Module 3

MODULE 3

ABUSE OF DOMINANT POSITION UNDER THE COMPETITION
ACT, 2002

3.1 INTRODUCTION

The Preamble of the Competition Act, 2002 (herein referred to as the “Act”) aims to protect
the interest of consumers and to promote competition in the market, and it is for this reason
that enterprises indulged in abusing their dominant position in the relevant market are liable
for scrutiny under provisions of the Act.

To understand the concept of abuse of dominant position, we have to understand the concept
of dominant position, and subsequently the scenarios that amount to such abuse of an
enterprise’s dominant position.

3.2 DOMINANT POSITION

Section 4 of the Competition Act, 2002 defines “dominant position” as:

“a position of strength, enjoyed by an enterprise, in the relevant market, in India, which
enables it to –

i. Operate independently of competition forces prevailing in the relevant market; or
ii. Affects its competitors or consumers or the relevant market in its favor.”

Thus, we can see, that there are certain criterions which need to be looked into before
considering an enterprise to be abusing its dominant position.

For an enterprise to be enjoying a dominant position, it would mean, that the enterprise is in a
position of strength in the relevant market, and the strength is of such nature that it enables
the dominant enterprise to “operate independently of competition forces prevalent in the
relevant market” and “affect its consumers and competitors in the relevant market in its
favour”.

There are certain factors which are often taken into account before determining whether a
particular enterprise is enjoying a dominant position or not. Section 19(4) of the Act lay down

the factors that need to be taken into consideration for determining the dominant position.
The factors are:

§ Market share of an enterprise
§ Size and resources of the enterprise
§ Size and importance of competitors
§ Economic power of the enterprise including commercial advantages over competitors.
§ Vertical integration of the enterprise or sale or service network of such enterprise.
§ Dependence on consumers on the enterprise
§ Monopoly or dominant position whether acquired as a result of any statute or by virtue

being a government company or public sector undertaking
§ Entry barriers including barriers such as financial risk, regulatory barriers, high capital

cost of entry, technical entry barriers, marketing entry barriers, economies of scale, high
cost of substitutable goods or service for consumers.
§ Countervailing buying power.
§ Market structure and size of market.
§ Social obligations and social costs.
§ Relative advantage, by way of contribution to the economic development, by the
enterprise enjoying a dominant position having or likely to have an AAEC.
§ Any other factor which the CCI may consider relevant for the inquiry.

It is important to note that the dominance of an enterprise in the relevant market is a question
of fact and a selection of the above-mentioned factors for assessing dominance, is solely
dependent upon the facts and circumstances of each case.

In the case of MCX Stock Exchange Ltd. v. NSE India Ltd.1 the Competition Commission of
India (herein referred to as “CCI”) held that:

“the position of strength is not some objective attribute that can be measured along a
prescribed mathematical index…. it has to be a rational consideration of relevant facts,
holistic interpretation of seemingly unconnected statistics or information of several aspects of
the economy.


1 Case No. 13/2009 .

… whether a particular player in a relevant market has clear comparative advantage in
terms of financial resources, technical capabilities, brand value, legacy etc. to be able to do
things which would affect its competitors who, in turn, would be unable to do or would find it
extremely difficult to do so on a sustained basis. The reason is that such an enterprise can
force its competitors into taking a certain position in the market which would make the
market and consumers respond or react in a certain manner which is beneficial to the
dominant enterprise but detrimental to the competitors.”

Under the Competition Act, 2002, an enterprise having a share of say for example 25% of the
market can possibly be determined to be the dominant enterprise if it satisfies the criteria
under the Act. However, on the other hand, an enterprise having a higher market share may
not be considered to be a dominant entity if it is shown that their behavior is constrained by
consumers and competitors.

3.2.1 Illustration: An enterprise “A” having a market share of 20% may be considered to be
a dominant player if the remaining 80% of the market share is shared by a large number of
players.

On the other hand, another enterprise “B” having a market share of 60% may not be
considered to be a dominant player if the market has limited or less entry barriers and a new
entrant can enter the relevant market and pose an effective competitive constraint on “B”
having 60% market share.

In the landmark case of Belaire Owner’s Association v. DLF Limited2, the CCI analyzed the
two expressions – “Operate independently of competition forces prevailing in the relevant
market” and “Affects its competitors or consumers or the relevant market in its favor.”
mentioned in Section 4(2)(a) of the Act.

The CCI opined that for the purpose of “Explanation to Section 4(2)(a)” of the Act, it is
important to examine the ability of an undertaking to operate independently of competitive
forces generated by its competitors. Also, it noted that it is a higher degree of strength when
an enterprise can freely adopt price or non-price strategy to overcome downward pressures on
its profit from its rivals, or take control of, or bind consumers or create a market environment
that would deter newer competition, both in terms of competing enterprises or rival products.


2 Case No. 19 of 2010.

Under the Indian competition law regime, holding a dominant position in the relevant market
does not attract the attention of the competition regulator, however abuse of such dominant
position leads to contravention of the provisions of the Act and concurrent intervention by the
competition regulator.

Section 4 of the Act aims at targeting the exclusionary and exploitive abusive practices by a
dominant entity in the relevant market, which unless targeted by the competition regulator
tends to foreclose the existing competition prevalent in the market and acts as an entry barrier
to new entrants in the relevant market.

The Indian competition regulator, CCI enforces provisions under Section 4 of the Act based
on the certain steps. The steps involved are as follows:

§ Identification of the relevant product market and relevant geographic market.
§ Assessment of the dominance of enterprise in question. 3
§ Determining whether the dominant enterprise has pursued any activity that can be

constituted as an abuse of its dominant position.

3.3 RELEVANT MARKET

In the case of Arshiya Rail Infrastructure Limited (ARIL) v. Ministry of Railways & Others.4
the CCI opined that concept of relevant market in competition law is basically a tool to
identify and define the boundaries of competition between enterprises.

Relevant market tends to lay down the framework upon which the competition authorities
tend to apply the principles of competition policy. Market definition serves as a tool to
calculate market shares and such other factors involving market concentration and other
information regarding market power of enterprises for assessment of such enterprises’
dominant position.

The competition law in India makes it mandatory to define the relevant market in cases
involving combinations and abuse of dominance. Thus, defining the relevant market is the
primary step in the process of assessing the conduct of a market player. Once the relevant
market is defined, the next step is the provisional assumption that certain conduct of abuse of
dominance has taken place. This step is followed by the act of defining the boundaries of the


3 Note: There have been certain cases, wherein the CCI has undertaken investigation even when the enterprise
was not dominant.
4 Case No. 64/2010 & 12/2011.

smallest market in which such conduct could be sustained. After the contours of the smallest
possible market has been defined, the actual conduct of the dominant enterprise in question is
analyzed, and a determination is made whether such abuse of dominance has taken place or
has potential of taking place.

Traditionally itself, the competition authorities have preferred to define the relevant market in
a narrow manner contrary to the contentions of the alleged abusers of dominance who accord
for a wide definition of the relevant market. The primary reason as to why the alleged
enterprises prefer to accord a wider definition of the relevant market is because such wider
market definition would imply a lower market share in the widely defined market.
Assessment of market shares and exercise of market power are regarded to be essentials in
taking cognizance of competitive constraints faced by enterprises to define the relevant
market. Such constraints exist mainly in the product market within a particular area, thereby
implying that a relevant market must have a product and geographic aspect. For analyzing the
geographic aspect, analysis of the product market is of utmost important.

In regard to the principles of market definition, an effective competition is subjected to three
main constraints: demand substitutability, supply substitutability and potential competition.

Analyzing from an economic point of view, the most effective disciplinary force on suppliers
of a given product, especially in regard to pricing decisions is demand substitution.
Therefore, exercising the market definition includes identification of the effective alternative
sources of supply for consumers within a specific geographic location. Competitive
constraints arising from the supply side substitutability are not so immediate in nature as
compared to from the demand side, and therefore require analysis of additional factors.

In the case of Arshiya Rail Infrastructure Limited (ARIL) v. Ministry of Railways & Others.5,
the CCI was asked to adjudicate on the issue of substitutability of consumer preferences. The
DG and the informant in this case, defined the relevant product market as “transportation of
goods / freight either through containers or wagon over the railway network”. The relevant
market thus laid emphasis on the substitutability of containers and wagons for carrying
freight of all types via the railway network. The CCI opined contrary and said that restricting
the relevant market to only the railway network would result in a constrained analysis of the
relevant market.


5 Case No. 64/2010 & 12/2011.

The concept of potential competition plays an important role in competition assessment. The
concept of potential competition involves the analysis of SMP – significant market power
through a future entry. Thus, it is primarily a concept, wherein it is basically the study of the
likely competitiveness in the market when a new entrant comes into the market.
In the case of Surinder Singh Barmi v. Board for Control of Cricket in India6 the CCI opined
that the relevant market in the present case was “organization of private professional cricket
leagues/events in India”. The CCI in its finding differentiated the following from “private
professional leagues” like Indian Premier League (IPL).
§ Sports from other forms of television (including general entertainment programs and

movies).
§ Cricket from other form of sports.
§ International / first class cricket.

The CCI concluded that the dominance of the BCCI arose largely due to its regulatory power,
control over players, infrastructure and ability to control the entry of other leagues, thereby
implying its “monopoly status”. In furtherance to the above-mentioned findings, the CCI said
that the BCCI contributed largely to the failure and temporary suspension of other
“competing private professional leagues” like the Indian Cricket League (ICL) by means of
refusing approval to the league and by refusing such league to use BCCI controlled
infrastructure including cricket grounds. The CCI thus in this case finally opined that BCCI
was abusing its dominant position in the relevant market by:
§ Denying market access to potential competitors by “binding itself” not to organize,

approve, or recognize any other private professional league.
§ Limiting number of franchises in one private professional league.

3.3.1 Delineation of the Relevant Market


6 Case No. 61/2010.

Proper delineation of the relevant market involves a comprehensive delineation of both the
relevant product market and geographic market for enhanced development of competition
law cases in India.

3.3.1.1 Relevant Product Market

There are primarily three elements that pin up the relevant product market7. The three
elements are:

§ Price Increase
§ Reaction of Purchasers
§ Smallest Size Requirement

Price Increase

It is a well-established principle that consumers are bound to shift to substitutes with an
increase in price of a good (except for loyal and marginal consumers). To considerably affect
the behavior of consumers, the increase in price trend should be such that it is likely to
continue in the near foreseeable future. The behavioral consumption pattern of consumers to
a small-term change in price is likely to be different from a long-term change in price.

A small change in price is likely to affect the consumers in a manner that they look to identify
close substitutes., however a larger change in price is likely to make them identify more
distant substitutes. Therefore, it is a well-established fact that inclusion of distant substitutes
in the relevant product market may take place only wherein the change in price is
substantially big. Thus, the underlying principle herein is that the “price change should be
significant to affect the consumer reaction”.

Reaction of Purchasers

Consumers are generally regarded to act rationally which increase in price. For example, if all
the purchasers buy potato chips at a particular price. Now if the price of potato chips
increases, and all the purchasers shift to buy nachos from chips, then potato chips and nachos
would be regarded to be in the same product market with nachos being the substitute for
potato chips for all the consumers. If even after the price increase in potato chips, the


7 Relevant Market in Competition Case Analyses – Dr. S. Chakravarthy (Page 2)
(http://www.circ.in/pdf/Relevant_Market-In-Competition-Case-Analyses.pdf) .

consumers do not shift to nachos, then nachos is not a good substitute to potato chips from
the perception of the consumers, and therefore nachos and potato chips would not be
regarded to be in the same product market.

Smallest Size Requirement

It is a well-established principle of competition law that the market should be the smallest
collection of goods or services for which the consumer reaction holds. This principle restricts
product markets bracketing non-substitutes or distant substitute products. The rationale
behind such principle is that a product should not be merely treated as a substitute because of
an increase in price of a product.

It is regarded that there should be a direct connect with an increase in price of the product in
demand. The competition regulator should refer to the following factors while determining
the relevant product market8:

§ Price of the goods or service
§ Physical characteristics / end-use of goods
§ Consumer preferences
§ Existence of specialized producers
§ Exclusion of in-house production
§ Classification of industrial products

Therefore, for efficient determination of the product market, the CCI is to estimate the
demand elasticity of a particular group of products in the geographical area at the prevailing
price. Wherein the data required for determining the demand elasticity is unavailable,
economic agents may be interviewed to make the reasonable market inferences about the
relevant product market.

In the Alenia/de Havilland case9, the EU Commission held that commuter turboprop aircrafts
having more than 20 seats could be categorized into three different markets: aircraft with 20-
39 seats, aircraft with 40-59 seats and aircraft with more than 60 seats. The Commission held
that the seating capacities were fundamental to the defining the separate markets as such


8 Relevant Market in Competition Case Analyses – Dr. S. Chakravarthy (Page 3)
(http://www.circ.in/pdf/Relevant_Market-In-Competition-Case-Analyses.pdf) .
9 C-91/619 [1992] 1 CEC 2,034.

seating capacity was a determining factor in deciding the type of routes on which the aircrafts
could be used.

3.3.1.2 Relevant Geographic Market

Section 2(s) of the Competition Act, 2002 defines the term “relevant geographic market” as
“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 homogeneous and can be
distinguished from the conditions prevailing in the neighboring areas.”

Section 19(6) of the Act lays down the factors which need to be considered while
determining the relevant geographic market. The factors are as follows:

§ Regulatory trade barriers
§ Local specification requirements
§ National procurement policies
§ Adequate distribution facilities
§ Transport costs
§ Language
§ Consumer preferences
§ Need for secure or regular supplies or rapid after-sale services
In the Coal India case10 the CCI opined that for defining relevant geographic market in abuse
of dominance cases, the relevant geographic market has to be in India (or part thereof) and
cannot be global in any case. This conclusion was reached at after a technical reading of the
provision under Section 4 of the Act. The CCI in this regard mentioned:

“At the outset, it may be pointed out that the contention…. that the relevant market for the
present purposes has to be global and cannot be confined to India as was done by the
DG…… the plea advanced by the opposite parties contending the relevant market to be
global is ex facie contrary to the express provisions of the Act and has to be rejected.”11

Mathematically, the relevant market equation looks something like this:


10 Case Nos. 3, 11 and 59 of 2012.
11 Case Nos. 3, 11 and 59 of 2012 (Para 72).

RELEVANT GEOGRAPHIC MARKET + RELEVANT PRODUCT MARKET =
RELEVANT MARKET

The (Small but Significant and Non-transitory Increase in Price) SSNIP Test

The SSNIP test aims to establish the smallest product group and the geographical area, so that
a hypothetical monopolist controlling a product group in the specified geographical area can
sustain prices that are at least a small but significant amount above competitive levels. This
product group and geographical area is the relevant market.

Illustration12: According to the SSNIP test, if product X is a relevant market, a profit
maximizing hypothetical monopolist of product X can impose a small but significant, non-
transitory increase in price (SSNIP) above the current prices of the of the brands of product
X.

Exclusion of the Concept of Collective Dominance under the present Indian
Competition Regime

A situation of ‘collective dominance’ is one where a collection of unrelated entities are
dominant in the market when considered together. Where abuse of dominance provisions
ordinarily seek to punish conduct resembling that of a monopoly, the recognition of the idea
of collective dominance would bring into its scope a prescription on oligopolistic behaviour –
which potentially has effects similar to monopolistic behaviour on the market. While this
concept has found recognition in Europe,13 the CCI has outrightly rejected the application of
the concept to India.14 The most recent example wherein the CCI clearly rejected the
contention of “collective dominance” is in the case of Delhi Vyapar Mahasangh v. Flipkart
India Private Limited and its affiliates & Amazon Seller Services Private Limited and its
affiliates15. In this case although the CCI entertained contentions of anti-competitive
behaviour on the part of Flipkart and Amazon and held them to be prima facie violative of
Section 3 of the Competition Act, 2002 as per its Section 26(1) order, it refused to entertain


12 The SSNIP Test – Niminet Liviana (University of Bacau)
(ftp://ftp.repec.org/opt/ReDIF/RePEc/bac/pdf/2008/20081312.pdf) .
13. See Compagnie Maritime Belge Transports SA v. Commission of the European Communities, Cases C-

395-96/1996 (European Court of Justice; March 16, 2000).

14. See Meru Travel Solution Pvt Ltd v. ANI Technologies Private Limited, Cases no. 25-28/2017
(Competition Commission of India; June 20, 2018), ¶ 43.

15 Case No. 40/ 2019 (Competition Commission of India, January 13, 2020).

the contention of “collective dominance” against Amazon and Flipkart under Section 4 of the
Competition Act, 2002.

3.4 ABUSE OF DOMINANT POSITION

What constitutes an abuse?

As per Section 4 of the Competition Act, 2002, an enterprise or group would be regarded to
be abusing its dominant position if it directly or indirectly imposes any unfair or
discriminatory:

§ ‘condition in purchase or sale of goods and services’, and
§ ‘price in purchase or sale of goods and service’16.

Also, an enterprise or group would be regarded to be abusing its dominant position if it limits
or restricts:

§ ‘the production of goods or provision of service or market in question’, and
§ ‘technical or scientific development in relation to goods or services to the prejudice of

consumers’.

An enterprise or group indulging in practices resulting in denial of market access or market
foreclosure would also be regarded to be contravening provisions of Section 4 of the Act.
Also, enterprises which use its dominant position in one relevant market to enter into or
protect its other relevant market, would be liable for contravention of provisions under
Section 4 of the Act. Also, if an enterprise or group makes a conclusion of contracts subject
to acceptance by other parties of supplementary obligations which by their nature or
according to commercial usage have no connection with the subject of such contracts, it
would lead to an abuse of such enterprise’s dominant position.

It is important to note even if an enterprise imposes unfair or discriminatory condition it
should not per se be considered as an abuse of dominance. The explanation to Section 4(2) of
the Act makes it clearer as it aptly points out that if unfair or discriminatory condition is
imposed to meet competition, such act would then not be considered as abuse of dominance.
Therefore, we can see that not every unfair or discriminatory condition would amount to an


16 Note: Unfair or discriminatory pricing is deemed to include “predatory pricing”.

abuse, and such abuse would only take place if it has some relation with the competition
prevalent in the Indian market.

For proper adjudication on abuse of dominance cases, the Raghavan Committee Report
provided certain important questions17:

§ How will the practice harm competition?
§ Will it deter or prevent entry?
§ Will it reduce incentives of the firm and its rivals to compete aggressively?
§ Will it provide the dominant firm with an additional capacity to raise prices?
§ Will it prevent investments in research and innovation?
§ Do consumers benefit from lower prices and greater product and service availability?

There has been no specified classification of abusive conduct under the Act, however under
the existing global competition laws, abuse of dominant position can be categorized under:

§ Actions which exploit customers or suppliers. (e.g. Excessively high prices, restricting
quantities).

§ Conduct which amounts to exclusionary behavior and protection of dominant position,
because it removes or weakens competition from existing competitors or tends to
strengthen entry barriers, thereby removing potential competition.

ECONOMIC PRACTICES THAT LEAD TO ABUSE OF DOMINANCE

Non-pricing practices that lead to Abuse of Dominance

There are certain non-pricing practices undertaken by enterprises which also amount to abuse
of dominance practices, few of such non-pricing practices amounting to such abuse of an
enterprises dominant position are:

Exclusive Dealing Agreements

Exclusive dealing agreements apply to both exclusive supply obligation and exclusive
purchasing obligation. In an exclusive supply obligation, a supplier is restricted from
supplying to anyone other than the specific downstream agreed customer. In an exclusive
purchasing obligation, a downstream customer is forbidden to acquire products or avail


17 Dominance and Its Abuse – Dr. S. Chakravarthy (Page 8) (http://www.circ.in/pdf/CPS-06-Abuse-Dominance-
Ethiopia-Workshop_May08.pdf) .

services except from specific supplier. In competition practice, it has been observed that
predominantly cases concerning exclusive purchasing obligations are more prevalent among
dominant enterprises.

The concept of exclusive dealing agreements, are also known as “single branding”, “non-
compete obligations” and “exclusive purchasing” etc. All these terms imply and connote the
very similar idea that a purchaser is prevented from purchasing competing products from
anyone other than the dominant enterprise in question.

The European Commission in the landmark case of Hoffmann-La Roche v. Commission18
opined that an enterprise which is holding a dominant position in the relevant market and ties
purchasers (even if such ties are made at a request) by an obligation or promise on their part
to obtain all or most of their requirements exclusively from the said enterprise is said to be
abusing its dominant position. The EU Court in this case also said that, a defense opining that
the customer willingly entered into the exclusive agreement (or requested such exclusivity)
cannot be validated as the issue in these cases is not whether the agreement is oppressive to
the customer or not, but whether such agreement could horizontally foreclose the competition
in the market.

Illustration: If A, a dominant enterprise in the electricity supply market, enters into an
exclusive purchasing clause in a supply contract at the request of a local distributor, such a
practice would attract the attention of the competition regulator on grounds that such
practice would mean abusing of A’s dominant position in the electricity supply market.

In the case of Intel Corporation Inc. v. European Commission & Association of Competitive
Technology Inc.19 , the Court clearly upheld the view held in the Hoffmann-La Roche case,
and was of the opinion that exclusive dealings by a dominant enterprise (whether
contractually or on the consideration of a rebate) would be regarded prima facie abusive,
regardless of the circumstances of the case.

The Hon’ble Supreme Court of India in the case of Competition Commission of India v. Fast
Way Transmission Pvt. Ltd. & Others.20 opined that the term denial of market access “in any
manner” is a wide term and that such term should be given its natural meaning. The Court
thus said that once the existence of “dominant position” is proved, the question whether the


18 Case 85/76 [1979] ECR 461.
19 Case C-413/14 (“CJEU Judgment”).
20 (2018) 4 SCC 316 .

denial of market access is done by a competitor or not becomes irrelevant. The only
consideration to be taken note of by the Court is the denial of market access.

In general, to analyze whether an exclusive dealing agreement is of anti-competitive nature or
not, the possible anti-competitive effects and post-competitive effects of such agreement have
to be weighed and looked into. The possible anti-competitive effects would include whether
the exclusive dealing agreement would be deterring entry into the same or neighboring
relevant market. Also, whether the exclusive dealing agreement is deterring entry in a
vertically related market will be looked into for analyzing the possible anti-competitive
effects.

Tying

Tying involves the practice of a supplier of one product - the tying product, requiring the
buyer of the first product to buy a second product – the tied product. The various forms of
tying are:

§ Contractual Tying: Such a tie is the consequence of a specific contractual stipulation.
§ Refusal to Supply: The effect of a tie can be achieved wherein a dominant undertaking

refuses to supply the tying product unless the customer purchases the tied product.
§ Technical Tying: Such a tying occurs where the tied product is physically integrated into

the tying product, such that it becomes impossible to separate or take one product without
the other.
§ Bundling: The concept of bundling is closely knit and related to the concept of tying. It is
a situation wherein two products are sold as a single package at a single price. Such
bundling can primarily be of two types:
§ Mixed Bundling: When two products are generally sold separately, but when sold

together they are available at a discounted price such a scenario of discounted price
of two products when sold together is known as mixed bundling.
§ Pure Bundling: When two products can only be possibly purchased together, such a
scenario is known as pure bundling.

The concept of ‘tying’ in relation to abuse of dominant position is such, that tying involves
the dominant enterprise to “leverage” its position in relation to the tying product in order to
achieve increased sales in the market for the tied product, thereby extending the market

power. Such tying would be a classical example of a scenario of horizontal foreclosure of
market.

Traditionally, the concept of ‘tying’ was regarded to be per se illegal under US anti-trust
laws, however with the commercial revolutions world-wide “tying” has become a
commercial inevitability and is no longer considered per se illegal under the modern
competition and anti-trust laws.

The concept of tying over the years have had its benefits as well as anti-competitive effects
over the years on a case to case basis. The role of the competition regulator in relation to
tying-in comes in when such tying-in has foreclosure effect on the market.

Illustration: A company “A” having dominance over the tying product “X” also has some
market power in relation to the tied product “Y”. In such a scenario, the vitality of the
“leveraging theory” comes in and such a scenario is liable to raise entry barriers and
subsequent market foreclosure in the product “Y” market. It is here where the anti-
competitive effects of tying-in comes in and attracts attention of the competition regulator.

The concept of tying in relation to abuse of dominance have certain determinants which
needs to be fulfilled for such contravention to be established. The determinants governing
such contravention are as follows:

§ Does the alleged enterprise have a dominant position?
§ Is the alleged dominant enterprise guilty of tying two distinct products?
§ Was there a scenario wherein the customer was coerced to purchase both the tying and

the tied products?
§ Is the tie of such nature that it is detrimental to competition by means of foreclosure of

market?
§ Is there at all an objective justification for such tying?

In the case of Microsoft Corporation v. Commission21, the question of whether two distinct
products were the subject of a tie or not was the key issue. The Commission opined that
Microsoft tied its Music Player to its operating systems. On appeal the higher court upheld
the decision of the Commission and regarded that the operating system and the music player


21 T-201/04 [2007] ECR II – 3601.

are separate products as Microsoft supplied the Media Player as a separate product to work
with its competitors’ operating systems. Therefore, it was clear that Media Player could be
separately downloaded from the Microsoft website, but to promote the media player as a
stand-alone product, Microsoft had a separate license agreement for the media player.

Thus, tying has been one of the most delicately used non-pricing practices which have led to
numerous instances of abuse of dominance worldwide.

Refusal to Supply

When a dominant enterprise refuses to supply goods or services, such a scenario may lead to
the abuse of the dominant position of the enterprise. It is one of the most controversial topics
when dealing with competition practice, as on one side although it may be regarded to be
abusive of an enterprises dominant position on the other side it may be violative of an
enterprise’s freedom of trade.

It is for this reason that, to determine abuse of enterprise’s dominant position with regard to
refusal to supply, the following issues are to be considered:

§ Is there an instance of refusal to supply?
§ Does the alleged enterprise have a dominant position in an upstream market?
§ Is the product to which access is sought indispensable to someone wishing to compete in

the downstream market?
§ Would such refusal to supply lead to the elimination of competition or appreciably affect

the competition in the downstream market?
§ Is there any objective reasonable justification for the refusal to supply?

In the case of Commercial Solvents v. Commission22 the Court of Justice opined that “an
enterprise which has a dominant position in the market in raw materials and which, with the
object of reserving such raw materials for manufacturing its own derivatives, refuses to
supply a customer, which is itself a manufacturer of these derivatives, and therefore risks
eliminating all competition on the part of this customer, is abusing its dominant position.”


22 Case 6 and 7/73 [1974] ECR 223.

In the case of BL v. Commission23, the Court of Justice upheld the decision of

the

Commission saying that BL had abused its dominant position by refusing to supply a certain

type of approval certificate for Metro cars imported from the continent as such practice was

part of a strategy of BL aimed at discouraging parallel imports into UK.

Pricing practices that lead to Abuse of Dominance

There are certain pricing practices undertaken by enterprises which also amount to abuse of
dominance practices, few of such pricing practices amounting to such abuse of an enterprises
dominant position are:

Excessive Pricing

Excessive pricing is one of the most widespread issues in the competition regulation regime
across several jurisdictions including India. The primary motive of competition policy in
India is prevention of excessive pricing.

Amongst the numerous issues relating to excessive pricing, the few prominent ones which
have been upon by regulators, academicians and courts are:

§ Whether or under what market conditions pricing by dominant enterprises require
intervention of the competition authorities?

§ What constitutes “unfair” and “excessive pricing”?
§ What are the practical challenges in applying the various tests for assessing unfairness of

prices?
§ The choice of effective remedies.

A combined reading of Section 4(1) and Section 4(2) of the Act prohibits imposition of
“unfair price” by dominant firms. The challenge for the CCI in cases of excessive pricing is
to maintain an equilibrium between the static and dynamic efficiencies such that the
investment incentives are safeguarded alongside protection of the consumers interest.

Till date there is not universally accepted definition of excessive pricing or unfair pricing,
however, competition authorities and courts have opined for alternative methodologies to
detect and recognize excessive pricing practices.


23 Case 226/84 [1986] ECR 3263.

Price-cost comparison
The EU courts have established the fact that excessive pricing happens when a dominant
enterprise charges a price that has no reasonable relation to the economic relation to the
actual economic value of the product. The courts therefore have opined for a two-stage test24:
§ The competition authorities are to first assess whether the difference between the cost

incurred and the price charged is excessive or not?
§ If it is excessive, they must assess whether a price of unfair nature has been imposed in

itself or when compared to competing products?
Another suggested approach for assessing excessive pricing is by using rates of profit. As per
this approach, the prices of a particular dominant enterprise are deemed to be excessive if the
enterprise obtains profit, higher than it could expect or estimate to earn in an otherwise
identical competitive market25.
International Price Comparisons
The European Commission in the case of United Brands Company & United Brands
Continental BV v. Commission of the European Communities26 came to the conclusion that
United Brands was charging excessive prices based on comparison of prices between
different countries.
In competition economics, it is considered that the level of fixed costs and capital intensity
would be equal in the same industry although they might be widely differing across
industries, thereby making it possible to compare prices in a given industry across nations,
and that the average price across the countries could be treated as a standard benchmark for
price in averagely competitive markets.


24 Scandlines Sverige AB v. Port of Helsingborg Case COMP/A.36.568/D3,23.
25 Excessive Prices: Using Economics to Define Administrable Legal Rule – Evans and Padilla (2004) – CEMFI
Working Paper No. 0416. (https://www.cemfi.es/ftp/wp/0416.pdf ).
26 Case 27/76.

Earlier prices of the dominant enterprise27

In many cases of excessive pricing, the earlier prices of the dominant enterprise have also
been used a benchmark. In the case of General Motors Continental NU v. Commission28,
General Motors had imposed a steep increase in the price of type certificates and this test was
applied to analyze whether the increment is price was excessive or not. Thus, we can see that
this test implies that competition law is directed more towards price increases, rather than
excessive price levels. Therefore, we can conclude that this “one size fits all” test is not ideal
for dealing with excessive or unfair price cases under the Indian competition law regime.

Predatory Pricing

Predatory pricing is one of the most commonly and widely used pricing strategies adopted by
dominant enterprises. It is a strategy adopted wherein the dominant enterprise offers low
price to consumers (below the cost of production) on a short-term basis to eradicate
competitors and then subsequently charge higher prices in the medium and long run to
recover such losses incurred. It is one of the deadliest pricing strategies adopted by dominant
enterprises (usually the ones having deep pockets) to ensure the exit of competitors and
competition from the market by offering products and services at lower costs for a short-time
period.

Sub-clause (b) of explanation to Section 4(2) of the Competition Act, 2002 defines predatory
pricing as “the sale of goods or provision of services, at a price which is below the cost, as
may be determined by regulations, of production of the goods or provision of services, with a
view to reduce competition or eliminate the competitors.”

Thus, we can see that the concept of predatory pricing mainly has two major components:

§ Pricing below cost.
§ With a view to reduce competition and eliminate competitors from the market.

The concept of predatory pricing therefore as we see is based largely on the cost-based

approach, clubbed with the intention of reducing competition and eliminating competitors

from the market. The CCI 2009 Regulations on “determination of cost of production”,

clarified the default cost benchmark for determining whether a dominant enterprise was


27 Note: The presumption as to this test is that the prior price of the product or service was not below the
competitive level. It also forms a view about the extent of increment which is permissible and the limits beyond
which such increment would amount to be excessive.
28 Case No. 26/75, [1975] ECR 1367.

pricing below cost or not to be the “average variable cost” (AVC). The CCI however may
choose to deviate such cost benchmark from AVC to other cost concepts like avoidable cost,
long run average incremental cost, cost prevailing at market value, depending upon the nature
of market, industry and technology29.

In the case of MCX Stock Exchange Ltd. v. NSE of India Ltd.30 the CCI while technically
interpreting Section 4(2)(a)(ii) of the Act held “predatory pricing” to be a subset of “unfair
pricing”. The CCI thus noted that the “zero pricing policy adopted by National Stock
Exchange (NSE) can be perceived to be unfair as far as MCX-SX is concerned”31.

The concept of “predatory pricing” has a wider ambit under the EU competition laws. The
EU law states predatory pricing as a “practice where the dominant company lowers its price
and thereby deliberately incurs losses or foregoes profits in the short run so as to enable it to
eliminate or discipline one or more rivals or to prevent entry by one or more potential rivals
thereby hindering the maintenance or the degree of competition still existing in the market or
the growth of that competition”32.

Therefore, after analyzing the definitions of predatory pricing, it can be inferred that the
following principles primarily govern the principle:

§ Sacrifice (incurrence of short-run losses below pricing below cost)
§ Anti-competitive foreclosure (reduction of competition and elimination of competitor)

Predatory pricing exists if there is an intention of eliminating a competitor33.

Going by precedential analysis of predatory pricing instances, the general principle of the
European Competition Law on predatory intent state that:

§ Prices are considered to be predatory if the dominant enterprise is selling its product or
provision of service lesser than the average variable cost (AVC);

§ Pricing above AVC but below the Average total cost (ATC) is predatory if it’s done as a
part of a strategy to eliminate a competitor34.


29 The Competition Commission of India (Determination of Cost of Production) Regulations 2009 (Notification
No. 6 of 2009) (https://www.cci.gov.in/sites/default/files/regulation_pdf/cost_pro.pdf).
30 Case No. 13/2009 (Para 10.70 Order issued on 23.06.2011).
31 Case No. 13/2009 (Para 10.73 Order issued on 23.06.2011).
32 DG Competition Discussion Paper on the application of Article 82 of the Treaty to Exclusionary Abuses –
European Competition Commission, Brussels (Para 93 – December 2005
.(http://ec.europa.eu/competition/antitrust/art82/discpaper2005.pdf).
33 AKZO Chemie BV v. Commission [1991] ECR I-3359.
34 Competition Law – Whish & Bailey (6th Edition – Oxford University Press) (Page 733).

The CCI in the landmark case of MCX Stock Exchange Ltd. v. NSE of India Ltd.35, the CCI
while laying down the test of predatory pricing said that, “before a predatory pricing
violation is found, it must be demonstrated that there has been a specific incidence of under-
pricing and that the scheme of predatory pricing makes economic sense. The size of
Defendant's market share and the trend may be relevant in determining the ease with which
he may drive out a competitor through alleged predatory pricing scheme-but it does not,
standing alone, allow a presumption that this can occur. To achieve the recoupment
requirement of a predatory pricing claim, a claimant must meet a two-prong test: first, a
claimant must demonstrate that the scheme could actually drive the competitor out of the
market; second, there must be evidence that the surviving monopolist could then raise prices
to consumers long enough to recoup his costs without drawing new entrants to the market.”
Thus, we can see that predatory pricing is one of the most rampantly used pricing
mechanisms adopted by dominant enterprises in their respective relevant market. Abuse of
dominance thus forms an integral part of national as well as global competition law. The
nascency of the Indian competition law and its reliance on global competition / antitrust
trends has been largely beneficial for the evolving competition law jurisprudence in India
especially in cases pertaining to abuse of dominance.


35 Case No. 13/2009 (Order issued on 23.06.2011).