Essence Of Competition Law In India: Concerning Section 4 Of The Competition Act

In the previous article, Section 3 of the Competition Act which has provisions for anti-competitive agreements and how such agreements can be rendered as void is covered. In this Part, Section 4 of the Competition Act has been covered to show how various enterprises misuse their dominant position in the market to undermine other enterprises. A company can misuse its strength or position in the market to exploit other companies and create an appreciable adverse effect on competition.

The elements that involve an enterprise being in a dominant position are – (i) a position of power or strength, (ii) that position is enjoyed in a relevant market in India and (iii) such a position gives powers to the enterprise to operate independently of competitive forces in the relevant market.

According to the Act, dominant position basically means a position of strength which is enjoyed by a company in a relevant market in India, which in furtherance of this enables it to operate without any competitors in the market and also affect them, consumers or the relevant market of that business in the company’s favour. And thus, such a company or enterprise will be in a position to disregard other competitive forces and will be able to impose trading conditions, fix prices, gain profits for themselves, etc. This abuse of their powers and position may result in the restriction of competition and also have an appreciable adverse effect on competition.

There have been various cases where the Competition Commission of India has observed that various enterprises have used their dominant position in the relevant market and exploit the resources and other enterprises to their own benefits. By abusing their dominant position, the enterprises in position of strength affect the economy as well by not letting other competitors perform in the relevant market. Sometimes, the consumers may benefit from such abuse and sometimes they may be exploited as well. For example, Reliance Jio, at a point of time, was in control of the majority of telecom market because of the cheap internet plans that it was providing its users. The consumers benefitted out of it, though the other competing companies had to substantially reduce their prices so as to stay in the market.

WHAT DOES DOMINANT POSITION MEAN?

As per Section 4 of the Competition Act, 2002, 'dominant position' means a position of strength which is enjoyed by an enterprise in the relevant market, in India, which enables it to operate independently of competitive forces prevailing in the relevant market; or affect its competitors or consumers or the relevant market in its favour. Dominant position is where an enterprise controls that relevant market and imposes restrictions indirectly on the other enterprises which in turn also affects the economy.

In Reliance Big Industries & Ors v. Karnataka Film Chamber of Commerce & Ors, the Commission held that only the actions of an 'undertaking' can be explained under Section 4 of the Act.

In Shri Neeraj Malhotra Advocates v. North Delhi Power Ltd., the Competition Commission of India had observed that Section 4 of the Act does not prohibit an enterprise from holding a dominant position in the market, but it does place a responsibility on such corporations which requires them not to abuse their dominant position. The actions, practices and conduct of an enterprise in a dominant position need to be examined in light of the evidence and circumstances of each case to determine whether or not the same constitutes an abuse of dominant position according to Section 4 of the Act.

In another case, Fast Track Call Cab Pvt. Ltd. And Meru Travel Solutions Pvt. Ltd. v. ANI Technologies Pvt. Ltd., the CCI, while determining whether the enterprise had a dominant position in the relevant market or not, held that a scrutiny has to be done to show that the enterprise held a dominant position in the relevant market before establishing the abuse. And such abuse should be assessed in light of the provisions incorporated under Section 19(4) of the Competition Act. The CCI had taken certain factors into consideration before determining the dominance of OLA in this case – the market shares of OLA, its competitors in the relevant market and the annual and monthly number of trips in the relevant market during the period of investigation.

For more reference, in a foreign case, American Tobacco Co. v. United States, the Court had observed that a dominant position is a market controlling position, capable of driving out competing businesses from the market.

HOW TO ESTABLISH WHETHER AN ENTERPRISE HOLDS A DOMINANT POSITION IN THE RELEVANT MARKET?

There are three steps which could establish whether an enterprise holds a dominant position and whether it is abusing it or not –

1.  Ascertaining the relevant market.

2.  Assessing the market strength to ascertain whether the enterprise held a significant amount of power.

3.  Whether the conduct and actions of the corporation amounts to abuse or not.

THE THREE STEPS –

Under Section 2(r) of the Competition Act, the relevant market can be defined as the market which maybe determined by the Commission with reference to relevant product market or the geographic market or with reference to both the markets. The determination of a relevant market is quite necessary to show whether the enterprise which was exercising its dominant position in that relevant market is affecting the competition between the competitors or not. In a foreign case, Standard Oil Co. of California and Standard Stations Inc. v. the United States, the Supreme Court of the United States defined the relevant market as the area of effective competition, within which the enterprise is operating.

It depends upon the CCI to take into account various factors while determining the relevant market. As per the provisions of the Act, the Commission shall also give due regard to the relevant geographic market and also the relevant product market.

The Commission needs to take into consideration various factors which have been enlisted under Section 19(6) for determining the 'Relevant Geographic Market' and for determining the 'Relevant Product Market' the factors have been listed out in Section 19(7) of the Competition Act.

In the case of M/s Saint Gobain Glass India Ltd. v. M/s Gujarat Gas Company Ltd., the CCI had stated that to determine the 'relevant product market', the Commission needs to give due regard to one or all of the factors enlisted under Section 19(7) of the Act.

In the case of Jupiter Gaming Solutions Pvt. Ltd. v. Government of Goa & Ors., the CCI was of the opinion that abuse occurs only when an enterprise used its dominant position in the relevant market.

In a case by Bharti Airtel Limited against Reliance Jio Infocomm Limited, predatory pricing was alleged by the Airtel and thus violating Section 4(2)(a)(ii) of the Competition Act. The CCI had closed this case and declared that providing free services cannot itself raise competition concerns unless the same is being offered by a dominant enterprise and shown to be an anti-competitive objective of excluding competition or competitors. Jio had been providing free services and was not deriving any profit from that at that point of time, thus it cannot be said that Jio was in a dominant position as such and was affecting competition in any way. The CCI in this case had defined the relevant market as wireless telecommunication services to users.

CONCLUSION –

The Competition Act was established with a purpose of eliminating the evils which have been present since contemporary industrialisation for promoting fair competition among competitors and also ensure an economy where the consumers get the fair prices of products. Actions of the competitors such as anti-competitive agreements and abuse of their dominant position in the relevant market creates barriers for the CCI to ensure a fair competition. The CCI has been continuously making efforts for eliminating these practices and has been quite successful in its endeavours as well. The need for eliminating such practices arises when the economy and the consumer base is affected. As mentioned earlier, having a dominant position in the relevant market is not an issue, but abusing that position causes concerns in the fairness of the competition.