Pro-competitive factors

• Accrual of benefits to consumers;
• Improvements in the production or distribution of goods or provision of services; and
• Promotion of technical, scientific and economic development by means of the production or distribution of goods or provision of services.

In addition to the above factors, Position of “Dominance” plays an important role in determination of AAEC. Dominance of a party is determined by: –

• Ability of the enterprise / group to ‘operate independently of competitive forces’ prevailing in the relevant market; or
• Ability of the enterprise / group to affect competitors / consumers / the relevant market ‘in its favour

A party in Dominant Position is more likely to cause AAEC. Dominance is always determined in relation to “relevant (product and geographical) market”

CCI’S VIEW ON RPM

CCI has dealt with RPM in a few cases:

1) Suggestion of prices to the distributors and monitoring prices in the downstream market would not constitute a violation of the Act.

2) No adverse effect on competition can be considered where there are a large number of competitors in the identified product market, and the original seller does not operate from a position of strength.

3) For RPM to be in contravention of the Act, it is also necessary that any discount control mechanism, which restricts provision of discounts, must be enforced uniformly across board and not merely on a single player.

4) An agreement falling under Section 3(4) of the Act requires to be analyzed under the “rule of reason” to gauge whether such an agreement has the potential to cause an AAEC and thus can be held as an anti-competitive agreement under Section 3(1) of the Act. Thus, to establish a contravention under Section 3(4) read with Section 3(1) of the Act, two conditions need to be fulfilled – (i) the agreement/understanding ought to exist (ii) such agreement/understanding has caused or has the potential to cause AAEC. Section 19(3) lays down the analytical framework to examine whether an agreement/understanding has or is likely to have an AAEC. Only those agreements/understanding whose net effect is anti-competitive i.e. if the anti-competitive effects exceeds the pro-competitive effects, are prohibited by the Act.7

5) In Hyundai Case, CCI had imposed a hefty fine on Hyundai for amongst other things, imposing RPM on its dealers. Hyundai had engaged mystery shopping agencies to monitor extra discounts offered by dealers to their customers and accordingly imposed penalty on such dealers. CCI held that these impugned agreements/ arrangements did not result into accrual of any consumer benefits; rather, the same resulted into denial of due benefits to the consumers as they were made to pay high prices. Further, the said arrangements and agreements did not result into any improvements in production or distribution of goods or provision of services. Further such arrangements have also resulted in creation of barriers to the new entrants in the market as they also took into consideration the restrictions on their ability to compete in price competition in the intra-brand competition of Hyundai brand of cars. Therefore, the Commission was of the opinion that Hyundai had contravened the provisions of Section 3(4)(e), read with Section 3(1) of the Act. However, the decision was reversed by NCLAT on the ground that relevant ‘geographic market’ or a ‘relevant product market’ were not determined by CCI.

6) A ‘resale’ is fundamental to an RPM arrangement in case where there is no resale of services by drivers of Uber and Ola. Instead, it found that the drivers were agents of Uber and Ola, with the companies offering composite services – characterized by a single transaction between the rider on the one hand and Ola or Uber on the other. It also noted that such dynamic pricing often results in prices lower than those charged by independent taxi drivers, which also shows that there is no fixed floor price as such.