Abuse of Dominant Position Under Competition Law

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THIS ARTICLE WAS WRITTEN BY VARSHA JHAVAR, A STUDENT OF  HNLU.

Introduction:

Fairness and level playing fields for each of the participants in the market are important for its sustainability and advancement. At the point, when there is perfect competition in the market, the buyer is sovereign, as his welfare is increased. In any case, in actuality the markets are flawed and the imperceptible hands in the Adam Smith’s hypothesis not always supports the buyer’s interest. Thus we require an external regulator to keep up contestability and fairness in markets.

The Competition Act, 2002 aims at fostering competition, not stopping it, but regulating it and making sure that the activities of business entities do not have adverse impact on the market. Its three important features are prohibition of anti-competitive agreements, abuse of dominant position and regulation of combinations.[1]Section 4 of the Competition Act, 2002 deals with abuse of dominant position. Abuse of dominant position may be understood as referring to conditions in which improper means are resorted to maintain or achieve position of economic strength or market power or where such position is misused to attain benefits.

There are three stages of abuse handling:

1.Identifying Relevant Market: It is the first step and it involves the analysis of the product, the geographic market as well the legal provisions. Product market has been defined in section 2(t) of the Competition Act, 2002 as comprising all products or services regarded as interchangeable or substitutable by the consumer, because of features of the products or services or their price or use. The geographic market has been defined in section 2(s) of the Competition Act, 2002 as the area in which the conditions of competition like supply and demand of goods and services are noticeably homogenous and are distinguishable from conditions in the neighbouring areas.

The Competition Commission of India has in certain cases restricted the relevant market to particular suburbs like in Belaire Owners’ Association v DLF Limited[2], while in other cases included all of India as the relevant market.[3]

2.Determining Dominance:The next step is the determination of dominant position. An enterprise is said to be in a dominant position under section 19(4) of the Act, on the basis of the market share, size and resources of the enterprise; size and importance of the competitors, economic power, commercial advantage over the competitors, independence of consumers, entry barriers etc. which enables it to have a substantial adverse effect on the competition. The position enables it to operate without worrying about its competitors and can affect the competitors or consumers or the relevant market in its favour.

3. Establishing Abuse: The next step is finding evidence of the abuse. According to section 4 of the Act, abuse can be identified on the basis of imposition of conditions by the entity for product production, price, transaction and indulges in practices resulting in denial of market access to its competitors. The dominant enterprise may also use its position in relevant market to enter into another market. The just competitive practices employed by entities to compete with their competition, cannot be called abuse of dominant position. Entities can be exempted for the abuse of dominant position under section 28 of the Act, if they there is transfer of property, rights, liabilities or discharge and reduction of liability, the formation or winding up of an enterprise or the amendment of the memorandum of association or any other instruments regulating the business of any enterprise.

Inquiry into dominant position of enterprise:

Section 19 of the Act states that, Commission on its own motion or on receiving of information, it may enquire into contravention of abuse of dominant position. The section lists the factors which have to be taken into consideration while determining the effects of an agreement and the factors to be regarded for understanding whether an enterprise enjoys dominant position. Section also defines relevant product market and relevant product market.

Orders by Commission after inquiry into abuse of dominant position:

Section 27 of the Act states that, if after conducting enquiry under section 19the court finds than an agreement is in abuse of dominant position, the court can pass any or all orders directing enterprises from discontinuing the agreement, or impose penalty or direct the modification of agreement or any other order it deems fit.

Interim order:

If the Competition Commission is conducting an enquiry on abuse of dominant position, it may under section 33, requires the business entity which has committed or is committing abuse, to temporarily stop the activity until the conclusion of the enquiry.[4]

Appeals:

Section 53A states that the National Company Law Appellate Tribunalconstituted under the Companies Act, 2013 is the appellate tribunal established for hearing appeals from the orders or decisions or directions passed by the Competition Commission. According to 53B the appeal has to be filed within 60 days of the passing of the order or decision or direction.

Case Laws:

In Telefonaktiebolaget Lm Ericsson v/s Competition Commission of India[5],Telefonaktiebolaget LM Ericsson filed infringement case against Micromax and Intel for the payment of royalty and the latter in response to the former filed a complaint before Competition Commission under Section 19(1)(a) of the Competition Act alleging abuse of dominant position by Ericsson on account of it demanding an unfair royalty. Ericsson has a large portfolio of Standard Essential Patents (SEPs) in respect of technologies that are used in mobile handsets and network stations and charges royalties for the use of these technologies. In the instant case the issues were: whether the company is an ‘enterprise’ and whether the patents constitute or come under the expression ‘property’, and are they ‘goods’. S. 2(h) defines enterprise and it can be ascertained whether it is engaged in any activity relating to production, supply, distribution, acquisition or control of articles or goods and the conclusion was Ercisson is an enterprise. The second issue whether patents are ‘goods’ as defined in the Sale of Goods Act, 1930 and after the study of definition of goods in a few acts, it was concluded that it was a good.The third issue is regarding the inclusion of patents under the ambit of the term ‘property’. In Vikas Sales Corporation v. Commissioner of Commercial Taxes^[6], the Supreme Court deliberated on the point whether the expression ‘property’ would include immaterial things such as patents, copyrights and trademarks, which was answered in the affirmative by referring to the definition of ‘property’ in Black’s Law Dictionary, Sixth Edition. Hence the essentials are: whether the company is an ‘enterprise’ and whether the product comes under the expression ‘property’, and whether they are ‘goods’.

In Bharti Airtel Ltd. Vs. Reliance Industries Ltd. & Reliance Jio Infocomm Ltd.[7], it was held that providing free services cannot by itself raise abuse of competition concerns unless it is offered by a dominant enterprise and is tainted with objectives of anti-competitive nature. When in a market big players are already existing and an entrant introduces offers and schemes to incentivise its customers, it is not termed as abuse of competition.

In Fast Track Call Cab Pvt. Ltd. & Meru Travel Solutions Pvt. Ltd Vs. ANI Technologies Pvt. Ltd.[8], although market share is one of the indicators for assessing market dominance, but it cannot be seen in isolation.

Conclusion:

Section 4 of the Competition Act, 2002 deals with abuse of dominant position. A dominant undertaking will be in a stature to disregard the market powers and singularly impose trade conditions, settle costs, and so on which is damaging and may result in preventing any kind of competition, or the elimination of effective competition.^[9] If dominant position is held by a firm, holding a lot of market power, would be able to set costs over the competitive level to sell products of a mediocre quality or to decrease the rate of development beneath the level that would exist in a competitive market. There are three stages of abuse handling determining relevant market, determining dominance and establishing abuse. Section 19 and 27 deal with inquiry and orders after inquiry respectively. Interim order is passed under section 33 and appeals are filed under section 53A. Holding a dominant position is not the problem, but its misuse to the disadvantage of other competitors is, which resultantly substantially affects the competition in the relevant market.

[1]https://astrealegal.com/abuse-of-dominance-under-the-indian-competition-regime/

[2]Case no. 19 of 2010. Decided on 12 August 2011

[3] http://ijlljs.in/wp-content/uploads/2017/04/Online_Paper.pdf

[4]http://www.cci.gov.in/sites/default/files/advocacy_booklet_document/AOD.pdf

[5] W.P.(C) 464/2014

[6](1996) 4 SCC 433

[7] (Case No. 03 of 2017) CCI

[8](Case No. 6 & 74 of 2015) CCI

[9] http://ijlljs.in/wp-content/uploads/2017/04/Online_Paper.pdf