Abuse of Dominance

Avirup Bose
02/04/2016
 Abuse of dominance
• The substantive test and benchmark for analysis under the Act is to
prohibit practices that have an appreciable adverse effect (AAEC) on
competition in India.
• Section 4 of the Act deals with the regulation of abuse of
dominance (ie, the regulation of unilateral conduct).
• The Act prohibits the abuse of a dominant position by any
‘enterprise’ or ‘group’, and defines dominant position as a position
of strength enjoyed by an enterprise in the relevant market in India,
which enables it to – (a) operate independently of the competitive
forces prevailing in the relevant market or (b) affect its competitors
or consumers or the relevant market in its favour.
• ECJ Judgment explained the meaning of dominance under the
Treaty of Rome as under:
“Position of economic strength enjoyed by an undertaking which
enables it 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, its customers
and ultimately of the consumers”

[Hoffman-LaRoche (1979) and United Brands (1978)]

 Abuse of dominance
• In India, the determination of ‘dominance’ is based on a
qualitative assessment of the prevalent market dynamics
and the relative position of strength enjoyed by the market
participants.
• Section 4 stipulates that practices such as imposition of
unfair or discriminatory conditions on price in purchase or
sale (including predatory pricing), limiting or restricting the
production of goods, denial of market access, and
leveraging market position in one relevant market to enter
into another relevant market, shall amount to abuse of
dominance.
• Evidently, section 4 of the Act is a welcome departure from
the earlier competition law regime under the aegis of the
Monopolies and Restrictive Trade Practices Act, 1969,
wherein emphasis was placed on the size of the concerned
player, rather than the actual abusive practice or conduct of
such a player.
 Abuse of dominance
• Abuse of dominance requires an analysis of
the level of dominance of the concerned
enterprise and its abusive conduct.
• While determining the abusive conduct of a
dominant enterprise or group, the CCI
scrutinizes the abusive practices by way of the
following three steps:
1. determination of the relevant market;
2. assessment of dominance of such enterprise
or group; and
3. assessment of its abusive conduct.
 Abuse of dominance
• While determining dominance, the CCI is required to consider the
following factors listed under section 19(4) of the Act:
1. market share;
2. size and resources of the enterprise;
3. size and importance of competitors;
4. economic power of the enterprise, including commercial advantages
over competitors;
5. vertical integration of the enterprises or sale or service network of such
enterprises;
6. dependence of consumers on the enterprise;
7. legal monopoly or dominant position;
8. 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 switching costs;
9. countervailing buyer power;
10. market structure and size of the market;
11. social obligations and social costs;
12. relative advantage, by way of the contribution to the economic
development, by the dominant enterprise; or
13. any other factor that the CCI may consider relevant for the inquiry.
 CCI’s jurisdiction: definition of the term ‘enterprise’
• The Act prohibits abuse of dominance by an ‘enterprise or
group’. The CCI in Reliance Big Industries & Ors v
Karnataka Film Chamber of Commerce & Ors (Case No. 25
of 2010) held that only the conduct of an ‘enterprise’ can
be examined under the provisions of section 4 of the Act.
• Notably, the Act provides an exemption to any activity that
relates to the sovereign functions of the government,
including those related to energy, currency, defense and
space. For instance, an activity in relation to the collection
of taxes (a purely sovereign function) would not fall within
the purview of the Act and an entity discharging such
functions would not constitute an enterprise (M/s Red
Giant Movies v Secretary, Commercial Taxes &
Registration Department, Government of Tamil Nadu
(Case No. 54 of 2014)
• Accordingly, the CCI cannot scrutinize the conduct of such
entities to determine any plausible contravention of section
4 of the Act.
 Relevant market
• The definition of the relevant market is pivotal to any abuse of
dominance analysis, given that the dominance of an enterprise is
always determined with respect to a particular relevant market.
• In addition to being the basis for determining whether an entity
enjoys a dominant position, the definition of the relevant market is
crucial in analyzing the anti-competitive effects of the relevant
entity’s behavior.
• The relevant market is an aggregation of the relevant product
market and the relevant geographic market (section 2(r) of the
Act).
• The relevant product market is defined as all those products or
services that are regarded as interchangeable or substitutable by
the consumer, on the basis of the characteristics of the product, its
prices and intended use (section 2(t) of the Act)
• The relevant geographic market is defined as a market comprising
the area in which there exists distinct homogenous competitive
conditions in terms of demand and supply of goods or services,
which can be distinguished from the conditions prevailing in the
neighbouring areas (section 2(s) of the Act).
 Relevant market
• Sections 19(6) and 19(7) of the Competition Act lists the
factors to be taken into consideration while determining a
relevant market.
• Section 19(7) - “relevant product market”, CCI will have
due regard to all or any of the following factors, namely:—
(a) physical characteristics or end-use of goods; (b) price of
goods or service (c) consumer preferences; (d) exclusion of
in-house production; (e) existence of specialized producers;
(f) classification of industrial products.
• Section 19(6) - “relevant geographic market”, have due
regard to all or any of the following factors, namely:— (a)
regulatory trade barriers; (b) local specification
requirements; (c) national procurement policies; (d)
adequate distribution facilities; (e) transport costs; (f)
language; (g) consumer preferences; (h) need for secure or
regular supplies or rapid after-sales services.
 Relevant market
• A relevant market has therefore two fundamental dimensions,
product and geographic.
• The product market describes the good or service. The geographic
market describes the locations of the producers or sellers of the
product or service.
• Relevant market is defined by consumer or purchaser preferences
and actions. For instance, if purchasers consider two goods to be
close substitutes or readily interchangeable, those two goods are
considered to be in the same relevant market.
• As an illustration, butter and margarine can be considered to be in
the same relevant market. In contrast, even if producers/sellers
consider two goods to be very similar on the ground that they are
manufactured on the same machines, the goods may not be in the
same relevant market.
• As an illustration even if 13–inch automobile tyres and 14–inch
automobile tyres are made on the same machine, purchasers do
not substitute between 13-inch and 14-inch tyres and thus the two
sizes are in two different relevant markets.
 Relevant market
• Competition Authorities in various countries use or adopt different
definitions of the product market.
• Despite the lack of uniformity, the veneer that runs through the
definitions is that the product market has the characteristic of
interchangeability or substitutability of goods/services by the
consumers/purchasers.
• Put differently, goods/services that purchasers consider to be
substitutes are generally regarded to be in the same product
market and those that the purchasers do not consider to be
substitutes are regarded to be in separate product markets.
• On the demand side, the relevant product market includes all such
substitutes that the consumer would switch to, if the price of the
product relevant to the investigation were to increase. From the
supply side, this would include all producers who could, with their
existing facilities, switch to the production of such substitute goods.
• There are 3 elements that pin a product market. They are: (a) Price
increase, (b) Reaction of purchasers, (c) Smallest size requirement.
 Price Increase
• The critical issue in the element price increase is that the
purchasers shift for substitutes when the price of the
product/service increases.
• The price increase must be non-transitory, meaning
thereby that the increase is expected to continue over the
foreseeable future.
• The reaction of the purchasers to a transitory or short-term
change in price is likely to be different from their reaction
to a long-term change in price.
• If cake bakers know that an increase in the price of butter is
temporary, then they are likely to continue to use butter in
baking cakes. On the other hand, if they know that such a
price increase is permanent and over a long period, then
they are likely to invest in developing a recipe that uses
margarine. Thus, if the price of butter is expected to be
high for a long period of time, butter and margarine are in
the same product market.
 Price Increase
• The price increase needs to be small but significant.
• A small price change is likely to make the purchasers
identify close substitutes. A large price change is likely
to make them identify more distant substitutes.
• For the Competition Authority, the inclusion of distant
substitutes in the relevant product market may be
warranted, if the increase in the price is big. Otherwise,
close substitutes alone would fall into the relevant
product market.
• Another point to be made is that the price change
should be significant, so that purchasers react to the
change. A very insignificant price change may cause no
purchaser reaction. The expression “significant” is
subjective but some countries adopt 5 % price change
as significant as in United States and Canada
 Reaction of Purchasers
• Purchasers react to price increases generally rationally.
• Continuing with the butter and margarine example,
assume that all the purchasers at the old prices bought
butter.
• If the price of butter increases and if all the purchasers
switch to margarine from butter, then margarine and
butter would be in the same product market with
margarine being the substitute for butter for all the
customers.
• If the purchasers do not switch to margarine in
response to price increase to butter, then margarine is
not a good substitute to butter in the perception of the
purchasers and therefore, butter and margarine would
not be in the same product market.
 Smallest Size Requirement
• The third element constituting the product market is that
the market should be the smallest collection of goods or
services for which the purchaser reaction holds.
• This requirement prevents product markets bracketing non-
substitute products. The rationale for including this
element is that products should not be considered as
substitutes merely because there is a price increase in the
product in demand/use by customers.
• Substitutability should have a direct nexus with the price
increase in the product in demand/use.
• Relevant product market could be determined by the
Competition Authority having regard to all or any of the
following factors: • physical characteristics or end-use of
goods; • price of goods or service; • consumer
preferences; • exclusion of in-house production; •
existence of specialised producers; • classification of
industrial products.
 Smallest Size Requirement
• For determining the product market, Competition Authorities may
estimate the demand elasticity of some group of products in the
neighborhood of prevailing prices.
• Demand elasticity is the percentage change in quantity demanded
divided by percentage change in the price of the product.
• But data may not be available for computing elasticity and
therefore, competition officials, who do the spade work
investigation, would be advised to interview a host of economic
agents to gather sufficient information to enable the Competition
Authority to make reasonable inferences about the correct relevant
product market.
• Economic agents who could provide useful information include: (1)
Purchasers of the product, (2) Purchasers of similar products, (3)
Sellers of the product, (4) Sellers of the same product in another
region, (5) Sellers of similar products, (6) Association of purchasers
or sellers of the product, (7) Wholesalers/retailers of the product
and similar products, (8) Statistical bureaus for the product.
 Relevant Market
• The EU ‘Notice on Market Definition’ provides that the
starting point of market definition is the consideration that
an enterprise is subject to three main competitive
constraints – (a) demand substitutability, supply
substitutability and (c) potential competition.
 Demand side substitutability
• Demand side substitution is the most important factor in
delineating the relevant product market.
• Two or more products are substitutable when a sufficient
number of consumers of one product considers another
product as an alternative and would purchase it in the case
of an increase in the price of the first product.
• The starting point in our analysis are the product
characteristics and their functional interchangeability.
Hence it is required to establish, from the perspective of
the consumer, if two products have similar characteristics
and serve the same function.
 Relevant Market
• The test was applied by the ECJ in United Brands v
Commission (Case 27/76), where it had to be ascertained
whether bananas formed a separate product market or
were merely part of a broader market for fresh fruits.
• The ECJ analyzed the characteristics of banana's and
consumers’ preferences and held:
 “The banana has certain characteristics, appearance, taste,
softness, seedlessness, easy handling, a constant level of
production which enable it to satisfy the constant needs of
an important section of the population, consisting of the
very young, old and the sick […]”
• The court noted that a very large number of consumers
having a constant need for bananas are not noticeably or
even appreciably enticed away from the consumption of
this product by the arrival of other fresh products on the
market.
• ECJ held that bananas form a distinct market by itself.
 Relevant Market
• Bottled mineral water and soft drinks are separate markets since
they have different characteristics (taste, composition), intended
use (bottled water is drunk to quench thirst, whereas soft drinks are
drunk more in a social context) and price (Nestle/Perrier, Case
IV/M.190)
• Oceanic cruises form a distinct market from other land-based
holidays due to their unique features such as ‘the experience of the
sea’, customers’ expectations and prices (Case COMP/M.3071 –
Carnival Corporation/P&O Princess II)
• Pop music and classical music form distinct markets and within the
pop music category a large number of different genres (jazz, soul,
gospel, heavy metal, rap) are readily identifiable and these
characteristics may also form separate markets (Case IV/M. 202 –
Thorn EMI/Virgin Music)
• Manual and electronic tooth brushes are considered to be in
different markets, because of substantial price differences
(COMP/M.3732 Procter & Gamble/Gillette)
 Relevant Market
• The EU’s ‘Notice on Market Definition’ proposes to apply the so-
called SSNIP test (Small but Significant Non-Transitory Increase in
Price) as the most appropriate quantitative method for analyzing
the customer’s preferences.
• Accordingly it has to be established whether a small but significant
non-transitory increase in price would cause the purchasers of a
certain product to switch to its credible alternatives after the price
increase.
• The basic question behind this test is – whether the producer may
raise prices of its products without losing market share. (The
Hypothetical Monopolist Test)
• The Commission describes the SNIPP test in the following way –
“ The question to be answered is whether the parties' customers
would switch to readily available substitutes or to suppliers
located elsewhere in response to a hypothetical small (in the
range 5 % to 10 %) but permanent relative price increase in the
products and areas being considered. If substitution were enough
to make the price increase unprofitable because of the resulting
loss of sales, additional substitutes and areas are included in the
relevant market.”
 Relevant Market
• In practice the application of SSNIP test begins with the
narrowest possible product definition based on
functional interchangeability. Then the question has to
be answered if a hypothetical monopolist supplier on
the identified product market could profitably increase
price for the relevant product or service.
• This would be the case when the consumers were not
able to switch to other products or services in reaction
to price increase.
• If the price rise turns out to be unprofitable then the
next closest substitutes of the product or service must
be included in the market examination and the process
needs to be repeated.
• The test is completed when a set of products or
services is identified where SSNIP would be profitable
for the hypothetical monopolist.
 Relevant Market
• However, not every result of the SSNIP test may be deemed
reliable and meaningful.
• In particular, if the starting price used in the SSNIP test was
not reached under competitive conditions, e.g., if it has
already been set at a monopoly level.
• What should be the extent of the price increase that is to
be implemented? For example, a smaller SSNIP test (>5%)
may result in a narrower definition of the relevant market.
• Thus the EU Commission suggests testing an increase
between 5-10%, while the US FTC sets out the bench mark
of 5% that can be adjusted as required by the facts of the
case.
• Lastly, the results of SSNIP can only be of an approximate
nature, due to the insufficient or imprecise empirical data
or market information collected by the Commission.
• For these reasons the test is not the only instrument to
define relevant product markets.
 Relevant Market
• Therefore the EU Commission uses additional quantitative
methods, that help verify the SNNIP test results. These include:
• Own-price elasticity – shows the changes in demand for a product
in case of its price increase/decrease. If the demand is in-elastic, a
conclusion may be drawn that there are no close competitors to the
product in question and that it forms a separate market. In
Gencor/Lonrho, it was held that due to low price elasticity platinum
jewellery products formed a separate market from gold jewellery.
• Cross elasticity shows changes in demand of one product in case of
price increase/decrease of another product. This test helps to
establish the existence of a competitive relationship between two
products and whether they are part of the same product market.
• Price correlation analysis measures whether two prices of two
products moved according to one pattern in the past. A high degree
of co-relation over time suggests that the products concerned are in
the same relevant market.
 Relevant Market
• EU Commission may also use other evidence to analyze relevant
markets
• Evidence of substitution or ‘shock analysis’ – the Commisison will
consider recent evenst or shocks in the markets, such as entry of a
new market player or launching of a new product that resulted in
substitution between two products or services. In Piaggio/Aprilia
the Commission examined which scooters were bought as
substitutes when Aprilia reduced its sales due to financial problems.
• Customer preferences/perceptions – the Commission usually has
recourse to diverse studies, surveys and reports that reflect
customer preferences. The Commission may also carry out its own
market surveys by contacting customers and competitors during the
market investigation process.
• In the Carnival Corporation/P&O the Commission conducted a
market investigation into the reasons why consumers book a cruise.
The goal of this investigation was to ascertain whether oceanic
cruises might be regarded as separate market from land-based
holidays.
 Relevant Market
• Switching costs – high costs for customers for
switching to alternative products may affect the
results of the SSNIP test.
• The Commission also investigates the existence of
other legal or technological barriers that may
present customers from switching to other
products.
• In the metal packaging industry, the EU
Commission has differentiated between the
market for tinplate and the market for aluminum
aerosol cans. One of the reasons for such
differentiation was the high costs of switching
from tin plate to aluminum.
 Relevant Market
 Supply side substitutability
• Although in most cases the interchangeability is
analyzed in the light of demand side substitutability,
but in certain cases, supply side substitutability also
needs to be considered.
• In Continental Can case, ECJ rejected the EU
Commission’s finding that there are separate markets
for different types of light metal containers.
• Its main argument was that the Commission failed to
examine whether producers of types of light metal
containers other than containers for fish and meat
might be able to switch to supply the relevant products
without incurring significant additional costs.
 Relevant Market
• Firstly, the suppliers must be able to switch to
supply the product in a short term.
• Moreover, a switch in the production must be
possible without incurring any significant
additional cost or risks. At this point all other
barriers to switching production such as statutory
restrictions or technological barriers need to be
taken into consideration.
• For example, in the Microsoft case the
Commission highlighted the importance of IP
rights when assessing supply side substitutability
on the market for media players.
 Relevant Market
• The Commission’s Notice on Market Definition gives a practical
example:
• Paper is usually supplied in a range of different qualities, from
standard writing paper to high quality papers to be used, for
instance, to publish art books. From a demand point of view,
different qualities of paper cannot be used for any given use, i.e. an
art book or a high quality publication cannot be based on lower
quality papers.
• However, paper plants are prepared to manufacture the different
qualities, and production can be adjusted with negligible costs and
in a short time-frame. In the absence of particular difficulties in
distribution, paper manufacturers are able therefore, to compete
for orders of the various qualities, in particular if orders are placed
with sufficient lead time to allow for modification of production
plans.
• Under such circumstances, the Commission would not define a
separate market for each quality of paper and its respective use.
The various qualities of paper are included in the relevant market,
and their sales added up to estimate total market value and
volume. (Para 22)
 Relevant Market
• When supply-side substitutability would entail
the need to adjust significantly existing tangible
and intangible assets, additional investments,
strategic decisions or time delays, it will not be
considered at the stage of market definition.
• Examples where supply-side substitution did not
induce the Commission to enlarge the market are
offered in the area of consumer products, in
particular for branded beverages.
• Although bottling plants may in principle bottle
different beverages, there are costs and lead
times involved (in terms of advertising, product
testing and distribution) before the products can
actually be sold.
 Relevant Market

• The third source of competitive constraint,

potential competition, is not taken into account
when defining markets, since the conditions
under which potential competition will actually
represent an effective competitive constraint
depend on the analysis of specific factors and
circumstances related to the conditions of entry.
• If required, this analysis is only carried out at a
subsequent stage, in general once the position of
the companies involved in the relevant market
has already been ascertained, and when such
position gives rise to concerns from a
competition point of view.
 Relevant Geographic Market

• The geographical boundaries of the relevant market

can be similarly defined.
• Geographic dimension involves identification of the
geographical area within which competition takes
place. Relevant geographic markets could be local,
national, international or occasionally even global,
depending upon the facts in each case.
• Some factors relevant to geographic dimension are
consumption and shipment patterns, transportation
costs, perishability and existence of barriers to the
shipment of products between adjoining geographic
areas.
• For example, in view of the high transportation costs in
cement, the relevant geographical market may be the
region close to the manufacturing facility
 Relevant Geographic Market
• For example, markets for sand, gravel, cardboard boxes,
refuse hauling and other heavy but low value products are
often quite small because the cost of transportation is a
large fraction of the cost of the product.
• Transportation cost therefore can indirectly affect the limits
of the geographical markets. Limits of geographic markets
are often determined by transportation costs, tariffs, trade
barriers etc.
• As an illustration, if foreign producers of a product must
pay a tariff (domestic producers do not) then the resulting
increase in the price of the foreign product may be so large
that the consumers would not switch from the domestic
product for the foreign product.
• Similarly regulations such as for health and safety can serve
as barriers to the sale of some goods and services.
 Relevant Geographic market
• The relevant geographic market could be determined by the
Competition Authority having regard to all or any of the following
factors:
1. regulatory trade barriers;
2. local specification requirements;
3. national procurement policies;
4. adequate distribution facilities;
5. transport costs;
6. language;
7. consumer preferences;
8. need for secure or regular supplies or rapid after-sales services.
• Barriers to market entry include administrative decisions by State
agencies, legal provisions relating to conditions of manufacturing
and delivery, legal professional standards, trade policy (tariffs,
quotas, antidumping measures etc), financial barriers laid down by
the State and barriers in terms of techniques, technologies and
intellectual property rights.
 Relevant Geographic Market

• The geographic market may be national (i.e.

India), smaller than India (e.g. local or regional),
wider than the country (e.g. part of South Asia),
or even worldwide.
• This part outlines some practical issues which are
particularly relevant to geographic market
definition:
• demand side issues
• supply side issues, and
• imports
 Relevant Geographic Market- The demand side
• As with the product market, the objective is to identify
substitutes which are sufficiently close that they would
prevent a hypothetical monopolist of the focal product in
one area from profitably sustaining prices 5 to 10 per cent
above competitive levels.
• The process starts by looking at a relatively narrow area –
the focal area.
• This might be the area supplied by the parties to an
agreement or the subject of a complaint about conduct or,
if that area were relatively wide, past experience might
suggest a narrower area that is more appropriate.
• The hypothetical monopolist test is applied to this area,
and repeated over wider geographic areas as appropriate
until the hypothetical monopolist would find it profitable to
sustain prices 5 to 10 per cent above competitive levels in
the area(s) in question
 Relevant Geographic Market- The demand side
• The principles applied in defining the geographic
market are the same as those for the product market.
• For example, the analysis of price discrimination and
chains of substitution would proceed in the same way
as set out in our discussions for relevant product
market.
• The evidence used to define geographic markets on the
demand side will usually be similar to the information
used to define the product market.
• In addition to that evidence, the value of a product in
relation to costs of search and transport is often an
important factor in defining geographic markets.
• The higher the relative value, the more likely
customers are to travel further in search of cheaper
supplies. The mobility of customers may also be a
relevant factor.
 Relevant Geographic Market- The demand side
• For consumer products, geographic markets
may often be quite narrow, e.g. where
sufficient numbers of consumers are unlikely
to switch to products sold in neighbouring
towns or regions, let alone countries.
• For wholesaling or manufacturing markets,
customers may be in a better position to
switch between suppliers in different regions,
providing transport costs are not too high.
 Relevant Geographic Market – the Supply Side
• This entails looking at the potential for
undertakings in other (e.g. neighbouring)
territories to supply the focal area.
• When defining the geographic market, supply
side substitution is analyzed using the same
conceptual approach set out for the product
market.
• Therefore, the main evidence will usually mirror
the information gathered on product market
definition.
• Where the price of a product is low relative to its
transport costs, this might indicate a relatively
narrow geographic market.
 Relevant Geographic Market – the Supply Side
• When considering whether the geographic market
should be defined more widely than a national market,
data on imports may be informative. Significant
imports of the product may indicate that the market is
wider than a national market.
• However, the presence of imports in a territory will not
always mean that the market is international, for a
number of reasons.
• First, imports may come only from international
operations of domestic suppliers, in which case they
may not act as an independent constraint on domestic
firms. Second, in order to import on a larger scale,
international suppliers may require substantial
investments in establishing distribution networks or
branding their products in the destination country.
 Relevant Geographic Market – the Supply Side
• Third, there may be quotas which limit the volume of
imports into the destination country. These factors may
mean that suppliers of the relevant product located
outside the national market would not provide a
sufficient constraint on domestic suppliers to be
included in the same relevant geographic market.
• Conversely a lack of imports does not necessarily mean
that the market cannot be international.
• The potential for imports may still be an important
source of substitution should prices rise.
• For example, when the European Commission looked
at a merger between bus manufacturers in Germany, it
found that although imports were low at the time,
there were no significant barriers to imports from the
rest of the EC should prices in Germany rise.
 The competitive price versus the current price
• Throughout this guideline, the test has been
couched in terms of a hypothetical monopolist
profitably sustaining prices above competitive
levels.
• However, where an enterprise has market power,
it may operate in a market where the current
price is substantially different from the
competitive price.
• For example, an undertaking with market power
may well have already raised prices above
competitive levels to its profit maximizing level. If
so, the undertaking would not profitably sustain
prices above current levels. If it tried to sustain
higher prices, consumers would switch to
purchasing other products.
 The competitive price versus the current price

• However, it would be wrong to argue that these products

prevented the undertaking from exercising market power
and so it would usually be inappropriate to include them in
the relevant market. This problem is sometimes known as
the cellophane fallacy after a US case involving cellophane
products. (US v EI Du Pont de Nemours & Co [1956] 351 US
377)
• The possibility that market conditions are distorted by the
presence of market power (or other factors) will be
accounted for when all the evidence on market definition is
weighed in the round. For example, where prices are likely
to differ substantially from their competitive levels, caution
must be exercised when dealing with the evidence on
switching patterns as such evidence may not be a reliable
guide to what would occur in normal competitive
conditions
 Relevant market
• In practice, the CCI’s definition of the relevant market
varies from case-to-case, based on factual matrix.
• In the absence of specific guidelines for defining the
relevant market, the CCI does not follow a consistent
approach in delineating the relevant market.
• As such, the CCI has restricted the relevant geographic
market to particular suburbs in some cases (such
as Belaire Owners’ Association v DLF Limited (Case
No. 19 of 2010) and Mr Om Datt Sharma v M/s Adidas
AG & Ors) (Case No. 10 of 2014) and has, without any
specific differentiation, defined the relevant market on
an ‘all India basis’ in other cases.
• A narrow definition of the relevant market only
facilitates establishing an entity’s dominance.
 Relevant market
• In the DLF case, CCI defined the ‘relevant market’
extremely narrowly to be the market for ‘high-end
residential apartments in the city of Gurgaon’. By restricting
the product scope and the geography of the relevant
market to a particular suburb, the CCI’s decision that DLF
was dominant in the relevant market was but a foregone
conclusion.
• In contrast, in FICCI Multiplex Association of India v United
Producers/Distributors Forum and Hindustan Coca
Cola Beverages Pvt. Ltd, (RTPE 16 of 2009) case which
dealt with the alleged abuse of dominance in relation to
the sale of its aerated drinks and bottled water at high
prices by Coca-Cola in multiplex theatres, the CCI held that
Coca-Cola was not dominant, by defining the market to be
all multiplex theatres in India, as opposed to any single
multiplex theatre, which would no doubt have led to the
obvious conclusion that Coca-Cola was dominant.
 Relevant market
• Interestingly, in Maharashtra State Power Generation Limited v
Coal India Limited and Ors (Case Nos. 03, 11 and 59 of 2012), the
CCI noted that defining a global market as the relevant market was
contrary to the express provisions of the Act.
• The CCI reasoned that the explanation to section 4 of the Act
indicated that the ‘dominant position’ is a position of strength
enjoyed by an enterprise in the relevant market ‘in India’.
• Accordingly, the contention of the parties to define the relevant
geographic market as the global market was held by the CCI as
legally untenable.
• Though the facts of Coal India may have warranted restricting the
relevant market to India, by concluding that a worldwide definition
of the relevant market would not be permissible in any instance of
abuse of dominance, the CCI has adopted a narrow and restrictive
view. In doing so, the CCI has failed to consider products which are
not affected by national barriers.
 Relevant market
• In terms of the product market definition, the CCI
has primarily considered demand-side
substitution as a determining factor in delineating
the relevant product market.
• For instance, in Coal India, the CCI did not include
imported coal as a part of the relevant product
market since imported coal could not be used as
a substitute to domestic coal as it was expensive,
had different qualities and the boilers used by
Indian thermal power plants had specifications
suited specifically to domestically manufactured
coal.
 Relevant market
• Further, in a recent decision, the CCI acknowledged the
constantly increasing size of the Indian online retail
industry and concluded that the online market and the
offline brick and mortar market were in fact different
channels of distribution of the same product and
constituted the same relevant market.
• The CCI had based its analysis on demand-side
substitution, noting that consumers weighed the
options available in both markets and a significant
price increase in the online market was likely to result
in the consumers shifting towards the offline market
and vice versa (In re Mr. Ashish Ahuja v Snapdeal.com
and Ors) (Case No. 17 of 2014)
 Relevant Market :Photochromic Lenses GKB
• Case of abuse of dominance in glass and plastic ophthalmic lenses -
Transitions India, (joint venture in India between Transitions Optical
Holdings B.V., The Netherlands and Transitions Optical Inc., USA)
• The core business model of Transition India is to purchase substrate (semi
-finished lens) from its caster partners, process the substrate (i.e. apply
the Photochromic coating), and to sell the finished goods back to the lens
casters
• Ophthalmic lenses are available in various types in terms of material such
as glass, plastic, polycarbonates etc, value addition in terms of colouring
so as to reduce glare and prevent UV Rays and different coatings such as
anti-reflective, hydrophobic and anti-resistant.
• Whether all the photochromic lenses form part of relevant market or the
differences in material and consequent differences in characteristics and
price lead to delineation of glass photochromic lenses (GPL) and plastic
photochromic lenses (PPL) as distinct markets- GPL and PPL, have certain
advantages as well as disadvantages
• The decision on delineation of relevant market required assessment of
consumer behaviour and the underlying preferences – a market survey
helps and in its absence to note that generally there appeared to be a
preference for lighter and unbreakable lenses.
 Relevant Market :Photochromic Lenses GKB
• The speed of transition from light to dark and vice versa is faster in
case of PPL - important characteristic would naturally contribute
substantially to the consumer preference in favour of PPL
• Price differences between the two products, as a factor in
consumer choice, were also examined - Indian consumers are
acknowledged as being generally very price sensitive.
• The price of GPL starts from as low as US$1.25 and PPL starts from
around US$20. While no doubt the growing Indian middle class
tends to suggest the possibility of a market continuum.
• Commission concluded that the continuum exists on an intra-
product basis and not inter-product basis and exclusivity prevails.
• Behavioural economics also seem to suggest that price differences
do not act as a competitive constraint, as the perception of higher
quality of PPL may not be in proportion to the differences in prices.
• Characteristics of the products, factors relevant to demand
decisions, importantly price and the lack of competitive constraints
reflected by price differences between PPL and GPL, the
Commission concluded that the market for Plastic Photochromic
Lenses in India was the relevant product market in this case.
 Relevant Market in Housing DLF
• Defining the relevant market of a housing project in Gurgoan by
DLF. DLF Ltd. was providing services of a developer/builder within
the meaning of “service” given under section 2(u) of the Act
• The next point to be determined was whether these services,
provided by DLF Ltd. to the informant, are of a distinct nature “by
reason of characteristics … their prices and intended use” as
stipulated in section 2(t) of the Act
• The nature of service being provided by DLF Ltd. in the context of
the instant case was described as services of developer / builder in
respect of “high-end” residential building in Gurgaon
• Two important components of service definition with regard to
characteristics of the underlying physical asset that required
interpretation, viz. “high-end” and “residential”. The third
component, viz. “Gurgaon” related to “geographic market”
• Terms like “high-end” or “affordable” are relatively subjective and
therefore it was felt necessary to establish a clear and logical
interpretation of the term “high-end”. Whether “investment” or
“own residence” decision centres on locational preference of the
purchaser and this preference is generally not interchangeable or
substitutable
 Relevant Market in Housing DLF
• “high-end” is not a function of size alone - a complex mix of factors such as
size, reputation of the location, characteristics of neighbourhood, quality
of construction and ability to pay most important amongst all objective
differentiators of a customer’s characteristics
• To take into account the income or expenditure levels of the customer
base – all factors together create a distinctly identifiable residential unit
that is not substitutable in an economic sense
• Users / buyers of ‘high-end’ accommodation demand quality, ambience
and are willing to pay significantly higher prices to meet their
requirements - paying capacity of the growing upper middle and rich
classes
• From the cost perspective it is quite logical to accept an apartment costing
Rs. 2 – 2.5 crores ($20 – 25 million) as “high-end” in the Indian socio-
economic reality
• The relevant geographic market Gurgaon was seen to be the relevant
geographic market - is not easily substitutable - geographical
characteristics such as proximity to Delhi, proximity to Airports and a
distinct brand image
• Since a residential property is by nature immovable, its geographical
location is amongst the foremost factors for consideration.
 Arshiya- Transportation Logistics Industry
• Railway services and railway infrastructure in India is a legal
monopoly, owned by the central government
• Policy of selective privatization of railway operations
through PPP arrangement in containers trains a function
given to the container train operators (CTO) retaining
passenger and goods train as a monopolist
• Private container train operators alleged that Indian
Railways along with CONCOR, one of the CTO (partly
government-owned) have abused their dominant position
individually and also have entered into anti-competitive
agreement to the detriment of other CTOs
• Argued that Indian Railways and CONCOR are a group
entity (a claim not accepted by the Commission) and that
the relevant market for the purpose of competition
assessment is ‘market for rail services in India’
• What constitutes relevant market – is it the market for
railway infrastructure, movement of goods through railway
network or movement of containers etc?
 Arshiya- Transportation Logistics Industry
• Argument that road and rail, as a medium of transportation, had
limited substitutability depending upon the various factors like type
of goods to be transported, distance, time
• Data available in the public domain suggested that overall market
share of roads was far in excess of rail.
• Market share was nearly equal in many commodities that were
predominantly carried over rail.
• Indian Railways had stopped operating the container trains
suggesting that general wagon trains were altogether functionally
different from the container trains.
• An overarching point in determination of the relevant market is the
fact that a container can be placed over any vehicle, independent of
the medium of transportation. In view of these facts, the relevant
market was defined as movement of containers in India.
• Consequently assessment of competition was required to be
conducted in containers since only that mode has been opened to
container train operators.
 Honda Siel case– automobile industry
• Recently, in Shri Shamsher Kataria v Honda Siel Cars India Ltd &
Ors (Case No. 03 of 2011), the CCI undertook a detailed analysis
while delineating the relevant market.
• In this case, the information was filed against various automobile
manufacturing companies or original equipment manufacturers
(OEMs) on the basis that the OEMs were involved in activities
leading to competition law concerns in India by restricting the
availability of genuine spare parts of automobiles manufactured by
them in the open market.
• It was also alleged that the car manufacturing companies controlled
the operations of various authorized workshops and service
stations that were in the business of selling automobile spare parts
besides rendering after sale automobile maintenance services.
• The technological information, diagnostic tools and software
programs required to maintain, service and repair the
technologically advanced automobiles manufactured by each OEM
were unavailable in the open market. Consequently, the repair,
maintenance and servicing of such automobiles could only be
carried out at the workshops or service stations of the authorized
dealers of the OEMs.
 Aftermarkets
• An after market is a market for a secondary product, that is, a
product which is purchased only as a result of buying a primary
product. For example, a customer would purchase a printer
cartridge (a secondary product) only for use with a printer (the
primary product). Another example is replacement heads for razors
(the secondary product) and razors (the primary product). The
primary product and the secondary product are complementary.
• Three possible types of market definition are often put forward as
regards after markets:
a) a system market: a unified market for the primary product and
the secondary product (e.g. a market for all razors and
replacement heads)
b) multiple markets: a market for primary products and separate
markets for the secondary product(s) associated with each
primary product (e.g. one market for all razors, individual markets
for each type of replacement head), and
c) dual markets: a market for the primary product and a separate
market for the secondary product (e.g. one market for all razors, a
separate market for all replacement heads).
 Aftermarkets

• The appropriate definition depends on the facts of the

case. A system market may be appropriate either where
customers engage in whole life costing or where reputation
effects mean that setting a supra competitive price for the
secondary product would significantly harm a supplier's
profits on future sales of its primary product.
• Where neither of the conditions set out above applies, a
multiple markets or a dual markets definition may be
appropriate.
• he former is likely where, having purchased a primary
product, customers are locked in to using only a restricted
number of secondary products that are compatible with
the primary product. A dual markets definition is
appropriate where secondary products are compatible with
all primary products (and perceived to be so by customers)
 Whole life costing

• Whole life costing occurs where customers

correctly anticipate the cost of future necessary
purchases of the secondary market product when
buying the primary product.
• For example, if a razor (with a 'life' of five
replacement heads) costs Rs.10, and each
replacement head costs Rs.2, the whole life cost
of the razor would be Rs.20.
• This depends on customers being able to form
reasonable expectations on future prices of the
secondary product when purchasing the primary
product.
 Whole life costing
• Whole life costing means that customers view the purchase of the
primary and secondary product as a system, or a unified deal.
Where whole life costing would make it unprofitable for a
hypothetical monopolist to raise the price of the secondary market
product above the competitive level it may be appropriate to adopt
a system market definition. In this context it is appropriate to
consider whether:
a) it is relatively easy to obtain and comprehend information on the
secondary market product, and relatively easy to predict how
much of the secondary market product is likely to be required
over the life time of the primary product, so that customers are
able to whole life cost
b) the price of (or likely expenditure on) the secondary product is a
relatively high proportion of the primary product's price, so that
customers are likely to whole life cost, and
c) sufficient customers are able and likely to whole life cost so that it
would be unprofitable for a supplier to set a supra competitive
secondary market product price due to the number of customers
that would adapt their purchasing behaviour in the primary
market (within a reasonable period of time)
 Reputation
• A supplier might not wish to increase prices of its
secondary product for existing customers if that
would earn it a reputation for exploitation and
significantly reduce its ability to attract new or
repeat customers to its primary product.
• Reputation is more likely to be important where
suppliers have the prospect of relatively large
numbers of new or repeat customers and where
undertakings cannot price discriminate between
new or repeat customers and other customers.
 NSE case – stock exchanges

• MCX Stock Exchange Ltd. vs. National Stock Exchange of India Ltd
(Case No 13/2009) the CCI assessed all the segments of the stock
exchange market including equity, futures and options, WDM
segment dealing with government securities alongside the currency
derivative market.
• It effectively delineated different sectors of the stock market.
• The CCI was of the opinion that the other segments of the stock
market were not ‘adequate substitutable or interchangeable
products’ for the currency derivative (“CD”) segment.
• Since the CD segment was ‘distinctly different’ from other segments
requiring separate approvals, it was considered an independent and
distinct relevant market.
• The boundaries of relevant market freeze when the products
involved cease being practically interchangeable or substitutable;
thereby the CD segment in India was found to clearly be an
independent and distinct market.
 Radio Taxis – Ola Cab case

• In Fast Track v Ola Cabs (Case No. 06 of 2015), Fastrack

contended that, Ola occupies a dominant position in the
market of radio taxi services in the city of Bengaluru and
they have abused their dominant position by engaging in
predatory pricing. According to Fast Track, Ola spends more
money on discounts and incentives (apart from the variable
costs it may be incurring) on customers and drivers as
opposed to revenue earned by them. According to Fast
Track, Ola spends around Rs. 574 per trip while earning an
average revenue of Rs. 344 leading to a direct loss of Rs.
230 per trip.
• CCI has held the relevant market as 'Radio Taxi services in
the city of Bengaluru' and accordingly arrived at the prima
- facie opinion that Ola is dominant in the relevant market.
 Relevant market – e-commerce
• However, it may be argued that radio taxi services and non
- radio taxi services do not form separate 'relevant product
market' but are merely different channels of
transportation, which are substitutable.
• It is admitted that the radio taxi services has some added
features like phone booking facility, tracking facility, etc. But
analyzing substitutability of radio taxi service with non
radio taxi service from a demand perspective, the said
special features may not make much difference.
• CCI in Mohit Manglani v. Flipkart India Private Limited and
Others, Case No. 80 of 2014, while considering the
allegations of 'unfair trade practices' by some major online
retail companies, has held that online and offline retail
markets do not constitute separate relevant market as they
are merely different channels of distribution which are
substitutable.
 Relevant market
• The CCI did not accept the ‘unified systems market’
definition submitted by the OEMs and concluded that
the automobile primary market and the aftermarket
for spare parts and repair services did not constitute a
unified systems market. The CCI noted that the
consumers in the primary market (ie, the market for
manufacture and sale of cars) did not undertake a
whole-life cost analysis at the time of purchase of the
automobile and, accordingly, the CCI bifurcated the
relevant market into three separate markets, namely:
• the market for manufacture and sale of cars;
• the market for sale of spare parts; and
• the market for sale of repair services (the market for
sale of spare parts and sale of repair services were held
to be interconnected).
 Relevant market
• The CCI was also of the view that a ‘clusters market’ existed
for all the spare parts for each brand of car manufactured
by the OEMs in the Indian automobile market.
• Noting that each OEM had a 100 per cent market share in
each of the relevant markets, the CCI held each OEM to be
a dominant entity in the aftermarket for their brand’s
genuine spare parts and diagnostic tools, and also in the
aftermarket for the repair services for their brand’s
automobiles.
• As such, the CCI considered each individual separate brand
of automobiles as a separate relevant market, instead of
considering the broader relevant market of the
aftermarkets for the entire automobile industry. Based on
this analysis, the CCI concluded that the OEMs held
dominant positions in the respective relevant markets and
considered each OEM to have abused its dominant
position.
 Factors for Assessing Dominance
• Market Shares
• The Competition Act does not prescribe any
structural definition of dominance in terms of a
defined threshold of market shares alone.
• In the CCI’s view, an indicator of dominance does
not have to be pegged at any point but has to be
considered in conjunction with numerous factors
given in Section 19(4) of the Competition Act.
• In MCX Stock Exchange Ltd. & Ors. vs National
Stock Exchange of India Ltd. & Ors., Case No.
13/2009 (NSE Case), factors other than the
market shares, like size and resources were
looked into by the CCI, in arriving at the
conclusion that the second largest player was
dominant in a market.
 Market Shares
• When looking at market shares, it is also relevant to
look at the largest firm's market share relative to its
competitors; the smaller the shares of the competitors,
it is more likely that the CCI will hold the largest firm as
dominant. Market share of a competitor also
determines the competition constraint on the other
players.
• For example, both Pepsi and Coke enjoy over 40 per
cent market share in soft drink market in India and
again in the truck chassis market, there are only two
players namely Ashok Leyland and Telco and both have
almost equal market shares.
• This reflects that one has ability to exercise competitive
pressure on another and therefore, neither of them
may be "dominant in the relevant market".
 Size and resources of the enterprise

• In addition to market shares, the overall size and

resources of an enterprise as compared to those
of its competitors is a relevant factor in assessing
dominance of that enterprise.
• The CCI held that it is the comparative strength
that is relevant and not the limited manifestation
of that strength in a particular product or
geographic market. (Belaire Owner’s Association
v. DLF Limited, Case No. 19/2010)
• The CCI noted that the superior size and
resources of Schott Glass and its subsidiary active
in the downstream market, provided them with
economic power vis-à-vis their competitors.
(Kapoor Glass Private Limited vs. Schott Glass
India Pvt. Limited; Case No. 22/2010
 Countervailing buyer power

• Competitive constraints may be exerted not

only by actual or potential competitors but
also by customers.
• In the Schott Glass Case, where customers
were several small enterprises, who
individually lacked the requisite size or
financial strength, the CCI held that they
cannot be said to exercise countervailing
buying power on the enterprise in question.
 Vertical Integration
• Where an enterprise’s subsidiaries can provide various
related services, the enterprise can be held to be enjoying
vertical integration.
• In the NSE Case, NSE was held to be vertically integrated by
the CCI as its subsidiaries provided the related information
technology services, data information products, clearing
and settlement services etc.
• Similarly, in the DLF Case, DLF’s formidable sales network
and the townships were found to be integrated with a wide
array of commercial properties, retail space, recreation
facilities, all of which were owned and/or operated by DLF.
• In the Schott Glass Case, Schott Glass’s vertical relationship
with its JV downstream, according to the CCI, contributed
to Schott Glass “commanding a huge and unrivalled market
power in the relevant upstream market(s) in India”.
 Dependence of consumers
• The CCI gave consideration to dependence of
consumers on the enterprise in question to assess
dominance in the DLF Case and the Schott Glass Case.
• In the DLF Case, DLF was found to be dominant in the
market for the provision of real estate services of high-
end residential accommodation in Gurgaon city, as
amongst other factors, consumers in Gurgaon city were
highly dependent on DLF.
• Similarly, in the Schott Glass Case, the CCI observed
that both consumers and customers were heavily
dependent on Schott Glass for their requirements, due
to its superior product range, preference of
pharmaceutical companies for its products, and lack of
viable alternative options.
 Entry Barriers
• The potential impact of expansion by actual
competitors or entry by potential competitors,
including the threat of such expansion or entry, is
also a relevant factor in assessing dominance.
• Heavy capital requirement, huge operational
costs, long gestation periods, and the lack of
switching by pharmaceutical companies (referred
to as “stability periods” in the decision), were
held by the CCI to create significant barriers to
entry in the relevant markets in the Schott Glass
Case.
 Collective dominance
• Section 4 of the Act only applies where an “enterprise” or a “group”
enjoys a dominant position in the relevant market. The term ‘group’
for the purposes of Section 4 is defined to include enterprises which
can (a) exercise 26 per cent or more of voting rights, or (b) appoint
more than 50 per cent of board members, or (c) control the
management or affairs, of another enterprise.
• The Act does not recognize the concept of dominance by
enterprises that are unrelated to each other by structural or control
based links arising from common corporate ownership, as Section 4
applies only to an enterprise or group.
• Therefore, whilst a group may be found to have violated Section 4
and abused its dominance, the Act makes no provision for a
potential finding of “collective dominance”.
• In determining whether the actions of the three public sector oil
marketing companies led to an infringement of the Competition
Act, the CCI explicitly held that the concept of collective dominance
is not envisaged under the provisions of Section 4 (Royal Energy v.
IOCL, BPCL and HPCL; C-97/2009/DG-IR, MTRP Case No 1/28)
• The Competition (Amendment) Bill, 2012, has proposed to
introduce the concept of “collective dominance” in India
 Specific types of abuse

• Once it has been established that an

enterprise enjoys a dominant position in a
relevant market, it is necessary to establish
that the dominant enterprise has abused that
position for a violation of Section 4 of the Act.
• The Act does not define the term ‘abuse of
dominance’, however, Section 4(2), sets out
circumstances in which there shall be an
abuse of dominance.
 Imposition of unfair or discriminatory conditions in the
purchase of goods and services
• The imposition of unfair and/or discriminatory
conditions by a dominant enterprise may amount to a
violation of Section 4(2)(a)(i) of the Competition Act.
• The CCI has observed that when different rates of
discounts are given to buyers by a dominant
enterprise, it would amount to an abuse by imposing
unfair and discriminatory conditions.
• In the DLF Case the CCI held that unfair, one-sided
terms in contracts entered into by a dominant
enterprise amounts to the imposition of an unfair
condition in violation of Section 4(2)(a)(i).
• Equally in various cases filed by state power generation
companies, the CCI has held Coal India to be dominant
and to have abused its dominance by imposing unfair
terms in the fuel supply agreement signed by the
purchasers with it.
 Imposition of unfair or discriminatory prices, including
predatory prices
• The concept of predatory pricing under Section 4(2)(a)(ii),
has two elements: firstly, the price of goods must be below
the relevant measure of cost and secondly, the pricing must
be with a view to reduce competition or eliminate
competitors.
• According to the CCI (Determination of Cost of Production)
Regulations, 2009, the default measure of cost to
determine whether the price of goods is predatory is the
average variable cost.
• The CCI may however use other measure of cost depending
on the nature of the industry, market and technology,
including avoidable cost, long run average incremental cost
and market value.
• Predatory pricing was held to be a subset of ‘unfair pricing’
and a price of zero was held to be unfair and therefore
abusive under the Act in the NSE Case.
• Further the unfairness of price was assessed vis-à-vis a
competitor.
 Conduct resulting in denial of market access
• In Kansan News Pvt. Ltd. v. Fastway Transmission Pvt. Ltd. & Ors,
where cable TV operators belonging to the Fastway Group had
refused to broadcast the Kansan News channel, the CCI found that
the Fastway group had effectively denied Kansan News access to
the market, in contravention of Section 4(2) (c) of the Act.
• This decision has however been set aside by the Competition
Appellate Tribunal as in its view there was no denial of market
access as Kansan News who is a broadcaster does not compete with
the multi service operators.
• The Compat has failed to consider that a vertical agreement may be
anticompetitive if one of the parties is dominant.
• In the NSE case, where access codes were denied to the currency
derivative segment of the stock exchange by NSE to a software
vender, the CCI held this to amount to denial of market access.
• In the BCCI Case, the CCI held that the media rights agreements for
the broadcast of Indian Premier League wherein BCCI committed to
not organizing any competing league, was abusive as it had denied
market access to other competitions. Also, limitation on the
franchises was held to be limitation of market access.
 Tying and Bundling

• An abusive tie or bundle by a dominant

enterprise was assessed by the CCI in the
Hiranandani Hospital case where the CCI has
held that the hospital has engaged in tying
and bundling in allowing only one umbilical
cord stem cell bank, selected every year in a
competitive process, to provide its services to
its maternity patients.
• The matter is pending in appeal before the
COMPAT.
 Objective Justification
• The cases decided thus far do not provide authoritative
guidance in determining whether the CCI will allow an
objective justification defence in abuse of dominance cases.
• However, in the Schott Glass Case, the CCI observed that a
manufacturer or a supplier is not obliged and cannot be
forced to supply its products to a customer which had used
its name and labels without its prior permission in the past.
• The CCI found that Schott Glass was within its rights to
cease supplies to a customer in order to protect its
trademarks and that its refusal to supply such customer
was objectively justified.
• Further, the Act provides for a limited defence of ‘meeting
competition’, however, there is no substantive decision on
this defence.
• Interestingly, while the provisions of the Act make an abuse
of dominance a per se offense, the CCI has been in its
various decisions considering the impact or effect of the
unilateral conduct on competition in the relevant market.
 Penalties and sanctions
• The CCI has the power to impose the highest economic
penalties in India. In case of contravention of section 4 of
the Act, the CCI is empowered to levy a penalty of up to 10
per cent of the average turnover of the enterprise for the
preceding three financial years or direct the division of a
dominant enterprise.
• However, as there are no guidelines issued by the CCI in
relation to the determination of penalties, the CCI currently
has absolute discretion in relation the imposition of a
penalty and there are no guidelines to assist in the
determination of the quantum of penalty. Additionally, in
most cases there is absence of coherent justification for the
penalties imposed.
• For instance, in the Auto Parts case, all the OEMs were
fined the same percentage quantum, despite differences in
conduct, which ought to have been considered as a
mitigant.
 Penalties and sanctions
• In the case of Indian Exhibition Industry Association v
Ministry of Commerce & Industry & Anr, (Case No. 74
of 2012) the Indian Exhibition Industry Association
(IIAA) filed an information against the Ministry of
Commerce & Industry (Ministry) and Indian Trade
Promotion Organization (ITPO) alleging the
contravention of the provisions of section 4 of the Act
based on the time gap restriction imposed by ITPO
between two exhibitions/fairs. In 2006, the ITPO had
reformulated certain guidelines imposing a ‘time gap
restriction’ of 15 days between two events having
similar product profiles and coverage for events that
were not conducted by ITPO.
• However, in case of ITPO fairs, the time gap was 90
days before the start or 45 days after the close of an
ITPO event.
 Penalties and sanctions
• Further, in 2007, the concerned guidelines were
reassessed and the time gap of 15 days was
maintained. However, in case of ITPO and third-party
fairs having similar product profiles, the time gap was
90 days before the ITPO’s event and 45 days after it.
• The CCI held that ITPO was ‘playing a dual role as a
regulator as well as the organizer of exhibitions’ and, as
such, considered the acts of ITPO to be an abuse of its
dominant position.
• The penalty imposed by the CCI on the ITPO was
limited to 67.5 million rupees (around 2 per cent of the
average of the turnover for the preceding three years).
• The removal of discriminatory features and the
differences in time gap restrictions by an amendment
in 2013 was considered by the CCI as a mitigating
factor.
 Penalties and sanctions
• Further, the ‘turnover’ (Section 2(y) of the Act) to be taken
into account while imposing penalties under the Act has
also been subject to debate. Though the Act does not
stipulate that the CCI must only consider the turnover that
can be attributed to the business relating to which the
abusive conduct has occurred, the COMPAT has held that in
the case of multi-product companies, (ie, a company
engaged in various lines of the business), the ‘relevant
turnover’ which relates to the activity of the company
contravening the provisions of the Act, should be
considered (M/s Excel Crop Care Limited v Competition
Commission of India) (Appeal No. 79 of 2012 )
• This view of COMPAT is contrary to the CCI’s practice of
imposing a penalty based on the entire turnover of the
infringing enterprise. However, COMPAT itself has failed to
apply this concept of ‘relevant turnover’ in its subsequent
decisions.
 Penalties and sanctions
• For instance, in its decision in M/s DLF Limited v
Competition Commission of India &
Ors (COMPAT DLF) (Appeal No. 20 of 2011),
COMPAT did not restrict the calculation of the
penalty on the basis of DLF Limited’s turnover
arising only from the residential segment, despite
the relevant market in that case being the market
for ‘high-end residential accommodation’.
• COMPAT upheld the penalty levied by the CCI,
which was calculated on the basis of DLF’s
turnover pertaining to its entire business (ie, the
development of residential, office and
commercial properties).