BIBLIOGRAPHY

Internet Sources:-

 https://blog.ipleaders.in/constitutes-abuse-dominant-position-competition-law/
 file:///C:/Users/Dell%20Exclusive/Downloads/Competition%20law%20imp
%20file.pdf
 http://www.legalservicesindia.com/article/729/Abuse-o-Dominant-Position.html
 https://www.legalbites.in/abuse-dominant-position-competition-law/
 http://www.mondaq.com/india/x/668306/Antitrust+Competition/
Abuse+Of+Dominant+Position+An+AntiCompetitive+Practice

Books:-

 Agarwal, Dr. V.K., “Competition Act, 2002” Bharat Law House Pvt. Ltd., New
Delhi 2011.
 TABLE OF CONTENTS

S . No. Topic Page No.

1. INTRODUCTION

2. DOMINANT POSITION

3. RELEVANT MARKET

4. SCOPE OF SECTION 4

5. ABUSE OF DOMINANT POSITION

6. JUDICIAL APPROACH

7. CONCLUSION
 ABBREVIATIONS USED

1. CCI - Competition Commission of India

2. SC - Supreme Court
3. Sec. - Section
4. Para. - paragraph
5. V. - Versus
6. W.B. - West Bengal
7. Ors. - Others
 ACKNOWLEDGEMENT

The success and final outcome of this project required a lot of guidance and assistance from many people
and I am extremely fortunate to have got this all along the completion of my project work. Whatever I
have done is only due to such guidance and assistance and I would not forget to thank them.

I respect and thank Dr. Mayank Pathak for giving me an opportunity to do the Project work on Abuse of
Dominant Position under Section 4 of the Act and I am extremely grateful to him, our subject teacher
for providing all the support and guidance.
 TABLE OF CASES
 United Brand v. Commission of the European Communities 1978 ECR 207.
 American Tobacco Co. V. United States 328 U.S. 781 (1946).
 In re Continental Car Co. Inc. (1972) CMLR D 11.
 CCI V. Coordination Committee of Artists and Technicians of W.B. Films and
Television, AIR 2017 SC 1449.
 In Re: Johnson And Johnson Ltd. (1988) 64 Comp Cas 394 NULL.
 MCX Stock Exchange Ltd. v. National Stock Exchange & Ors. Case No. 13 of 2009
(COMPAT, 5/12/2014)
 Brooke Group Ltd. v. Brown & Williamson Tobacco Corp.509 US 209 (1993).
  INTRODUCTION
Section 4 of the Act deals with Abuse of Dominant Position. The term dominant position has
been defined in Explanation (a) of the Section 4 which means:

Dominant Position has been defined as a position enjoyed by an enterprise whereby enables it to

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

ii. affect its competitors or consumers or the relevant market in its favour.

For determining the dominant position it is essential that along with Section 4, Section 19(4) is to
be read which clearly states that while inquiring, the Commission shall have due regard to the
factors mentioned there in order to determine that whether an enterprise enjoys a dominant
position or not. Thus Section 4 Explanation (a) read with Section 19(4).

The abuse of dominance analysis under the Act starts with the determination of market, once the
relevant market has been determined; the CCI’s next task is to establish whether the enterprise
enjoys a dominant position. It is important to note here that the Act does not prohibit the mere
possession of dominance that could have been achieved through superior economic performance,
innovation or pure accident but only its abuse.

Sub-section 1 of Section 4 clearly states that, “No enterprise or group shall abuse its dominant
position.”

Sub-section 2 of Section 4 clearly states the conditions where there shall be an abuse of dominant
position.

Along with this what is relevant market is to be determined on reading Section 19(5) of the Act,
which clearly states that “For determining whether a market constitutes a relevant market” for
the purposes of this Act, the Commission shall have due regard to the relevant geographic market
and relevant product market. The definition clause of the Act under Section 2(r) defines a
relevant market.

The Explanation to Section 4 defines certain expressions which includes “dominant position”
“predatory price” and “group.”
  DOMINANT POSITION

Section 4 prohibits any enterprise from abusing its dominant position. The term ‘dominant
position’ has been defined in the Act as ‘a position of strength, enjoyed by an enterprise, in the
relevant market, in India, which enables it to operate independently of competitive forces
prevailing in the relevant market; or affect its competitors or consumers or the relevant market in
its favour’. The definition of the dominant position provided in the Competition Act is similar to
the one provided by the European Commission in United Brand v. Commission of the European
Communities1 case. In the United Brands case the Court observed that:

‘….a position of strength enjoyed by an undertaking which enables it to prevent effective

competition being maintained on the relevant market by affording it the power to behave to an
appreciable extent independently of its competitor, customers and ultimately of its consumers.

In the case of American Tobacco Co. V. United States2 , the US Supreme Court defined
dominant position as “it is a controlling position capable of driving competition from the market
and controlling prices.” The Act sets out following factors which the CCI will take into account
to establish the dominant position of an enterprise3:

i. market share of the enterprise;

ii. size and resources of the enterprise;
iii. size and importance of the competitors;
iv. economic power of the enterprise including commercial advantages over competitors;
v. vertical integration of the enterprises or sale or service network of such enterprises;
vi. dependence of consumers on the enterprise;
vii. monopoly or dominant position whether acquired as a result of any statute or by
virtue of being a Government company or a public sector undertaking or otherwise;

1. [1978] ECR 207.

2. 328 U.S. 781 (1946).
3. Section 19(4).
 viii. entry barriers including barriers such as regulatory barriers, financial risk, high capital
cost of entry, marketing entry barriers, technical entry barriers, economies of scale,
high cost of substitutable goods or service for consumers;
ix. countervailing buying power;
x. market structure and size of market;
xi. social obligations and social costs;
xii. relative advantage, by way of the contribution to the economic development, by the
enterprise enjoying a dominant position having or likely to have an appreciable
adverse effect on competition;
xiii. any other factor which the Commission may consider relevant for the inquiry.

The Court of Justice in the Case of Continental Car Co.4 observed thus:

Undertakings are in a dominant position when they have power to behave independently., which
puts them in a position to act, without taking into account, their competitors, purchasers or
suppliers. This power does not necessarily have to be derived from an absolute domination
permitting the undertaking which hold it to eliminate ill will on the part of their economic
partners but it is enough that they be strong enough as a whole to ensure to those undertakings an
overall independence of behavior even if there are differences in intensity in their influence on
the different partial markets… they have the power to determine prices or control, production or
distribution for a significant part of the production in question.

Dominance per se is not bad. It is only when there is an abuse of the dominant position that
Section 4 of the Competition Act is invoked. Thus, once the dominance of an enterprise in the
relevant market is determined the CCI has to establish the abuse of its dominance by an
enterprise. So clear knowledge about what is dominant position and dominancy a clear study of
Explanation (a) of Section 4 and Section 19(4) has been done.

4. In re Continental Car Co. Inc. (1972) CMLR D 11.

  RELEVANT MARKET

Relevant market means the market in which one or more goods compete, whether two or more
products can be considered substitute goods and whether they constitute separate and particular
market for competition.

The Act defines the relevant market under Section 2(r) which ‘means the market which may be
determined by the Commission with the reference to the relevant product market or the relevant
geographic market or with reference to both the markets’. Also Section 19(5) clearly enumerates
that ‘for determining whether a market constitutes a “relevant market” for the purposes of the
Act, the Commission shall have due regard to the “relevant geographic market” and “relevant
product market.”

The relevant geographic market is defined u/s 2(s) as ‘a market comprising the area in which the
conditions of competition for supply of goods or provision of services or demand of goods or
services are distinctly homogenous and can be distinguished from the conditions prevailing in
the neighboring areas.’

The relevant product market is defined u/s 2(t) as ‘a market comprising all those products or
services which are regarded as interchangeable or substitutable by the consumer, by reason of
characteristics of the products or services, their prices and intended use’

Thus to understand relevant market we need to consider Section 2(r) along with Section 19(5).
Later on reading both the Sections we need to consider the two other important terms associated
with the relevant market and they are Relevant Geographic Market and Relevant Product Market.
The two terms have been defined under Section 2(s) and 2(t) respectively.

The Act further provides that the CCI shall determine the relevant geographic market having due
regard to all or any of the following factors mentioned5:

i. regulatory trade barriers;

ii. local specification requirements;

5. Section 19(6).
 iii. national procurement policies;
iv. adequate distribution facilities;
v. transport costs;
vi. language;
vii. consumer preferences;
viii. need for secure or regular supplies or rapid after-sales services

The Competition Act provides that the CCI shall determine the relevant geographic market
having due regard to all or any of the following factors mentioned6:

i. physical characteristics or end-use of goods

ii. price of goods or service
iii. consumer preferences
iv. exclusion of in-house production
v. existence of specialized producers
vi. classification of industrial products

Purpose of defining “relevant market” is to assess with identifying in a systematic way,

competitive constraints that undertakings face when operating in a market. It presupposes that
there is sufficient degree of interchangeability between all products forming part of the same
market in so far as specific use of that product is concerned.7

6. Section 19(7).
7. CCI V. Coordination Committee of Artists and Technicians of W.B. Films and Television, AIR
2017 SC 1449.
  SCOPE OF SECTION 4

Section 4 provides for prohibition of abuse of dominant position. The Act does not consider
dominance as anti-competitive but its abuse. Abuse of dominance rather than dominance should
be the key for competition policy. As per the Report of the High-Level Committee on
Competition Policy and Law (2000), abuse of dominance rather than which prevents, restricts or
distorts competition needs to be frowned by competition law. It is interesting to note that the
provision of Section 4 does not have the word ‘dominance’ but the ‘dominant position’. The
word dominant position has been discussed before under Section 4, Explanation (a). In order to
determine the dominant position, it is the ability of the enterprise to act independently of the
competitive forces. The dominant position can be determined in the context of the relevant
market and on the basis of any of the thirteen factors enlisted under clauses (a) to (m) of Section
19(4) of the Act. Two important elements of Section 4 are as follows: -

 First, there must be a dominant position.

 Second, the existence of clearance is not sufficient for a prohibition to be invoked; it
is also necessary that the position is abused.

The abuse of dominant position impedes fair competition between the firms, exploits consumers
and makes it difficult for other players to compete with the dominant enterprise on merit. Abuse
of dominant position includes:

 Imposing unfair condition or price;

 Predatory pricing;
 Limiting production or market or technical development;
 Certain barriers to entry;
 Applying dissimilar conditions to similar transactions;
 Denying market access;
 Using dominant position in one market to gain advantages in another market;8

8. Report of the High-Level Committee on Competition Policy and Law (2000), para. 3.6.
  ABUSE OF DOMINANT POSITION
Section 4 of the Competition Act, 2002 states that:-

(1) No enterprise shall abuse its dominant position.

(2) There shall be an abuse of dominant position under sub-section (1), if an enterprise,—

(a) directly or indirectly, imposes unfair or discriminatory—

(i) condition in purchase or sale of goods or services; or

(ii) price in purchase or sale (including predatory price) of goods or service; or

Explanation.—For the purposes of this clause, the unfair or discriminatory condition in purchase
or sale of goods or services 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 conditions or prices 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

(c) indulges in practice or practices resulting in denial of market access; 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.

Explanation .—For the purposes of this section, the expression—

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

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

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

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

(c) “group” shall have the same meaning as assigned to it in clause (b) of Explanation to Sec.5.

The concept of abuse is an objective concept relating to the behaviour of an undertaking in a

dominant position which is such as to influence the structure of a market where , as a result of
the very presence of the undertaking in question , the degree of competition is weakened and
which , through recourse to methods different from those which condition normal competition in
products or services on the basis of the transactions of commercial operators , has the effect of
hindering the maintenance of the degree of competition still existing in the market or the growth
of that competition”

The philosophy of the Competition Act is that a situation of monopoly per se is not against
public policy but, rather, the use of the monopoly status such that it operates to the detriment of
potential and actual competitors. At this point it is worth mentioning that the Competition Act
does not prohibit or restrict enterprises from coming into dominance. There is no control
whatsoever to prevent enterprises from coming into or acquiring position of dominance. All that
the Act prohibits is the abuse of that dominant position. The Act therefore targets the abuse of
dominance and not dominance per se. This is indeed a welcome step, a step towards a truly
global and liberal economy.

Prohibition of abuse of dominant position [Section 4(1)]:

Section 4(1) of the competition Act, 2002 prohibits abuse of dominant position by any enterprise
or group. Sub- section (1) says that no enterprise or group shall abuse its dominant position. The
term ‘enterprise’ has been defined under Sec. 2(h) of the Act as follows:
“enterprise” means a person or a department of the Government, who or which is, or has been,
engaged in any activity, relating to the production, storage, supply, distribution, acquisition or
control of articles or goods, or the provision of services, of any kind, or in investment, or in the
business of acquiring, holding, underwriting or dealing with shares, debentures or other
securities of any other body corporate, either directly or through one or more of its units or
divisions or subsidiaries, whether such unit or division or subsidiary is located at the same place
where the enterprise is located or at a different place or at different places, but does not include
any activity of the Government relatable to the sovereign functions of the Government including
all activities carried on by the departments of the Central Government dealing with atomic
energy, currency, defence and space.

The term ‘group’ used under Section 4 has the same meaning as assigned to the term ‘group’
under Section 5, 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;

Identification of abusive use of dominant position [section 4(2)]:

There are five kinds of abusive use of dominant position-

1. Unfair or discriminatory trade practices– According to this, abuse of dominant

position happens when an enterprise or group directly or indirectly imposes
discriminatory conditions on the sale of goods or rendering of prices or price in sale or
purchase of predatory price of goods or services.
2. Limiting production or technical or scientific development– An abuse of dominant
position happens in the market where an enterprise or group directly or indirectly
imposes conditions that limit the production of the goods or technical or scientific
development resulting in the production of the goods or services.
 3. Denial of access to market, barriers to entry and expansion– Any condition that
causes denial to access to the market in any manner shall constitute an abuse of
dominant position.
4. Imposition of supplementary obligations– when an enterprise makes the conclusion
of contracts subject to an acceptance of supplementary obligations by other parties,
and those obligations are such that by their very nature or according to commercial
usage in that field, they have no connection with the subject-matter of the contract.
5. Protection of other markets– when an enterprise uses its position in a relevant
market to enter into another market, then there is an abuse of dominant position.

Predatory Price [Explanation (b)]:

The Competition Act, 2002 outlaws predatory pricing, treating it as an abuse of dominant
position, prohibited under Section 4. Predatory pricing under the Act means the sale of goods or
provision of services, at a price which is below the cost, as may be determined by regulations, of
production of the goods or provision of services, with a view to reduce competition or eliminate
the competitors. Predatory pricing is pricing one's goods below the production cost, so that the
other players in the market, who aren't dominant, cannot compete with the price of the dominant
player and will have to leave the market. The CCI in In Re: Johnson And Johnson Ltd.9 said that
"the essence of predatory pricing is pricing below one's cost with a view to eliminating a rival."

ROLE OF COMPETITORS IN PREDATORY PRICING:

When a single entity in the market rises almost instantaneously, it is mostly because of the abuse
of dominant position and predatory pricing which follows. These two principles are seen to
intertwine to form a bridge between legal and economic boundaries, and overlap over the
existing players in the market. Such activities are basically found to be illegal, however it is just

9. (1988) 64 Comp Cas 394 NULL.

one of the many most frequently used ways in which that enterprise or group may abuse its
position of dominance. Predatory Pricing is mostly dependent upon the use/misuse of dominant
position.

In MCX Stock Exchange Ltd v. National Stock Exchange of India Ltd.10.the CCI while laying
down the test for predatory pricing said that:

"before a predatory pricing violation is found, it must be demonstrated that there has been a
specific incidence of under-pricing and that the scheme of predatory pricing makes economic
sense. The size of Defendant's market share and the trend may be relevant in determining the
ease with which he may drive out a competitor through alleged predatory pricing scheme-but it
does not, standing alone, allow a presumption that this can occur. To achieve the recoupment
requirement of a predatory pricing claim, a claimant must meet a two-prong test: first, a claimant
must demonstrate that the scheme could actually drive the competitor out of the market; second,
there must be evidence that the surviving monopolist could then raise prices to consumers long
enough to recoup his costs without drawing new entrants to the market."

In the matter of Brooke Group Ltd. v. Brown & Williamson Tobacco Corp.11 the Hon’ble
Supreme Court of United States held that prices which are below the average variable cost can be
predatory in nature only if the dominant firm undertaking this practice has a sustainable option or
an opportunity to recoup the losses which are deliberately incurred by them in order to drive the
competitors out of the market.

Analysing the impact of predatory pricing on consumers:

The Raghavan High Level Committee had prepared a report in which they addressed various
important issues in the context of abuse of dominance. One such question was related to the
impact of predatory pricing or low prices on the consumers. The findings of the committee were

10. MCX Stock Exchange Ltd. v. National Stock Exchange & Ors. Case No. 13 of 2009 (COMPAT,
5/12/2014)
11. Brooke Group Ltd. v. Brown & Williamson Tobacco Corp.509 US 209 (1993).
similar to that of the holding of the Hon’ble Supreme Court of India in the matter of Haridas
Exports v. All India Floating Glass Mfrs. Association and Ors.12

In the above case, the court concluded that if some products are available at a price below than
that of their average variable cost from abroad, then it should not always be restricted. The above
finding was coupled with the condition that such a reduction in price shall not affect the
competition prevailing in the market. It is done to ensure the preservation of the interests of
consumers.

In the Raghavan committee report, it was stated that when the reduction in the prices of the
product is done with the intention of eliminating other firms, it should be prevented. However
the restrictions should not prevent the firms capturing the larger market share due to high
efficiency and low prices. There should be a demarcating line between wilful restrictions to
eliminate competition and reduction in competition due to high-level efficiency of the dominant
firm.

In contrast to this, predatory pricing adversely affects the consumers. As per the recoupment test,
there is a strong probability that the dominant firm engaging in the practice of predatory pricing
would increase the prices gain in future.

To conclude, whilst all the competitors in the market have diverse backgrounds and economic
portfolios, it should be understood that principles of fairness apply to each of them individually.
Predatory Pricing may in some cases be implemented and considered as a check by the Govt
agencies to rule out unlawful market entities or business practices. Interestingly given the
developing affairs of the Indian Economy the market is often vulnerable to new entrants who
struggle to establish themselves, however the same doesn't seem to the case with "Jio" a part of
the conglomerate of the Reliance Group of Industries. Thought what may have been appearing as
an act of predatory pricing, as has been accused by the other major players in the relevant market
sector, it shall be interesting to watch what the course of actions which further go on in the
sectors of telecommunications in India.

12. AIR 2002 SC 2728.

 JUDICIAL APPROACH

1. Bharti Airtel Limited Vs. Reliance Industries Limited & Reliance Jio Info comm
Limited (Case No. 03 of 2017) CCI

 By providing free services cannot by itself raise competition concerns unless the same is

offered by a dominant enterprise and shown to be tainted with an anti-competitive
objective of excluding competition/ competitors.
 In a competitive market scenario, where big players are already operating in the market, it
would not be anticompetitive for an entrant to incentivise customers by giving attractive
offers and schemes.
 Providing services below the average variable cost unless it coupled with abuse of
dominant position does not amount to predatory pricing in contravention to the
Competition Act (Section 4).

2. Fast Track Call Cab Pvt. Ltd. & Meru Travel Solutions Pvt. Ltd Vs. ANI
Technologies Pvt. Ltd. (Case No. 6 & 74 of 2015) CCI

 Market share is one of the indicators for assessing dominance, but the same cannot be

seen in isolation to give a conclusive finding.
 No restriction affecting the entry or expansion of other entrants into the market in
indicative of lack of abuse of dominant position.
 The narrow interpretation of the concept of dominance would mean that
an entrant armed with a new idea, a superior product or technological solution that
challenges the status quo in a market and shifts a large consumer base in its favour would
have to be erroneously held dominant.
 The interpretation of the Competition Act, 2002, does not allow more than one dominant
player.
 3. Ashish Ahuja V. Snapdeal Case No. 17 of 2014

In an order released today, CCI said that "no case of contravention of the provisions of the
(Competition) Act is made out against the opposite parties and the information is ordered to be
closed forthwith...".

The watchdog noted that "insistence by SanDisk that the storage devices sold through the online
portals should be bought from its authorised distributors by itself cannot be considered as
abusive as it is within its rights to protect the sanctity of its distribution channel". Further, the
Commission observed that SanDisk had in a circular only clarified that the full range sales and
warranty services offered by it is limited to those products brought from its authorised national
distributors. "The conduct of SanDisk in issuing such circular can only be considered as part of
normal business practice and cannot be termed as abuse of dominance," CCI said."As far as
Snapdeal.Com is concerned, it is not engaged in the purchase or sale of storage devices, rather it
owns and manages a web portal that enables those sellers who stock storage devices to sell such
devices through its web portal for a commission."
  CONCLUSION
The Competition act, 2002 was formulated as there was a need to shift the focus from curbing
monopolies to promoting competition both internal and external. Thus, through its authorities the
Competition Act keeps a check on the abuse of the dominant position and other malafide trade
practices in the relevant market and on receipt of any complaint, it takes necessary actions and
on proving of the allegations respective penalties are imposed on the defaulters.

As a consequence of abuse of dominance, the CCI , after an inquiry into the abuse of dominant
position, may pass all or any of the orders under Section 27 of the Competition Act

(a)direct any enterprise or association of enterprises or person or association of persons, as the

case may be, involved in such agreement, or abuse of dominant position, to discontinue and not
to re-enter such agreement or discontinue such abuse of dominant position, as the case may be;

(b) impose such penalty, as it may deem fit which shall be not more than ten per cent. of the
average of the turnover for the last three preceding financial years, upon each of such person or
enterprises which are parties to such agreements or abuse: Provided that in case any agreement
referred to in section 3 has been entered into by any cartel, the Commission shall impose upon
each producer, seller, distributor, trader or service provider included in that cartel, a penalty
equivalent to three times of the amount of profits made out of such agreement by the cartel or ten
per cent. of the average of the turnover of the cartel for the last preceding three financial years,
whichever is higher;

(c) award compensation to parties in accordance with the provisions contained in section 34;

(d) direct that the agreements shall stand modified to the extent and in the manner as may be
specified in the order by the Commission;

(e) direct the enterprises concerned to abide by such other orders as the Commission may pass
and comply with the directions, including payment of costs, if any;

(f) recommend to the Central Government for the division of an enterprise enjoying dominant
position;

(g) pass such other order as it may deem fit.