Critical Analysis of the Competition Law in India
The Competition Law in India seeks to make sure fair competition by way of prohibiting change practices which motive considerable adverse effect on the opposition in markets within India. Section 4 of the Act offers with Abuse of Dominance or dominant role by using a company or a group. Market strength is used to intend the potential of business to raise responsibility above the level that might prevail underneath the aggressive conditions. The Competition law prohibits the use of market controlling function to prevent individual corporations or a collection from driving out competing organizations from the marketplace as well as from dictating prices. The concept of abuse of a dominant position of market power refers to anti-competitive enterprise practices in which dominant companies may also interact to keep or grow their position within the marketplace.
There is nothing like “Pure” or “perfect” competition as expressed in a present market structure. This is just a benchmark that is used to meet the actual operating market structure. But in a scenario where not the buyer or the seller has a direct implication over the price of the product or services it produces, the demand and supply are influenced through the price. The independent bargaining of consumers and suppliers is the way through which the price is established. None of the parties involved are that financially big to have the market power to manipulate the price of a homogeneous product. Customers' business which leads to competition forces the producers to conflicts for achieving the required needs for the same by innovating and developing new products[i].
The Competition Act regulates to make a safe and fair environment that prohibits or prevents the “abuse of dominance” by using an agency or undertaking ‟for smooth and healthy competition”. So, to understand the existence of dominance we need to also apprehend the CCI’s definition of the relevant market because it differs from case to case, which is primarily based on the type of factual matrix. As such, the CCI has confined the relevant geographic market place to a unique point in a few cases such as Belaire Owners’ Association vs. DLF Limited and Mr. Om Datt Sharma’s case[ii] and has, without any specific differentiation, defined the relevant market on an all India basis in other cases. Dominance is largely established upon the position of economic superiority cherished by a task, which offers it the power to limit any sort of efficient competition being followed in a relevant market by using giving it the authority to act to the best extent irrespective of its competitors. Dominance means obtaining the market power, which authorizes the challenge to control the price or its production independently of its competitors. The remedies from the abuse are given under Section 27 of the Competition Act (hereinafter referred to as the “Act”).[iii]
“Overriding” or “influential” is the dictionary meanings to the term “Dominant”. On the alternative hand, it means dominating exploitation for acquiring economic causes or gains. An undertaking holding a position that is “dominating” is only possible if it can behave independently or separately without the fear of its competitors, customers, suppliers, and, the ultimate consumer.[iv]
A dominant position has two principal aspects:
1. Dominant enterprise’s position such as it permits it to operate independently of competitive forces generated by its rivals. This is vital because healthy competition among competitors promotes productivity and allocate efficiencies and optimizes purchaser surplus. So if an enterprise takes measures with intention to create entry barriers, control output, or price, it causes concerns.
2. The issue of dominance given in explanation (a) (ii) of Section 4 of the Act relates to the capability of an organization to affect its competition or the relevant market. In sense, this is a better degree of strength where a company can be freely able to adopt price or non-price strategies to overcome negative demand on it, to seize, bind consumer or to create a market environment that might deter more competition, both in terms of competing enterprises or rival products.[v]
Determination of the dominant position relies upon two main factors :
1. Market share, and;
2. Entry conditions
ABUSE OF DOMINANCE
The whole idea behind the implementation of a regulation or an Act for the fair opposition within the market is that a scenario of monopoly at the face of it isn't against public welfare policy. However, to use the same status wherein it operates to the gain of its full potential and in front of the actual competitors, the Act does not restrict the undertakings to end up the “dominant” player or having a “dominant” position.
A few of the examples which form a part of the abuse of dominant position are mentioned as follows-
As per Section 4(b) of the Act, predatory pricing is when a sale of products or the availability of services is at a rate of value that is lower the value price to scale back the competition or eliminate the competitors.
Refusal to supply
This practice involves purposefully withholding the supply of the product or service, therefore, increasing the demand for the same and forcing the customer to shop for the merchandise or service at a better value and thus, manipulating the requirement of the client.
The practice of limited supply provides a product of luxurious and precious nature which has the advantage of raising the price as a result of its shortage. An appropriate example for this is the diamond market wherein though large quantities of the area unit kept in storage but only a small amount of diamonds are polished and supplied to the customers, therefore, leading to its high value.
Many cases have come up for consideration before the CCI relating to abuse of dominant position.[vi]Recently, a decision with a broad perspective was given by the CCI, involving all the important automotive makers and suppliers in India. The problem was regarding restriction on completion by the car manufacturers on the sale of spare parts in the downstream market.
Transportation Sector Case
In Shri Shamsher Kataria[vii]two levels of the market were identified. One is the primary market for the sale of cars in India and the second, aftermarkets, at the secondary level, are market for the sale of spare parts and market for repair and maintenance services. Original Equipment Manufacturers (OEM’s) argued that there is no such division as primary and secondary markets and there is only one system market.
The CCI observed two aspects that determined and affect competitors and consumers, market share, and entry conditions. In respect of the market share, it was noted by the CCI that OEMs have a 100% share in the aftermarket for their brand of cars. This is often a result of the inter-brand and intra-brand non-substitutability of spare parts of one brand with another.
In actual sense, a dominant position means that authority or position of strength and superiority that is enjoyed by an undertaking that allows it to affect its competitors within the relevant market. Such enterprises going to be in a dominant position to ignore the economic process and unilaterally impose commerce conditions, fix prices, etc. which is abusive and should end in preventing any fair competition, or the elimination of effective competition. Abuse of a dominant position is a vital part of the constitution of modern competition authorities. For a developing country like India, competition authorities who are regulating through the Competition Law rules, it is recommendable to deal with “abuse of dominance” on a priority basis. The important question in the case of India as the Competition Commission of India has not yet started enforceable action on such an issue.
[i] Sneha Singh & Syed Ahmed, abuse of dominant position (2015 [ii] Mr. Om Datt Sharma V M/S Adidas AG & Ors Case No. 10 of 2014 [iii] https://indiankanoon.org/doc/1190031 [iv] Section -4 of the competition act
ABOUT THE AUTHOR
This blog has been authored by Ritul Tyagi who is a Final Year B.A., LL.B. (Hons.) student at Galgotias University, Greater Noida
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