ABUSE OF DOMINANT POSITION

1) What is dominant position?

The Competition Act defines Dominant position as a position of strength,
enjoyed by an enterprise, in the relevant market in India, which enables it to:
(i) operate independently of competitive forces prevailing in the relevant
market; or
(ii) affect its competitors or consumers or the relevant market in its
favour.1
It is the ability of the enterprise to behave/act independently of the market
forces that determines its dominant position. In a perfectly competitive market
no enterprise has control over the market, especially in the determination of
price of the product. H
The term market power is variously known as dominant position, monopoly
power and/ or substantial market power. 2

2) Abuse of dominant position

a) Definition
Abuse is stated to occur when an enterprise or a group of enterprises uses its
dominant position in the relevant market in an exclusionary or/ and an
exploitative manner.
Section 4 (2) of the Act specifies the following practices by a dominant
enterprises or group of enterprises as abuses:
(i) directly or indirectly imposing unfair or discriminatory condition in
purchase or sale of goods or service;
(ii) directly or indirectly imposing unfair or discriminatory price in purchase or
sale (including predatory price) of goods or service;
(iii) limiting or restricting production of goods or provision of services or
market;
(iv) limiting or restricting technical or scientific development relating to goods
or services to the prejudice of consumers;
(v) denying market access in any manner;

1
2 http://www.cci.gov.in/sites/default/files/advocacy_booklet_document/AOD.pdf

(vi) making conclusion of contracts subject to acceptance by other parties of

supplementary obligations which, by their nature or according to commercial
usage, have no connection with the subject of such contracts;
(vii)using its dominant position in one relevant market to enter into, or
protect, other relevant market.
b) Factors considered by the CCI
1. RELEVANT MARKET3
Dominance has significance for competition only when the relevant market
has been defined.
The relevant market means the market that 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.
2. FACTORS TO DETERMINE DOMINANT POSITION4

market share,
the size and resources of the enterprise;
size and importance of competitors;
economic power of the enterprise;
a vertical integration;
dependence of consumers on the enterprise;
extent of entry and exit barriers in the market;
countervailing buying power;
market structure and size of the market;
source of dominant position viz. whether obtained due to statute
etc.;
social costs and obligations and contribution of enterprise enjoying
dominant position to economic development.

The Commission is also authorized to take into account any other factor which
it may consider relevant for the determination of dominance.
c) Investigation and Consequence
In exercise of powers vested under section 19 of the Act, the Commission
may inquire into any alleged contravention of section 4 (1) of the Act that
proscribes abuse of dominance. Section 19 (4) gives a detailed list of
factors that the Commission shall consider while inquiring into any
allegation of abuse of dominance.
The Commission, on being satisfied that there exists a prima facie case of
abuse of dominance, shall direct the Director General to cause an
3 sub-section (r) of Section 2
4 sub section (4) of Section 19

investigation and furnish a report. The Commission has the powers vested
in a Civil Court under the Code of Civil Procedure in respect of matters like
summoning or enforcing attendance of any person and examining him on
oath, requiring discovery and production of documents and receiving
evidence on affidavit. The Director General, for the purpose of carrying out
investigation, is vested with powers of civil court besides powers to
conduct search and seizure
After inquiry the Commission may pass inter- alia any or all of the
following orders under section 27 of the Act:
1) direct the parties to discontinue and not to re-enter such
agreement;
2) direct the enterprise concerned to modify the agreement.
3) direct the enterprises concerned to abide by such other orders as
the Commission may pass and comply with the directions, including
payment of costs, if any; and
4) pass such other orders or issue such directions as it may deem
fit.
5) can impose such penalty as it may deem fit. The penalty can be
up to 10% of the average turnover for the last three preceding financial
years upon each of such persons or enterprises which are parties to bidrigging or collusive bidding.
6) Section 28 empowers the Commission to direct division of an
enterprise enjoying dominant position to ensure that such enterprise does
not abuse its dominant position.
d) Interim Order
Under section 33 of the Act, during the pendency of an inquiry into abuse
of dominant position, the Commission may temporarily restrain any party
from continuance with the alleged offending act until conclusion of the
inquiry or until further orders, without giving notice to such party, where it
deems necessary.
e) Appeals
The Competition Appellate Tribunal (COMPAT) is established under section
53A of the Act, to hear and dispose of appeals against any direction issued
or decision made or order passed by the Commission under specified
sections of the Act. An appeal has to be filed within 60 days of receipt of
the order / direction / decision of the Commission.
f) COMPENSATION [Section 53N]
A person may move an application to COMPAT to adjudicate upon claim
for compensation that may arise from the findings of the Commission.
g) Intellectual Property and Abuse of Dominance

Intellectual Property Rights and Competition laws are generally considered

as contradictory to each other as IPRs grant exclusivity which hinders
competition. But it is an established principle that the two are
complementary and focus on same goal, i.e., innovations and general
welfare.
Therefore IPRs are covered under competition laws but given special
treatment in assessment. Section 3 relating to agreements explicitly
exempts reasonable conditions imposed for protecting IPRs and section 4
relating to abuse of dominance on account of holding of IPRs considers all
the factors under the framework of competition harm before arriving at
any conclusion

3) Case law analysis

Jeetender Gupta Vs. Bmw India Ltd. and Another

BMW does not provide a spare tyre popularly called Stepney in the trunk of
the cars manufactured/sold by them.
BMW? brand of cars made/marketed by Opposite Party No.1 employ a run flat
tyre technology which allows the vehicle to operate in flat tyre running mode
at a speed of 80 km/h (50 mph) and a distance of 80 km when operating in
flat tyre running mode.
since spare tyre is a standard feature and its absence would normally not be
expected, this omission is likely to remain un-noticed even during the test
drives, unless notified explicitly. The Informant has alleged that that the
Opposite Party No. 1 makes no suitable efforts to inform their prospective
customers about the missing spare tyre feature either through their
promotional advertisements or promotional material at various showrooms
etc. Their sales team also allegedly deviate the subject by selectively informing
prospective customers about the features and advantages of run flat tyre
technology. They neither clearly spell out that there would be no provision of a
spare tyre in the car nor they inform about the likely procedure a customer
would be required to adopt in the event of any tyre puncture or flat tyre.
Opposite Party No. 1 capitalizes on the run flat tyre technology to bundle with
every new sales a specialized insurance policy called BMW Secure Advance?
from its subsidiary
This is marketed as an essential feature that would enable consumers to get
tyres replaced free of cost subject to certain terms and conditions.
Opposite Parties project the insurance policy to be something exclusive, it is
not the case. The tyres that can be replaced through insurance are restricted to
four in number, in a given year. Tyre replacement is not at all free of cost, but

depending upon the quality of the tyre, only a percentage of tyre value is
provided by the insurance policy.
According to the Informant, The Opposite Party No. 1 not only forces upon the
flat tyre technology but also misuses this as an advantage to market an
insurance policy through Opposite Party No. 2 thereby adversely affecting
the competition to sell insurance policies for the cars or preventing the
consumers to consider alternate insurance policy. The insurance policy sold
through BMW, are much higher priced than the competitors, even though the
same facilities are also provided by most other insurance companies. Thus
BMW is misusing its dominant position to force upon a tyre technology
which would provide them leverage to sell insurance through them at a higher
price than market, which is clearly an abuse both towards the consumer as
well as the competition. Also, it has been alleged that the Opposite Party No.
1 uses its dominant position in the market of luxury cars to enter into the
market for insurance. Thus, the Informant has alleged contravention of
Section 4(2)(c), 4(2)(d) and 4 (2)(e) of the Competition Act 2002.
The Commission finds that since, as per the Informant, the allegations
of abuse emanates from the Opposite Part No. 1 having
a dominant position in the relevant market of luxury cars in India. Since
the Commission has already found that the Opposite Party No. 1 is
not dominant in the relevant market, the question of abuse of such
dominance by Opposite Party No. 1 is moot. The Commission is of the view
that there is no prima facie case of violation of section 4 of the Act as the
Opposite Parties
the market share of the entire luxury car segment and that of the individual
luxury car manufacturers are transient in nature and the swing in their market
shares within a period of a single year is remarkably high, for the Commission
to conclude that any one of these companies can be dominant, since for a
company to bedominant in a relevant market, it should have substantial
market power and should be able to hold on to that market power for a
reasonable period of time. The Commission is of the opinion that it is not so in
the case of Opposite Party No. 1.
4) International Perspective
a) European Union
i) Provisions
Article 102 of the Treaty on the Functioning of the European Union is
aimed at preventing undertakings who hold a dominant position in a
market from abusing that position. Its core role is the regulation of
monopolies, which restrict competition in private industry and produce
worse outcomes for consumers and society. It is the second key
provision, after Article 101, in TFEU competition law.

ii) Case law analysis

Tying one product into the sale of another can be considered abuse too, being
restrictive of consumer choice and depriving competitors of outlets. This was the
alleged case in Microsoft v. Commission5leading to an eventual fine of 497 million
for including its Windows Media Player with the Microsoft Windows platform.

The European Court found that Tetra Pak's activities 6 in relation to the
markets in nonaseptic machines and cartons constituted an abuse of
its dominant position in the distinct, but closely associated, markets for
aseptic machines and cartons intended for the packaging of liquid
foods.
b) United Kingdom
Since 1 May 2004 not only the European Commission, but also the Office
of Fair Trading (OFT) has the power to apply and enforce Articles 81 and 82
of the EC Treaty in the United Kingdom.
Section 52 of the Competition Act 1998 obliges the OFT to prepare and
publish general advice and information about the application and
enforcement by the OFT of Articles 81 and 82 of the EC Treaty and the
Chapter I and Chapter II prohibitions contained in the Competition Act
1998.
c) United States
The Sherman Act 1890 provides the marrow for anti-trust law dealing
with dominance and monopolization.
Similar to Indian law, there could be no unlawful monopolization where
no market previously existed.7
5) Conclusion
Challenges faced by the CCI in the future would expand to beyond unilateral
abuse of dominance. The threat of a collective dominance looms large.
Therefore the Indian Competition mechanism should allow the CCI a wider
scope to investigate infringement and collect evidence of anti-competitive
agreement.
Further acquisition of subsidiaries beyond the frame-work of an anticompetitive arrangement and their operation must be considered. This is in
order to prevent incidents such as the BMW case, and in foresight the
Google/Microsoft case adjudicated by the EU Commission.
5 Case T-201/04 Microsoft v Commission Order, 22 December 2004
6 Case T-83/91 Tetra Pak v European Commission [1994] ECR II-755
7 Fraser v. Major League Soccer, 284 F.3d 47 (1st Cir. 2002)

Therefore, a robust revision of the competition laws must be executed, to

accommodate changing trends in globalization and cross-border ventures.