Factors that competition commission of India considers while determining Dominant Position of an Entity
Introduction: Understanding the criteria used by the Competition Commission of India (CCI) to assess dominant positions of entities is crucial in ensuring fair competition in markets. These criteria, outlined in Section 19(4) of the Competition Act, 2002, provide a comprehensive framework for evaluating dominance. Additionally, insights from specific CCI orders shed light on factors such as market share, economic power, entry barriers, network effects, and switching costs, which play pivotal roles in determining dominant positions.
Dominant position determined by considering factors in the following CCI Orders:
155. The DG has examined the dominance of Google in the market for app stores for Android smart mobile OS in India. After analysis of various factors such as substantial market share enjoyed by Google, quantity and popularly of apps available in Google Play Store, existence of significant entry barriers, importance of Play Store from users’ perspective, existence of network effect in the operation of app stores, lack of countervailing buyer powers of OEMs, etc., the DG has concluded that Google Play Store is in dominant position in the market for app store for Android OS in India. (Umar Javed v. Google, 2022) .
Section 19 (4) of Competition act, 2002 lays down factors for dominance. CCI can have regard to any or all of them.
(a) market share of the enterprise;
(b) size and resources of the enterprise;
(c) size and importance of the competitors;
(d) economic power of the enterprise including commercial advantages over competitors;
(e) vertical integration of the enterprises or sale or service network of such enterprises;
(f) dependence of consumers on the enterprise;
(g) 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;
(h) 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;
(i) countervailing buying power;
(j) market structure and size of market;
(k) social obligations and social costs;
(I) 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;
(m) any other factor which the Commission may consider relevant for the inquiry.
The CCI in Umar Javed v. Google LLC 2022 (upheld by NCLAT) assessed dominance of google in the many relevant product markets that were delineated basis the following factors :
a) Control of Google over Android
b) Market Share Analysis
c) Intra brand competition
d) Necessity of a Google Account
f) Entry barrier in OS market
g) Lack of countervailing buyer power
The CCI in Federation of Hotel & Restaurant Associations of India and Ors. Vs. MakeMyTrip India Pvt. Ltd. and Ors 2022 :
It held, among other factors, Network Effects as an important factor to determine dominance.
232. Network effects play a pivotal role in dominance assessment. As the DG has pointed out, MMT-Go has more than 45,000 properties listed on its platform. Due to such wide choice available on MMT-Go’s portal, consumers also prefer MMT-Go to other portals, which in turn incentivises hotels/franchisee service providers to list on it. Further, MMT-Go offers several benefits and features, which coupled with its market position has resulted in network effects. In the kind of market under consideration, such network effects also create insurmountable entry barriers for existing as well as potential market participants.
The CCI in In Re Whatsapp (privacy policy case), 2021 considered “lock in” effect as a factor for dominant position:
In India, the network effects have indubitably set in for WhatsApp, which undergird its position of strength and limit its substitutability with other functionally similar apps/platforms. This, in turn, causes astrong lock-in effect for users, switching to another platform for whom gets difficult and meaningless until all or most of their social contacts also switch to the same other platform. Users wishing to switch would have to convince their contacts to switch and these contacts would have to persuade their other contacts to switch. Thus, while it may be technically feasible to switch, the pronounced network effects of WhatsApp significantly circumscribe the usefulness of the same.
The CCI in XYZ (Confidential) and Ors. Vs. Alphabet Inc. and Ors. 2022 considered switching costs:
91. The DG has also examined the switching costs associated with shifting onto a competing OS such as consumer inertia, satisfaction with the characteristics of Android devices and brand loyalty which may prevent any switching to the competing OS. It is noted that users face considerable switching costs while changing an operating system. This factor further adds to the hegemony of Google in the delineated relevant market for licensable OS for smart mobile in India.
Conclusion: The Competition Commission of India employs a multifaceted approach to determine dominant positions of entities, considering various factors outlined in Section 19(4) of the Competition Act, 2002. Insights from CCI orders further elucidate the significance of factors such as market share, economic power, network effects, and switching costs in assessing dominance. By comprehensively evaluating these factors, the CCI aims to uphold fair competition and prevent monopolistic practices in markets, thereby promoting consumer welfare and market efficiency.
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