DOMINANCE AND MONOPOLY PRACTICE UNDER COMPETITION LAW6 min read

By- Srusti Parekh

DOMINANCE UNDER COMPETITION ACT

The concept of Dominance is explained in section 4 and section 19 of the competition act 2002. This section deals with the abuse of dominance. The main aim of this act is to create, protect, and maintain a competitive market that will in return protect the interest of the customer. Competition Commission of India is the deciding authority in India whenever there are allegations related to section 4 and section 19 of this act. Just being Dominant is not wrong but misusing the dominant position is wrong.

Meaning of Dominant Position is defined in the section 4 is as follows:

“Dominant Position means a position of strength or power enjoyed by the enterprise, in the relevant market, in India, which enables it to

(A) Operate independently of the competitors OR

(B) Affects its Competitors or consumers in favour

An enterprise must have enough strength to operate independently and power to affect its competitors. Then only it will be said that enterprise is in a Dominant Position. In the perfectly competitive market, no enterprise would have control over the market in relation to the cost of the price of any product. Thus, keeping this in view the act highlights a number of factors that should be taken care of while stating that enterprise is dominant or not.

Competition Commission of India is the deciding authority in India whenever there are allegations related to section 4 and section 19 of the Competition act. According to section 19 of this act, commission may inquire into allegations of the contravention of section 4 of the act,

1. On its own motion OR

2. On receipts of any information OR

3. When the reference is made by government.

1. On its own motion

If the competition commission itself feels on its own without anyone complain that some company is using its wrong position then commission may start inquiry on its own.

2. On receipts of any information

Suppose any citizen or any company or any competitor gives information to CCI that this particular enterprise or company is misusing its dominant power CCI may start inquiry or investigation.

3. When the Reference is made by the Government

When central government or state government wants CCI to inquire on allegation related to section 4 of the act, CCI can start the inquiry based on that.

When CCI starts any investigation based on the allegations, there are three steps are follows:

  • What is the relevant market in the particular case?
  • To check whether the enterprise is dominant or not
  • In case the dominate position was abused by the enterprise
  • There are two types of relevant market

1. Relevant product market

A market consists of all those products or services that are interchangeable or substitute by the customer. If the customer is not able to afford one product or service the customer should have an option of selecting other product similar to the one. Utility must be interchangeable by some other product.

2. Relevant demographic market.

A market consisting the area in which the conditions of the competition for supply or demand of the goods or services are distinctly homogeneous and can be distinguished from the conditions prevailing in the neighbouring areas.

There are factors which are considered by CCI in determination of relevant product market.

I. Physical characteristics or end use of goods

II. Price of the goods or services

III. Consumer preferences

IV. Exclusions of in-house production

V. Existence of specialized products

VI. Classification of industrial products.

There are factors which are considered by CCI in determination of relevant geographic market.

I. Regulatory trade barrier

II. Local specification requirements

III. National procurement policies

IV. An adequate distribution facility

V. Transport costs

VI. Language

VII. Consumer preferences

VIII. Need for secure, or regular supplies or rapid Aftersales services.

  • To check whether the enterprise is dominant or not

Meaning of Dominant Position is defined in the section 4 is as follows:

“Dominant Position means a position of strength or power enjoyed by the enterprise, in the relevant market, in India, which enables it to

(A) Operate independently of the competitors OR

(B) Affects its Competitors or consumers in favour

The factors to decide the Dominance

I. Market share of the enterprise

II. Size and resource of the enterprise

III. Size and importance of the competitors

IV. Economic power of the enterprise

V. Dependence of the consumer on the enterprise

VI. Entry barriers like financial risk

VII. Social obligations and social costs

VIII. Any other factors which the commission may considers relevant for the inquiry.

  • In case the dominate position was abused by the enterprise

There are five situations when enterprise is considered as abusing its dominant position

 Imposing unfair or discriminatory condition or price in purchase or sale of goods or services; or (Predatory prices are also included)

 Limiting or restricting production or technical and scientific development relating to goods or services; or

 Indulging in the practices resulting in market access denial; or

 Conclusion of contracts subject to acceptance of another obligation; or

 Using dominant position in a one market to enter into another market.

Case laws

  • Sh. Dhanraj Pillay and Others Vs M/S Hockey India

In this case it was found as HI was dominant in international hockey activities, it used this dominance to obtain dominance in the field of domestic hockey activities in India and for this reason the provisions of Section 4(2)(e) were applicable. This was done in order to ensure that the league promoted by FIH and HI was successful from the commercial angle. It was argued that HI was using its powers with the object of promoting its league in collaboration with FIH. It was therefore stated that the action of HI was totally abusive.

  • Jupiter Gaming Solutions Private … vs Government of Goa & Ors.

It has been found that the Government of Goa enjoyed the position of dominance, since they are solely engaged in the work of awarding the tender to successful bidder for running Goa Lotteries, which no other enterprise can do so in the territory of Goa. The Government of Goa hold a position of dominance as Section 4 of the Competition Act, it is undoubted that Govt. of Goa has the ability to behave independently of the competitive forces prevailing in the relevant market since they have been given exclusive authority to run lotteries under the Lotteries Regulation Act, 1998. In terms of provisions to Section 4 (2) of the Competition Act, 2002 and Section 19(4) of the act, Government of Goa, certainly enjoys the position of dominance in the relevant market of lotteries in Goa under the Goa Brand Lottery Scheme (online and paper lotteries) under the Lotteries (Regulation) Act, 1998. The analysis of the factors, establishes dominance of Government of Goa in its areas of operations in the relevant market of running and conducting Goa Lotteries. Hence it proved that Government of Goa is guilty.

READ ALSO: INTERIM ORDERS, EXTRATERRITORIALITY AND PENALTIES UNDER COMPETITION LAW




MONOPOLY PRACTICES UNDER COMPETITION ACT

The concept of Monopoly was described under Monopolies, and Restrictive Trade practice (MRTP)Act 1969. However, this act was abolished in the year 2002. The main objective of the MRTP act was to prohibit Monopolistic Trade Practice. The meaning of Monopoly is One seller many buyers. Under monopoly the main aim of the company is to earn maximum profit from the customer more than the natural profit which is fair and free from competition. It also destroys efficiency and discourages innovation.

According to MRTP act, Monopolistic Trade Practice means

  1. Maintaining unreasonable level of prices
  2. Preventing or reducing competition unreasonably,
  3.  Limiting technical development detrimental to common interest, or
  4.  Allowing quality deterioration, and
  5. As per the 1984 amendment unreasonably increasing the cost of production and prices of goods and services.




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