top of page
  • Writer's pictureLexology

Part 7: Competition Compliance in India - dominant players


Vibrant graphic used as a badge to depict Competition Compliance in India

This is part 7 of a ten part series - that was authored by AnantLaw and published by Lexology on 30 April 2020. All laws stated in this series were accurate on 24 February 2020.

 
 

Part7: How to behave as a market dominant player


Determining dominant market position

Which factors does Indian jurisdiction apply to determine if the company holds a dominant market position?

The dominant position of an enterprise is a reflection of the market power that a firm enjoys and is reflective of the dominant firm’s ability to operate independent of prevailing market forces or affect its competitors or consumers or the relevant market in its favour. Section 4 of the Competition Act defines ‘dominant position’ as: 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.


In terms of the Competition Act; a firm’s dominance does not depend solely on the size or market share that the firm has, but also on other factors provided under section 19(4) of the Competition Act. These factors include the:


  • Market share of the enterprise – however, market share is one of the indicators of dominance, and it cannot be seen in isolation to give a conclusive finding of dominance;

  • Size and resources of the enterprises – in the Float Glass case, the Competition Commission of India (CCI) refused to conclude that M/s Saint Gobain Glass India Limited enjoyed a dominant position merely because the data relating to the production facility and the installed capacity led to the inference that Saint Gobain was the largest player in the market;

  • Size and importance of the competitors;

  • Economic power of the enterprise, including commercial advantages over competitors;

  • Countervailing buying power; and

  • Market structure and size of market.

Further, it is only within the parameters of a correctly defined relevant market that dominance of an entity can be assessed; therefore, delineation of the relevant market (as prescribed under the Competition Act) is imperative to any dominance analysis.


 

Abuse of dominance

If the company holds a dominant market position, what forms of behaviour constitute abuse of market dominance? Describe recent cases.

Though dominance per se is not frowned upon under the Competition Act, a dominant company is subject to a ‘special responsibility’. Therefore, certain exploitative or exclusionary conduct by a dominant company or group is prohibited under the Competition Act.

The special responsibility or duty of the dominant company is to ensure that its conduct does not lessen competition in the market.


Section 4(2) of the Competition Act provides for a list of actions and activities that, if committed by a dominant entity, would amount to an abuse of dominant position. They include:


  • Directly or indirectly imposing unfair or discriminatory conditions or prices (including predatory prices) in the purchase or sale of goods or services;

  • Limiting or restricting:

  • The production of goods or services or markets thereof; or

  • Technical or scientific development relating to goods or services;

  • Indulging in practices resulting in the denial of market access in any manner;

  • Making the conclusion of contracts subject to unrelated supplementary obligations; and

  • Leveraging (using dominance in one relevant market to enter into or protect another relevant market).

Any market conduct of a dominant player that falls under the above-mentioned categories (section 4 of the Competition Act) is considered as an abuse of dominance by the CCI. In the JCB case (Case No. 105/2013), the CCI considered vexatious litigation as abuse of dominant position and stated that predation through abuse of judicial processes presents an increasing threat to competition particularly because of its relatively low antitrust visibility. The recent trends in the CCI’s orders indicate its willingness to extend findings of abuse to novel categories of conduct and markets. Recent findings of search bias by Google is one example: in the Google case (Case Nos. 07 and 30/2014), the CCI found Google to have abused its dominance by (1) resorting to search bias in its universal search results, which were not strictly determined by relevance and thus unfair to users; (2) prominently placing its own commercial flight unit, linked to its specialised search options, which deprived users of additional choice; and (3) using restrictive clauses under intermediation agreements that prevented partners from using competing search engines. In Faridabad Industries Association (FIA) v M/s Adani Gas Limited (Case No. 71/2012), the CCI held that the imposition of unfair or discriminatory conditions in gas supply agreements is in violation of section 4(2)(a)(i) of the Competition Act. Clauses such as minimum guaranteed offtake, payment of interest, force majeure and termination are unfair, discriminatory or unreasonable. The order of the CCI was also upheld by the National Company Law Appellate Tribunal.


Under what circumstances can abusing market dominance be exempted from sanctions or excluded from competition law enforcement?

The only explicit defence that is listed in the Competition Act is the ‘meeting competition’ defence for discriminatory prices or conditions. This defence enables enterprises in dominant positions to respond to moves made by their competitors. In Dhruv Suri v Mundra Port & Special Economic Zone Ltd (Case No. 18/2009), the CCI permitted the discounts charged by a port operator as it was designed to meet the competition put forth by other port operators in the same market.


The Competition Act does not provide for an objective justification defence; however, the CCI has considered sound business justifications while analysing cases for abuse of dominance. The CCI, in the Schott Glass case (Case No. 22/2010), held that Schott Glass was justified to stop dealing with its customer to protect its own trademark. In Faridabad Industries Association (FIA) v M/s Adani Gas Limited (Case No. 71/2012), even though Adani Gas was found to be abusing its dominant position through several clauses in gas supply agreements, the CCI held that a restriction imposed by a dominant enterprise may not be abusive if the dominant enterprise is imposing the restriction because it is subject to the same restriction by a third party or upstream party. Undercutting of prices by a new entrant, who was otherwise incumbent in a different relevant market, was further seen by the CCI as a promotional offer and not as predatory pricing.

AnantLaw Briefings

bottom of page