Abuse of Dominant Position under Section 4 of Competition Law

ABUSE OF DOMINANT POSITION UNDER SECTION 4 OF COMPETITION LAW

INTRODUCTION

When a firm tries to overtake another firm and participates in action that is done with an intention to dispense with or discipline a contending firm or to dissuade future progress by new contending firms, uses methods not suitable to be used in a fair market environment, and resulting to such act, the competition is fairly mitigated or lessened, or is completely wiped out, is said to “abused” their respective dominant position.

Since the Competition Act 2002 has been tabled; it has not only governed competition between firms in India, but also focused on curbing monopolistic approach, abuse of dominance, and penalizing anticompetitive conduct. Competition law tries curbing this abuse of irrational and arbitrary power and maintains a suitable fair-trade market environment, true competition between firms, and helps smaller firms to remain in the competition. For this, the Competition Commission of India was established as an executive authoritative body to regulate the enforcement. Section 4 of the said act talks about various methods through which a firm can place itself in a dominating position and thereby, abuse such position and due to this act, make suffer the smaller firms. As per the concept, it is important to establish dominance, as abuse cannot take place without dominance.

This act is considered as “abusive or improper exploitation of market” aimed at restricting competition.

LEGAL ANALYSIS

Under Section 4 itself, regulation for “Abuse of Discretion” is provided. The examination under the Act is to deny rehearses that have a calculable unfavorable impact on rivalry in India. Dominant position can be defined as “dominant position (dominance) in terms of a position of strength enjoyed by an enterprise, in the relevant market in India, which enables it to:

1. operate independently of the competitive forces prevailing in the relevant market; or
2. affect its competitors or consumers or the relevant market in its favor.”[1]

Dominance has centrality for rivalry as it was at the point when the significant market has been characterized. The term relevant market signifies “the market that might be controlled by the Commission regarding the pertinent item advertise or the important geographic advertise or regarding both the business sectors”. The Act mentions a few variables of which any one or all will be considered by the Commission while characterizing the applicable market.

To define a relevant market, the act mentions certain key features that can be taken into consideration by the commission. It may include market share, economic power, etc. The firm does not need to fall under every key feature, as even a single feature is enough for one to be considered under the relevant market. Also, it is the discretionary power of the commission to figure out any other key feature for the characterization of a relevant market in which there can be an introduction of dominance.

ACTS RESULTING IN DOMINANCE

Section 4(2) of Act prevents following acts resulting in abuse of dominant position:

1. Impose unfair or discriminatory condition or price in sale and purchase of goods or services;
2. Limit or restrict;
3. Production of goods or services
4. Technical or scientific development relating to goods or services to the prejudice of consumers;

Indulges in practice resulting in a denial of market access;

1. Make the conclusion of contracts subject to acceptance by other parties;
2. Use its dominant position in one market to enter into other relevant markets;

Clear from this, none of the abovementioned acts should be performed by any of the firms. In case done, they shall be considered to have committed “Abuse of Dominant position”.

But it is important to note that holding a dominant position in the market per se is not wrong, but its abuse is. The act does not ask one to not hold a dominating position, as it is very difficult to create an ideal market condition. Either firm shall, at a specific be, be dominant over the other. But the act prohibits the firm to dominate over the other, or to say, abuse its power and be involved in Exploitative and exclusionary practices. Secondly, these said points are not exhaustive in their nature. The case shall be decided on merits, and whether a certain firm has been involved in the abuse of their power shall be depended upon the facts and circumstances of the case. This was held in the landmark judgment of Shri Neeraj Malhotra, Advocates v. North Delhi Power Ltd.[2] This was an interpretation of section 4 of the act, as observed by CCI.

EXPLOITATIVE AND EXCLUSIONARY PRACTICES

Though it is not clearly expressed, yet Section 4 covers both, exploitative and exclusionary practices. These steps, if taken by a firm, can be considered under the umbrella of “Abuse”.

Exploitative Practice– In case there is an exploitation of costumers by setting up higher prices, is an exploitative practice by the firm.

Exclusionary practice– to take possession or to foreclose a firm, a certain value method is used by the dominant firm, is exclusionary practice. A prime example of the exclusionary method is predatory pricing.

The “predatory price” under the Act means “the sale of goods or provision of services, at a price which is below the cost, as may be determined by regulations, of production of goods or provision of services, with a view to reduce competition or eliminate the competitors”[3]

This pricing can be established after certain key features. The firm must be in a dominant position and must price the product in the relevant market at a lower cost. This shall substantially decrease the competition and costumers will be easily attracted to the new pricing by the dominant firm, thereby failing the older trust of firm and hence, destroying true competition in the market.

The concept of Whether a practice is Exploitative, Exclusionary or both, was observed in HT Media Ltd v Super Cassettes Ltd (2014) (HT Media case)[4], where it was held that Super Cassettes Industries Limited (SCIL) has committed both exploitative and exclusionary practices, while imposing Minimum Commitment charges (MCC), and was held to have abused its dominant power.

It is the duty of the Competition Commission of India (CCI) to resolve the disputes and control the unfair trade practices in the market. Although, the sovereign functions of governments or policymaking, is not the power of CCI.

CONCLUSION

Section 4 not only maintains a smooth fair trade in the market but also restricts discrimination in trading. It imposes certain limits and restrictions on all the firms, which result in prohibiting abuse of such dominance.  An endeavor in a predominant position is qualified additionally to seek after its own advantages. Notwithstanding, such an endeavor takes part in unhealthy conduct whenever it utilizes the open doors emerging out of its predominant situation so as to receive business profits which it would not have procured if there had been typical and adequately viable rivalry. End impact shall be considered to check the motivation of the party in view of this section. For example, regardless of whether access to a market has been denied not.

 As it were, Section 4(2) can also come into action when a similar attempt by numerous entities resulted in whether the entry of other firms was prohibited by their actions. According to the Act, if a firm confirms its presence in trade practice resulting in restriction for other firms’ entry in the market, it shall be an abuse of its position.

Conclusively, it can be assumed that in absence of section 4 of the act, the major element of the fair competition shall go missing and may result in chaotic competition, thereby explain the need and importance of the section, as well as the act.

[1] THE COMPETITION ACT, 2002. Section 4, Explanation (2)(b).

[2] Shri Neeraj Malhotra, Advocates v. North Delhi Power Ltd, Case No. 06/2009.

[3] THE COMPETITION ACT, 2002. Section 4, Explanation (2)(a).

[4] HT Media Ltd v Super Cassettes Ltd (2014), Case No. 40 of 2011.