The competition law is one of the fast growing legal jurisprudence and grown at tremendous pace in last 60 years and has continued to evolve in last 20 years. India too has moved from the MRTP regime to more elaborate competition law regime by enacting the Competition Act, 2002 and making the Competition Commission of India operative in last 6 years (CCI was set up in October 2003 but was made operational in May 2009). The new law embodies the philosophy of modern competition law. The new law prohibits anti-competitive agreements, abuse of dominant position by enterprises and regulates combinations (acquisition, acquiring of control and Merger and acquisition), which causes or are likely to cause an appreciable adverse effect on competition within India. This article will talk about the abuse of dominance and the CCI’s view.
Under Competition Act 2002, Dominant Positionis defined as the position of strength, enjoyed by an enterprise in the relevant market, in India which enable it to:
There are three stages to determine the abuse:
The relevant market must have both the product and geographical aspect and former must be clearly delineated. There are three main principles which define the market: Demand substitutability, Supply substitutability and potential competition.
In Kansan News Pvt Ltd Vs Fast Ways (CCI Order dtd 03.07.2012), CCI opined that Cable TV service was a distinct product and was not a perfect substitute of other platforms of TV channel transmission such as DTH, IPTV etc. CCI noted that change in the price of cable would not affect its market in comparison to the DTH since the characteristics of the two platforms are entirely different.
There are various economic tests applied by the Authorities to determine the relevant markets – one being SSNIP test (Small but Significant, and Notransitory Increase in Price). This test seeks to establish the smallest product group (and geographical area) such that a hypothetical monopolist controlling that product group (in that area) could profitably sustain ‘supra competitive’ prices i.e. prices which are small but significant amount above competitive levels. In Indian context, the application of this test is not uniform and CCI has adopted random, pick and choose policy which leads to uncertainty and unpredictably about the jurisprudence of competition regime in India. In NSE Vs MCX case (CCI case n. 13 of 2009) found the application of SSNIP test to be technical, arcane and esoteric and said that it should be applied only in combination cases. But in complete volte face, in DLF case, the CCI said that SSNIP is often applied in abuse of dominance cases and concluded (without any economic analysis) that SSNIP will lead to same relevant market as delineated otherwise by CCI. However, SSNIP test was nowhere referred to in the Sun Direct TV Case. There are other economic tests like ‘elasticity of demand’, ‘Price –correlation Analysis, and Critical Loss Analysis.
Thus there are three broad elements which help in determining relevant product market: Price increase, reaction of purchasers, and smallest size requirement. In Indian context, the Act lists the factors that must be considered by the Authority while determining relevant product market:
Act provides that following factors must be considered while determining relevant geographical market:
Here again, there are three factors – demand side, supply side and imports. Principles applied are same as those while determining relevant product market. The CCI in the Coal India Case (Case no. 3, 11, 59 of 2012) has taken view that the relevant geographical market in an abuse of dominance case has to be India and cannot be global in any manner.
The decision in Ajay Devgan Vs Yashraj Productions (Case no. 66 of 2012) raises concerns whether the CCI should have determined the all theatres as relevant market instead of restricting to single screen theatres. CCI assumed that cities and large towns are predominantly dominated by multiplexes and single screen theatres are mostly prevalent in small towns and villages. This means that consumersin rural areas would stand to lose the right of choice as to what film to watch if the single screen theatre in their area could only screen one film over a particular period of time as was the case in the current dispute where single screens were compelled to buy rights to telecast the movie ‘jab takhaijaan’ instead of ‘son of sardar’.
Regulatory barriers also determine the geographical extent of the relevant market in as many cases, these could be trade barriers like quantitative import restrictions or import duties that add to the switching and transport costs, thus reducing the geographic boundaries of a market.
The concept of the dominance is broader than economic power over price. It is not same as economic monopoly, although a monopoly would clearly be dominant. The general definition of dominant position or market power is the ability of an enterprise to behave independently of its competitors and the absence of competition or constraint from the conduct of competitors. In Kapoor Glass, the CCI stated that independence in the context of dominance does not mean absence of any other player in a relevant market, but that enterprise whose dominance is being ascertained has market power and is in a position to influence competitive forces to its own advantages and to the detriment of others.
In India, while market share remains an important indicator of dominance, the CCI has considered other factors like size and resources of enterprise, size and importance of competitors, and legal monopolies and entry barriers etc.
In NSE Case, the NSE was held to occupy dominant position on basis of its overall financial strength and level of vertical integration in the stock market in spite of the fact that market share of NSE based on transactional volumes was less than market share of MCX.
Similarly, in DLF case, due consideration was given to factors like statements issued by DLF in public domain, DLFs vast amounts of fixed asset ad capital, turnover, brand value, strategic relationship, wide sales network etc. In EU, market share has been recognised as one of the prime indicator of dominance.
‘Abuse of dominance’ is not defined in most competition laws. However, the law only enumerates some conducts which amount to abuse. It may be noted the list of practices in various laws amounting to abuse is generally illustrative and not exhaustive. Treaty of European country prescribes certain conducts. Indian law as well prescribes certain conducts. The basic difference between Indian law and EU law is that conduct specified ‘may’ amount to abuse in EU law whereas the conduct specified ‘shall’ amount to abuse of dominance in India law. There is no statutory defence available to a dominant enterprise like objective justification, introductory pricing in new products etc. under the India law. In the Act following conduct of dominant enterprise are considered abusive:
The Competition Commission of India has charted its own course while deciding the cases and is not following the EU or US jurisprudence. The adaptability shown by the CCI to the Indian conditions is remarkable and is leading to growth of awareness in the corporate world to engage in fair competition
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