.1.1 The basis of this dissertation and the most important question that has been discussed in
this dissertation is that of “Collective Dominance”.
But, before that it would be imperative to understand the two words, ‘collective’ and
‘dominance’, separately.
6.1.2 The term ‘Dominant Position’ was first defined by the European Court of Justice in the
United Brands case41 as:
“a position of economic strength enjoyed by an undertaking which enables it to prevent

effective competition being maintained in the relevant market by giving it the power to
behave to an appreciable extent independently of its competitors, customers and
ultimately of consumers”.
6.1.3 A firm which is considered to entitle dominance has a high degree of market power. In
EU regime, the main factor when a merger significantly impedes effective competition is when it
creates or strengthens a dominant position.42
6.1.3 The Raghavan Committee Report, which was the basis of the formation of the Indian
Competition Act, 2002, had recommended in paragraph no. 4.4.5 while dealing with
“Dominance”:
“The Committee recommends that "Dominance" and "Dominant Undertaking" may be

appropriately defined in the Competition Law in terms of "the position of strength
enjoyed by an undertaking which enables it to operate independently of competitive
pressure in the relevant market and also to appreciably affect the relevant market,
competitors and consumers by its actions”. The definition should also be in terms of
“substantial impact on the market including creating barriers to new entrants". This
definition may perhaps appear to be somewhat ambiguous and to be capable of different
interpretations by different judicial authorities. But then, this ambiguity has a justification
41
Case 27/76, United Brands Company and United Brands Continentaal BV v. Commission of the European
Communities, paragraph 65
42
- 24 -
having regard to the fact that even a firm with a low market share of just 20% with the
remaining 80% diffusedly held by a large number of competitors may be in a position to
abuse its dominance, while a firm with say 60% market share with the remaining 40%
held by a competitor may not be in a position to abuse its dominance because of the key
rivalry in the market. Specifying a threshold or an arithmetical figure for defining
dominance may either allow real offenders to escape (like in the first example above) or
result in unnecessary litigation (like in the second example above). Hence, in a dynamic
changing economic environment, a static arithmetical figure to define “dominance” will
be an aberration. With this suggested broad definition, the Authorities/Tribunals
concerned would have the freedom to fix errant undertakings and encourage competitive
market practices even if there is a large player around. Abuse of dominance is key for the
Competition Policy/Law.”
6.1.4 In paragraph 4.4.8, the Raghavan Committee Report also suggested that,
“To be considered dominant, a firm must be in a position of such economic

strength that it can behave, to an appreciable extent, independently of its
competitors and customers. Therefore, to assess dominance it is important to consider
the constraints that an enterprise faces on its ability to act independently. The current
market share is a necessary but insufficient pre-requisite for dominance. In spite of
having a large market share a firm may be constrained by the threat of competition from
potential entrants and by the purchasing power of its own customers. Entry barriers could
result from absolute advantages such as patents (legal) and access to certain inputs. These
could also result from strategic first-mover advantages. High sunk cost could make
markets incontestable. Exclusionary practices could increase the strategic advantages of
the first mover. Lastly, factors other than existing or potential competition need to be
considered. For example, strong purchasing power – if customers are powerful relative to
the enterprise – can also constrain the behaviour of the firm.”
6.1.5 On these lines, while “dominance” (“dominant position”) has been defined explicitly in
Explanation (a) attached to Section 4 of the Competition Act, 2002, the term “collective” shall
have to be understood in a more literal sense.
6.1.6 “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
- 25 -
(ii) Affect its competitors or consumers or the relevant market in its favor.43
6.1.7 So far, and at present, the concept of dominance provided for under Section 4 of the
Competition Act, 2002, embraces concept of single dominance, i.e. the situation of dominance
abused only by an enterprise or a group, i.e. single enterprise or a group of inter-related entities
(or group of entities under one control or management). Section 4 (1) presently reads as follows:
“No enterprise of group shall abuse its dominant position.”
6.1.8 And, explanation (c) attached to the section 4 has defined the term “group” to have the
same meaning as assigned to it in clause (b) of the Explanation to section 5 which is more in the
nature of controlling power or controlling stake in an enterprise. The definition of “Group” can
be read as under:
“Explanation- (b) "group" means two or more enterprises which, directly or indirectly,
are in a position to —
(i) exercise twenty-six per cent or more of the voting rights in the other
enterprise; or
(ii) appoint more than fifty per cent of the members of the board of directors
in the other enterprise; or
(iii) control the management or affairs of the other enterprise;
6.1.9 “Collective” literally, as given in Oxford Dictionary, means “adj. 1. Formed by or

constituting a collection; 2. Taken as a whole; 3. Common”. Therefore, Collective dominance
can be described as a position of two or more ‘independent entities’ that together hold a position
of joint dominance where they act or present themselves as one unit.
6.2 How is Collective Dominance supposed to be interpreted?
6.2.1 The concept of collective dominance, since new to the Indian Competition law and
policy, can be studied in reference to the developments in the EU Competition law and policy
regime in this regard.
43
Explanation (a) attached to Section 4 of the Competition Act, 2002
- 26 -
6.2.2 In EU regime also, the concept has developed through case laws and mainly by defining
“Collective Dominance” under Article 102 TFEU (previously Article 82, and, before that Article
86). However, “Collective Dominance” is interpreted in the same way in merger cases. 44
6.2.3 The Article 102 TFEU states that:

“Article 102
(ex Article 82 TEC)
Any abuse by one or more undertakings of a dominant position within the internal market or in a
substantial part of it shall be prohibited as incompatible with the internal market in so far as it
may affect trade between Member States.”
6.2.4 The previous Article 82 (and, Article 86 before that) was first aptly interpreted by the
Court in the leading Italian Flat Glass45 case in paragraphs 357 and 358 as:
“357. The Court notes that the very words of the first paragraph of Article 86 46 provide
that "one or more undertakings" may abuse a dominant position. It has consistently been
held, as indeed all the parties acknowledge, that the concept of agreement or concerted
practice between undertakings does not cover agreements or concerted practices among
undertakings belonging to the same group if the undertakings form an economic unit. It
follows that when Article 85 refers to agreements or concerted practices between
"undertakings", it is referring to relations between two or more economic entities which
are capable of competing with one another.
358. The Court considers that there is no legal or economic reason to suppose that the
term "undertaking" in Article 86 has a different meaning from the one given to it in the
context of Article 85. There is nothing, in principle, to prevent two or more independent
economic entities from being, on a specific market, united by such economic links that,
by virtue of that fact, together they hold a dominant position vis-à-vis the other operators
on the same market. This could be the case, for example, where two or more independent
undertakings jointly have, through agreements or licences, a technological lead affording
them the power to behave to an appreciable extent independently of their competitors,
their customers and ultimately of their consumers.”
44
45 Joined cases T-68/89, T-77/89 and T-78/89, Società Italiana Vetro SpA, Fabbrica Pisana SpA and PPG Vernante
Pennitalia SpA v Commission of the European Communities (hereinafter “Italian Flat Glass case”)
46
Now, Article 102 TFEU
- 27 -
6.2.5 In other words, it cannot be excluded that two or more independent firms in a specific
market have economic links that give them a collective dominant position relative to other firms
in the same market. The Court has then clarified the question as to how the economic links of
two or more inter-connected firms are supposed to be interpreted by giving an example of
agreements or licences which would give them a technological lead and constitute an
independent behavior towards their competitors.47
6.2.6 In Gencor case48, the Court had observed as follows:
“276. Furthermore, there is no reason whatsoever in legal or economic terms to

exclude from the notion of economic links the relationship of interdependence existing
between the parties to a tight oligopoly within which, in a market with the appropriate
characteristics, in particular in terms of market concentration, transparency and product
homogeneity, those parties are in a position to anticipate one another's behavior and are
therefore strongly encouraged to align their conduct in the market, in particular in such a
way as to maximize their joint profits by restricting production with a view to increasing
prices. In such a context, each trader is aware that highly competitive action on its part
designed to increase its market share (for example a price cut) would provoke identical
action by the others, so that it would derive no benefit from its initiative. All the traders
would thus be affected by the reduction in price levels.
277. That conclusion is all the more pertinent with regard to the control of
concentrations, whose objective is to prevent anti-competitive market structures from
arising or being strengthened. Those structures may result from the existence of
economic links in the strict sense argued by the applicant or from market structures of an
oligopolistic kind where each undertaking may become aware of common interests and,
in particular, cause prices to increase without having to enter into an agreement or resort
to a concerted practice.”
6.2.7 In another case of Compagnie maritime case49, it was observed by the Court as follows:
47
Karolina Rydman, Supra n. 1, pages 19, 20
48
Case T-102/96, Gencor Ltd v Commission of the European Communities (hereinafter “Gencor case”)
49
Joined Cases 395/96 P. and 396/96 P., Compagnie maritime belge transports SA (C-395/96 P), Compagnie
maritime belge SA (C-395/96 P) and Dafra-Lines A/S (C-396/96 P) v Commission of the European Communities,
paragraphs 35-36, 38, 41-45 (hereinafter “Compagnie Maritime case”)
- 28 -
“In terms of Article 86 of the Treaty (now Article 82 EC50), a dominant position
may be held by several undertakings. The concept of undertaking in the chapter 1 of the
Treaty devoted to the rules on competition presupposes the economic independence of
the entity concerned. It follows that the expression one or more undertakings in Article
86 of the Treaty implies that a dominant position may be held by two or more economic
entities legally independent of each other, provided that from an economic point of view
they present themselves or act together on a particular market as a collective entity. That
is how the expression collective dominant position should be understood.
In order to establish the existence of a collective entity, it is necessary to examine the

economic links or factors which give rise to a connection between the undertakings
concerned. In particular, it must be ascertained whether economic links exist between
those undertakings which enable them to act together independently of their competitors,
their customers and consumers. The mere fact that two or more undertakings are linked
by an agreement, a decision of associations of undertakings or a concerted practice within
the meaning of Article 85(1) of the Treaty (now Article 81(1) EC51) does not, of itself,
constitute a sufficient basis for such a finding. On the other hand, an agreement, decision
or concerted practice (whether or not covered by an exemption under Article 85(3) of the
Treaty) may undoubtedly, where it is implemented, result in the undertakings concerned
being so linked as to their conduct on a particular market that they present themselves on
that market as a collective entity vis-à-vis their competitors, their trading partners and
consumers.
The existence of a collective dominant position may therefore flow from the nature and
terms of an agreement, from the way in which it is implemented and, consequently, from
the links or factors which give rise to a connection between undertakings which result
from it. Nevertheless, the existence of an agreement or of other links in law is not
indispensable to a finding of a collective dominant position; such a finding may be based
on other connecting factors and would depend on an economic assessment and, in
particular, on an assessment of the structure of the market in question.
Furthermore, a finding that two or more undertakings hold a collective dominant position
must, in principle, proceed upon an economic assessment of the position on the relevant
market of the undertakings concerned, prior to any examination of the question whether
those undertakings have abused their position on the market.”
50
51
- 29 -
6.2.8 The conclusions that can be drawn from the above paragraphs can be seen as follows:
- Dominant position may be held by two or more economic entities; what is important
is legal independence; however, from an economic point of view they present
themselves or act together on a particular market as a collective entity.
- It is necessary to examine the economic links or factors which give rise to a
connection between the undertakings concerned.
- Mere fact of linkage by way of an agreement or a concerted practice within the
meaning of Article 101 TFEU does not constitute a sufficient basis for upholding
“Collective Dominance”. However, such agreements or practices may result in the
undertakings so linked that they present themselves as a collective entity.
- Another factor relevant for assessing a “Collective Dominance” is the economic
assessment of the “relevant market”.
6.3 How does the concept of Collective Dominance correlate to Tacit

Coordination?
6.3.1 Economic theories have had a great impact on the development of collective dominance.
Economic theories provide tools to use when assessing whether firms on a market are likely to
coordinate their behaviour and give rise to collective dominance. A comparison of the economic
characteristics of an oligopolistic market respective a perfect market and a monopoly provide
insight into the conditions for collective dominance to occur.
6.3.2 The economic arguments for collective dominance to be assessed from a more economic,
i.e. effects based, point of view were adhered to in the case Airtours v. Commission52 in the year
2002. Thus, the assessment of collective dominance has focused in finding tacit coordination
rather than finding market characteristics that facilitate collective dominance.53
6.3.3 In Airtours case, the Court had laid down certain conditions for “Collective Dominance”
to exist. One among those conditions was that “the situation of tacit coordination must be
sustainable over time”.
52
Case T-342/99, Airtours plc v Commission of the European Communities (“Aitrours case”)
53
- 30 -
6.3.4 The Court in Airtours case, while referring to Gencor case, had observed:
“A collective dominant position significantly impeding effective competition in

the common market or a substantial part of it may thus arise as the result of a
concentration where, in view of the actual characteristics of the relevant market and of
the alteration in its structure that the transaction would entail, the latter would make each
member of the dominant oligopoly, as it becomes aware of common interests, consider it
possible, economically rational, and hence preferable, to adopt on a lasting basis a
common policy on the market with the aim of selling at above competitive prices,
without having to enter into an agreement or resort to a concerted practice within the
meaning of Article 81 EC (see, to that effect, Gencor v Commission, paragraph 277) and
without any actual or potential competitors, let alone customers or consumers, being able
to react effectively.”54
6.3.5 In this paragraph, the Court has stated the ways in which “Collective Dominance” by way
of “Tacit Coordination” may be achieved-
- As a result of a concentration;
- Coming together in common interests;
- Adopting an economically rational and lasting policy on the market with the aim of
selling at above competitive prices, without entering into an agreement or a concerted
practice within the meaning of Article 81 EC (Now, 101 TFEU)
6.3.6 The Court, then, in the next paragraph in Airtours case went on to lay down three
conditions necessary for finding “Collective Dominance”.55 The three conditions can be seen as
follows:
(i) Each member of the dominant oligopoly must have the ability to know how the
other members are behaving in order to monitor whether or not they are adopting
the common policy.
It is not enough for each member of the dominant oligopoly to be aware that
interdependent market conduct is profitable for all of them but each member must
also have a means of knowing whether the other operators are adopting the same
strategy and whether they are maintaining it. There must, therefore, be sufficient
market transparency for all members of the dominant oligopoly to be aware,
54
Airtours case, Supra n. 52, paragraph 61
55
Ibid, paragraph 62
- 31 -
sufficiently precisely and quickly, of the way in which the other members' market
conduct is evolving;
(ii) The situation of tacit coordination must be sustainable over time, that is to say,
there must be an incentive not to depart from the common policy on the market.
As the Commission observes, it is only if all the members of the dominant
oligopoly maintain the parallel conduct that all can benefit. The notion of
retaliation in respect of conduct deviating from the common policy is thus
inherent in this condition. In this instance, the parties concur that, for a situation
of collective dominance to be viable, there must be adequate deterrents to ensure
that there is a long-term incentive in not departing from the common policy,
which means that each member of the dominant oligopoly must be aware that
highly competitive action on its part designed to increase its market share would
provoke identical action by the others, so that it would derive no benefit from its
initiative;
(iii) To prove the existence of a collective dominant position to the requisite legal
standard, the Commission must also establish that the foreseeable reaction of
current and future competitors, as well as of consumers, would not jeopardise the
results expected from the common policy.
6.3.7 From these conditions, the Court has tried to define the concept of “Collective
Dominance” on effects based approach applied to the concept of “Tacit Coordination” that may
be involved among the firms.
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7. Significance in India
Besides understanding the concept of “Collective Dominance”, the major purpose of this
dissertation is to understand the relevance and significance of this concept in Indian perspective
and to understand the need of the proposed amendment to be brought in present Section 4 by the
Competition Bill, 2012.
7.1 Amendment proposed to amend Section 4
7.1.1 An amendment has been proposed to the present Section 4 of the Act. If the amendment
is brought in then, upon a proper interpretation, the concept of “Collective Dominance” shall be
put into force. So far only individual entities or entities coming under a group were not allowed
to abuse their dominant position, but with the coming into effect of the proposed amendment,
even unrelated entities would be brought in and made liable under the amended Section 4 once it
is established that they have been enjoying their dominant position “either jointly or singly”.
7.1.2 The amended Section 4 has further added the words “either jointly or singly” after the
words “enterprise or group” appearing in the existing Section 4.56 Thus, the Section 4 will now,
thus, be read as follows:
“No enterprise or group, either jointly or singly, shall abuse its dominant position.”
7.2 Why need it when we have provisions to control “Concerted Practices”,

“Cartelization”, and “Tacit Coordination” along with the regulation of
Mergers?
7.2.1 This was the first question that was put before when I started the discussion on this
concept with one of the senior professionals in the Indian competition law regime that when we
already have the provisions for controlling and even prohibiting “concerted practices”,
“Cartelization”, “tacit coordination” (Section 3) and “Mergers or Combinations” (Section 5) then
do we really require the proposed amendment that would bring in the concept of “Collective
Dominance”. The questions were raised that when the purpose of the concept of “Collective
56
Supra n. 9
- 33 -
Dominance” is to curb the ill practices that may crop in an oligopolistic market which is already
being done by the provisions of Section 3 and Section 5 and to some extent Section 4, then the
existing competition law requires no further amendments.
7.2.2 However, in my further submissions it will be shown why do we need the proposed
amendment and how will this concept of “Collective Dominance” be explicit in use in India by
separately analyzing Sections 3, 4, 5 and 6.
7.2.3 For the starters, Section 3 deals specifically with agreements whether be it explicitly
entered into or implied by the actions or by formation of any association or cartel. And, in a way
are best tried to be prohibited at the initial stages. Similarly, Sections 5 and 6 deal with the
control of Mergers or Combinations at their initial stages only i.e. when they are proposed to be
entered into such a Combination. Section 4 deals with the “Abuse of the Dominant Position”.
Section 4 is in a way applied to control the established enterprises when they begin to dominate
their position.
7.3 Analyzing Section 3
7.3.1 Section 3(1) in clear terms prohibits any person or enterprise or association of persons
from entering into any agreement which is causes or is likely to cause an appreciable adverse
effect on competition within India. This means that the section tries to prevent firms from
entering into agreements at the very stage of entering into the agreement. Not only that, certain
agreements as provided in the definition of “agreement” in Section 2(b), which cannot be
detected, like implied agreements, have also been tried to be prohibited.
7.3.2 Sub-Section (2) expressly provides for the illegality of any and every agreement into in
contravention of sub-section (1). The only requirement is that such agreements cause an
appreciable adverse effect on competition. What would constitute an “appreciable adverse effect
on competition” has been provided in sub-sections (3) and (4) on the horizontal scales of an
industry and on the vertical scales of an industry respectively.
7.3.3 Sub-section (3) provides for the presumption of existence of “appreciable adverse effect
on competition” in cases of any agreement entered into, or practice carried on, or decisions taken
- 34 -
by, any enterprises or association of enterprises or persons, including cartels 57 , engaged in

identical or similar trade of goods or provision of services, which-
(a) Determine prices;
(b) Puts limitations or controls on production, supply, technical developments;
(c) Share market or sources of production;
(d) Result in bid rigging or collusive bidding.
7.3.4 However, proviso to sub-section (3) has provided exclusion to the Joint-Venture
agreements if such agreement increases efficiency in production, supply, distribution, storage,
acquisition, or control of goods or provision of services.
7.3.5 Sub-section (4) has similarly provided for the presumption of existence of “appreciable
adverse effect on competition” in cases of agreements amongst enterprises or persons at different
stages or levels of the production chain in different markets, in respect of production, supply,
distribution, storage, sale or price or, or trade in goods or provision of services, including-
(a) Tie-in arrangements;
(b) Exclusive supply agreements;
(c) Exclusive distribution agreement;
(d) Refusal to deal conditions;
(e) Resale price maintenance conditions
7.3.6 And, sub-section (5) excludes agreements entered into for the purposes of preservation of
intellectual property rights.
7.3.7 Now, it can be seen that Section 3 has already tried to achieve much by restricting or
controlling practices which generally have been correlated to the concept of “Collective
Dominance” such as express collusive agreements, tacit collusions or coordination, concerted
practices or cartelization, however with an exclusion of JV agreements.
7.3.8 In fact, Section 3 has provided what is absent in the Article 101 TFEU i.e. Tacit
coordination. Tacit Coordination in EU regime is not considered illegal when entered into unless
it is covered under Article 102 TFEU or considered when dealing with ECMR.
57
Cartel has been defined in Section 2(c) and includes an association of producers, sellers, distributors, traders or
service providers who, by agreement amongst themselves, limit control or attempt to control the production,
distribution, sale or price of, or, trade in goods or provision of services
- 35 -
7.3.9 The question as to the necessity of bringing in the amendment, then, seems very much
reasonable since it would be doing nothing more than what has already been provided but bring
confusion among the practitioners.
7.4 Analyzing Sections 5 & 6
7.4.1 Section 5 provides the definition of Combinations in the nature of Mergers,

Amalgamations or Acquisitions and Section 6 provides for regulation and even prohibition of
such Combinations. They are the Merger Control Regulations of Indian Competition law.
7.4.2 Section 5 has defined “Combination” as the acquisition, in the nature of share purchase or
of control, of one or more enterprises by one or more persons (or a group) or Merger or
amalgamation of enterprises on the bases of post-merger or post-acquisition assets value or
Turnover.
7.4.3 “Control” has been specifically defined under the Explanation (a) attached to Section 5 to
include controlling the affairs or management by-
(i) One or more enterprises, either jointly or singly, over another enterprise or group;
(ii) One or more groups, either jointly or singly, over another group or enterprise.
7.4.4 And, “group” has been defined in the explanation (b) as to mean two or more enterprises
which, directly or indirectly, are in a position to-
(i) Exercise 26% or more of the voting rights in the other enterprise; or
(ii) Appoint more than 50% of the members of the board of directors in the other
enterprise; or
(iii) Control the management of affairs of the other enterprise.
7.4.5 Section 6 prescribes regulations in terms of procedures to be followed when entering into
or forming any “Combination”. Sub-section (1), however, prohibits altogether from entering into
or forming a “Combination” if it causes or is likely to cause an appreciable adverse effect on
competition within relevant market in India and, if entered, it will be void.
7.4.6 Now, in all of the Section 5 sub-section (b) is worth noting as it is different from an
acquisition in the nature of shares and from a Merger or Amalgamation, all the more so because
of the inclusion of the specific words, such as “control”.
- 36 -
7.4.7 Sub-section (b) of Section 5 reads as follows:
“(b) acquiring of control by a person over an enterprise when such person has
already direct or indirect control over another enterprise engaged in production,
distribution or trading of a similar or identical or substitutable goods or provision of a
similar or identical or substitutable service, if-”
7.4.8 Upon a proper reading one can see the following elements of this sub-section:
- Acquisition of “Control”; Control has already been defined;
- By a person over an enterprise;
- Such person already has direct or indirect control over another enterprise;
- That other enterprise is engaged in the business of similar or identical or substitutable
goods or provision of services.
7.4.9 In this respect, D. P. Mittal58 has very aptly written as follows:
“Para 5.9-3 Control- Person having control over another enterprise engaged in
production etc. of similar or substitutable goods-
A person acquiring control of an enterprise has been defined in section 5(b) of the
Competition Act as the one who has already direct or indirect control over another
enterprise engaged in production, distribution or trading of a similar or identical or
substitutable goods or provision of a similar or identical substitutable services. The
definition provides structural link between the two enterprises over which the said person
exercises control. In that case, the person has the ability to adopt a common policy on the
market and to act independently of the competitors of the enterprises, customers and
consumers. This would mean “Collective Dominance” of two or more enterprises or
uncompetitive oligopolies. The two independent enterprises are united by economic links
and by virtue of that fact may hold a dominant position vis-à-vis other operators in the
same market.”
7.4.10 Thus, analyzing this section and with emphasis on sub-section (b) it can be seen that what
has been tried to control and restrict is the “Collective Dominance” by independent enterprises
which are united by economic links in the business of similar or identical or substitutable goods
or provision of a similar or identical substitutable services but later form a “Combination”.
58
D. P. Mittal, Competition Law & Practice, Taxmann Publications, 3 rd Edition, 2011 at Page 352-353
- 37 -
7.5 Analyzing Section 4
7.5.1 Section 4, at present, provides that “no enterprise or group shall abuse its dominant
position”. The provision prohibits the use of market controlling position to prevent the individual
enterprise or a group or a collection of unrelated firm in an industry from driving out competing
businesses from the market as well as from dictating prices. The concept of abuse of Dominant
Position of market power refers to anti-competitive business practices in which the dominant
firm(s) may engage in order to maintain or increase its/their position in the market.59
7.5.2 The provision first supposes that the enterprise(s) or the group(s) enjoy a dominant
position in the market, and then prohibits that enterprise(s) or group(s) from abusing it. Thus,
“Dominant Position” and “Abuse of Dominant Position” are the two requirements. And,
dominance itself is not prohibited. What is prohibited is its “abuse”.60
7.5.3 The definition of “dominant position” has already been discussed. And, “abuse of
dominant position” has been explained in sub-section (2) of Section 4 as follows:
“There shall be an abuse of dominant position under sub-section (1), if an enterprise or a

group-
(a) directly or indirectly, imposes unfair or discriminatory—
(i) condition in purchase or sale of goods or service; or
(ii) price in purchase or sale (including predatory price) of goods or service.
Explanation.— For the purposes of this clause, the unfair or
discriminatory condition in purchase or sale of goods or service referred to in sub-
clause (i) and unfair or discriminatory price in purchase or sale of goods
(including predatory price) or service referred to in sub-clause (ii) shall not
include such discriminatory condition or price which may be adopted to meet the
competition; or
(b) limits or restricts—

(i) production of goods or provision of services or market therefor; or
(ii) technical or scientific development relating to goods or services to the
prejudice of consumers; or
59
D. P. Mittal, supra note 58, at Page 281
60
Ibid at Page 283
- 38 -
(c) indulges in practice or practices resulting in denial of market access in any

manner; or
(d) makes 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; or
(e) uses its dominant position in one relevant market to enter into, or protect, other
relevant market.
7.5.4 The conditions mentioned in this sub-section (2) are very much similar to the conditions
present in sub-section (3) of Section 3, excepting the conditions in clauses (d) and (e) of sub-
section (2) of Section 4.
7.6 Comparing Sections 3, 4 and 5
7.6.1 Having analyzed these sections we can see that Sections 3 and 5 have very well handled
the issue of “Collective Dominance” as understood in terms of the conditions as have been
discussed in the leading case laws of the EU regime and discussed above, i.e.
- Section 3 covers prohibition of “collusive agreements”, “tacit coordination”,

“concerted practices”, and “cartelization”. But, again, “concerted practices” and
“cartelization” have been considered only in the cases of business in identical or
similar trade of goods or provision of services. These have not been considered in the
cases of vertical markets. Also, section 3(4) which has provisions for controlling
agreements in respect of vertical arrangements has limited the scope to those 5 kinds
of arrangements.
- Sections 5 and 6 cover the Combinations which have or are likely to have appreciable
adverse effect on competition. But, like sub-section 5(b), which deals specifically
with the acquisition on the horizontal level of a market, there is nothing in this section
which specifically deals with the acquisition in vertical market.
- 39 -
7.6.2 However, what has not been able to achieve is “Collective Dominance” in respect of
- Vertical arrangements in view of Section 3(4)

Excepting those 5 kinds of arrangements the section does not seek to regulate any
other situation that may arise, such as concerted practices among the firms on the
vertical scales.
For example, there are three firms, A, B and C. A and C are already holding a
dominant position in their respective sectors in production chain. And, B is doing
good in its sector. Enterprise ‘A’ decides to sell bread and buys bread from a firm ‘B’
which buys its raw material from firm ‘C’. A and C by using their dominant positions
are able to make an impact over B and convince B to enter into an informal
agreement that they (A and C) will fix (increase or decrease) prices of their as well as
B’s products in consultation with each other every month irrespective of whether
there are any market fluctuations. However, there is no agreement as given under
Section 3(4) so as to make it void under Section 3(2). This is a simple agreement to
sell at fixed prices for every other player except that they are fixed by the dominant
firms in vertical chain in collusion with each other (and by abusing their dominance
over one other firm), which has not been included under Section 3.
- Vertical Mergers or Combinations in view of Section 5.

For the purposes of this section the Raghavan Committee Report has a better
explanation as to why a specific mention of acquisition of control on vertical scales
was not made. The Raghavan Committee Report had questioned the need of
controlling arrangements or combinations on vertical scales. The relevant extracts
from the Report are as follows:
“4.6.7 Vertical Mergers

Competition Law must not normally have any objections to vertical. Vertical mergers
are measures for improving production and, distribution efficiencies. The process
internalizes the benefits of supply chain management and, as such cannot be
perceived as injuries to competition. Vertical mergers can be treated, as a process by
which there is a transmission of a good or a service across departments such that the
commodity can be sold in the market without much adaptation. This implies that
firms choose to bypass market transaction in favor of internal control.
4.6.8 For the purposes of competition law, integration ought to imply only that
administrative direction rather than a market transaction forms the basis of the
- 40 -
cooperation between two or more individuals engaged in productive or distributive

activity. The firm chooses, on the basis of relative costs, whether to perform the
activity by itself, subcontract it to others, or to sell a finished or semi finished product
to other firms who in turn sell it to the market with or without further processing, as
the case may be. The law should understand that the definition of a firm should imply
that the entity constitutes the area of operations within which administration rather
than market process coordinates work.
4.6.9 The prevailing wisdom has obfuscated the distinction between a market
transaction with administrative direction, and replaced the latter with the former. It
would be naive for the law to suppose that vertical mergers create less efficiency
rather than internal growth. The only difference is a question of historicity. Vertical
growth is usually the result of efficiencies that have been present within the firm in
the past. Vertical mergers on the other hand, are the result of as yet unrealized
efficiencies, which the firm attempts to attain through structural change.”
7.6.3 Seemingly fair enough the concept has not been included. But, it is this very situation for
which the amendment as proposed could be put to good use.
7.7 Understanding post-amendment Section 4 w.r.t. Vertical arrangements
7.7.1 It has already been discussed that the present Section 4 only condemns the “abuse” of a
“dominant position” by an enterprise or group. But, after the amendment any abuse of a
dominant position by an enterprise or a group, either on its own or in collusion with any other
unrelated enterprise or group will also be taken into consideration.
7.7.2 Arrangements or Combinations between firms or enterprises in vertical segments which

could have “appreciable adverse effect on competition”, but were not taken into consideration by
the present sections, can now be covered into this amended section as the sub-section (2) of
Section 4 will remain intact.
7.7.3 Raghavan Committee Report had pointed out certain objections that may be linked to
the vertical integration:
“4.7.0 There could, however, be some specific objections to vertical integration, for
example:
- 41 -
 Fear of Foreclosure
It is supposed that, through vertical integration, a firm can create captive
distribution channels. This will foreclose the rival firms from the market,
represented by the captive distribution network. This may be a problem, if it
threatens competition in general.
 Entry Blocking
Monopolies can have the ability to prevent the entry of firms into the market.
Sometime it is claimed that even competitors can come together to prevent a
potential entrant. This is sometimes referred to as collective foreclosure. If through
integration, firms are able to internalize different levels of production, artificial
barriers to entry could be created. This implies that because of the size of the
incumbent, a potential entrant’s capital requirements will be high.
 Price Squeezes
Vertical mergers and integration internalize the process of production and enable a
firm to perhaps reduce costs. This will result in reduction in output prices, which is
usually interpreted as a price squeeze. The law should question only those
monopolies resulting from vertical mergers (integration) that lead to output
restriction rather than preventing vertical integration.”
7.7.4 If the amendment in section 4 is approved then any “dominant” firm would be guilty of
“abusing its dominance”, if it jointly with its raw material supplier or anyone in the vertical chain
does any of the things as given in sub-section (2), and would, thus, address the above mentioned
objections as follows:
- Fear of Foreclosure:
Clauses (b): limiting or restricting (i) production of goods or provision of services or
market therefor, or (ii) technical or scientific development relating to goods or
services to the prejudice of consumers.
- Entry Blocking:
Clause (c): indulges in practice or practices resulting in denial of market access.
- 42 -
- Price squeezes:
Clause (a): directly or indirectly, imposes unfair or discriminatory (i) conditions in
purchase or sale of goods or services, or (ii) price in purchase or sale of goods or
services.
7.7.5 Besides addressing the above objections the Sub-section (2) also includes in its domain:
(i) Any making or conclusion of contracts subject to acceptance by other parties of
supplementary obligations which have no connection with the subject of such
contracts;
(ii) Using its (or their) dominant position(s) in one relevant market to enter into, or
protect other relevant market.
- 43 -
8. Conclusion
8.1 In conclusion, with the coming into effect of the proposed amendment to Section 4 of the
Competition Act, 2002, the concept of “Collective Dominance” can be put to effect and can be
curbed with the help of an express and more direct provision in the Act.
8.2 As regards the questions that may be raised by the Competition Law practitioners as to
the necessity of this amendment when we already have Section 3 and Section 5, the amended
Section 4 will be an express answer to deal more specifically with the abuses of “Collective
Dominance” than going through the Sections 3 and 5.
8.3 Besides, “Collective Dominance” should and need also to be understood in the manner as
have been held by the European Courts in the leading cases of Italian Flat Glass case, Gencor
case, Compagnie Maritime Belge v. Commission, and the Airtours case, relevant part of which
have already been discussed in section 6.2 of this dissertation. This is so because the Article 102
TFEU (previously Article 82, and before that Article 86), which was finely discussed by the
courts in the above mentioned cases, contains the words “Any abuse by one or more
undertakings of a dominant position” which are similar in nature with the words “No enterprise
or group shall, jointly or singly, abuse its dominant position.”
8.4 In cases of conflict as to in which section, whether Section 3 or 4, would a case be dealt
with, which can be interpreted both ways, i.e. a cartel like behavior or a collective dominance
behavior, the legal position in EU case law of Hoffman La Roche61 is worth mentioning here.
The Court of Justice had confirmed in this case that when the conditions of both Article 101 and
Article 102 are met so that both provisions have been infringed, the Commission may bring
proceedings under either Article. The commission has generally treated anti-competitive joint
conduct by parties, including cartel activity, as a matter to be addressed under Article 101. On
occasion, however, it has applied the notion of collective dominant position to be addressed by
Article 102. 62
8.4 Therefore, in Indian context too the conflict can be resolved by reading both the
provision is the same way. By harmonizing both the provisions the situation could be made clear.
Further, the penal provisions are also same for the cases falling under Sections 3 and 4 which are
contained in Section 27, excepting the provisions for division of enterprise(s) enjoying dominant
61
Case no. 85/76, Hoffmann-La Roche & Co. AG v Commission of the European Communities
62
Mark R. Joelson, supra n. 15, Page 396-397
- 44 -
position contained in Section 28. Hence, whether a particular the case which has both types of
situations of cartelization and of collective dominance, the case can be taken up by the
Commission under either of the Section 3 for cartelization or Section 4 for “Collective
Dominance”.
8.5 Even if still the practitioners believe that this amendment need not be brought merely
because this concept of “Collective Dominance” is more applicable in the oligopolistic markets
and on the horizontal level of an industry, then, as I have discussed in section 7.7, one needs to
understand that the amendment has proposed to put in the words “jointly or singly” in the middle
of the Section 4(1) in place of “Collective Dominance” which, in simple literal sense, would
mean a firm together with any other firm (whether related or unrelated and whether on the
horizontal level or the vertical level of an industry) “abuses its dominant position”.
8.6 And, hence, it is only in the benefit of the Country’s Competition law regime that the
amendment be brought in keeping in view of the policy laid down in the Preamble to the
Competition Act, 2002.
- 45 -
9. Position in other Competition Law Regimes
9.1 United States of America
9.1.1 The United States anti-trust law has not developed the principle of “joint” or “collective
dominance” as has been fashioned under the EU competition law regime.63
9.1.2 The US Anti-Trust law is basically contained in the Sherman Act in Sections 1 and 2.
Section 1 regulates joint conduct, but this is more in the nature of “restraint of trade”. It declares
every contract, combination, or conspiracy in restraint of trade to be illegal.64 And, Section 2
provides for the unlawful monopolization. Section 2 does not forbid the status of being a
monopoly, but the act or attempted act of monopolization. Therefore, it is not illegal in and of
itself for a company to have achieved great dominance in its industry or for effective competition
to be lacking in the industry and marketplace. Unlawful monopolization under Section 2 involves
the attainment of monopoly power by unfair means or the use of that power unfairly to maintain
the monopoly and exclude effective competition.65
9.1.3 Section 2 can be read as follows:
“Section 2. Monopolizing trade a felony; penalty

“Every person who shall monopolize, or attempt to monopolize, or combine or conspire
with any other person or persons, to monopolize any part of the trade or commerce
among the several States, or with foreign nations, shall be deemed guilty of a felony…”66
9.1.4 In a 1911 Supreme Court decision in US v. American Tobacco Co. 67, various American
firms and two English corporations engaged in the tobacco trade were charged with
monopolization under Section 2, as well as with a conspiracy in restraint of trade under Section
1. There was involved a division of markets restricting, among other things, sales into and from
the US. The Court held that the defendants had monopolized interstate and foreign commerce,
finding that they had obtained “dominion and control over the tobacco trade”. The factual record
was sufficient to “justify the inference that the intention existed to use the power of the
63
Mark R. Joelson, supra n. 15, page 161
64
Ibid, page 13
65
Ibid, page 17-18
66
Taken from: http://www.stolaf.edu/people/becker/antitrust/statutes/sherman.html
67
United States v. American Tobacco Co., 221 U.S. 106 (1911)
- 46 -
combination as a vantage ground to further monopolize the trade in tobacco… either by driving
competitors out of business or compelling them to become parties to the combination…”68
9.1.5 Much later, in a 1946 case involving American Tobacco 69 , in which the primary
American cigarette manufacturers were found to have fixed prices and excluded competition in
the purchase of tobacco, the Court described Section 2 as making it a crime for parties:
“…to combine or conspire to acquire or maintain the power to exclude competitors from
any part of the trade or commerce among the several states or with foreign nations,
provided they also have such power that they are able, as a group, to exclude actual or
potential competition from the field and provided that they have the intent and purpose to
exercise that power.”
9.1.6 The 1949 General Electric incandescent lamp case likewise contained counts under both
Sections 1 and 2 in an international market-sharing setting. General Electric was found, by
reason of its dominant position in the industry, its restrictive agreements with other firms, its use
of foreign subsidiaries to eliminate foreign competition, and other activities to have monopolized
the US incandescent lamp industry in violation of Section 2. Philips, a Dutch firm, was found to
have also violated Section 2, by aiding General Electric to maintain latter’s monopoly. 70
9.2 Canada
9.2.1 The provisions as to “abuse of dominant position” are contained under Sections 78 and
79 of the Competition Act71. Section 78 contains a non-exhaustive list of the “anti-competitive
acts”, the practice of which may constitute abuse of a dominant position under Section 79.
9.2.2 Section 79 (1) provides that72:
“79. (1) Where, on application by the Commissioner, the Tribunal finds that
(a) One or more persons substantially or completely control, throughout Canada
or any area thereof, a class or species of business,
68
Mark R. Joelson, Supra n. 15, Page 161
69
American Tobacco Co. v. United States, 328 U.S. 781 (1946)
70
71 The Canadian Competition Act, (R.S.C., 1985, c. C-34)
72
Taken from: http://www.laws.justice.gc.ca/eng/acts/C-34/page-50.html#h-34
- 47 -
(b) That person or those persons have engaged in or are engaging in a practice of
anti-competitive acts,
(c) The practice has had, is having or is likely to have the effect of preventing or
lessening competition substantially in a market, the Tribunal may make an
order prohibiting all or any of those persons from engaging in that practice.”
9.2.3 Section 78 and 79 apply only if the Tribunal finds that the party (or parties) engaging in
the anti-competitive acts has a dominant position, i.e. in the language of Section 79(1)(a), “one
or more persons substantially or completely control a class or species of business”.73
9.2.4 The Competition Bureau has issued Enforcement Guidelines on the Abuse of Dominant
Provisions of the Competition Act (“Dominance Guidelines”). These Guidelines point out that
the reference to “one or more persons” in Section 79 “clearly contemplates cases where a group
of the unaffiliated firms may possess market power even if no single member of the group is
dominant by itself.”74
9.2.5 In assessing cases of alleged joint dominance the Bureau will consider, among other
factors, the collective market share of the group of firms, whether the firms engage in
coordinated anti-competitive behavior, the existence of entry barriers, and whether customers
can exercise countervailing market power to offset the attempted abuse. However, there is no
significant case law on the question of what type and extent of economic connection between
otherwise independent firms is need to establish collective dominance.75
9.3 UK
9.3.1 The provisions relating to abuse of dominant position in the context of UK competition
laws are contained in Section 18 of Chapter II of the Competition Act, 1998.
9.3.2 Section 18 is based on the Article 102 TFEU and can be read as follows:
“18. Abuse of dominant position
73
74
Ibid, Page 458
75
Ibid
- 48 -
(1) Subject to section 19, any conduct on the part of one or more undertakings
which amounts to the abuse of a dominant position in a market is prohibited if
it may affect trade within the United Kingdom.”76
9.3.3 The words of this Section can be directly related the Article 102 TFEU and be linked to
the cases of “Collective Dominance” as have been interpreted in various cases while interpreting
Article 102 TFEU.
9.4 China
9.4.1 The Chinese competition law is contained in the Anti-monopoly Law of the People's
Republic of China (“AML”).77 And, the provisions relating to abuse of dominant position can be
seen spread over a number of Articles.
9.4.2 Article 2 provides that AML shall be applicable to monopolistic conducts in economic
activities within the People's Republic of China.
9.4.3 Article 3 defines what “monopolistic conduct” means for the purpose of AML and
provides that:
“Article 3 For the purposes of this Law, "monopolistic conducts" are defined as the
following:
(1) Monopolistic agreements among business operators;
(2) Abuse of dominant market positions by business operators; and
(3) Concentration of business operators that eliminates or restricts competition or
might be eliminating or restricting competition.
9.4.4 Article 12 provides the definition of “Business operators” as follows:
“Business Operators” refers to a natural person, legal person, or any other organization
that is in the engagement of commodities production or operation or service provision.
9.4.5 Article 17 provides that a business operator with a dominant market position shall not
abuse its dominant market position to conduct the acts as given under this Article. And
76
http://www.legislation.gov.uk/ukpga/1998/41/section/18
77
http://www.china.org.cn/government/laws/2009-02/10/content_17254169.htm
- 49 -
“dominant position” has been defined as "dominant market position" refers to a market position
held by a business operator having the capacity to control the price, quantity or other trading
conditions of commodities in relevant market, or to hinder or affect any other business operator
to enter the relevant market.
9.4.6 Article 18 provides for the various factors to be considered while determining the
dominant market status of a business operator.
9.4.7 And, Article 19 provides for the circumstances where a business operator will be
assumed to have a dominant position. These circumstances are:
(1) the relevant market share of a business operator accounts for1/2 or above in the
relevant market;
(2) the joint relevant market share of two business operators accounts for 2/3 or above; or
(3) the joint relevant market share of three business operators accounts for 3/4 or above.
9.4.8 And, A business operator with a market share of less than 1/10 shall not be presumed as
having a dominant market position even if they fall within the scope of second or third item.
9.4.9 It is this Article 19 that clarifies the position that even the Chinese Competition Law
regime has included in its purview the situations of “Collective Dominance”. The clauses (2) and
(3), in fact, begin with the words “the joint relevant market share”.
9.5 Mexico
9.5.1 The Mexican law of competition is contained in the Ley Federal de Competencia
(“Federal Economic Competition Act” or “LFCE”). And, the substantive provisions of the
LFCE, setting out the prohibited activities, are contained in Chapters II and III of the statute.
9.5.2 Chapter II, entitled “Monopolies and Monopolistic Activities”, contains Articles 8-15 and
have their thrust against monopolistic practices, rather than against monopolies. While Article 8
declares that monopolies are prohibited, unless exempt, there are no additional provisions
expressly addressing and prohibiting single firm monopolization or abuse of a dominant position,
such as exist in the EU, UK, Canadian, etc. competition law regimes.78
78
- 50 -
9.6 Japan
9.6.1 The Japanese Anti-Monopoly Act (“AMA”), 1947, prohibits entrepreneurs from
engaging into 3 types of anti-competitive conducts:
(1) Private monopolization;
(2) Unreasonable restraint of trade;
(3) Unfair Trade Practices.
9.6.2 Private monopolization and unreasonable restraint of trade are prohibited by Section 3 of
the AMA, and unfair trade practices are prohibited by Section 19.
9.6.3 “Private Monopolization” has been defined in Section 2(5) as to mean such business
activities, by which any entrepreneur, individually or by combination or conspiracy with other
entrepreneurs, or by any other manner, excludes or controls the business activities of other
entrepreneurs, thereby causing, contrary to the public interest, a substantial restraint of
competition in any particular field of trade.79
9.6.4 The term "unreasonable restraint of trade" as defined under Section 2(6) means such
business activities, by which any entrepreneur, by contract, agreement or any other means
irrespective of its name, in concert with other entrepreneurs, mutually restrict or conduct their
business activities in such a manner as to fix, maintain or increase prices, or to limit production,
technology, products, facilities or counterparties, thereby causing, contrary to the public interest,
a substantial restraint of competition in any particular field of trade.80
9.6.5 Article 8 of the AMA deals with the provisions against cartel activity and other anti-
competitive acts engaged in by entrepreneurs through trade associations.
9.6.6 Article 19 provides that No entrepreneur shall employ unfair trade practices. And, unfair
trade practices have been defined in Article 2(9) as acts falling within any one of six listed
categories of activity that tend to impede fair competition.
9.6.7 And, Article 8-4 of the AMA authorizes the JFTC 81 to take remedial actions against
“monopolistic situations”, defined in terms of an oligopolistic market structure within an
79
http://www.jftc.go.jp/en/legislation_gls/amended_ama09/amended_ama09_01.html
80
Ibid
81
Japan Fair trade Commission
- 51 -
industry, rather than by specific conduct on the part of an enterprise. Pursuant to Article 2(7), an
enterprise or enterprises are in a monopolistic situation when –
(i) One enterprise has a market share of 50% or two enterprises have a market share
of 75% or more;
(ii) Conditions in the industry make new entry difficult;
(iii) The enterprise’s prices have been excessive, and
(iv) The enterprise’s profit rate is also excessive or the enterprise expends an
excessive amount on general expenses.82
9.6.8 However, this provision applies only in the case of markets where the aggregated total
value of goods and services that were supplied within Japan during the last one year period
exceeded 100 Billion Yens.
9.6.9 Thus, with this provision of Article 8-4, one can see that the concept of “Collective
Dominance” has been applied in Japanese competition law regime but within the limit scope.
9.7 South Africa
9.7.1 In the Republic of South Africa, the Competition law is contained in the Competition
Act, 1998.83 And, the provisions relating to abuse of dominant position are contained in Sections
7, 8 and 9 of Chapter 2.
9.7.2 Section 7 defines “Dominant Firm” as follows:
A firm is dominant in a market if—

(a) it has at least 45% of that market:
(b) it has at least 35%, but less than 45%, of that market, unless it can show
that it does not have market power; or
(c) it has less than 35% of that market, but has marker power.
9.7.3 Section 8 prescribes the acts that are prohibited for a “Dominant firm” and begins with
the words “It is prohibited for a dominant firm to…”
82
Marl R. Joelson, Supra n. 15, Page 523-524
83
Downloaded from: http://www.compcom.co.za/assets/Files/pocket-book-2005-R.pdf
- 52 -
9.7.4 Thus, it can be seen that the concept of “Collective Dominance” is not used in the South
African Competition law regime.
9.8 Conclusion
Thus, it can be seen, that many of the world’s grown economies also have either this concept of
“Collective Dominance” in their respective Competition law regimes or are now introducing the
same in their laws. And, with India introducing the same would then be joining the elite class of
those nations.
- 53 -
List of Abbreviations
1. AMA Japanese Anti-Monopoly Act, 1947
2. AML Anti-Monopoly Law of the People’s Republic of China
3. Co. Company
4. ECMR/EUMR Council Regulation (EC) No 139/2004 of 20th January 2004 on

the control of concentrations between undertakings
5. EU European Union
6. JFTC Japan Fair Trade Commission
7. No. Number
8. Plc. Public Limited Company
9. TEC Treaty of European Community
10. TFEU Treaty on Functioning of the European Union
11. UK United Kingdom of Great Britain and Northern Ireland
12. US United States of America
13. w.r.t. With respect to
- 54 -
Bibliography
I. Statutes, Treaties and Legislations
1. The Indian Competition Act, 2002

2. The Indian Competition (Amendment) Bill, 2012.
3. Treaty on the Functioning of the European Union.
4. Council Regulation (EC) No 139/2004 of 20th January 2004 on the control of
concentrations between undertakings (“the EC Merger Regulations” or “ECMR”)
5. The Sherman Anti-trust Act, 1890
6. The Competition Act, (R.S.C., 1985, c. C-34) of Canada
7. The Competition Act, 1998 of UK
8. Anti-monopoly Law of the People's Republic of China
9. Ley Federal de Competencia (“Federal Economic Competition Act” or “LFCE”),
1992 of Mexico
10. The Anti-Monopoly Act, 1947 of Japan
11. The Competition Act, 1998 of the Republic of South Africa
II. Reports and Articles
1. Report of the High Level Committee on Competition Policy and Law, Government of India,
2000
2. Report of the Working Group on Competition Policy, Planning Commission, Government of
India, 2007
3. Karolina Rydman, “Collective Dominance- How is it interpreted and how does it
correlate with tacit coordination”, Stockholm University
III. Books
1. Suzanne Rab, Indian Competition Law- An International Perspective, CCH India,

Wolters Kluwer (India) Pvt. Ltd., 2012
2. Mark R. Joelson, An International Anti-Trust Primer, Kluwer Law International, 3rd
Edition, 2006
- 55 -
3. Ana Rosado Cubero, Barriers to Competition: The evolution of the debate, Number 3,
Pickering and Chatto Ltd., 2010.
4. Josef Drexl, Laurance Idot and Joel Monegar, Economics Theory and Competition
Law, Earthscan Pubns Ltd, 2009.
5. Manfred Neumann and Jürgen Weigand, The International Handbook on
Competition, Edward Elgar Pub, 2nd Revised Edition, 2013
6. Simon Bishop and Mike Walker, The Economics of EC Competition Law, Sweet &
Maxwell, 3rd Edition, 2010
7. D. P. Mittal, Competition Law & Practice, Taxmann Publications, 3rd Edition, 2011
8. Dr. Deepashree, Micro Economics-II (for University of Delhi), 2nd Edition, 2013
IV. Case Laws
1. United Brands Company and United Brands Continentaal BV v. Commission of the European
Communities (1978), Case 27/76
2. Società Italiana Vetro SpA, Fabbrica Pisana SpA and PPG Vernante Pennitalia SpA v
Commission of the European Communities (1992), Joined cases T-68/89, T-77/89
and T-78/89
3. Gencor Ltd v Commission of the European Communities (1999), Case T-102/96
4. Compagnie maritime belge transports SA (C-395/96 P), Compagnie maritime belge
SA (C-395/96 P) and Dafra-Lines A/S (C-396/96 P) v Commission of the European
Communities (2000), Joined Cases 395/96 P. and 396/96 P.
5. Airtours plc v Commission of the European Communities (2002), Case T-342/99
6. Hoffmann-La Roche & Co. AG v Commission of the European Communities (1979),
Case no. 85/76
7. United States v. American Tobacco Co., 221 U.S. 106 (1911)
8. American Tobacco Co. v. United States, 328 U.S. 781 (1946)
V. Websites
1. Google.com (as a search engine)

2. www.cci.gov.in
3. http://planningcommission.nic.in
4. www.globalcompetitionforum.org
5. www.eur-lex.europa.eu
- 56 -
6. www.law.cornell.edu
7. www.supreme.justia.com
8. www.slideshare.net
9. www.prsindia.org
10. http://web.worldbank.org
11. http://en.wikipedia.org
12. www.stolaf.edu
13. www.laws.justice.gc.ca
14. www.legislation.gov.uk
15. www.china.org.cn
16. www.jftc.go.jp
17. www.compcom.co.za
- 57 -

Collective Dominance

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Collective-Dominance

An analysis of S. 4 as it exists and S. 4 as proposed by the amendment in

Competition (Amendment) Bill, 2012

(Dissertation prepared under the Internship programme of the CCI)

Submitted By: Under the guidance of:

This project report/dissertation has been prepared by the author as an

Contents Page No.

5.2 Competition Law and Policy 14

5.3 Need of Economic Theory 15

5.4 Perfect Market 16

5.7 Theory of Oligopolist’s Interdependence 19

5.8 Theory of Prisoner’s Dilemma 20

5.9 Tacit Coordination and Prisoner’s Dilemma 22

5.10 Aim of the Competition Law & Policy 23

6. Understanding Collective Dominance 24-32

6.2 How is Collective Dominance supposed to be interpreted? 26

7.3 Analyzing Section 3 34

7.4 Analyzing Sections 5 & 6 36

7.5 Analyzing Section 4 38

7.6 Comparing Sections 3, 4 and 5 39

7.7 Understanding post-amendment Section 4 w.r.t. Vertical Arrangements 41

9.7 South Africa 52

II Reports and Articles 55

1.1 The questions this dissertation aims to answer are:

3. TFEU and EUMR and Our Purpose

“A concentration which would significantly impede effective competition, in the common

4. Issues, Methodology and the Limitations

(1) What is Collective Dominance?

(2) How is collective dominance supposed to be interpreted?

(5) How is it dealt with in the other countries?

5. Economic Theory and Competition Law & Policy

5.1 “Competition”- Defined

1. The rivals must act independently, not collusively.

 Structure: a market is competitive if there are a large number of equally efficient

5.2 Competition law and Policy

5.2.1 The Raghavan Committee Report20 had suggested that-

“2.1.1. Competition policy is defined as "those Government measures that

5.3 Need of Economic Theory

5.3.5 The economic theory is, thus, a tool for analyzing:

5.3.6 Before moving on to the concept of “Collective Dominance” it would be imperative to

5.4 Perfect Market

1. The market price is considered as given by each player on the market;

5.7 Theory of Oligopolists’ Interdependence35

5.8 Theory of Prisoners’ Dilemma36

(i) Joint profitability can be materially improved through collusion or cooperation;

5.9 Tacit Coordination and Prisoner’s Dilemma

5.9.1 Tacit Coordination, or Tacit collusion, literally means “understood or implied

2. Tacit coordination must be possible to achieve

5.10 Aim of the Competition Laws and Policy

6. Understanding Collective Dominance

6.1 What is Collective “Dominance”?

“a position of economic strength enjoyed by an undertaking which enables it to prevent

“The Committee recommends that "Dominance" and "Dominant Undertaking" may be

“To be considered dominant, a firm must be in a position of such economic

6.1.6 “Dominant Position” means a position of strength, enjoyed by an enterprise, in the

“No enterprise of group shall abuse its dominant position.”

6.1.9 “Collective” literally, as given in Oxford Dictionary, means “adj. 1. Formed by or

6.2 How is Collective Dominance supposed to be interpreted?

6.2.3 The Article 102 TFEU states that:

6.2.6 In Gencor case48, the Court had observed as follows:

“276. Furthermore, there is no reason whatsoever in legal or economic terms to

In order to establish the existence of a collective entity, it is necessary to examine the