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CONTENTS
INTRODUCTION..........................................................................................................2
SECTION I.....................................................................................................................4
Section 4 – Dominant Position.......................................................................................4
1.1 Dominant Position – Definition...........................................................................4
1.2 Predatory Price.....................................................................................................5
1.3 Abuse of Dominant Position................................................................................6
1.4 Acts in bonafide Competition Exempted.............................................................6
SECTION II...................................................................................................................7
Ascertaining the Dominant Position – Statutory Guides under the Competition Act,
2002................................................................................................................................7
2.1 Dominant Position – Relevant Market.................................................................8
SECTION III..................................................................................................................9
Abuse of Dominant Position..........................................................................................9
3.1 Practices considered as Abuse of Dominant Position:.......................................10
3.2 Consequences of Abuse of Dominant Position..................................................12
3.3 Landmark Cases.................................................................................................13
BIBLIOGRAPHY........................................................................................................15

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INTRODUCTION

The Competition Act, 2002 follows the philosophy of modern competition laws and aims
at fostering competition and at protecting Indian markets against anti-competitive
practices by enterprises. The Act prohibits anti-competitive agreements and abuse of
dominant position by enterprises, and regulates combinations (consisting of mergers,
amalgamations and acquisitions), and thus lays down practices from which enterprises
should desist.
Competition laws all over the world are primarily concerned with the acquisition and/or
exercise of market power and its abuse. Market power is variously known in competition
jurisdictions as dominant position, monopoly power and substantial market power. The
abuse of dominant position is another way of interfering with competition in the
market place. In simple terms it refers to the conduct of an enterprise that enjoys a
‘dominant position’, as defined by the Act. In substance, ‘dominant position’ means
the position of strength enjoyed by an enterprise that enables it to act independently of
competitive forces prevailing in the relevant market. Such an enterprise would be in a
position to disregard market forces and unilaterally impose trading conditions, fix
prices etc. the abuse may result in the restriction of competition, or the elimination of
effective competition. Some of the various forms of abuse are: price-fixing, imposing
discriminatory pricing, ‘predatory’ pricing, limiting supply of goods or services,
denial of market access etc.
The market share of an enterprise does not, as under the MRTP Act, determine the
dominant position of an enterprise, though it is one of the factors to be considered,
along with other factors, including the market share of its competitors, in determining
whether it enjoys a dominant position or not. The Act sets out the factors that are to be
considered by the competition authorities in determining whether an enterprise enjoys
a dominant position1, as well as the method for determining the relevant product and
geographic market in which the dominant position is to be found.2 Finally, the
analysis should reveal if the result of the conduct indicated as abusive is the restriction
or elimination of competition in the relevant market, for the goods or services in
question. The regulatory provisions of the Act would be set in motion if the abuse

1 Section 19 (4)
2 Section 19 (4) – (7)

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were a breach of section 4 of the Act. The Section 4 of Competition Act, 2002 states
that:
Section 4 - Abuse of dominant position
4(1) No enterprise shall abuse its dominant position.
4(2) There shall be an abuse of dominant position under sub-section (1), if an
enterprise.—-
(a) directly or indirectly, imposes unfair or discriminatory—
(i) condition in purchase or sale of goods or service; or
(ii) price in purchase or sale (including predatory price) of goods or service,
Explanation.— For the purposes of this clause, the unfair or discriminatory condition
in purchase or sale of goods or service referred to in sub-clause (i) and unfair or
discriminatory price in purchase or sale of goods (including predatory price) or
service referred to in sub-clause (ii) shall not include such discriminatory condition or
price which may be adopted to meet the competition; or
(b) limits or restricts—
(i) production of goods or provision of services or market therefore; or
(ii) technical or scientific development relating to goods or services to the prejudice of
consumers; or
(c) indulges in practice or practices resulting in denial of market access; or
(d) makes 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; or
(e) uses its dominant position in one relevant market to enter into, or protect, other
relevant market.
Explanation.—For the purposes of this section, the expression—
(a) "dominant position" means 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;
(b) "predatory price" 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 the
goods or provision of services, with a view to reduce competition or eliminate the
competitors.

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Thus in this paper I have dealt with the concept of abuse of dominant position under
Competition Act, 2002 in general. The paper is divided into 3 sections. The Section I
deals with meaning of dominant position. Section II deals with ascertaining the
dominant position. Section III deals with abuse of dominant position with landmark
cases.

SECTION I
Section 4 – Dominant Position

Section 4 deals with abuse of dominant position.3 Section 4 (1) prohibits abuse by an
enterprise of its dominant position. Subsection (2) defines when there is abuse of a
dominant position within the meaning of section 4 (1). It lists the anti-competitive
practices of imposing unfair or discriminatory trading conditions or prices or
predatory prices, limiting the supply of goods or services, or a market or technical or
scientific development relating to goods or services, denial of market access,
imposing on other contracting parties obligations not related to basic contract with
them, and using a dominant position in one market to gain entry into another market
or to protect that other market.
1.1 Dominant Position – Definition

The dictionary meaning of the word ‘dominant’ is ‘overriding’, or ‘influential’.

‘predatory’ means exploitation for financial purposes. But they have specific
meanings under the Act and the second explanation to section 4, defines ‘dominant
position’ and predatory price’.
The elements that constitute a dominant position are: (i) a position of strength (ii) that
position being enjoyed in a relevant market in India (both product and geographical
market) (iii) then such a position gives an enterprise the power to operate
independently of competitive forces prevailing in the relevant market, meaning
thereby that it can at will, disregard market forces and conditions and impose its own
trading conditions, which will include the prices at which it is prepared to supply
goods or services.

3 Section 4

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Conduct amounting to an abuse of a dominant position may also be such that it affects
its competitors or consumers or the structure of the market in its favour. This results
when abuse of a dominant position would impair the ability of the competitors to
compare as they would and consumers would, as a consequence, have to accept higher
prices or reduced quality. Where the freedom of those constituting a market is eroded
in this manner, the structure of the market is deemed to have been altered in favour of
the dominant enterprise abusing its position.
Thus, it is the ability of the enterprise to behave/act independently of the market forces
that determines dominant position. In a perfectly competitive market no enterprise has
control over the market, especially in the determination of price of the product. Each
enterprise is a price taker. However, perfect market conditions do not obtain in reality.
Keeping this in view the Act specifies a number of factors that should be taken into
account while determining whether an enterprise is dominant.
1.2 Predatory Price

The explanation defines predatory price as 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 the goods or provision of services, with a view to reduce competition or
eliminate the competitors. The purpose of selling at predatory price is to offer low
prices, lower than variable costs, viz., below the average variable cost of production
so that competitors unable to sell at that price level will be eliminated. The usual
practice is to raise price to abnormal levels, towards what is termed “recouping the
loss”, after such competition has been either reduced or eliminated in the market.
Usually, where the price is below average variable costs, predation is presumed, viz.,
the existence of an intention to damage competitors. The definition states that
predatory price would be one that is below cost as may be determined by regulations.
The commission is empowered to make regulations to carry out the purposes of the
Act. This now leaves open now what costs will be considered as relevant for this
purpose. Further, enterprises should be able to the purpose of fixing that price.
Predation is exploitative behaviour and can be indulged in only by enterprises(s)
having dominant position in the concerned relevant market.
Thus the major elements involved in the determination of predatory behaviour are:
 Establishment of dominant position of the enterprise in the relevant market.

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 Pricing below cost for the relevant product in the relevant market by the
dominant enterprise (‘Cost’, for this purpose, will be defined in the regulations
to be notified by the Commission).
 Intention to reduce competition or eliminate competitors. This is traditionally
known as the predatory intent test.

1.3 Abuse of Dominant Position

The dominant position of an enterprise is a question of fact to be determined in each

case, taking into consideration a number of relevant factors, such as the product and
geographic market, its market share, the market shares of the competitors, any
technological advantages held by that enterprise, the strength of its competitors, and
barriers to entry. Section 19 (4) of the Act sets out the factors that ought to be taken
into consideration by the Commission while inquiring into the question whether an
enterprise enjoys a dominant position, within the meaning of section 4. An enterprise
may acquire dominant position over a period of time by its own efficiency in running
the enterprise and also by way the market evolves. Acquiring a dominant position is
not prohibited, only its abuse is prohibited.
Section 4 deals with abuse of a dominant position. As stated earlier, section 4 (1)
prohibits abuse of its dominant position by an enterprise. Section 4 (2) (a) – (e) set out
what conduct would be an abuse of a dominant position under the Act.
The practices stated in subsection (2), when engaged in by an enterprise that is shown
to be as a dominant undertaking, are prohibited under subsection (1). Those practices
are not declared void as in section 3 dealing with anti competitive agreements and in
section 6 dealing with the regulation of combinations. Any practice set out in section
4 is treated as anti competitive and is subject to regulation by Commission under
section 27 and where necessary, under section 28, the Commission may recommend
to the central government the division of any enterprise enjoying the dominant
position. They are just prohibited, as an abuse of its position by a dominant enterprise.
The section ought to have been extended to provide explicitly that such abuse of a
dominant position would be prohibited when it causes, or is likely to cause, an
appreciable adverse effect on competition in the relevant market within India. The
adverse effect on trade and commerce resulting from the abuse must be shown as an
anti-competitive effect.

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1.4 Acts in bonafide Competition Exempted

The explanation to Section 4 (2) (a) exempts such unfair or discriminatory trading
conditions or unfair or discriminatory prices, or predatory pricing referred to in
Section 4 (2) (a) (i) and (ii), setting out those practices as an abuse of dominant
position, from being considered as an abuse of dominant position, when they are
adopted to meet the competition. The basis for this contention is that when enterprises
are engaged in bonafide competition and readjusting their trading strategies to meet
the terms of offers of the competitors in the market as it evolves, there is no “abuse”
by any enterprise. They are only responding to market situation. For example if prices
fall in the market, for reasons not the action of an enterprise, a reduction in price by
that enterprise to match its prices to the new prices cannot be termed as unfair pricing
or predatory pricing.

SECTION II
Ascertaining the Dominant Position – Statutory Guides
under the Competition Act, 2002

In the enforcement of section 4, the first step is to establish that an enterprise against
which the complaint of abuse is made enjoys a dominant position within the meaning
of the second explanation to section 4, which in substance means that the enterprise’s
behavior in the market is not constrained by the market forces. This has to be proved
by facts. Section 19 (4) lists the factors that the Comission shall consider in an inquiry
as to whether an enterprise enjoys a dominant position or not. They are: market share
of the enterprise; its size and resources of the enterprise; its size and importance of the
competitors; economic power of the enterprise including commercial advantages over
competitors; the existence of 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
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dominant position having or likely to have an appreciable adverse effect on
competition; or any other factor which the Commission may consider relevant for the
inquiry. The Central Government may prescribe further factors that may be
considered in the making of this observation.
The market share of an enterprise by itself is not determinative of the issue of a
dominant position. The size of the market, the number of enterprises, the share of each
in the market and the way it is shared by the competing enterprises will only show the
importance of the market share of the enterprise for ascertaining the dominant
position.
Commercial advantages that would help in building up a dominant position are access
to raw materials, exclusive use of locations, etc. Similarly, vertical integration of a
manufacturer with the only supplier of raw materials would promote a dominant
position. If there are barriers to entry, in the form of high costs of investment that a
new entrant may not or would not be willing to incur immediately, or there are
statutory regulations preventing new entry, it would help existing enterprises to reach
a dominant position. An existing enterprise may itself create barriers to entry through
exclusive distribution and retail arrangements with itself.

2.1 Dominant Position – Relevant Market

Dominance has significance for competition only when the relevant market has been
defined. A dominant position is always with reference to a relevant market, both the
relevant product market and relevant geographic market. The Commission will have
to make inquiries if the enterprise is dominant in the relevant product and relevant
geographic markets. 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”. 4 The Act lays down the
factors any one or all of which shall be taken into account by the Commission while
defining the relevant market. The relevant product market is defined in terms of
substitutability5. It is the smallest set of products (both goods and services) which are
substitutable among themselves, given a small but significant non-transitory increase
in price (SSNIP).

4 sub-section (r) of Section 2

5 sub-section (t) of Section 2
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All products or services considered interchangeably or substitutes by the consumer by
reason of characteristics of the products or services, their prices and intended use,
constitute the relevant product market all those products and services compete among
themselves, in the perception of the consumer and therefore, all such interchangeable
products and services and services form the product market in the given case.
The market for cars, for example, may consist of separate ‘relevant product markets’
for small cars, mid size cars, luxury cars etc. as these are not substitutable for each
other on a small change in price. A relevant product in a relevant geographic market is
what matters.
Relevant geographic market is defined in terms of “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 neighboring areas”.6 A geographic market is not merely the physical
territory in which the competing enterprises operate. The dictionary meaning of
‘homogeneous’ is: formed of parts that all are of the same type. This refers to
uniformity of composition that can be distinguished from the conditions of
competition such as terms of supply, or the mix of the services offered or demanded
in the neighbouring areas.
The purpose of ascertaining the market is to be able to examine whether an enterprise
is dominant in a specific market, made up of the product or service, all operating in a
particular geographic area. If an enterprise is found to be enjoying a dominant
position in a specific market, comprising a geographic and a product market, the next
step would be to investigate if the prohibited abuse of dominant position has taken
place.

SECTION III
Abuse of Dominant Position

Dominance is not considered per se bad. Its abuse is. 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.
The Act gives an exhaustive list of practices that shall constitute abuse of dominance
position and, therefore, stand prohibited. Such practices shall constitute abuse only

6 sub-section (s) of Section 2

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when engaged in by an enterprise enjoying dominant position in the relevant market
in India.
Abuse of dominance is judged in terms of the specified types of acts engaged in by a
dominant enterprise alone or in concert, and shall remain prohibited. There is no need
for any reference by the Commission to the adverse effect on competition (in Indian
markets). Rather, any abuse of the type specified in the Act 7 by a dominant firm shall
stand prohibited.
The Act specifies the following practices by a dominant enterprises or group of
enterprises as abuses:
(i) unfair or discriminatory condition or price;
(ii) limiting or restricting production of goods or provision of services or market;
(iii) limiting or restricting technical or scientific development to the prejudice of
consumers;
(iv) denying market access in any manner;
(v) 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;
(vi) Using its dominant position in one relevant market to enter into, or protect,
other relevant market.

3.1 Practices considered as Abuse of Dominant Position:

 Unfair or discriminatory conditions or prices in purchase and sale:

There shall be an abuse of dominant position if an enterprise directly or indirectly,

imposes unfair or discriminatory condition in purchase or sale of goods or service or
price in purchase or sale (including predatory price) of goods or service. A dominant
enterprise has been prohibited from limiting production, market or technical development
to the detriment of consumers. The Act requires a dominant enterprise to act fairly and to
treat like cases alike.
One of the most blatant forms of this abuse is manifested in discounts on the selling
price. If discounts are given only to a select few customers to the peril of others within
the customers' relevant market, or to a customer who is willing to forgo its rights to
purchase from another competitor, such discounts in tandem with its terms and

7 Clauses (a) to (e) of sub section (2) of Section 4

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conditions are said to be unfair and discriminatory. Moreover, if such discounts and
conditions are imposed with the intention of eliminating competitors or distorting the
competitive forces established within the relevant market it is abuse of dominant
position. Such a discount is usually imposed by an enterprise on account of its
financial dominant and might which cannot be matched by its competitors. By using
its deep financial resources, certain enterprises succeed in entering into exclusionary
contracts with a majority of the consumers in the relevant market. In the long run, the
competitions' incapability to give these disproportionate discounts and induce
consumers into entering into such exclusionary contracts will drive them out of the
market.

 Restrict technical and scientific development in the market:

Any dominant enterprise, which by its actions limits or restricts the technical and
scientific development within the relevant market, is said to abuse its dominant
position. Incessant improvements to products and services in most markets/sectors
have propelled research and development costs to reach gargantuan proportions. Thus,
any dominant enterprise that uses its exceptional financial strength to develop a
product and sell it at disproportionately low costs will in effect limit its scientific
development in the market. The competition will be unable to sustain itself in the
market in wake of an advanced and cheaper variant, with its product becoming
obsolete and its returns/profits diminishing the enterprise will be driven out of the
market as it cannot sell its present product and it may not have the kind of resources
required to develop a new product and sell it at the disproportionately low costs. With
the dominant enterprise's product the sole product or a product facing competition
from significantly weaker and handicapped rivals, such an enterprise will be able to
dictate all further developments in the product and its prices, thereby stifling any
scope of innovation by the rivals.

 Denial of market access:

A dominant enterprise shall not indulge in any practice or practices resulting in denial of
market access in any manner. Any practice by the dominant enterprise which forecloses
the market access to other market players or deter entry to new players shall be
considered as abuse of dominant position by the Commission. If an enterprise uses it's

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dominance to enter into any agreement or arrangement resulting in the rivals right to
the relevant market being denied/adversely affected, it is said to be abusing its
dominant position. If an arrangement has the effect of denying a consumer the right to
purchase from any other rival supplier and such an arrangement has come into force
because of any inducement given on account of the enterprises dominance, it can be
concluded that it is in effect denying market access

 Using dominant position in one market to enter another:

An enterprise may have 'a marked ascendancy' over another enterprise in a different
market; this may be manifested in an enterprise exercising its dominance in a
particular market to affect the competitive forces in allied/corollary markets. Any
enterprise, which uses its financial or technical dominance in one market to enter
another market or distort the competitive forces in that market is said to abuse its
dominant position in violation of the provisions. Microsoft's entry into the Internet
Browser market serves as an apt illustration of abusing a marked ascendancy. In this
example, Microsoft used its position as the overwhelmingly popular Operating
System, to catapult its Internet Explorer browser software into the forefront of the
Browser market. As a result of Microsoft bundling its aforesaid software for free with
their OS, they entered into another product market and ran its competitors out of
business.

3.2 Consequences of Abuse of Dominant Position

Section 27 of the Act deals with orders by the Commission after inquiry into abuse of
dominant position. The Commission may pass all or any of the following orders,
namely, -
• may direct an enterprise with dominant position which has contravened Section
4 to discontinue such abuse of dominant position;
• may impose penalty not exceeding ten percent of the average turnover of last
three preceding financial years, upon a dominant enterprise contravening
Section 4.
In addition, the Competition Appellate Tribunal can be approached for award of
compensation to be paid by any dominant enterprise for any loss or damage shown to

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have been suffered by any applicant as a result of any contravention of the section 4
by such enterprise, if established by the Commission.
The Act also provides for direction to the dominant enterprise concerned to comply
with such other orders and directions, including payment of cost, if any. 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. The
Commission may, during the pendency of an inquiry into abuse of dominant position,
if the conditions of Section 33 of the Competition Act, 2002 are met, temporarily
restrain any party from carrying on the offending act until conclusion of the inquiry or
until further orders.

3.3 Landmark Cases

In Hoffmann-La Roche & Co. AG v Commission of the European Communities 8,

the court discuseed the meaning of dominant position and its relevant factors. The
market in question was for vitamins. The European Commission held that Roche had
abused its position in the vitamins market by entering into agreement with 22 buyers.
The agreement contained that grant of fidelity rebates would be given if they buy all
or most of their requirements of vitamins from Roche. Roche had contended that it did
not have a dominant position in view of its share in the market. Roche appealed in the
European Court.
The European Court Dominant position means large share in the market but not the
majority of the shares in the market. Roche was enjoying a dominant position on the
basis of Roche’s market share which was high and this large share gave ascendancy
position to Roche along with other factors. Share in the market is not determining but
a relevant factor.
The court observed that the existence of a dominant position may determined from
several factors which, taken separately, are not necessarily determinative but among
these factors a highly important one is the existence of very large market shares and
that substantial market share as evidence of the existence of a dominant position is
not a constant factor but varied from market to market according to the structure of
these markets , especially as far as production , supply and demand are concerned .

8 Case 85/76

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Thus what is large depends upon the structure of the market. Another relevant factor
is the relationship between the market shares of the undertaking concerned and of its
competitors. Though Roche did not have a large share but the other producers were
very small in comparison to Roche.
Compagnie Maritime Belge Transports SA v. Commission of European
Communities9 discussed the issue of collective dominance. Shipping lines operating
between Northern European and Western African brought before the Court the
decision of the Commission which decided that all the shipping conferences had
violated Article 81 of Treaty of Rome by entering into conferences. They entered into
an agreement to share the routes, not to enter into the area reserved for the other, not
to compete with each other and to refrain from operating as an independent operator.
They decided to modify their freight rates so as to lower them from the rates of other
independent operators. This was done to oust the other independent operators from the
market. The shipping conferences contended that collectively it cannot be said to be in
a dominant position because it is merely an arrangement of cooperation and not
dominance. There was no economic unity. Unless there is economic cooperation it
cannot be said that they hold dominant position.
The court rejected this argument and held that economic unity need not be proved. It
is sufficient that the collective unity acted against their consumers and competitors.
They wanted to harm them and thus it is an abuse of their dominant position.
In Tetra Pak Interational SA v. Commission of European Communities 10 the
tetrapak group specialized in equipment for the packaging of liquid or semi –liquid
food products in cartons. Its activities covered both the aseptic and the non aseptic
packaging sectors. Tetra Pak held 90-95% of the market in aseptic sector. In non
aseptic sector, where the structure was oligopolistic, Tetra Pak held 50-55 % of the
market in the European Community. The allegation was that they have entered into
anti competitive agreements stating that the buyers of Tetra Pak equipments and
machines were prohibited to change the configuration of the same and in case of
filling machines they could only use Tetra Pak cartons and no other cartons. The
Commission held that this amounts to abuse of dominant position because these are
anticompetitive agreements. Tetra Pak appealed to European Court and contended that
as far as dominant position is concerned, it is only in aseptic relevant market and not

9 [2000]EUECJ C-365/96
10 [1996 ECR I-5951]

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in non aseptic because the two are not interchangeable and thus constitute two
different markets. However the court rejected the argument and stated that inspite of
the given fact that they are not interchangeable, yet they are related market. The
dominant position of Tetra Pak in one market affects its position in the other market.
Thus it gives an advantage to Tetra Pak in other markets also.

BIBLIOGRAPHY

 T. Ramappa, Competition Law in India Policy: Policy, Issues, and

Developments, Oxford University Press, 2009
 Vinod Dhall, Competition Law Today: Concepts, Issues, and the Law in
Practice, Oxford University Press, 2007
 Pradeep S. Mehta, A Functional Competition Policy for India, Academic
Foundation, 2006
 Abir Roy, Competition Law in India, Delhi Law House, 2009
 

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