All economic theories are heavily based on Aassumptions and the first assumption of every economic theory is the assumption of perfect competition. According to Adam Smith’s concept of invisible hand, even if there exists any variation from the perfect competition in the market, the market forces will work out a way to bring an equilibrium thereby restoring perfect competition. However, in the real world perfect competition is rare if not completely absent and this gives rise to the need of market regulators to maintain fairness and competition; this role is played by government regulators like Antitrust Department in United States and Office of Fair Trading in Britain. In India, this vital function of ensuring healthy competition and fair market conditions is performed by the Competition Commission of India (“CCI”).

A quick glance at various recent decision of the CCI makes it apparent that one of the most common issues arising in the healthy functioning of Indian markets is the abuse of dominant position. With respect to abuse of dominant position, it has been stated time and again that “dominance per se is not prohibited under the Competition Act, but its abuse is.” Now the imperative question is what qualifies as abuse? Section 4 of the Competition Act, 2002 (“Act”) prohibits abuse of dominant position by an enterprise or group, i.e. it prohibits a position of strength enjoyed by an enterprise in the relevant market which allows it to (a) operate independently of competitive forces prevailing in the relevant market; (b) affect its competitors or consumers or the relevant market in its favor. The Act further provides for factors that may be taken into account while defining the relevant market. The CCI may determine this with reference to the relevant product market, and/or relevant geographic market. The Act also gives an exhaustive list of practices that shall constitute abuse of dominant position and, therefore, stand prohibited.

This abuse of dominant position under the Indian competition law can be of two types, exploitative and exclusionary. Exploitative abuse is when enterprise’s unfair and discriminatory practice generally affects the consumers, i.e. the consumer base of the particular goods or services is exploited. Recently, Supreme Court admitted one such case against Microsoft Corporation, where it was contended that Microsoft is using its dominant position in the market by offering identical products at different cost. Last year, CCI imposed a heavy fine on DLF for imposing highly arbitrary, unfair and unreasonable conditions on the apartment allottees.

While, exclusionary abuse is when unfair practices or discriminatory pricing is adhered to by the dominant enterprise, which can affect the market competition, even to the extent of driving the competitors out of the market. CCI in its decision last year held that National Stock Exchange (“NSE”) has abused its dominant position in the currency derivates segment to oust competitors. In this case NSE claimed that its currency derivative segment was functioning on a low variable cost and low fees and no membership deposit was an endeavor to encourage large participation. In another case, pertaining to a tender worth Rs. 24,000 crores by Oil and Natural Gas Corporation last year, the Commission held that “forced under-pricing is not predatory pricing”. Further, it was alleged by HLS Asia Ltd. that under pricing in tender amounts by Schlumberger does not leads to predatory pricing, considering the present, not so good market conditions.

However, on analyzing this position, one may opine that Schlumberger escaped its liability because of the prevalent market conditions and NSE incurred liability for cross-subsidization. It is imperative to mention here that as of now, there is no straight jacket formula to determine the abuse of dominant position. Besides this, Section 28 of the Act, empowers the commission to breakup a dominant enterprise to prevent it from abusing its dominant position, without even requiring the proof of such abuse.

This brings us back to square one, that is, dominant position is not prohibited but its abuse is, along with its probable abuse. The ability of CCI to penalize this dominance per se gives rise to legitimate concerns. Most competition legislations like in Europe and United Kingdom, and also in India, do not provide for this determination, but mere enumeration of prohibited conducts. The underlying concern here is therefore, to explicitly and clearly lay down the criteria to define dominance and its abuse, thereby empowering the regulatory authority around the world, including India, with the power to rectify the defect in the market and restore equilibrium, and if not equilibrium than a position close to equilibrium.