Competition Law Dominant Position and its Abuse: Meaning of Dominant Position

Dr. Vijay Kumar Singh

Associate Professor, School of Corporate Law, IICA
vrsingh.vk@gmail.com

Module written for e-Pathshala, MHRD Project NME-ICT of Government of India,

http://epgp.inflibnet.ac.in/view_search.php?&category=5656&ft=et

Keywords: Dominant position, dominance, market power, position of strength, market share, entry
barriers

Module 17
Objectives: To understand the concept of dominant position.

Introduction

Competition in markets means rivalry between competitors to attract customers which results in
enhanced consumer welfare by way of more choices, newer products and low prices. If there is no
competition in markets, one or more firms seek to gain monopoly or oligopoly which allows them to
disregard the competitive pressure exerted by the competitors, leading to loss of consumer welfare
available in a competitive market. Thus, unfair conduct of a dominant enterprise or the conduct of an
enterprise to seek dominance unfairly (monopolization) is under scrutiny under the competition laws.
These concepts are variously called “abuse of dominant position” or “monopolization” or “misuse of
market power,” or some similar term1. Prohibition of ‘abuse of dominant position’ forms an
important enforcement area for competition agencies around the world; the other areas usually being
prohibition of anti-competitive agreements (horizontal agreements including cartels and vertical
agreements) and the regulation of combinations (acquisition or mergers and amalgamations).

In India, while the MRTP Act2 provided for control of monopolies and prohibited ‘Monopolistic
Trade Practices (MTP)’, derived from the basic philosophy of prohibition ingrained in the
Constitutional Directive of ‘prevention of concentration of economic power to the common
detriment’; the Competition Act3 (hereinafter referred to as ‘the Act’) was enacted keeping in view the
economic development of the country post liberalization and privatization era4. The shift has been
from ‘command-and-control’ triggered policies to an open market policy and thus now ‘monopoly’
itself is not per se bad, however an abuse of this ‘monopoly’ is.

The practice of prohibiting ‘abuse of dominance’ is a challenging and complex task for the
competition agencies around the world for two simple reasons, i.e. there are several practices which
may amount to an abuse of dominant position (predatory pricing, offering rebates etc.) and there is a
very thin line of difference between the legitimate practice of an enterprise to become dominant in
market, which is perfectly justified from a business perspective, and using the dominant position
unfairly to the detriment of the competition in markets. In Verizon5, the US Supreme Court
recognized this by saying “the opportunity to charge monopoly prices – at least for a short period – is
what attracts “business acumen” in the first place, it induces risk- taking that produces innovation and
economic growth”. This is what Schumpeter had said in his theory of economic development6.

Learning Outcome

This module would enable the learners to:

 Define the ‘dominant position’ under the Competition Act, 2002.
 Enumerate the factors for determination of the ‘relevant market’, i.e. ‘relevant product
market’ and ‘relevant geographic market’.

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 Enumerate the factors to be considered while determining dominance of an enterprise or
group in the relevant market.

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17.1 Meaning of Abuse of Dominant Position
Abuse of Dominant Position in India happens when an enterprise or group indulges in any of the
category of activities mentioned in Section 4 of the Act. The definition of ‘enterprise’ under the Act
is quite broad and even includes the government departments except when performing sovereign
functions (relatable to energy, currency, defence and space)7. A ‘group’ means two or more
enterprises which, directly or indirectly, are in a position to:
(i) exercise fifty per cent or more of the voting rights in the other enterprise; or
(ii) appoint more than fifty per cent of the members of the board of directors in the other
enterprise; or
(iii) control the management or affairs of the other enterprise.
It is pertinent to note that the definition of ‘group’ has been referred to in Section 4 from Explanation
(b) to Section 5 of the Act which relates to regulation of combination provisions.

As regards the abuse of dominant position, the Raghavan Committee had identified two kinds of
prohibitions, i.e. the first which relates to actions taken by an incumbent firm to exploit its position of
dominance by charging higher prices, restricting quantities, or, more generally, using its position to
extract (economic) rent; and the second which relates to actions by an incumbent in a dominant
position to protect it position of dominance by making it difficult for potential entrants and
competitors to enter the market8.

17.1.1 ‘Dominant Position’ – Meaning of

Explanation to Section 4 of the Act gives the meaning of 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.
The present definition of ‘dominant position’ seems to be based on the economic definition laid down
by European Court of Justice (ECJ) in the case of United Brands9 with minor changes (i.e. ‘economic
strength’ is being replaced by ‘strength’, ‘firm’ is replaced by ‘enterprise’ and the term ‘to an
appreciable extent’ is deleted).

It is pertinent to note that the present definition of ‘dominant position’ is based on a number of
factors. Market share is not the sole determinant of position of dominance. Several factors are
considered in determining dominance of a firm as provided in Section 19(4) of the Act. This is a clear
departure from the concept of ‘dominant undertaking’ under the MRTP Act which was on the basis of
‘one-fourth control’ over total goods or services10. However, under the present competition law, the
dominant position of an enterprise is with reference to a ‘relevant market’ in India and the test is
twofold, i.e.
(i) The said position of strength enables the enterprise to operate independent of the
competitive forces prevailing in the market, which indicates that the enterprise is
dominant as there are no competitive constraints on the enterprise. In a general market
situation a firm cannot afford to behave independent of its competitors and in fact has to
constantly keep a tab on the activities of its competitors. For e.g. a firm which knows that
it only has the technology (patented) becomes dominant in that technology and can
behave independent of competitive forces. Pricing of anti-cancer drug by Bayer can be
an example which was subject matter of first compulsory licensing case in India after
which there was a significant reduction in the prices of the said drug, or it may be said
that position of strength of Bayer was lost due to entry of Natco11. OR
(ii) The said position of strength enables it to affect its competitors, or consumers or relevant
market in its favour. DLF Case can be an example of this criterion wherein the DLF, due
to its dominant position in real-estate markets in Gurgaon was able to affect consumers in
its favour. This case has been discussed as a case study subsequently for determination of
dominant position.

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17.1.2 Concept of ‘Market Power’
It may be noted that the concept of ‘market power’ which runs parallel to the concept of ‘dominant
position’ has been broader and has evolved in jurisdictions like US and EU with judicial
interpretations. In EU the concept has developed with more and more economic analysis being put in
place to determine the ‘market power’ of an enterprise which necessarily includes more than the
market share criterion12. The concept is important also in the context of a merger assessment also and
the competition agencies have taken SSNIP test (discussed below) to determine the same
13
. In European Union, there is a concept of ‘significant market power’ (SMP) and an operator is
presumed have SMP if it has more than 25% of telecommunications market in the geographic area in
which it is allowed to operate and is under an obligation to produce a Reference Interconnection Offer
(RIO), i.e. have to produce a document containing terms and conditions at which it will provide
access to specified services.

Here it is indeed important to consider that the ‘market power’ or ‘position of strength’ spoken about
in the Competition Act refers only to an enterprise or group and is different than a power acquired by
way of an agreement by two or more horizontal players (referred to as ‘collective dominance’). While
the concept of collective dominance is prevalent in EU and somewhat in US, which would be
discussed in Module 19; in India, it was proposed to introduce the concept in Section 4 which has not
yet actualised14. CCI has accordingly closed the cases based on ‘collective dominance’15.

This brings us to another practical issue as regards ‘vertical agreements’ (an agreement amongst the
enterprises or persons at different stages or levels of the production chain in different markets) under
section 3(4) of the Act wherein the five categories of agreements may be anti-competitive if it causes
or is likely to cause an AAEC. Now, if the nature of these agreements are seen, i.e. tie-in, exclusive
supply, exclusive distribution, refusal to deal or resale price maintenance, seems only can be forced
by an enterprise who has market power either in the upstream or the downstream market of the
vertical chain. This is a point to ponder!

17.2 Determining ‘Dominant Position’

Determining dominant position of an enterprise forms the first step, before the alleged abuse may be
looked into. As the dominance has to be determined in the context of a relevant market, determining
the ‘relevant market’ in which the said enterprise is dominant becomes the first step. . This first step
has been recognized by competition agencies around the world16.

Here it is important to note that there are two major stages of a case under the Competition Act, i.e.
the prima facie stage and the stage after report of Director General (DG) is received by the
Commission17. While ‘relevant market’ is a first step in determination of dominance of an enterprise,
there is no obligation on CCI to actually determine the relevant market at the prima facie stage as held
by Bombay High Court in Kingfisher Airlines Case18, however, in practice CCI determines the same
at prima facie stage. However, this determination is subject to change subsequently by a further
detailed analysis by DG.

17.2.1 Relevant Market

Market Definition is one of the most important analytical tools to examine and evaluate the
competitive constraints that a firm faces and the impact of its behaviour on competition19. The
definition of relevant market comprises defining a relevant product and/or a relevant geographic
market20. The definition of relevant market becomes important from the perspective of the
enterprises, because a broader market definition (in terms of products or geography) may reduce the
dominance of the enterprises concerned and ultimately the scrutiny under competition laws. For
example if the market in DLF Case21 would have been NCR rather than Gurgaon, DLF would not
have been dominant, and once there is no dominance, the assessment of abuse does not arise22.

17.2.2 Relevant Product Market

“Relevant product market" means a market comprising all those products or services which are
regarded as interchangeable or substitutable by the consumer, by reason of characteristics of the

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products or services, their prices and intended use23. The substitutability of the products by a
consumer (demand substitution) becomes an immediate competitive concern for the enterprises to
behave competitively (to offer less prices and better products). This is a situation when the consumers
are easily able to switch to available substitute products (relevant product market) or to suppliers
located elsewhere (relevant geographic market).

There are economic models to find the demand substitution, for e.g. Small but Significant Non-
transitory Increase in Price (SSNIP), i.e. by assessing whether customers would switch to other
readily available substitute products or to suppliers located elsewhere in response to a hypothetical
small (5-10%) but long term increase in price of the product in question24. Let us take a hypothetical
example, a consumer shifts to coffee from tea when there is SSNIP of tea25. Supply side
substitutability may also be considered, which is the ability of the producers to switch production to
the relevant products and markets in the short term without incurring significant additional costs or
risks in response to small and long term changes in relative prices26. For example, a producer of shirts
easily shift to the production of trousers. While these concepts are basics of market definition, there
are few cases in which a need was felt by CCI to make a passing reference to them, however not dealt
with the same in detail27. Jurisprudential development on these economic concepts would be worth
following.

Cellophane Fallacy: This doctrine, which is considered limitation of the SSNIP test, emerged from
the famous US case of DuPont where the court held that monopolisation of cellophane market was
not possible as there were many substitutes available on the basis of SSNIP test. However, later this
was challenged on the ground that there was a mistake in taking the monopolists price as the base
price which was already the raised price significantly above competitive price and then finding the
monopolist’s inability to raise price28.

The Act provides for the factors which the Commission will have due regard to while determining the
relevant product market29. These factors are:

(a) Physical characteristics or end-use of goods: For example the in DLF Case, the end-use i.e.
high-end luxury residential units which would not be substituted by low-end apartments was
considered a relevant factor. Substitutability of a product is decided by way of its physical
characteristics or end-use. Another example would be the Lamborghini Case30 wherein the CCI said
“the market for ‘Super Sports Cars’ constituted a separate market within the auto industry because of
its characteristics, price, intended use etc.,” taking in to account the fact of no substitution between a
super sports car with any other car.

(b) Price of goods or service: Price of a goods or service may be an important factor to determine
the relevant market. For example, in the car market price of cars may be one of the factors to
segregate them into high-end or low-end. Product differentiation on the basis of high-price consumers
(especially in luxury segment of products) becomes an important consideration. In the Lamborghini
Case (supra), the price of these super sports cars as Rs. 2 crores or above was also a consideration,
making these cars exclusively catering to a distinct class of consumers.

(c) Consumer preferences: Consumer preference of a particular brand or product may also be a
relevant factor in determining relevant product. For example, a consumer prefers to visit a 5 star hotel
and its services which may not be substitutable for him with services of a 3star hotel but does not
mind paying Rs. 100 in a 5-star hotel which would be available for Rs 30 in a 3 star hotel. This
differentiated product market may be justified on the ground of consumer preference.

(d) Exclusion of in-house production: An enterprise may seek to produce only for its own unit
rather than for the whole market. For example BMW decides to produce horns exclusively for its cars
and not for others. This part of production by BMW may be excluded from the overall horn market as
it is exclusive in-house production.

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(e) Existence of specialised producers: Similar to point (d) there may be market of specialised
producers and can be treated as a separate product market. Products which are so specialised or
distinct so as to constitute a separate market. For example, services for space tourism. .

(f) Classification of industrial products: In India, this classification in the National Industrial
Classification for manufacturing which may be an important factor while determining relevant
product market31.

In Ajay Devgan Case32, it was argued by the informant that ‘film industry in India’ is the relevant
market and Yash Raj Films are the dominant player being a ‘big-banner’ production house. However,
CCI found that: “No enterprise can be considered dominant on the basis of big name. Dominance has
to be determined as per law on the basis of market share, economic strength and other relevant factors
stated under section 19(4) of the Act. The Commission is unable to accept such a narrow approach
while determining the relevant market. A large number of movies are released in India every year. As
per the information available in public domain, in Bollywood itself, 107 and 95 films were released in
2011 and 2012 (till now) respectively. Out of this, the opposite parties produced only 2-4 films each
year. This cannot be said to amount to dominance even in the Bollywood industry, leave aside film
industry in India. Therefore, the claim of the informant that opposite parties were dominant players in
the market ‘film industry in India’ cannot be accepted. There is prima facie no contravention of
section 4 of the Act.” Another important observation in this case was that “the market cannot be
restricted to any particular period like Eid or Diwali and the market has to be considered a market
available throughout the year.33”

In cases, where the allegations are that the dominant enterprise or the group is trying to use its
dominant position in one market to protect its position in another market or enter into another market
[section 4(2) (e)], there is a requirement to determine two relevant markets. These two relevant
markets may be sub-sets of large market like stock exchange, for example in NSE Case, it was held
that NSE was abusing its dominant position in ‘stock exchange services market’ to protect its position
in the ‘currency derivative’ market in which it had another competitor MCX. Another case would be
markets in vertical chain, for example, in ACI Worldwide Case34, CCI determined the relevant
upstream market as ‘software for electronic payment systems’ and the consequent relevant
downstream market as ‘provision of services in respect of customization and modification of software
of electronic payment systems’.

17.2.3 Relevant Geographic Market

“Relevant geographic market” means 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 areas35. The
Act provides for the factors which the Commission will have due regard to while determining the
relevant product market36. These factors are:

(a) Regulatory trade barriers: Regulatory barriers may prohibit entry of products (alcohol in
Gujarat) add to the switching costs (fresh licence) and thus determines substitutability. There may be
two kinds of barriers, i.e. barriers imposed by India (for e.g. the tariff barriers) which forms the part of
broader Trade Policy of the country and the barriers which may be imposed by States within India.
While, the Constitution of India does not allow for barriers to be imposed by States (inter-state, i.e.
between two states as opposed to intra-state, i.e. within the state), there may be situations in which it
may be allowed on the grounds of public interest37.

(b) Local specification requirements: The products may be differentiated on the basis of local
specifications, for e.g. houses in hilly area may not be built from bricks rather light material may be
used like cardboards or wooden and asbestos sheets38.

(c) National procurement policies: National procurement policies can play an important role in
determination of relevant market. For example the procurement policies of the government in case of

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Ethanol Blending Program39, Biofuels40 and Sugar Industry41 have been considered by the
Commission.

(d) Adequate distribution facilities: A good chain of distribution facilities in a geographic area is
an important consideration in determination of the relevant geographic market because ease in
distribution of goods across geography creates homogeneity as the consumer could get the product
from faraway places without any issues thus making the products from two geographic area
substitutable.

(e) Transport costs: This is one of the most important factors in delineating the geographic
market. If the transportation cost between two geographies is high, the products from one geography
cannot be sold in the other geography at or around the prevailing price making it non-substitutable.

(f) Language: In a country like India, language diversity plays a very important role in
determination of relevant market, especially in services industry. For example a service provider who
is not acquainted with the local language (Hindi speaking) may not be substitutable with the local
service provider (Tamil speaking). This is often used to delineate the market in the TV broadcasting
market, for example.

(g) Consumer preferences: In DLF Case, the Commission considered Gurgaon as the relevant
market on the basis of consumer preferences and local specifications42. In Pragati Maidan Case43,
CCI considered the consumer preferences as an important factor to delineate the relevant market. It is
interesting to note that in this case, apart from the factors mentioned above, the factors like the law
and order situation in Noida & Greater Noida in comparison to Delhi and the profile/status of
potential visitors in such exhibitions was also considered. Delhi it is generally perceived to be better
placed on both counts and it is a relevant factor affecting the choice of consumers i.e. the exhibition
organizers.

(h) Need for secure or regular supplies or rapid after-sales services: The aforesaid factors would
be supplemented with the need to have regular supplies of goods and after-sales service across
geographies. For example, a BMW car may not be purchased by a consumer from a remote area just
because after-sales services may not be available to the consumer with ease.

It is pertinent to note that the CCI, while determining the relevant product or relevant geographic
market, may take into consideration any or all of the factors enumerated above44. After the relevant
market is determined, the next step is to determine the dominance of an enterprise in the said relevant
market.

17.3 Dominant Position

Once the relevant market is determined, the next step is to find out the dominant position of the
enterprise. The dominance of an enterprise has to be determined either by way of structural or
behavioural test. The structural definition identifies dominance by an established market share
threshold that may allow for possible situation-specific deviations (for example Israel)45. Behavioural
definitions broadly focus on a firm’s appreciable freedom from competitive constraints or ability to
act in ways that a competitively-constrained firm could not. The vast majority of countries follow the
behavioural definition46 which utilizes multi-facetted analysis that reaches beyond market share.
India is one of them.

Dominant position of the enterprise or group under the Act has to be determined by having due regard
to all or any of the factors mentioned in Section 19(4) of the Act. There are 13 factors enumerated
which may be classified into three heads as follows:

17.3.1 Market Share and Market Structure

(a) Market share of the enterprise;
(b) Size and resources of the enterprise;

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(e) Vertical integration of the enterprises or sale or service network of such enterprises;
(j) Market structure and size of market;

The aforesaid four factors specifically refer to the bigness of the enterprise in terms of market share,
size and resources, vertical integration with reference to the structure and size of the market under
examination. Market share becomes the starting point of this examination and most of the times are
considered proxy to the ‘market power’, as can be observed from the cases closed by CCI under
section 26(2). However, it has been said that market share is not only the parameter to test dominance
but other factors also play a very important role.

The Raghavan Committee on Competition Policy and Law, on the recommendations of which the
present Competition Act came into force, recognised this aspect and said “even a firm with a low
market share of just 20% with the remaining 80% diffusedly held by a large number of competitors
may be in a position to abuse its dominance, while a firm with say 60% market share with the
remaining 40% held by a competitor may not be in a position to abuse its dominance because of the
key rivalry in the market47.” This was the precise reason for which the Act does not specify the
specific percentage of market share when an enterprise may be considered dominant; while in some
jurisdictions like South Africa it has been mentioned specifically48. For an assessment of dominant
position in India, CCI may also refer to the international jurisprudence with required tweaking in
Indian context (discussed below).

17.3.2 Status of Competitors and Consumers

(c) Size and importance of the competitors;
(d) Economic power of the enterprise including commercial advantages over competitors;
(f) Dependence of consumers on the enterprise;
(i) Countervailing buying power;

The aforesaid factors are meant for examining the status of the dominant enterprise vis-à-vis its
competitors and consumers. For example, even if an enterprise does not have a substantial market
share may be considered dominant with reference to the size of its competitors, as noted above by the
Raghavan Committee. This was considered by EU in a case49 wherein British Airways was
considered to be dominant with only 39.7% market share given the next larger player having only
5.5% market share. Further dependence of consumers on the dominant enterprise is an important
factor which was considered by CCI in DLF case considering the fact that DLF has the largest land
bank in Gurgaon. Contra to the condition of ‘dependence of consumers’ there is a condition of
countervailing buying power which allows the buyer to negotiate the price. The concept ‘monopsony’
is an extreme example of this power and is a situation where there is a single buyer opposed to
‘monopoly’ in which there is a single seller.

17.3.3 Other factors

(g) 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;
(h) 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;
(k) 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;

Government plays an important role in the economic development and regulation of competition in
markets in India. It is important to note that the economy in India has travelled from ‘regulation’ to
‘management’ with less intervention from the government as the key feature. There is a shift towards
privatisation and even utilities like telecom, transport, etc. are being moved into the hands of private
player. However, Government has not completely withdrawn from the welfare activities and in fact in

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a number of areas runs enterprises (public sector enterprises) for profit. At this point, the Act does not
make a distinction between the public and private enterprises, the only exception being sovereign
functions of the Government.

The aforesaid factors are considered by the Commission in view of the historical developments, and
some enterprises of the Government enjoying natural monopoly (Oil Marketing Companies) and in a
number of areas there being entry barriers (e.g. Railways)50. While these factors are important in
determining dominance of an enterprise, factors like social obligation and social costs also becomes
important in certain cases, for e.g. reasons for cash inflow being offered by Government to Air India
may be to compensate the loss incurred by it in running flights in areas which are un-economical but
still required for maintaining connectivity in every corner of the country51. The social responsibility
aspect was considered by the Commission while examining the abuse of dominance case against Coal
India52.

Other than the aforesaid factors, the Act empowers the CCI to take into consideration any other factor
which may be relevant53. In EU, the dominant enterprise has also been considered to bear special
social obligation as held in the Michelin’s case54. This has been adopted by the Competition
Appellate Tribunal in the DLF case. This is again an area of jurisprudential development which would
be worth monitoring in the context of Indian competition law.

17.4 Case Study: DLF ‘Real Estate Sector’

This a classic case decided by CCI in which there is an elaborate discussion on the factors of
determination of relevant market and dominance of an enterprise which has been upheld by
Competition Appellate Tribunal (COMPAT) in Appeal55.

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Quadrant III: (Learn More / Source for Further reading / Web Resources):

Did you Know?

Description Image Source

In most of the cases closed under section 26(2)
of the Competition Act, 2002 the issue related
Orders of CCI
to individual consumer disputes rather than a
competition dispute.
Cases relating to alleged abuse of dominance
closed under section 26(2) of the Act were
Orders of CCI
closed on the basis of prima facie finding of
no dominance in the relevant market
First order of CCI under the provisions of the
Competition Act, 2002 was given in Banks http://www.cci.gov.in/menu/MainOrder.
Prepayment Penalty Case – Case 5 of 2009 pdf
which was a 26(6) order.
First order of penalty in an AOD case by CCI http://www.cci.gov.in/May2011/OrderO
was made against NSE – Case 13 of2009 on fCommission/MCXMainOrder240611.p
23.06.2011 df
http://www.prsindia.org/uploads/media/
Some significant amendments were proposed Competition%20(A)%20Bill,%202012/
in the Competition Act, 2012 The%20Competition%20(A)%20Bill,%
202012.pdf
The competition law and policy agenda was
http://www.wto.org/english/tratop_e/co
dropped from the agenda of WTO in 2004
mp_e/comp_e.htm
following resistance of developing countries.
American Bar Association section of Antitrust
Law publishes the latest developments on
http://shop.americanbar.org/eBus/Store/
Antitrust Laws in US and is a kind of
ProductDetails.aspx?productId=213824
restatement. The latest version (7thed) is
published in 2012.
On European Law: Richard Wish’s EU
http://ukcatalogue.oup.com/product/978
Competition Law is now published in Indian
0199586554.do
Edition, (7thed) published by Oxford

Interesting Facts

Sl. Interesting Facts

No.
The MRTP Act, 1969 had its genesis in the Directive Principles of State Policy embodied in
the Constitution of India. Clauses (b) and (c) of Article 39 of the Constitution lay down that
the State shall direct its policy towards ensuring:
(i) that the ownership and control of material resources of the community are so
1.
distributed as to best serve the common good; and
(ii) that the operation of the economic system does not result in the concentration of
wealth and means of production to the common detriment.
http://www.mca.gov.in/Ministry/annual_reports/annualreport2006/CHAPTER4.pdf
Definition of Dominant Position in Competition Act, 2002 is based on economic theory,
which was succinctly stated in the United Brand’s case decided by ECJ as follows:
2. “The dominant position referred to in this Article relates to a position of economic strength
enjoyed by undertaking which enables it to prevent effective competition being maintained on
the relevant market by giving it the power to behave to and appreciable extent independently

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 of its competitors, customers and ultimately of its consumers. United Brands Company and
United Brands Continental BV Re[1976] 1 CMLR D28
The seeds for the new competition law in India were laid down at the Singapore Ministerial
Conference of WTO in 1996 followed by a Committee in 1999 constituted under the aegis of
3. Ministry of Commerce (which deals with international trade) followed by the High Level
Committee constituted by Ministry of Commerce (the present ministry to which CCI is
affiliate to) under the chairmanship of SVS Raghavan.
It took almost ten years to get the complete Competition Act enforced, as the first provisions
4 were notified on 31.03.2003 (section 1, etc.) and the last provisions to be notified were
sections 43A and 45 on 01.06.2011.

Glossary

Starting Term Definition Related Term

Character
Abuse of
Abuse of dominance is the conduct which is
Abuse of Dominant
A prohibited by law by a dominant enterprise.
Dominance Position
For example unfair and discriminatory pricing.
Monopolisation
It is a power and influence over others. In
competition law context, dominance relates to
D Dominance this power and influence of an enterprise or Dominant
group in relevant market or on its competitors
and/or consumers
An infrastructure or resource that cannot be
reasonably duplicated, and without access to
E Essential Facility which competitors cannot reasonably provide Indispensable
goods or services to their customers. (South
African Competition Act)
Conduct that creates or maintains monopoly
power by disadvantaging and harming
Exclusionary
E competitors (excluding the competitors form
Conduct
relevant market from competing) These cause
indirect harm to consumers.
Conduct that exploits the consumer because
there are no competitors in the market or the
Exploitative
E exploiter is dominant enterprise (for e.g.
Conduct
excessive prices). These cause direct harm to
consumers.
Attempts by a dominant firm or group of
relatively large firms to maintain or increase
market control through various anticompetitive Abuse of
M Monopolisation
practices such as predatory pricing, pre- Dominance
emption of facilities, and foreclosure of
competition.
Monopoly is a situation where there is a single
M Monopoly seller in the market.

A monopsony consists of a market with a

M Monopsony single buyer.

The ability of a firm (or group of firms) to raise Dominance

M Market Power and maintain price above the level that would Significant
prevail under competition is referred to as Market Power

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Monopolistic
M monopoly and perfect competition. Firm is
Competition
N Natural Monopoly
O Oligopoly
P Predatory Pricing
R Relevant Market
U Unilateral Conduct
market or monopoly power.
Monopolistic competition describes an industry
structure combining elements of both
Duopoly or
oligopoly
somewhat dominant in relation to its product
(brand) in spite of there being many substitutes.
A natural monopoly exists in a particular
market if a single firm can serve that market at
lower cost than any combination of two or
more firms. Natural monopolies are thought to
exist in certain industries such as electricity,
railroads, natural gas, and telecommunications.
An oligopoly is a market characterized by a
small number of firms who realize they are
interdependent in their pricing and output
policies. The number of firms is small enough
to give each firm some market power.
This is a pricing strategy where the price of a
product is kept very low (generally below the
cost of production) to drive out the existing or
potential competitors out of the market.
The starting point in any type of competition
analysis is the definition of the "relevant" Relevant
market. There are two fundamental dimensions Product Market
of market definition: (i) the product market, and Relevant
that is, which products to group together and Geographic
(ii) the geographic market, that is, which Market
geographic areas to group together.
Monopolization
It is a conduct that does not require an
or abuse of
agreement between two or more parties.
dominance

Web Links

http://www.cci.gov.in/May2011/Advocacy/AOD.pdf
http://www.cci.gov.in/images/media/Advocacy/CompetitionAct2012.pdf
http://www.cci.gov.in/May2011/Advocacy/FAQ.pdf

Points to Ponder

Sl. Points to Ponder

No.
1. Whether the concept of ‘collective dominance’ in India would be successful in correcting the
anti-competitive elements?
2. Whether the concept of ‘market power’ is required in vertical agreements cases?
3. Is there a difference between ‘refusal to deal’ in Section 3(4) and ‘denial of market access’ in
Section 4(2)(c) of the Competition Act?
4. Whether CCI take into consideration any other factor for determining relevant market or
dominance other than those mentioned in Section 19?
5. Whether CCI can form a prima facie view as regards dominance on the basis of abuse rather
than taking into consideration the factors in Section 19(4)?

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Quadrant-IV(Assessment / Evaluation)

Multiple Choice Questions

1. In which case it was held that there is no obligation on CCI to actually determine the relevant
market at the prima facie stage:
(a) CCI v. SAIL
(b) Kingfisher Airlines
(c) Union of India v. Grasim
(d) None of the above

2. “Relevant product market" means a market comprising all those products or services which
are regarded as interchangeable or substitutable by the consumer, by reason, and intended use:
(a) of characteristics of the products or services
(b) their prices
(c) intended use
(d) all of the above
(e) none of the above

True or False

3. The dominant position referred to in Competition Act, 2002 relates to a position of economic
strength enjoyed by undertaking which enables it to prevent effective competition being maintained
on the relevant market by giving it the power to behave to and appreciable extent independently of its
competitors, customers and ultimately of its consumers.

4. Relevant geographic market” means 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.

Fill in the Blanks

5. The definition of ‘enterprise’ under the Act is quite broad and even includes the government
department except which performs the _______ functions.

6. “A decision to purchase a high-end apartment in Gurgaon is not easily _________ by a

decision to purchase a similar apartment in any other geographical location”.

7. Match the Columns

Verizon v. Trinko ECJ

United Brand’s Case DuPont Case
Cellophane Fallacy Schumpeter
Theory of Economic Development US Supreme Court

Endnotes:
1
OECD Background Note: Policy Roundtables on Abuse of Dominance and Monopolisation, OCDE/GD
(96)131. <http://www.oecd.org/competition/abuse/2379408.pdf> accessed June 28, 2014
2
The Monopolies and Restrictive Trade Practices Act, 1969 [Act No. 54 of 1969]
3
The Competition Act, 2002 [Act No. 12 of 2003]
4
Vijay Kumar Singh, “Competition Law and Policy in India: Journey in a Decade”, NUJS Law Review vol. 4
(2011): 523-566
5
Verizon Communications Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 US 398, 407 (2004)

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6
John Cantwell, “Innovation, Profits and Growth: Schumpeter and Penrose”, Working Paper: University of
Reading, <http://www.reading.ac.uk/Econ/Econ/workingpapers/emdp427.pdf>accessed June 29, 2014
7
Section 2(h) of the Competition Act, 2002
8
Report of High Level Committee on Competition Policy and Law: Chaired by SVS Raghavan, 2000, Para
4.4.3,
<http://www.globalcompetitionforum.org/regions/asia/India/Report_of_High_Level_Committee_on_Competitio
n_Policy_Law_SVS_Raghavan_Committee29102007.pdf> accessed June 9, 2014.
9
United Brands v Commission, Case 27/76 [1978] ECR 207, [1978] 1 CMLR 429.
“Dominance is a position of economic strength which enables a firm to prevent effective competition
being maintained on the relevant market by affording it the power to behave to an appreciable extent
independently of its competitors, customers and ultimately of its consumers”. Also see Hoffmann-La
Roche & Co. AG v. Commission Case 85/76 (paragraph 91) the Court held that abuse does not imply
that the dominance is the means by which the abuse is brought about. Thus, there does not need to be a
correlation between dominance and abuse, which is not true in the Indian context.
10
Section 2(d) of the MRTP Act, 1969
11
ManasiSood, “NatcoPharma Ltd. v. Bayer Corporation and the Compulsory Licensing Regime in India”,
(2013) 6 NUJS Law Review 99
12
GiorgioMonti, The Concept of Dominance in Article 82,
<https://www.lse.ac.uk/collections/law/staff%20publications%20full%20text/monti/ECJdominancepaper.pdf>ac
cessed July 29, 2014
13
Whether, post-merger, the parties can institute a non-transitory price increase above a certain threshold level
(say 5 or 10 per cent) which will vary depending on the case without attracting entry of new firms or production
of substitute products. Their ability to maintain or exceed this price threshold is assessed by detailed
examination of quantitative and qualitative market structure and firm behaviour factors. Glossary of Industrial
Organisation Economics and Competition Law, compiled by R. S. Khemani and D. M. Shapiro, commissioned
by the Directorate for Financial, Fiscal and Enterprise Affairs, OECD, 1993.
14
In section 4(1), after the words “or group”, the words “jointly or singly” were to be inserted by way of The
Competition (Amendment) Bill, 2012, which could not be passed.
<http://164.100.24.219/BillsTexts/LSBillTexts/asintroduced/136_2012_ENG_LS.pdf>accessed June 29, 2014
15
Consumer Online Foundation against Tata Sky Limited &Ors., Case 2 of 2009 (CCI-decided on March 2011)
Para 19, <http://www.cci.gov.in/menu/MainOrderConsumer250411.pdf> accessed June 29, 2014
The DG has also discussed the issue of abuse of dominance by the opposite parties by restricting
interoperability. The DG noted that this is a very vague allegation and was not established through
investigation. It further observed that Indian law does not recognize collective abuse of dominance as
there is no concept of ‘collective dominance’ which has evolved in jurisdictions such as Europe. The
word ‘group’ referred to in section 4 of the Act does not refer to group of different and completely
independent corporate entities or enterprises. It refers to different enterprises belonging to the same
group in terms of control of management or equity. This is not the case with the opposite parties. The
contention of the informant that each of the DTH respondents is individually dominant is not
sustainable. This Commission agrees with the informant to the extent that market share is not the only
determinant of dominance. But the concept of dominance does centre on the fact of considerable
market power that can be exercised only by a single enterprise or a small set of market players. Every
single player in any relevant market cannot be said to possess such dominance, as seems to be the
contention of the informant. All service providers of the entire DTH industry cannot be said to be
individually dominant. Individually, none of the DTH operators has dominant position in terms of
Explanation (a) to section 4. It is noteworthy that the Competition Act uses the article “an” and not
“any” before the word “enterprise” in subsection (2) of section 4. For a plural interpretation of “an” the
combined entity should be an identifiable artificial juridical person such as association of persons
(AOP) or body of individuals (BOI) mentioned in subsection (l) of section 2 of the Act. That is why the
Act includes the term “group” separately because a “group” of firms with joint management control
can have collective decision making and can exercise joint dominance. In this case, the respondents
cannot be said to be AOP or BOI. Therefore, they cannot be said to be “an enterprise” for the purpose
of section 4.
N. Sanjeev Rao against AP Hire Purchase Association & 162 Ors., Case 49 of 2012 (CCI-decided on
07.02.2013) – Para 16, <http://www.cci.gov.in/May2011/OrderOfCommission/492012.pdf>
As regards abuse of dominance i.e. contravention of the provisions of section 4 of the Act, the
Commission finds that there was no concept of collective dominance in the Act, which is the case of
informant. It is not even alleged that any of the OPs was individually dominant in the relevant market.
Even if the allegation that OP-2 to the OP-163 were controlling at least 60% of the entire auto finance

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 market in the cities of Hyderabad and Secunderabad is considered to be correct, the same would not
serve any purpose in view of absence of the concept of joint dominance in section 4 of the Act.
Also see Dish TV India Limited v. Hathway Cable, Case 78 of 2013 (CCI-decided on 06.03.2014),
<http://www.cci.gov.in/May2011/OrderOfCommission/262/782013.pdf> accessed June 29, 2014
Appraisal of Section 4 and 5 makes is abundantly clear that Competition Act, 2002 covers dominance
of one enterprise or a group of enterprise (satisfying the conditions laid down in the proviso to Section
5). The cases referred to by the Informant namely General Motors Continental LV vs. Commission of
European Communities, Hoffman-La Roche & Co. AG vs. Commission of European Communities
andSirenaS.r.l&Ors merely refer to broad principles of European Competition Law, and is not
applicable to Indian Competition Act, 2002. Hence the ratio laid down is not relevant to the facts of
present case. USDOJ decision in Merger Approval for merger of Sirius Satellite RaidoIc.andXM
Satellite Radio Inc. is also not relevant to the facts of the present case.)
16
OECD Policy Roundtable on Market Definition: DAF/COMP (2012)19.
<http://www.oecd.org/daf/competition/Marketdefinition2012.pdf> accessed June 29, 2014
17
See Competition Commission of India v. Steel Authority of India Ltd. and Anr. (SAIL Decision),
(2010)10SCC744, Coram: S.H. Kapadia, C.J., K.S. PanickerRadhakrishnan and Swatanter Kumar, JJ., (for a
detailed note on difference between ‘inquiry’ and ‘investigation’ by CCI and relevance and scope of prima facie
opinion of the Commission)
18
Kingfisher v. CCI, [2011]100CLA190(Bom) (Coram: J.N. Patel and C.L. Pangarkar, JJ.). “We find that it was
not necessary for the Commission to first find out the relevant geographic market, relevant products market or
relevant market. Such things can be found or concluded upon investigation and not necessarily before that.”
This decision was appealed before Supreme Court in SLP, however was dismissed. See
MANU/SC/0787/2010,Special Leave to Appeal (Civil) No. 16877/2010 decided on 24.09.2010.
19
Id.
20
Section 2(r) of the Competition Act – “relevant market” means 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;
21
Belaire Owner’s Association against DLF Limited &Ors. Case 19 of 2010 (decided on 12.08.2011).
<http://www.cci.gov.in/May2011/OrderOfCommission/DLFMainOrder110811.pdf>. DLF Park Place
Residents Welfare Association against DLF Home Developers Ltd. Case 18 of 2010 (decided on 29.08.2011)
<http://www.cci.gov.in/May2011/OrderOfCommission/DLFParkMainOrder300811.pdf> accessed June 29,
2014.
22
It may be noted that a number of real-estate cases are closed by CCI on this ground alone. For e.g. against
Puri Constructions (Case 12 of 2013), BPTP Limited (Case 33 of 2013), Supertech (86 of 2013),
etc.<http://www.cci.gov.in/index.php?option=com_content&task=view&id=180> accessed June 29, 2014
23
Section 2(t) of the Competition Act
24
Notice on Market Definition of EU (Official Journal C 372, 09/12/1997 P. 0005 – 0013), Para 17, <http://eur-
lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31997Y1209(01):EN:HTML>accessed June 29, 2014
25
Few more economic concepts like ‘price elasticity of demand’ and ‘cross price elasticity’ are also important in
this assessment
26
Notice on Market Definition of EU
27
Kapoor Glass Case- Case 22 of 2010 (decided on 29.03.2012),
<http://www.cci.gov.in/May2011/OrderOfCommission/Case22of2010MainOrder.pdf>. BCCI Case- Case 61 of
2010 (decided on 08.02.2013), <http://www.cci.gov.in/May2011/OrderOfCommission/612010.pdf> accessed
August 01, 2014.
28
U.S. v. E. I. du Pont, 351 U.S. 377, 76 S.Ct. 994, 100 L.Ed.1264
29
Section 19(7) of the Competition Act, 2002
30
Exclusive Motors Pvt. Limited against Automobili Lamborghini S.P.A., Case 52 of 2012 (CCI – decided on
06.11.2012) Para 6.1, <http://www.cci.gov.in/May2011/OrderOfCommission/Case52of2012.pdf>accessed July
25, 2014 (Case was closed under Section 26(2) of the Act as Lamborghini was not found to be prima facie
dominant in the relevant market).
31
National Industrial Classification: Central Statistical Organisation Ministry of Statistics and Programme
Implementation Government of India (2008),
<http://mospi.nic.in/mospi_new/upload/nic_2008_17apr09.pdf>accessed July 29, 2014
32
Ajay Devgan Films Informant Through Naik and Company against Yash Raj Films Private Ltd, Case 66 of
2012, Para 9, <http://www.cci.gov.in/May2011/OrderOfCommission/662012.pdf> (case involved the alleged
anti-competitive agreements and abuse of dominant position by Yash Raj Films by entering into agreements
with majority of ‘single-screen theatre owners’ at the release of movie ‘EkTha Tiger’ during Eid Festival with a

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condition that they have to release its another movie ‘Jab TakHaiJahan (JTHJ) during Diwali leaving very less
for movie ‘Son of Sardar (SOS)’ produced by Ajay Devgan)
33
Id., para 7.
34
M/s Financial Software and System Private Limited against M/s ACI Worldwide Solutions Private Limited,
Case 52 of 2013 (CCI – decided on 04.09.2013)
<http://www.cci.gov.in/May2011/OrderOfCommission/261/522013.pdf>accessed July 29, 2014 (prima facie
order of the Commission directing investigation into the alleged abuse of dominance.
35
Section 2(s) of the Competition Act, 2002
36
Section 19(6) of the Competition Act, 2002
37
See debates and commentaries on Constitution of India Articles 301-307 and Article 19(6)
38
See Dissenting Opinion of Member (R) in Sanjay Kumar Gupta v. DLF Case 50 of 2012 (decided on
13.12.2012), http://www.cci.gov.in/May2011/OrderOfCommission/502012M.pdf accessed July 29, 2014
39
India Glycol Case: Case 14 of 2012 (decided on 26.07.2012).
<http://www.cci.gov.in/May2011/OrderOfCommission/142012.pdf>accessed July 29, 2014
40
Royal Energy against Oil Companies: MRTP Case 1/28(C-97/2008/DGIR) (decided on 09.05.2012).
<http://www.cci.gov.in/May2011/OrderOfCommission/MRTP1-28main.pdf> accessed July 29, 2014
41
SuoMotu Case 1 of 2011: In Re Sugar Mills (decided on 30.11.2011),
<http://www.cci.gov.in/May2011/OrderOfCommission/SUGAR%20CASE%20NO.%201-
2010%2030.Nov%202011.pdf> accessed July 29, 2014
42
“Para 12.36: …A decision to purchase a high-end apartment in Gurgaon is not easily substitutable by a
decision to purchase a similar apartment in any other geographical location. Gurgaon is known to posses certain
unique geographical characteristics such as its proximity to Delhi, proximity to Airports and a distinct brand
image as a destination for upwardly mobile families.”
43
In Re: Indian Exhibition Industry Association against Ministry of Commerce & Industry and India Trade
Promotion Organization (ITPO), Case No. 74 of 2012, Para 21,
<http://www.cci.gov.in/May2011/OrderOfCommission/261/Case%20No%2074%20of%202012.pdf>accessed
July 29, 2014(investigation has been ordered for alleged abuse of dominant position in this case)
21. It is also noted that the information available in the public domain (viz. trade fairs event calendar
for the months of April 2012 to December 2012) showed that PragatiMaidan was booked almost all the
year round with most of the trade fairs and exhibitions being held at PragatiMaidan, Delhi. Even the
nearest venue i.e. Noida and Greater Noida lagged far behind PragatiMaidan in respect of indoor
exhibition area and frequency of trade fairs and exhibitions held. This is indicative of consumer
preference for the venue, a factor listed for consideration under section 19(6) of the Act while
determining the relevant geographic market.
Also see PDA Trade Fairs (A division of PradeepDeviah& Associates Pvt. Ltd.) against ITPO, Case No. 48 of
2012 decided on 11.10.2012, the Commission held ITPO to be dominant in the relevant market for providing
venue for trade fairs/ exhibitions within geographic area of Delhi, however, closed the case finding no prima
facie abuse.
44
Section 19(5) of the Competition Act: For determining whether a market constitutes a “relevant market” for
the purposes of this Act, the Commission shall have due regard to the “relevant geographic market”' and
“relevant product market”.
45
For example, in Israel, a firm possessing more than 50% market share is deemed to be a monopoly, and thus
subject to both substantive and procedural rules concerning monopolies, regardless of its de facto market power.
This type of definition may be called mainly structural, since market shares (of the market leader or several
market leading firms) are emphasized as the core characteristic of dominance/substantial market power and are
used for defining it. See ICN The Unilateral Conduct Working Group Report on the Objectives of Unilateral
Conduct Laws, Assessment of Dominance/Substantial Market Power, and State-Created Monopolies, (May
2007) <http://www.internationalcompetitionnetwork.org/uploads/library/doc353.pdf> accessed July 29, 2014
46
Id.
47
Report of High Level Committee on Competition Policy and Law: Chaired by SVS Raghavan, 2000, Para
4.4.5,
<http://www.globalcompetitionforum.org/regions/asia/India/Report_of_High_Level_Committee_on_Competitio
n_Policy_Law_SVS_Raghavan_Committee29102007.pdf> accessed July 29, 2014
48
Section 7 of the South African Competition Act (A firm with a market share over 45% is conclusively
considered dominant. A firm with a market share between 35% and 45% is presumed to be dominant, but the
firm may rebut that presumption by showing it does not have market power. If the firm’s share is below 35%,
the enforcer has the burden of showing that it has market power.) Also see OECD Peer Review on Competition
Law and Policy in South Africa: 2003.
<http://www.oecd.org/daf/competition/prosecutionandlawenforcement/2958714.pdf> accessed July 25, 2014

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49
Case C-95/04 P - British Airways v Commission [2007] ECR I-02331
50
Arshiya Rail Infrastructure Limited against Ministry of Railways and CONCOR Case 64 of 2010 (decided on
14.08.2012) <http://www.cci.gov.in/May2011/OrderOfCommission/642010.pdf> accessed July 29, 2014
51
http://www.financialexpress.com/news/competition-panel-to-probe-if-ai-bonds-tilt-playing-field/909279/0
52
MSRTC (Power Generating Companies) against Coal India: Case 3, 11 and 59 of 2012 (decided on
09.12.2013) <http://www.cci.gov.in/May2011/OrderOfCommission/27/592012.pdf> accessed July 29, 2014
53
Section 19(4) (m) of the Competition Act, 2002
54
Case 322/81 NederlandscheBandenIndustrie Michelin (Michelin I) v Commission [1983] ECR 3461
55
DLF v. CCI Appeal No. 20 of 2011 decided on 19.05.2014 (Coram: Justice V.S. Sirpurkar, and Members Smt.
PravinTripathi and Shri. Rahul Sarin),
<http://compat.nic.in/upload/PDFs/mayordersApp2014/19_05_14.pdf>accessed August 1, 2014

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