Competition Law

Abuse of Dominant Position

Understanding Abuse of Dominant Position

The Competition Act prohibits an enterprise from abusing its dominant position. Section 4 provides that an abuse of dominant position occurs when an enterprise/ group:

  1. Imposes unfair or discriminatory condition in purchase or sale of goods or services or imposes unfair price in purchase or sale of goods or services;
  2. Limits or restricts production of goods or services or limits technical or scientific development relating to goods or services to prejudice of consumers;
  3. Indulges in practice resulting in denial of market access;
  4. Predatory pricing;
  5. Uses its dominant position in one relevant market to enter into other relevant market;

Dominant Position- refers to the position of strength enjoyed by an enterprise in the relevant market which enables it to-

  1. Operate independently of competitive forces prevailing in relevant market;
  2. Affect its competitors or consumers or relevant market in its favour

Relevant Market- The relevant market means “the market that may be determined by the Commission with reference to the relevant product market or the relevant geographic market or with reference to both the markets”.

For determining “relevant market”, the Commission shall consider the “the relevant geographic market” and “relevant product market.”

While determining “relevant geographic market”, the Commission considers the following factors:

  • 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-sales services

While determining “relevant product market”, the Commission considers the following factors:

(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 specialised producers;

(f) Classification of industrial products.

Predatory Pricing under the Act- “predatory price” means the sale of goods or provision of services, at a. price which is below the cost, as may be determined by regulations, of production of the goods or provision of services, with a view to reduce competition or eliminate the competitors.

In the case of MCX Stock Exchange Ltd v. National Stock Exchange of India Ltd., DotEx International Ltd. and Omnesys Technologies Pvt. Ltd, 2011 CompLR 129 (CCI), the Commission defined predatory pricing as the conduct, “where a dominant undertaking incurs losses or foregoes profits in the short term, with the aim of foreclosing its competitors.”

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