Dominant Position

What is a Dominant Position?

An undertaking is dominant if it has substantial market power in the relevant market such that it can behave to an appreciable extent independently of its competitors and customers. It is important to understand what is a dominant position and what constitutes the same in order to prevent the abuse of a dominant. Private monopolies can be detrimental to the national economy and it is necessary to control them, further, it is felt that fair and free competition is required for the growth of a healthy economy. Therefore, the prevention of abuse of dominant position is required to ensure that there is free and fair competition which is the object of the Competition Act, 2002.

The Competition Act, 2002, set up the Competition Commission of India, in order to fulfill the objectives of the said Act, whose duty is to eliminate practices having adverse effects on competition, promote and sustain competition, protect the interests of consumers and ensure freedom of trade carried on by other participants, in markets in India.

Official definition of a Dominant Position

Definition under the Competition Act, 2002.

Section 4, of the Competition Act, 2002, lays out what constitutes an abuse of the dominant position and explains what is a dominant position. Explanation (a) of s.4 defines the dominant position as a position of strength, enjoyed by an enterprise, in the relevant market, in India, which enables it to operate independently of competitive forces prevailing in the relevant market; or affect its competitors or consumers or the relevant market in its favor. The definition is similar to those in the competition laws of several other jurisdictions, such as the European Union and the United Kingdom.

What is the relevant market?

The definition of relevant market is provided under Section 2(r) which states that the market which may be determined by the Commission with reference to the relevant product market or the relevant geographic market or with reference to both the markets. Section 2(s) further defines the relevant geographic market as a market comprising the area in which the conditions of competition for supply of goods or provision of services or demand of goods or services are distinctly homogenous and can be distinguished from the conditions prevailing in the neighbouring areas. And lastly, Section 2(t) defines the relevant product market as a market comprising of all those products or services which are regarded as inter-changeable or substitutable by the consumer, by reason of characteristics of the products or services, their prices and intended use; or the production or supply of, which are regarded as inter-changeable or substitutable by the supplier, by reason of the ease of switching production between such products and services and marketing them in the short term without incurring significant additional costs or risks in response to small and permanent changes in relative prices.

Criteria for Determining Dominant Position

Section 19(4), of the Competition Act, 2002, lays out the factors to be considered while while inquiring whether an enterprise enjoys a dominant position or not under section 4. The aforementioned factors are as follows:

• market share of the enterprise
• size and resources of the enterprise
• size and importance of the competitors
• economic power of the enterprise including commercial advantages over
• competitors
• vertical integration of the enterprises or sale or service network of such
• enterprises
• dependence of consumers on the enterprise
• monopoly or dominant position whether acquired as a result of any
• statute or by virtue of being a Government company or a public sector
• undertaking or otherwise
• entry barriers including barriers such as regulatory barriers, financial risk, high capital cost of entry, marketing entry barriers, technical entry barriers, economies of scale, high cost of substitutable goods or service for consumers;
• countervailing buying power
• market structure and size of market
• social obligations and social costs
• relative advantage, by way of the contribution to the economic development, by the enterprise enjoying a dominant position having or likely to have an appreciable adverse effect on competition.
• any other any other factor which the Commission may consider relevant for the inquiry.

Case Laws Regarding Dominant Position

Most case laws reiterate the definition provided under Section 4, in conjunction with the criteria under Section 19, of the Competition Act, 2002. However, there exist some additional notable observations.

The Supreme Court, in Coal India Ltd. v. CCI, provided a comprehensive overview of the definition and meaning of the dominant position. It observed that dominant position means a position of strength enjoyed by the enterprise in the relevant market which in turn involves adverting to the relevant geographic market or the relevant product market or both as defined and it should enable the enterprise to enjoy the position of strength to operate independently of competitive forces prevailing in the market.

The Supreme Court, in Uber (India) Systems (P) Ltd. v. CCI, observed that predatory pricing is not only an abuse of a dominant position but also evidence of having a dominant position.

The Delhi High Court, in Saurabh Tripathy v. CCI, observed that the fact that a commercial contract has been negotiated between two parties is certainly a vital factor to be considered while determining whether an enterprise has abused its dominant position.

What is Abuse of Dominant Position

Abuse of a dominant position is prohibited under competition law, as outlined in Section 4. An enterprise or group is considered to abuse its dominant position if it directly or indirectly imposes unfair or discriminatory conditions or prices in the purchase or sale of goods or services, including predatory pricing. However, conditions or prices adopted to meet competition are not considered unfair or discriminatory. Additionally, abuse occurs if the enterprise limits or restricts production or market access, hinders technical or scientific development to the detriment of consumers, engages in practices denying market access, imposes supplementary obligations unrelated to contracts, or leverages its dominance in one market to enter or protect another. It is to be noted that merely having do

The abusive activities covered therefore include both exploitative abuses, such as unfair or discriminatory conditions or prices, as well as exclusionary abuses, such as denial of market access. The listed abuses are similar to those in Article 82 of the EC Treaty of Rome and reiterated by the courts in such cases as Hoffinann-LaRoche, United Brands, Tetra Pak, and Akzo Chemie.

A few notable cases of abuse of Dominant Position are:

In Competition Commission of India v. Google, the Competition Commission of India (CCI) conducted an investigation against Google based on complaints filed by Matrimony.com and Consumer Unity & Trust Society (CUTS). The allegations included abuse of dominant position by Google in the market for online search and search advertising services. The complainants claimed that Google had biased search results in favor of its own services and imposed unfair conditions on advertisers. In 2018, the CCI found Google guilty of anti-competitive practices and imposed a penalty of ₹1.36 billion (approximately $21 million).

In Competition Commission of India v. Reliance Industries Limited, the CCI received complaints against Reliance Industries Limited (RIL) alleging abuse of dominant position in the gas supply market. It was alleged that RIL had manipulated gas prices and imposed unfair terms and conditions on buyers. After a detailed investigation, the CCI found RIL guilty of anti-competitive practices and imposed a penalty of 212.43 billion (approximately $185 million).

Research that Engages with Dominant Position

There has been a recent trend of shift in India and other parts of the world from a form-based (centered on pre-requisite of dominance), which may some times lead to false positives, to an effects-based (weighing pro and anticompetitive effects and considering efficiency justifications) which is also considered a positive shift and normatively desirable. The aforementioned article discusses the evolution of abuse of dominance investigations, highlighting a shift towards an effects-based approach globally. Traditionally, such investigations focused on dominance without adequately considering actual market effects. This shift is exemplified by the European Union's case law. Similarly, the article notes a positive trend towards an effects-based approach in Indian competition law, which historically followed a form-based approach. This evolution in approach is crucial in ensuring more nuanced and effective enforcement of competition law, particularly concerning dominant positions, within the Indian context.

Further, an ongoing debate in competition jurisprudence today revolves around the enforcement of competition law in digital markets, where traditional tools must be adapted; this paper focuses on assessing dominance and abuse in platform markets, particularly in light of the 2019 Supreme Court judgement in the Uber matter, which, by deeming loss-making pricing as an indicator of dominance, contradicts the Competition Commission of India’s stance, raising concerns over the law's certainty; the author stresses the need for urgent guidelines or amendments to address unresolved issues in digital platforms before the law becomes incoherent.

International Experiences

Within the European Union (“EU”), dominant position is defined and interpreted under EU competition law, which emphasizes the assessment of a firm's market power and its ability to act independently of competitors, customers, and consumers. Similarly, in the United States, the dominant position is a key consideration in antitrust enforcement, where the focus is on preventing monopolization and preserving competitive markets. However, the legal standards and enforcement approaches differ between the EU and the US, particularly in the context of digital markets and emerging technologies. In India, the concept of dominant position has been outlined in the Competition Act, 2002 as explained in the official definition section. However, the application of this concept differs from that in other jurisdictions due to unique market dynamics and legal interpretations.

Issues and Challenges

There are multifaceted challenges posed by the concept of dominant position in the digital market within the framework of Indian competition law. Krishnakant Dwivedi underscores the pivotal role of competition law in ensuring a fair economic environment and safeguarding consumer interests, particularly in the face of rapid digital transformation. However, the digital revolution has brought forth a plethora of complexities, including concerns about market domination and consumer privacy. Dwivedi highlights the analogy between data and oil, emphasizing the significance of consumer data in the digital economy and its potential to confer market dominance upon certain firms. The article discusses how the concentration of data within dominant companies can distort market dynamics, hindering competition and consumer choice. Moreover, it explores the challenges posed by mergers and acquisitions in the digital space, where increased market concentration may result in reduced competition and innovation. The jurisdictional boundaries of the Competition Commission of India (CCI) in addressing these issues are also examined, particularly regarding the intersection of competition law and consumer privacy. Through relevant case studies, such as Competition Commission of India v. Google LLC and Ors., the article illustrates instances where companies have abused their dominant positions in the digital market, underscoring the need for regulatory frameworks to evolve and adapt to effectively address these challenges while ensuring fair competition and consumer protection.

Way Ahead

In the context of dominant position within India's competition law framework, several key trends and future perspectives emerge. With the rapid growth of the digital economy and the increasing dominance of e-commerce platforms, competition authorities are expected to intensify their focus on addressing issues related to market dominance. This includes heightened scrutiny of big tech companies for potential abuse of dominance and concerns surrounding data privacy. Additionally, the role of artificial intelligence is set to reshape market competition, offering companies opportunities to gain insights and optimize operations while raising questions about fairness and competition. Merger control will also be a critical area of concern, especially as the Indian economy continues to grow and witness consolidation trends, requiring the Competition Commission of India (CCI) to enhance its scrutiny of mergers to ensure competition is not unduly affected. Moreover, with Indian companies expanding globally and international companies operating in India, cross-border competition issues will need to be addressed through enhanced cooperation with international competition authorities. Sector-specific regulations are expected to play a more prominent role, tailoring competition law enforcement to address unique challenges across various industries. The focus on consumer welfare will remain paramount, with competition law enforcement placing greater emphasis on protecting consumer interests from anti-competitive practices. Strengthening penalties and deterrence measures will be crucial in deterring companies from engaging in such practices, while advocacy and awareness efforts will aim to educate stakeholders about the benefits of competition and compliance. A data-driven approach is anticipated to aid in the quicker identification of potential anti-competitive behavior, particularly in digital markets where platform dominance may raise concerns. Ultimately, as India's economy evolves and adapts to global trends, competition law enforcement will need to strike a delicate balance between fostering innovation and ensuring fair competition to promote economic growth and protect consumer welfare, while addressing the challenges posed by dominant positions in the marketplace.