Decartelization of Cartels - India
Decartelization of Cartels - India
Decartelization of Cartels - India
Table of Contents
Acknowledgement
I am highly elated to carry out my research on the topic, Abuse of Dominance: The Indian
Approach. I would like to give my deepest regard to our course teacher Ms. Tulika Shree,
who held me with her immense advice, direction and valuable assistance, which enabled me
to march ahead with this topic. I am thankful to her for providing such important and
interesting topics for project report which are not only helpful but also encouraging from
future perspective.
I would like to thank my friends, who gave me their precious time for Discussion and helped
me a lot in completing my project by giving their helpful suggestion and assistance. I would
like thanks to my seniors for their valuable support. I would also like to thank the library
staff and computer lab staff of our university for their valuable support and kind cooperation.
ANSHUL RATHI
Sec. C Roll no.- 27
Batch XI
RESEARCH METHODOLOGY
STATEMENT OF PROBLEM
In order to assess the concept of Abuse of Dominance and the penalties levied thereby, the
approach of Competition Commission of India and its evolution with the mature jurisdictions.
AIMS AND OBJECTIVES
The primary aim of this research work is to highlight the concept of Abuse of Dominance
under Competition Act, 2002 in India. Research paper will first look to the framework of
Abuse of Dominance cases in India and the way Competition Commission of India and
COMPAT are dealing with the situation
OBJECTIVES
1. To study the meaning of Abuse of Dominnce as understood across different
jurisdictions and to arrive at a definition for the purpose of this research work.
2. To analyse the concept of Relative turnover and response of Competition
Commission of India and COMPAT with comparission to other mature Jurisdictions
HYPOTHESIS
It is hypothesized by the researcher that the existing concept for Abuse of Dominance under
Competition Law in India is capable to avoid such problems and the penalties levied are
justifiable. Also that Competition Commission of India has already evolved into a mature
framework.
RESEARCH QUESTIONS
Doctrinal (Non-Empirical) Method of Research has been relied upon for conducting the
research. For the purpose of research Encyclopedias, Books, Reports of Competition
Commission of India, research projects related to Relevant Market have been relied upon.
MODE OF CITATION
A uniform system of Bluebook citation has been adopted throughout the project.
BACKGROUND
India began its journey of transformation from a closed economy to a liberalized market
economy in 1991. India has since 1991, grown tremendously as a market and economic
powerhouse but when competition law was introduced in india in the form of the Competition
Act 2002 there were severe resistance from the Indian industry which claimed that indian
market hhad not achieved the scale ad dynamics which merit a modern competitive law
regime being enfrced although, the number of complaints and investigatons under the
Indian competition regime since 2009 has provided the conntrary.
The Act finally came into effect in a phased manner, with significant ammendments in 2007.
The provisions relating to anti-competitive agreements and abuse of dominance came into
effect in May 2009 and the provisions in relation to merger control came into effect in June
2011.
The Competition Commiccion of India ( CCI ) is the regulatoy body is the regulatory body
established under the Act to administer theprovisions of the Act and the Competition
Appellate Tribunal in the appellate body. The substantive test and the benchhmark for
analysis under the Act is to prohibit practices which have an appreciable adverse effect on
competition in India.
The regulations of abuse of dominance is the important pillar in Indias competition law
policy. Section 4 of the Act deal with the regulation of abuse of dominance i.e. the regulation
of unilateral conduct. The Act prohibits the abuse of a dominant position by any enterprise
The ingredients to establish a section 4 violation are: (a) defining the relevant market (b)
determining whether the entity under investigation commands a dominant position in the
relevant market and (c) determining whether such dominant entity has indulged in any
activity which amounts to abuse of its dominance.
While determining dominance, the CCI is required to consider the factors listed in Section
19(4) of the Act, including market share of the enterprise, size and resources of the enterprise,
size and importance of the competitors, economic power of the enterprise, vertical integration
of the enterprise or sale or service network of such enterprises, dependence of consumers on
the enterprise, etc.
1 Coal India Limited is a state-owned enterprise which enjoys a monopolistic
position due to national legislation in the sector.
2 Maharashtra State Power Generation Company Ltd v. Mahanadi Coalfields Ltd.
and Coal India Limited, Case No.3,11 & 59 of 2012.
Section 4 of the Act imposes strict liability and the Act is silent on whether there is a
requirement to assess the actual appreciable effect on competition in the market. However, an
analysis of the abuse of dominance cases adjudicated by the CCI to date reveals thats the
CCI has set fairly high standards embarked upon a detailed analytical approach I determining
the relevant market and establishing dominance. As a result, the CCI undertakes a market
effect analysis before coming to its conclusion on whether the conduct complained about
amounts to an abuse.
The small but significant Non-transitory increase in price (SSNIP) test has been traditionally
used by the competition law regulators for delineating the boundaries of the product market.
However, its application has often been questioned on account of an inherent price distortion
in markets dominated by single or a handful of enterprises. There are also limitations on the
application of the SSNIP test in abuse of dominance cases. In India, the SSNIP test has been
used by CCI on multiple occasions but its approach has not been uniform. The Indian market
particularly poses intrinsic issues which make the application of the SSNIP test difficult. For
instance, lack of market data, difficulties in conducting consumer surveys and determining an
appropriately representative sample group, extreme price sensitivity of the consumers etc.
Furthermore, the characteristics of certain sectors do not permit the application of the SSNIP
test, particularly in those areas where quality of service, and not price, exerts a greater
influence on customers choice.
In the absence of economic tests applicable in the Indian market, determination of relevant
market are often guided by pure public perception and the wisdom of CCI members, without
statistical data to support the same. Therefore, while in the DLF order case, the CCI restricted
the relevant market to a mere suburb of the National Capital Region, in the Coca Cola Case 3,
the CCI held that relevant geographical market cannot be confined to the closed market inside
the premises of multiplexes and considered the relevant market to be the market of all
multiplex theatres across India. In the BCCI Case4, the BCCI was alleged to be abusing its
3 Consumers guidance Society v. Hindustan Coca Cola Beverages Ltd. and INOX
Leisure Pvt Ltd. Case No. 99 of 2009.
4 Surinder Singh Barmi v. Board for Control of Cricket in India, Case No.61of 2010
dominant position in relation to grant of franchise rights, media rights, sponsorship rights,
and commercial contracts related to the organization of the Indian Premier League. However,
the CCI arrived at a simplistic definition of the relevant market as the market for the
organization of private professional cricket leagues/events in India. By contrast, in the
Hockey India Case5, the CCI undertook a far more detailed analysis and considered it
appropriate to define the relevant market on the basis of each specific allegation against the
association. It is notable that in the BCCI Case, although the CCIs order states that it has
employed the SSNIP test for the determination of the relevant market, the decision did not
present any empirical analysis to indicate how the SSNIP test was applied and what the
conclusions of its analysis were.
Establishing Dominance
The Act does not prescribe any bright line market share test for the determination of
dominance. In the cases heard by the CCI till date, there has been no guidance as to the
percentage of market shares that may indicate the likelihood of being dominant. Asian
antitrust jurisdiction such as Singapore and Malaysia follow the approach where an enterprise
enjoying a market share over 60% I likely to be dominant in the relevant market.
While market shares of dominant enterprises are considered as an important factor in CCIs
assessment, none of the cases decided so far specify a magic number tat can led to a
determination of dominance. Market shares of an enterprise constitutes only one amongst the
several factors that the CCI is required to take into consideration to assess dominance under
Section 19(4) of the Act. While in the Shri Sonam Sharma v. Apple Inc. USA and Ors 6, The
CCI regarded market shares to be the screening criterion, CCIs initial decisions in the DLF
Order Case establish the market shares are not the sole criterion for assessing dominance.
While a magic number is not pre-requisite, in terms of allocating burden of proof and
allowing enterprises an opportunity of being prepared and aware of their increased
obligations as dominant enterprises, it would be useful for the CCI to prescribe a several
mature antitrust jurisdictions
5 Dhanraj Pillay and others v. M/s Hockey India, Case No. 73 of 2011.
6 Case No 24 of 20111
The Act provides that a maximum of 10% of the average turnover for the preceding three
years can be levied but fails to clarify whether turnover for such imposition of penalty is
only the relevant turnover i.e. the turnover that can be attributed to the business in which the
abuse of dominance takes place or the general overall turnover of the contravening enterprise.
The concept of relevant turnover emerged in India for the first time by COMPAT in the
Aluminium Phosphide tablets case7. The opportunity came before the COMPAT in an appeal
against the decision of the CCI punishing three alluminium phosphide tablets manufacturers
for bid rigging under section 3(3) of the Act. The CCI has levied a total penalty of Rs. 3170
million in this case but this penalty was significantly reduced by the COMPAT. In its analysis,
the CCI did not give any reasons while imposing the penalty and clculated the penalty on the
total turnover of the enterprise. The COMPAT held that CCI shold only have considered the
relevant turnover, while calculating the penalty since infringing enterprises in this case were
multi-product companies. Further the COMPA reprimanded the CCI for lack of formal
reasoning in it formal orders and elucidated that the CCI must consider the doctrine of
proportionality while imposing penalties. The COMPAT also observed that the adjudicatory
role of the CCI necessitates that it considers necessary factors such as the financial health of
the company, its reputation and the likelihood of the company being closed down due to
harsh penalty, before coming to a particular amount which is linked to the enterprise turnover.
The COMPATs order was then challenged at Supreme Court, which upheld the decision of
the COMPAT.
The Act does not seek to prohibit the existence f dominance but only the abuse of dominance;
however, the CCI does have the power to order division of dominant enterprise under section
28 of the Act, to ensure that such dominant enterprise will not abuse its dominant position.
While the CCI has not yet used this power either as a curative or a preventive meassure, it is
interesting that such a measure find a place in the Act. Unlike mature antitrust jurisdictions,
European Union and United States, there is extremely limited guidance as to how the CCI
may order and implement a division of a dominant enterprise. Given the complex regulatory
7 Appeal No. 79 ,80,81 of 2012
to
Mature antitrust jurisdictions have assessed abuse of dominance across a varied spectrum of
abusive conduct across sectors but the provisions relating to abuse of dominance in India are
in a state of evolution. There is much for the CCI to learn in terms of a focal point and
enforcement priorities from landmark precedents globally.
The decision in the Astra Zeneca Case8, wherein Astra Zeneca was found guilty of abusing its
dominating position by misleading patent authorities and manipulating the regulatory system
to prevent generic competition against its anti-ulcer medicine, holds significant value in India
8 Case C-457/10 P.
given the CCIs special focus towards the pharmaceutical sector and its quest to ensure that
generic manufacturers are not illegally kept away from the markets.
Rebates and discounts are type of abuses which the CCI is yet to deal with in detail as abuse
of dominance cases relating to rebates have not been tested in India so far the CCI has
much to imbibe from the decision in Intel Case 9 where Intel was found guilty of abusing its
dominant position by implementing a series of conditional rebates to computer manufacturers
and European dealers by taking measures aimed at preventing or delaying the launch of
computers based on competing products.
Conclusion
In the years to come, abuse of dominance in technology, emerging industries and intellectual
property pose challenging competition law concerns which will mandate the use of flexible
competition policy to adapt to the manner in which companies compete and conduct their
business practices. Given the global nature of these sectors with national territories not
constituting significant trade barriers, competition policy is required to address these aspects
as a cohesive body of principles which found reflection in each jurisdictions national
competition law. For instance, the CCI has recently ordered an investigation against the
Ericsson group10 ( a global player in telecommunications sector) on the basis of two
9 COMP/C-3/37.990
10 Case No. 50 of 2013 and 76 of 2013
complaints claiming that the Ericsson Group, contrary to its obligation to grant licenses for its
Standard Essential Patents on FRAND terms, has been imposing unfair terms for licensing its
patents and demanding exorbitant royalties. Any decision by CCI in this regard will
undoubtedly cause a ripple effect and will affect the way other competition regulators
approach the Ericsson Groups business practices in their respective jurisdictions it is
therefore imperative that the CCIs approach to these sectors and their specific issues
develops in a manner which is harmonious with the approach of other mature jurisdictions.
The CCI would therefore need to develop competition concerns arising from abuse of
dominance cases in a way, harmonious with the global precedents.
BIBLIOGRAPHY
BOOKS
1. T Ramappa, Competition Law in India: Policy, Issues and Developments,
OxfordUniversity Press 2006.
2. D.P. Mittal, Competition Law, Taxmanns 2003.
3. VinodDhall, Competition Law Today: Concepts, Issues and the law in Practice,Oxford
University Press, 2007.
.
Websites:
1. http://www.cci.gov.in/
2. http://www.internationalcompetitionnetwork.org/