The Competition Act, 2002 was introduced repealing the earlier legislation Monopolies and Restrictive Trade Practices (MRTP) Act, 1969, wherein under the Competition Act, 2002 a new authority was established as Competition Commission of India to administer the compliances in relation to competition in India.
Abuse of Dominant Position
“Dominant position” means a position of strength, enjoyed by an enterprise, in the relevant market, in India, which enables it to—
In general sense the word dominant position refers to a situation wherein the enterprise is in a position to dominate the market independently and also affects its competitors.
Abuse of dominant position is a condition wherein an enterprise or a group of enterprises uses its position in the market in an exclusive manner. The Competition Act, 2002 provides a list of relevant practices that will eventually comprise abuse of a dominant position and, such circumstances are disallowed. The Act also states that having dominant position is not bad but the abuse of such dominant position is considered as bad or against the law and competition.
Wherein section 4 states as follows:
(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
(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.”
Factors Determining dominant position
According to section 19 () of the Competition Act, 2002, the following factors shall be kept in mind by the CCI while determining dominant position of an enterprise:
1. enterprise’s market share;
2. resources and size of the enterprise;
3. importance and size of the competitors;
4. economic power of the undertaking including commercial advantages over competitors;
5. Consumer dependence on enterprise;
6. dominant position or monopoly whether acquired as by any statute or being a Government company or a PSU or otherwise;
7. 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;
8. buying power;
9. size of market and market structure;
10. social costs and social obligations;
11. relative advantage, by the enterprise enjoying a dominant position having or likely to have an appreciable adverse effect on competition, by way of the contribution to the economic development;
12. any other factor considered relevant for the inquiry by CCI.
Relevant decided case laws for Dominant position
In Uber India Systems Private Limited v CCI (2019), the apex Court held that the losses made by Uber India Systems Private Limited, per trip were prima facie indicative of abuse by way predatory pricing as well as of dominance itself.
In ESYS Information Technologies Pvt Ltd v Intel Corporation & Ors (2014) (Intel case), the Competition Commission of India dismissed claims made under section 4 based on distribution agreements of Intel in part because the intel products distributors are not precluded from dealing in the products of its competitors and they were found dealing in the competing products and therefore ‘there is no question for foreclosure of market for Intel’s competitors.
In Google LLC & Anr vs Competition Commission of India, the CCI held that the prominent display and pre-determined of Google’s own products in the search results was an discriminatory/unfair condition in the provision of services. Further the Hon’ble NCLAT upholds penalty of INR. 1,337 crore on google for abuse of dominant position in Android Mobile Device Ecosystem. This case is currently pending with the Hon’ble Supreme Court of India.
Consequences of Abuse of Dominant position
According to section of the Competition Act, 2002, the CCI, after an inquiry into the abuse of dominant position, may pass all or any of the following orders:
1. direct an association of enterprise or enterprise/undertaking having dominant position involved in abuse of such dominant position to discontinue such abuse;
2. impose penalty not exceeding 10% of the average of the turnover for the last 3 preceding FY’s, upon each of such enterprises or person which are parties to such abuse;
3. direct the undertaking or association of enterprise concerned to abide by such orders as the CCI may comply and pass with the directions, including payment of cost, if any.
In addition to the aforesaid orders, the CCI has the power to order division of enterprise enjoying dominant position to ensure that it does not abuse its dominant position in accordance to the provisions of section 28 of the Competition Act, 2002.
Crediting sums realised by way of penalties
According to section 46 of the Competition Act, 2002, All sums that are realised by way of penalties under this Act shall be credited to the Consolidated Fund of India.