Competition Law and ‘Abuse of Dominant Position’ – Issues and Approaches for Developing

Countries Gopa Chandra Mandal* Abstract Law is an instrument of social change. With the
emergence of string and dominating market players, law was required to regulate human behaviour
(be it social life or business life) in the market. As countries across the world have been shifting to
market economies, they have been adopting, or modernising competition laws. Since, competition
law is primarily based upon economic and legal principles, the reasoning behind competition law
should be described by analogy (not logic but experience) and the reasoning should be gathered by
keeping in mind the legislative goals of competition law. The Article on “Competition Law and ‘Abuse
of Dominant Position’ –Issues and Approaches for Developing Countries” has been orchestrated with
this view. The development of competition law started in the Europe in the early 18th century.
However, the Sherman Act, 1890 is considered as the first attempt in the drafting of modern
competition law. Years of government controls and protective regimes have left India with a weak
competition culture. Ascertaining the literacy and other factors crucial to the Indian economy and
social system, the Indian Parliament was aware of the fact that India needs an efficient competition
law regime for the protection of the consumers. India took up economic reforms in the early 1990s,
and in the second phase of the reforms, it enacted a new competition law to replace the Monopolies
and Restrictive Trade Practices (MRTP) Act, 1969; which had become obsolete in certain respects.
The Competition Act, 2002 came on the Statute Book in January 2003, which is in economic terms a
more sophisticated law. It covers the three standards limbs of competition law: anti-competitive
agreements, abuse of dominant position and merger regulation. It also mandates the Competition
Commission of India to undertake competition advocacy. Competition law has two-fold purposes:
firstly, competition law ensures competition in the market and secondly, competition law restricts
unfair competition in the market. Because wherever there is competition, there is a likelihood of
unfair competition and violation of the “rules of game” is the essence of unfair competition. The
nature of competition law is to determine those rules. * LL.M. Part II, Department of Law, University
of Calcutta, Hazra Campus. E-mail : gopachandra27@gmail.com Chapter 11 Competition Law and
‘Abuse of Dominant Position’ –Issues and Approaches ... 95 Introduction “Competition may be
viewed as a social mechanism which, in the economic field, first cleared the way for the modern
complex economic structure and then produced organised monopolistic groups which are now so
potent a control.”1 The need for evolving and stating the competition policy of India can hardly be
overemphasised. The experience of industrially advanced countries, the United States, for example,
shows that direct intervention of the government in the running of industries through controls is
inappropriate as a means to speed up industrial progress. The government’s role is best limited to
laying the basic rules for operating in the country, and providing the means for preserving the
freedom of both sellers and buyers, so that there is the minimum of ‘a working competition’. That
takes us to the question of appropriate machinery for enforcing such a competition policy and this
again is determined by the structure of the country’s market. History and Development of
Competition Law The modern statutes controlling cartels and monopolies, however, first appeared
in the United States in 1890.2 The development of competition law started with the grant of
individual freedom against existing guilds in the Europe in the early 18th century. This shows that
the roots of competition law are very deeply rooted. The first traceable event of origin of
competition law can be regarded as the book of ‘Wealth of Nations’ by Smith, where he gave the
metaphor of the invisible hands. According to him, the person intends only his own gain, and he is in
this, led by an invisible hand to promote an end which was no part of his intention.3 The ‘invisible
hand’ of competition ensured that social welfare would be maximised. However, the Sherman Act,
18904 is considered as the first attempt in the drafting of modern competition law. It was an attempt
to promote and preserve competition. The Act was enacted in response to the rising number of
large-scale business enterprise in the post-civil war period and the growing number of trusts by
American companies. The Sherman Act, 1890 prohibited contracts, combinations, or conspiracies in
restraint of trade,5 and also prohibited monopolization or attempts or conspiracies to monopolize.6
Meaning of Competition Competition law was not a theory about price or cost relationships, as it
came to be in neo-classical economics, nor was it a theory about the ‘struggle for survival’. 7 Rather
competition was a belief about the role of individual self-determination in directing the allocation of
resources; it was a theory about the limits of State power to give privileges to one person or class at
the expense of others.8 Competition law is the engine of free enterprise. Market economy performs
with respect to competition in the market. From an economist perspective, competition involves a
process of business rivalry between the firms that strive to win customer’s business by achieving the
lowest level of costs and prices, developing new products or services or exploiting particular
strengths, skills or other advantages to meet customer’s needs more effectively than competitors.9
Goals of Competition It is generally accepted that efficiency and consumer welfare are the primary
goals of competition law. Apart from that there are some non economic and societal goals, which
competition law would like to achieve. The societal purpose rationale for competition law finds its
introduction in the passage of Justice Hands in United States v. Aluminium Co. of America;10 where
he preferred the preservation of small business over the preservation of free market in the following
words: “It is impossible, because of its indirect social and moral effect, to prefer a system of small
producers, each dependent for his success upon his own skill and character, to one in which the
great mass of those engaged must accept the direction of a few.” 96 Competition Law in New
Economy Competition law forces the market players to search for better permutation and
combination for providing greater profits through greater efficiency. Shuffling and reshuffling of
products makes the output maximized because there is no further possibility of rearrangement of
resources that could increase the value to consumers of total output. This leads to a prosperous
society and permits individual consumers to determine by their own actions what goods and services
they want most.11 The Competition Act, 2002 The Competition Act, 200212 received the assent of
the President on 13th January 2003, subsequent to which various sections have been brought into
force from time to time. The Object of the Act, set out in the Preamble is “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.” Objectives of the
Competition Act, 2002 The basic objective of the Competition Act, 2002 is to provide a law relating
to competition among enterprises that will ensure that the process of competition among enterprise
is left free without stronger trading enterprises manipulating the market to their advantage and
following from that, to the disadvantage of consumers.13 The key provisions include – • Section 3,
which deals with anti-competitive agreements, • Section 4, which discusses about of a dominant
position, and • Section 5, which deals with the regulation of combinations; a combination may be an
acquisition or a merger. The New Competition Law Repealing the MRTP Act It was realized by the
Indian Government that many provisions of the MRTP Act and judicial pronouncements thereof, are
not useful in the changing economic and social milieu of India. The need for a new law has its origin
in Finance Minister’s Budget Speech in February, 1999: “The MRTP Act has become obsolete in
certain areas in the light of international economic developments relating to competition laws. We
need to shift our focus from curbing monopolies to promoting competition. The Government has
decided to appoint a committee to examine this range of issues and propose a modern competition
law suitable for our conditions.” The Competition Act, 2002 repealed the Monopolies and Restrictive
Trade Practises Act, 1969 (MRTP Act). The replacement of the MRTP Act of 1969 by a new
Competition Act is a natural corollary to economic liberalisation and opening up of trade to
competition. It is to be noted that the MRTP Act was inadequate, in comparison with the
competition laws of many countries, for regulating anti-competitive practices. The general definition
of a restrictive trade practice under that Act was seen as not specifically covering the numerous
categories of anti-competitive agreements, practices, etc. Under the Act as originally enacted, the
Competition Commission was the authority to deal with competition issues arising out of market
conditions and complaints of violations of the Act. In Brahm Dutt v. Union of India (2005), 14 it was
successfully challenged that the Competition Commission could not combine in itself the roles of a
market regulator and an adjudicatory body. This lead to a large number of amendments to the
Competition Act in 2007, the principal ones being the basic nature of the functions of the
Competition Commission in that the Competition Commission will not only function as a market
regulator, an expert body performing advisory and regulatory functions and the establishment of a
Competition Appellate Tribunal which would be a quasi-judicial adjudicatory body. Competition Law
and ‘Abuse of Dominant Position’ –Issues and Approaches ... 97 The Competition Act, 2002 as
amended in 2007 and 2009, covers the major provisions dealing with anti-trust issues, viz. regulation
of anti-competitive agreements, abuse of dominant position and a combination or an acquisition
falling under the Act. Abuse of Dominant Position The traditional definition of ‘dominance’ is that it
relates to a position of economic strength enjoyed by an enterprise in the relevant market which
enables it to prevent effective competition by affording it the power to behave independently of
competitors and of customers.15 The abuse may result in the restriction of competition, or the
elimination of effective competition. Some of the various forms of abuse are: price-fixing, imposing
discriminatory pricing, ‘predatory’ pricing, limiting supply of goods or services, denial of market
access, etc. Section 4: Dominant Position Abuse Section 4 of the Competition Act, 2002 deals with
the abuse of a dominant position. Section 4(1) prohibits abuse by an enterprise of its dominant
position. Sub-section (2) of Section 4 defines when there is abuse of dominant position within the
meaning of Section 4(1). It lists the anti-competitive practices of imposing unfair or discriminatory
trading conditions or prices or predatory prices, limiting the supply of goods or services, denial of
market access, imposing on other contracting parties obligations not related to the basic contact
with them and using a dominant position in one market to gain entry into another market or to
protect that other market. Amendments to Section 4 Certain amendments have been made to
Section 4 by the Competition (Amendment) Act, 2007. The amended Section reads as follows: –
Section 4. Abuse of dominant position. [(1) No enterprise or group shall abuse its dominant
position.]16 (2) There shall be an abuse of dominant position [under sub-section (1), if an enterprise
or a group.]17– (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 therefore; or (ii)
technical or scientific development relating to goods or services to the prejudice of consumers; or (c)
indulge in practice or practices resulting in denial of market access [in any manner];18 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– 98 Competition Law in New Economy (i) operate independently of competitive
forces prevailing in the relevant market; or (ii) affects 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) [(c)
“group” shall have the same meaning as assigned to it in clause (b) of the Explanation to section
5].19 Elements Constitute Dominant Position The dictionary meaning of the word ‘dominant’ is
‘overriding’, or ‘influential’. Second explanation to Section 4 defines ‘dominant position’ and
‘predatory price’. The elements that constitute dominant position are: – 1. a proposition of strength;
2. that position being enjoyed in a relevant market in India (both product and geographical markets);
3. and such a position that gives the enterprise the power to ‘operate independently of competitive
forces in the relevant market’, meaning thereby that it can at will, disregard market forces and
conditions and impose its own trading conditions, which will include the prices at which it is
prepared to supply goods or services.20 Comparative Law As stated earlier, ‘dominant position’ has
a specific meaning under Section 4 of the Competition Act, 2002, and in the European Community
Law, in Article 82, on which both the Indian Act and the Competition Act, 1998, UK, are based. It
does not contain the commonly understood connotations of dominant position, as constituted by
size or market share of an enterprise, though they are relevant in ascertaining dominant position.
Dominant Position A dominant enterprise is one that has the power to disregard market forces, i.e.,
competitors, customers and others and to take unilateral decisions that would benefit it and also, in
the process, cause harm to the process of free competition, injuring the customers by saddling them
with higher prices, limited supplies, etc. A dominant position is acquired over a period of time and
the many factors which may further the acquiring of a dominant position by an enterprise are –
technological superiority, access to certain intellectual property rights in the supply of the products,
early entry, weak competition, the nature of the industry, government regulations, etc. The Office of
Fair Trading (United Kingdom) believes that an enterprise cannot be in a dominant position when it
does not have substantial market player. 21 Abuse An enterprise abuses its dominant position when
it resorts to an anti-competitive practice to maintain or increase its position in the market, especially
when such practice is not a response to the market, and when it has a significant effect on
competition. In Hoffman-La Roche v. Commission22 the European Court has held that the concept of
abuse is an objective concept regarding 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 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. Competition
Law and ‘Abuse of Dominant Position’ –Issues and Approaches ... 99 Dominant Position in Relevant
Market In a particular case, before abuse can be established, it will be necessary to determine that
the enterprise is dominant. This involves two important exercises – first, to define the relevant
market, and secondly, to assess whether the enterprise is dominant in the relevant market. Relevant
Market The relevant market identifies the producers or services which are such close substitutes for
each other that they operate as a competitive constraint on the conduct of the suppliers thereof; it
sets the framework within which dominance is to be determined.23 A dominant position is always
with reference to a relevant market, both the relevant product and relevant geographic markets.
The determination of the relevant market is of crucial importance. ‘Relevant market’ means the
market which may be determined by the commission with reference to the relevant product market
or the relevant geographic market or with reference to both the markets.24 ‘Relevant geographic
market’ means 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 homogeneous and can
be distinguished from the conditions prevailing in the neighbouring areas.25 ‘Relevant product
market’ means 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.26 Conclusion The dominant position of an enterprise is a
question of fact to be determined in each case, taking into consideration a number of relevant
factors. Section 19(4) of the Competition Act, 2002 sets out the factors that ought to be taken into
consideration by the Commission while inquiring into the question whether an enterprise enjoys a
dominant position, within the meaning of Section 4. An enterprise may acquire a dominant position
over a period of time by its own efficiency in running the enterprise and also by the way the market
evolves. Acquiring a dominant position is not prohibited, only its abuse is prohibited. In recent years,
there has been a rapid growth in the amount of legislation with the object of securing a more
competitive business environment. Competition law or anti-trust law has thus assumed a more
prominent place as an area of study in business and management courses. It lies at the crossroads
between economic and social policy. Bibliography 1. Abir Roy and Jayant Kumar, Competition Law in
India (Eastern Law House Pvt. Ltd., 2008). 2. Competition Act, 2002. 3. Competition (Amendment)
Act, 2007. 4. D.M. Raybould, Comparative Law of Monopolies (E. Susan Singleton Ed., 1999). 5.
Hovenkamp, The Political Economy of Substantive Due Process (1988). 6. J.H. Agnew, Competition
Law [Allen & Unwin (Publishes) Ltd., 1985]. 7. Julious Stone, The Province and Function of Law. 8.
Richard Wsish & David Bailey, Competition Law (Oxford University Press 2102), 7th Edition. 9. Smith,
Wealth of Nations (W. Pickering, 1995). 10. T. Ramappa, Competition Law in India- Policy, Issues, and
Developments (Oxford University Press, 2006) 3rd Revised Edition Published in 2004. 11. Vinod
Dhall, Competition Law Today: Concepts, Issues, and the Law in Practice, (Oxford University Press,
2007). 100 Competition Law in New Economy References (Endnotes) 1. Julious Stone, The Province
and Function of Law, pp. 762,763. 2. D.M. Raybould, Comparative Law of Monopolies (E. Susan
Singleton Ed., 1999) pp. 3-4. 3. Smith, Wealth of Nations (W. Pickering, 1995). 4. Canada enacted its
first law in 1889 and some states of the United States too had earlier law but, on account of their
limited effectiveness, they have not acquired comparable significance in anti-trust history. 5. Section
1, Sherman Act, 1890. 6. Section 2, ibid. 7. Hovenkamp, The Political Economy of Substantive Due
Process (1988) 40 Stan L Rev 379 (417-419). 8. See Supra note 11. 9. See Supra note 13, at p. 15. 10.
United States v. Aluminium Co. of America, 148 F 2d 416; 2d Cir 1945. 11. Abir Roy and Jayant
Kumar, Competition Law in India (Eastern Law House Pvt. Ltd., 2008) p. 15. 12. Act No. 12 of 2003.
13. T. Ramappa, Competition Law in India- Policy, Issues, and Developments (Oxford University
Press, 2006) 3rd Revised Edition Published in 2004, p. 1. 14. Brahm Dutt v. Union of India (2005) 64
CLA 214 SC. 15. United Brands and United Brands Continental BV v. Commission of the European
Communities (1978) 1 CMLR 429 and Hoffman-La Roche v. Commission (1979) 3 CMLR 211. 16.
Substituted by the Competition (Amendment) Act, 2007 for “No enterprise shall abuse its dominant
position.” 17. Substituted by the Competition (Amendment) Act, 2007 for “under sub-section (1), if
an enterprise.” 18. Inserted by the Competition (Amendment) Act, 2007. 19. Inserted by the
Competition (Amendment) Act, 2007. 20. T. Ramappa, Competition Law in India- Policy, Issues, and
Developments (Oxford University Press, 2006) 3rd Revised Edition Published in 2004, p. 159. 21. Ibid,
pp. 160-161. 22. Hoffman-La Roche v. Commission (1979) 3 CMLR 211. 23. Vinod Dhall, Competition
Law Today: Concepts, Issues, and the Law in Practice, (Oxford University Press, 2007) p. 11. 24.
Section 2(r), the Competition Act, 2002. 25. Section 2(s), ibid. 26. Section 2(t), ibid. qqq Abuse of
Dominant Position in Indian Context: A Critical Analysis M.A. Saleem Ahmed* Abstract The
Competition Act, 2002 (as amended), follows the philosophy of modern competition laws and aims
at fostering competition and at protecting Indian markets against anti competitive practices by
enterprises. The Act prohibits anticompetitive agreements, abuse of dominant position by
enterprises, and regulates combinations (mergers, amalgamations and acquisitions) with a view to
ensure that there is no adverse effect on competition in India. Competition laws all over the world
are primarily concerned with the exercise of market power and its abuse. The term “market power”
is variously known as “dominant position”, “monopoly power” and/ or “substantial market power”.1
Dominance The Act defines dominant position (dominance) in terms of a position of strength
enjoyed by an enterprise, in the relevant market in India, which enables it to behave/act
independently of the market forces that determine its dominant position. In a perfectly competitive
market no enterprise has control over the market, especially in the determination of price of the
product. However, perfect market conditions are more of an economic “ideal” than reality. Keeping
this in view, the Act specifies a number of factors that should be taken into account while
determining whether an enterprise is dominant or not.2 Factors to Determine Dominant Position
Dominance has been traditionally defined in terms of market share of the enterprise or group of
enterprises concerned. However, a number of other factors play a role in determining the influence
of an enterprise or a group of enterprises in the market. These include: • Market share, • The size
and resources of the enterprise; • Size and importance of competitors; • Economic power of the
enterprise; • Vertical integration; • Dependence of consumers on the enterprise; * M.A., M.L.,
PGDLAL, Guest Lecturer, Government Law College, Chengalpattu, Tamil Nadu. Chapter 12 102
Competition Law in New Economy • Extent of entry and exit barriers in the market; • Countervailing
buying power; • Market structure and size of the market; • Source of dominant position viz.
Whether obtained due to statute etc.; • Social costs and obligations and contribution of enterprise
enjoying dominant position to economic development. • The Commission is also authorized to take
into account any other factor which it may consider relevant for the determination of dominance.
Abuse of Dominant Position It is the abuse of dominant position which is prohibited by provisions of
Sec. 4 of competition act. The term dominant position has been defined to mean a position of
strength enjoyed by an enterprise in the relevant market in India which enables him to, 1. Operate
independently of the competitive forces prevailing in the relevant market. 2. Affects its competitors
or consumers on the relevant market in its favor. The act does not consider dominance as anti-
competitive, but its abuse.3 The abuse of dominance which prevents, restricts or distorts
competition needs to be removed by competition law. The dominancy has a tendency to be abused.
The competition act of India does not have the word dominance, but the dominant position. It is the
ability of the enterprise to act independently. There are two important elements in sec. 4, 1. There
must be a dominant position 2. That position is abused In Anush Kumar Bhati vs. Sony Entertainment
Television, it was alleged that the opposite parties in their programme KBC-4 has not adopted fair
method in selecting candidates or choosing questions. It was held that they were not in a dominant
position because at the prime time of broadcast, viewers had choice to see whatever channel they
wanted according to viewership rating and hence, the opposite parties were not in a dominant
position consequent to which, matter was closed under Sec. 26(2) of competition act. The abuse of
dominant position affects the fair competition between firms and exploits the consumers and makes
it difficult for other players to compete with the dominant enterprise. Abuse of dominant position
includes, 1. Imposing unfair condition or price 2. Predatory pricing 3. Limiting production or technical
development 4. Certain barrier to entry 5. Applying dissimilar conditions to similar transactions 6.
Denying market access 7. Using the dominant possession to gain advantages in other markets
Previously, Sec. 4 was applicable to enterprises, but not to a group of enterprises. But after 2007
amendment, it is applicable to a group of enterprises also. Abuse of Dominant Position in Indian
Context: A Critical Analysis 103 Essential Elements for Dominant Position 1. How strong the entity is
in the market? 2. Relevance of position of the strength in the relevant market. 3. Whether this
position of strength enables the entity to take decision unilaterally? 4. Whether the entity can
impose its own trading conditions? When the 3rd and 4th factors are present, then it is very clear
that there is an abuse of dominant position. Adversely Affecting Factors 1. The entity is taking
decision without regard to market forces. 2. It will adversely affect the consumers by cutting down
free and healthy competition. Collective Dominance The dominant position need not be done by a
single entity. A group means where two or more entities join together and make them to be in a
position to control directly or indirectly over another entity. Traditionally, abuse of dominance
provisions have hinged on the danger of unwelcome practices in markets that resemble
monopolies.4 Monopolies have generally been deemed undesirable (except in rather specific
circumstances), pushing competition law to attack them whenever it can. The raising of a suspicious
eye towards collusion by rival enterprises arises out of a similar apprehension of increased market
concentration in an oligopoly. An oligopoly is a market with a limited number of large suppliers,
none of whom achieves market dominance. Suppliers in such oligopolies have an increased chance
of coming together to create an ostensible ‘joint monopoly’, with characteristics much like those of
an independent one. Two major perils of such a collusive situation may be identified. First, it would
lead to an effective break-down of the competitive process, a process which enjoys the presumption
of essentially despite criticism from some corners. Second, it would allow the participants thereof to
contort the market to their favour, as is the wont of a monopoly. Competition Law regimes combat
the former through explicit prohibitions on ‘anti-competitive’ agreements on price-fixing,
geographical division and the like, all at the stage of the existence of the agreement itself.
Traditionally, these provisions were understood to have the mandate of controlling collusive
behaviour, while abuse of dominance provisions were understood to be restricted to monopolistic
practices by single entities.5 Unfortunately, this understanding has severely curbed the ability of
enforcement authorities to check a monopoly-like contortion of the market. Extending abuse of
dominance provisions to encompass those situations where independent companies, in acting
together, create situations of dominance should logically serve to remedy this defect. Thereby, when
several independent companies maintain economic ties of such a nature that they are able to adopt
similar practices in a market which render them immune to the competitive forces therein, even if
they would be unable to do so individually, they are considered jointly dominant in that market. This
would make it possible to punish, for instance, the hidden charges placed by most telecom operators
today – none of whom dominate the market by themselves. With its focus on the behavioural
element of abuse rather than on concentration per se, importation of this concept theoretically
serves to sidestep the express necessity of agreements in anticompetitive agreement provisions.
Legally, however, the treatment of collective dominance appears somewhat confused world over.
The test that European Economic Community jurisprudence has supplied is an insufficient one –
necessitating that firms, to be dominant jointly, must show ‘connecting factors’ that allow them to
act similarly in a relevant market, 104 Competition Law in New Economy in doing which they would
be able to function independently of the competitive forces in the market.6 No effectual objective
parameters have been developed to determine where such dominance exists. In practice, factors
used to demonstrate collusive behaviour under anti-competitive agreement provisions are often re-
hashed to prove the existence of ‘economic links’. Consequently, the practical utility of the addition,
other than in specific circumstances has thus far been limited. The major conditions for Collective
Dominance7 is, 1. When two or more entities are exercising 26% or more of the voting rights of
another entity. 2. They are able to appoint more than 50% of directors on board. 3. Where they are
managing other enterprises or business. If any of the above three points are proved, then there is a
collective dominance. Factors to be Considered 1. Market share – Percentage of the share, the entity
is holding in the market. 2. Resources of the enterprises 3. Resources of the competitors 4.
Commercial advantage 5. Economic power 6. Sources of funding 7. Vertical integration 8. Storage
facilities – For example, warehouses 9. Dependency of consumers on the enterprise 10. Monopoly
11. Entry barriers 12. Social obligations of the entity 13. Any other factors as the commission deems
fit. Different Types of Abuse 1. Unfair pricing – predatory pricing is possible if a firm is in dominant
position 2. Restricting development – limiting other entities to use the technical advancements 3.
Denying access to market 4. Making the external factors to conclude on the contractual subjects
Predatory Pricing The practice of predatory pricing involves price cutting with the intention of
eliminating competition by driving out the competitors in the market. Predatory pricing is classified
under Section 48 as an abuse of dominance. Stated in simple terms, Predatory Pricing refers to a
practice of driving rivals out of business by selling at a price below the cost of production.9
Predatory pricing is a commercial strategy by which a dominant firm first lowers its price to a level
which will ultimately force its rivals out of the market. When the latter have been successfully
expelled, the company can raise the prices again and reap the rewards.10 However, the simplicity of
the definition masks the extremely complicated nature of this concept. Across jurisdictions, there is
little agreement whether the practice of Predatory pricing really exists and whether it should be
treated under antitrust/competition laws. Abuse of Dominant Position in Indian Context: A Critical
Analysis 105 The main challenge in penalising Predatory pricing is that it is hard to distinguish
between fair, aggressive pricing (which is an essential ingredient of competitive markets) and unfair,
predatory pricing.11 The United States Supreme Court has expressed doubts about the likelihood
that firms would engage in below-cost pricing. • First, a decision to engage in below-cost pricing is
very costly, as it is unclear how long the prices have to be set below cost in order to drive out
competitors. • Second, the last firm standing must be able to raise prices to an anticompetitive level
so as to recoup the losses it has suffered. Almost inevitably high prices invite new entrants, reducing
the predator’s profits, making the strategy unworkable. Given the considerable cost, uncertainty and
risk present in any decision to engage in a belowcost pricing campaign, the United States Supreme
Court reached the conclusion that ‘predatory pricing schemes are rarely tried, and even more rarely
successful.’12 Predatory pricing is analyzed under antitrust/ competition laws as illegal
monopolization or attempt to monopolize. As stated earlier, under the Act, it is dealt with under
Section 4 which prohibits the ‘Abuse of Dominant Position’ by an enterprise.13 ‘Abuse of Dominant
Position’ refers to the conduct of an enterprise14 that enjoys a ‘dominant position’ which is defined
under the Competition Act to mean 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) affects its competitors or consumers or the relevant market in its favour.
Conduct amounting to an abuse of dominant position may also be such that it affects its competitors
or consumers or the structure of the market in its favour. This results when abuse of a dominant
position would impair the ability of the competitors to compete as they would and consumers
would, as a consequence, have to accept higher prices or reduced quality. Where the freedom of
those constituting a market is eroded in this manner, the structure of the market is deemed to have
been altered in favour of the dominant enterprise abusing its position. PREDATORY PRICING is an
exclusionary practice. Although the enforcement provisions of the Act have not yet been notified, it
can be expected that the CCI when interpreting Section 4 of the Act will look into an allegation of
PREDATORY PRICING not only when it has actually produced the pursued exclusionary effect, such as
the elimination of competition or creation of an entry barrier, but also when such a conduct is ‘likely’
to attain these goals. A similar approach is followed in the European Community where the
European Court of Justice has held that it must be possible to penalize predatory pricing whenever
there is a risk that competitors will be eliminated since the aim pursued, which is to maintain
undistorted competition, rules out waiting until such a strategy leads to the actual elimination of
competitors. Once a predatory price allegation is established, the enterprise would be said to have
abused its dominant position. Where after inquiry, the CCI finds that an enterprise in a dominant
position is in contravention of the provisions of Section 4, it may pass any of the orders specified
under Section 27 of the Act and may further under Section 28 of the Act direct the division of an
enterprise enjoying a dominant position to ensure that such an enterprise does not abuse its
dominant position. Consequences of Abuse The competition commission after an enquiry into abuse
of dominant possession may pass all or any of the following orders under Sec. 27 of the Competition
Act, 1. Direct an enterprise with dominant position to discontinue such abuse. 2. Impose penalty not
exceeding 10% of average turnover for the last 3 preceding financial years. 3. Direct the enterprises
to abide by such other order as the commission pass. 4. In addition to the above said orders, the
competitive commission has the power to order division of enterprise enjoying the dominant
position to ensure that it does not enjoy further dominant position under Sec. 28 of Competition Act.
106 Competition Law in New Economy Concluding Remarks Thus, Competition law and policy, in
India, seeks to be a means to achieve the ends of efficient allocation of resources, technical progress,
consumer welfare and regulation of concentration of economic power. It can be seen that the Indian
competition law mostly follows the EU model and so its influence is evident in the Indian provisions
regarding dominant position also. But the Indian definition of dominant position differs from the EU
definition in some aspects. It is important to recognize that the Competition Act does not frown
upon positions of market dominance per se, unlike the Monopolies and Restrictive Trade Practices
Act, 1969. It is not illegal for an undertaking to have a dominant position; However, where a firm is
found to be in a dominant position it has a special responsibility not to allow its conduct to impair
genuine competition on the common market.