1

ABUSE OF DOMINANT POSITION

'Dominance in the Relevant Market is necessary to Predatory pricing

U/s 4 of The Competition Act, 2002'

By: Paramvir Singh Narang

[email protected]
 2
INDEX

SI.No Title Page

Case Laws 3
Abbreviations 4
I Introduction 5
II Key Definitions/Concepts 5
(a) Competition Law 6
i. Introduction
ii. Constitutional Provisions as per Constitution of India
(b) Anti-competitive Agreements 7
(c) Mergers 7
(d) The Competition Act,2002 7
(e) Relevant Market 8
(f) Dominant Position 9
i. Factors relevant for determining dominant position
U/s19(4)
ii. Criterias for Dominant Position
(g) Abusive Conduct 10
i. Categories
ii. Three Stages
III Abuse of Dominant Position 11
IV Abuse of Dominant Position and Predatory Pricing 15
V Case laws which prove Quinessentiality of dominance in relevant markets for 15
predatory pricing
VI Conclusion 18
VII Bibliography 19
 3

CASE LAWS
Central inland water transport corporation v Braja nath Ganguly & Ors (1986 SCR(2) 278)
Reliance Natural Resources v Reliance Industries Ltd(AIR 2010 SC)
Reliance Natural Resources v Reliance Industries Ltd(AIR 2010 SC)
Case C-62/86, AKZO Chemie v Commission of the European Communities, [1991] ECR I 3359
Johnson And Johnson Ltd., (1988) 64 Comp Cas 394
Kapoor Glass Limited v Schott Glass India P. Ltd(2012) CLA 137 CCI
Film & Producers Guild of India v Multiplex Association of India, case no 37/2011, CCI 2013
Department of Justice v Microsoft (1990)
Bharti Airtel ltd v Reliance Industries Ltd( case no 3 of 2017)
Ajay devgn Films v.Yashraj Films Pltd(2012 Comp LR 1099 CCI)
Belaire owners association v DLF Ltd & HUDA (2011)complLR0239 CCI

Surinder Singh Barmi v BCCI case 2013) 113 cla 579 CCI

Shamsher Kataria v Honda SIEL India, Ltd(case no 3/2011, CCI)

MCX Stock Exchange v National Stock Exchange (case number 13/2009, CCI)

Matushita v Zenith Radio 475 US 574, 594(1986)

 4
ABBREVIATIONS

The Act The Competition Act, 2002

CCI Competition Commission of India
NSE National Stock Exchange
MCX Metropolitan Stock Exchange of India
BCCI Board of Control of Cricket in India
PCs Personal Computers
MAI Multiplex Association of India
 5
I. Introduction
“You maybe in a dominant position fine, but the day you start abusing this position law will take
its own course.”
This is an axiomatic principle applicable to every sphere of our day-to-day lives, but specifically
more so to the field of Competition Law and this paper is an elucidation on the subject of 'Abuse of
Dominant Position' as identified and defined under Section 4 of The Competition Act, 2002 and in
particular 'How dominance in the Relevant Market is necessary to Predatory Pricing' This paper at
the outset defines the key terms 'Competition Law', 'Relevant Market', 'Dominant Position' ,
'Predatory Pricing', ' Factors to be considered by CCI to determine Dominant Position' thereafter
this paper discusses the applicability of the provisions of this act in India and how dominance in
relevant market is necessary to predatory pricing citing leading case laws and in conclusion the
paper discusses how the global perspective is more or less in sync with the Indian view in
preventing abuse of dominant position and urges the regulatory authorities to have a more
pragmatic and open view and not be restricted to only the legal aspect of competition laws.

II. Key Definitions & Concepts

a. 'Competition Law'

(1) Introduction to competition law-According to World bank in 1999, Competition is a situation

in market in which firms or sellers independently strive for buyers patronage to achieve business
objectives vis-à-vis sales,profits or market shares.benefits of having competition in the market are
lower prices,better products,wider choices and greater efficiency then those existing under
conditions of monopoly. Competition Law consists of rules that are provided for protecting the
process of competition in order to maximize consumer welfare.The primordial concern of
Competition Law is to curb activities which cause harm to consumer welfare, some of these
activities can be as follows:degrading quality of products in the market, depriving consumers of
choice, suppressing innovation, raising prices, reducing output. Due to such variety in the concerns,
there cannot be codified rules with precise application such as Penal or procedural codes, rather
these competition issues require assessment of market power along with economic
concepts.“Competition Law has grown at a phenomenal rate in recent years in response to the
enormous changes in political thinking and economic behavior that have taken place around the
world.”1 Similarly behaviors with which Competition Law is concerned include Cartelization,
Mergers, Discriminatory pricing, Predatory pricing and such behaviors require an understanding of
1 Competition Law, Oxford University Press, Richard Whish & David Bailey
the economic concepts and forces that are at work in any given market.

The rationale behind Competition Law is that it facilitates competition and yields social benefits
which are lost through monopoly and competition helps in reducing the damage already done.2 It is
prudent to study how competition is promoted by the law of the land and what are the constitutional
provisions that advocate the growth of Competition law in India.

(2) 'Constitutional provisions of competition law in India'

India being a sovereign,socialist, secular,democratic republic, more the choices in market the better
it is for the consumer and benefit of the consumer in the longer run is the ultimate goal of having
competition.The following Articles of the Indian constitution contain provisions that foster market
competition, namely:
Article 19(g)-Freedom to practice any profession or to carry on any occupation, trade or business.
Article 38-(1) State to secure a social order for the promotion of welfare of the people by securing
and protecting a social order in which justice,social,economic and political shall inform all
institutions of national life. (2)State shall direct its policy to minimize all inequalities in income and
endeavour to eliminate inequalities in status,facilities and opportunities.
Article 39-Certain principles of policy to be followed by the state (c)that the operation of the
economic system does not result in concentration of wealth and means of production to the common
detriment.These two articles namely 38 and 39 are part of the Directive Principles of State policy
and aim at securing social justice with economic growth and are in the nature of duties imposed
upon the state to work towards the well being of its citizens.These articles embody the principles of
Distributive Justice,by removal of economic inequalities resulting from transactions between
unequals in society.These articles reflect the constitutional objectives of building an egalitarian
social order, where materials are to be equally divided.In the Central Inland water transport
corporation case3, The Court ruled that, it will strike down any unfair or unreasonable agreement
entered into by parties when there is gross inequality in their bargaining power and the victim had
no choice but to give his assent to the contract. Similarly in Reliance natural Resources case4 court
ruled that material should be equally divided and a private deal amongst family in this case cannot
take precedence over government policy, which is towards equitable distribution of resources.
Similarly, part XIII of the Constitution of India contains provisions on Trade, Commerce &
intercourse within the territory of India under the following Articles 301, 302, 303 and 304. Due to
such explicit mandates setout in the constitution which envisaged prevention of concentration of
2 Competition Law, J.H.Agnew
3 Central inland water transport corporation v Braja nath Ganguly & Ors (1986 SCR(2) 278)
4 Reliance Natural Resources v Reliance Industries Ltd(AIR 2010 SC)
economic power, the MRTP Act, 1969 was brought into force which paved ultimately for the
present day Competition Act, 2002
7
b. 'Anti-competitive agreements'
Agreements that have as their object or effect the restriction of competition are unlawful, unless
they have some redeeming virtue such as the enhancement of economic efficiency, for example
cartel agreement between competitors to fix prices to share markets or to restrict output, also
referred to as Horizontal Agreements, such agreements are punishable by law and can lead to
imprisonment. Horizontal Agreements are defined U/S3(3) of the act and are those anti-competitive
agreements or practice or decision taken by an association of enterprises or persons engaged in
respect of supply of goods or services which are identical or similar that cause or are likely to cause
an appreciable adverse effect on competition in India including Price-fixing, control of production,
partioning of market, bid-rigging or collusive bidding. Also agreements amongst enterprises or
persons at different stages or levels of production cain in different markets, in respect of production,
supply,distribution,storage,sale or price of, or trade of goods, including Tie-in arrangements,
exclusive supply agreements, exclusive distribution agreements, refusal to deal, resale price
maintenance, resale price maintenance are referred to as Vertical Agreements U/s3(4) of the Act.
Such agreements are also unlawful if they are are harmful to competition, for example supplier
instructing its retailer not to resell them at less than a certain price(resale price maintenance)

c. 'Mergers'
Many global economies have a system in place which enables a competition authority(in India CCI)
to investigate mergers between companies that can be deemed or are harmful to competition.With
aim to prevent markets from becoming less competitive.

d. 'Competition act, 2002'

Was promulgated to meet the challenges of a growing economy and primarily to promote and
sustain competition in markets to protect interest of consumers,ensure freedom of trade carried on
by other participants in markets in India. It lead to setting up of a well funded,
independent,autonomous body of Competition Commission of India (CCI), which had powers to
impose penalties on offenders. This act hinges of effect theory and does not condemn the existence
of monopoly in the market, it focusses on anti-competitive agreements,abuse of dominant position,
mergers, regulation of factors which will have adverse effect on competition.
 This Act covers essentially Four areas of competition:
1. Anti-competitive Agreements U/s 3:Which talks about preventing competing firms
from colluding together to increase prices or reduce quantities of goods and
 services; or to exclude other firms from a market.

8
2. Abuse of Dominance U/s 4 :To prevent firms with a dominant position or
significant market power from using their market power to exclude competitors
from the market or reduce competition.
3. Combination Regulations U/s 5 and U/s6: Checks and stops mergers and
acquisitions that would reduce competition.
4. Competition Advocacy U/s 49: Spread the information on benefits of competition
among all stakeholders to establish and nurture competition culture in Indian
economy.
 This act recognized the primacy of 'Rule of Reason' over 'per se rule' to protect market from
anti-competitive practices
 State monopolies, government, procurement and foreign companies should be subjected to
competition law, accordingly should cover all businesses who purchase goods,services
regardless of purpose.Thus it provides level playing field for all enterprises without any
exceptions to public or private enterprises.
 Pre-notification of mergers, considers predatory pricing as abuse and sought to differentiate
between Horizontal, Vertical and Conglomerate mergers.
 Competition advocacy emphasis, by creating awareness of competition in India to create a
culture of competition.
 Unfair trade practices cases to be tried under Consumer Protection Act, 1986
 This act also empowered u/s 32 with a provision for extra-territorial jurisdiction
empowering CCI to take action against foreign entities.

e. 'Relevant market'
Before determination of dominant position, it is important to delineate the relevant market to help
define the boundaries of competition between firms. And to identify in as systematic way the
competitive constraints the undertaking involved face. U/s 2(r) of The Competition Act, 2002
defines relevant market, as the market which may be determined by the commission with respect to
the relevant product market or the relevant geographic market or with reference to both the markets.
Relevant Geographic Market U/s2(s), means a market comprising the area in which the conditions
of competition for supply of goods or services or demand of goods, services are distinctly
homogenous and can be distinguished from the conditions prevailing in the neighboring areas.
Relevant Product Market U/s2(t), means a market comprising all those products/services which are
regarded as inter-changeable or substitutable by the consumer, by reasons of characteristics of the
products or services, their prices and intended use.

9
f. 'Dominant position'
The dictionary meaning of the word Dominant is having or to exert authority or occupying a
commanding or elevating position, while dominance in Competition law parlance means acquisition
of significant market power, which enables the enterprise to increase the price or limit production
independently of competitors as well as customers. Dominant Position, has to be determined in the
relevant market as defined U/s 2(r) of The Competition Act, 2002 & the factors for such
determination are provided U/s 19(4),(5),(6),(7) of The Competition Act, 2002. A dominant
position is created when one or more undertaking in a particular market use their position in that
market to determine economic parameters such as price, supply, amount of production and
distribution by acting independently of their competitors and customers.A firm holding such a
dominant power would have the ability to set prices above the competitive level to sell products of
an inferior quality or to reduce the rate of innovation below that would exist in a competitive
market.

1. U/s19(4), Factors relevant for determining dominant position

This section lists all the factors to be considered by CCI to determine dominant position
a) Market Share of the Enterprise
b) Size & Resources of the Enterprise
c) Size & importance of the competitors
d) Economic Power of the enterprise including commercial advantages over competitors
e) Vertical integration of the enterprises or sale or service network of such an enterprises
f) Dependence of consumers on the enterprises
g) Monopoly or dominant position whether acquired as a result of any statute or by virtue of
being a government company or a public sector undertaking
h) Entry barriers, regulatory barriers,financial risk, high cost of entry,marketing,technical
barriers,economies of scale,high cost of substitutable goods
i) Countervailing buying power
j) Market structure and size of market
k) Social obligation and social cost
l) Relative advantages by way of contribution to economic development by the enterprise
enjoying dominant position.
m) Any other factor CCI may consider relevant for the inquiry
The main criteria is market share, along with the length of the time for which the company held the
critical market share. Authorities across the countries have taken a very wide and varied range of
market shares as indicators of dominance, going down to 40% in some jurisdiction.

10
CCI recognized two commonly used measures for defining Market share :Sales Figures(Value
Terms) and Active Stock(Volume Terms).As per the high level committee on competition Policy
and law, observed-Specifying an arithmetical figure for defining 'Dominance' may either allow real
offenders to escape or result in un-necessary litigation.

2. ' Criterias of dominant position'

Dominant position, in essential is a position of strength enjoyed by an company in the relevant

market, which enables it to- operate independently of competitive forces prevailing in the relevant
market; or affect its consumers or competitors or the relevant market in its favour. As per Michael
porter to show abuse of dominance, the following 5 criterias need to be satisfied5.

i. The threat of substitute products or services

ii. The threat of the entry of new competitors

iii. The intensity of competitive rivalry

iv. The bargaining power of customers (buyers)

v. The bargaining power of suppliers

Therefore high markets shares, which have been held for a pre-longed period of time indicate a
dominant position, i.e where an undertaking holds 50 per cent or more of the market, provided that
rivals hold a much smaller share of the market6

g. ' Abusive conduct '

Abusive conduct is a behaviour by a firm with enormous market power, so much so that it can
behave independently on the market without any regards to competitors, customers and even
consumers.for example when a dominant company reduces it prices to less than the cost price in
order to drive a competitor out of the market and /or to deter a competitor from entering the market
so that it can at a later time charge higher prices, such a practice is also referred to as Predatory
Pricing.

1.Categories
Basically their are two categories of abusive conduct: Exclusionary abuses and exploitative abuses

5 Michael E. Porter, The Five Competitive Forces that Shape Strategy, Harvard Business Review 86 (1979)
6 Case C-62/86, AKZO Chemie v Commission of the European Communities, [1991] ECR I 3359, para 60
Exclusionary abuse Exploitative abuse
These practices or conduct prevent the entry or Such practices involve, charging of higher prices
expansion of new competitors or to drive out from its customers, discrimination amongst
existing competitors out of the market. They are customers and paying low prices to suppliers.
directed towards competitors & competition Competition authorities give it less priority.
authorities give higher priority
Comprises of refusal to deal, limiting, restricting Its directed towards customers and suppliers
or denying market accessPredatory pricing,
loyalty discounts/rebates, squeezing of margins,
tie-ins, bundling, leveraging and exclusive deals
or other vertical restraints.
By definition require the demonstration of the Comprises of excessive prices,imposition of
effect of exclusion or foreclosure from the unfair and discriminatory conditions and
market in order to establish the offence. discrimination among customers as to price or
other conditions.
2. 'Three stages'
There are Three stages in determining if an enterprise has abused its dominant position:
1. First stage is defining the relevant market
2. Second Stage is determining whether the concerned enterprise is in a dominant position; or
has a substantial degree of market power or has monopoly power in that relevant market.
3. 3rd Stage is the determination of whether the undertaking in a dominant position having
substantial market power or monopoly has engaged in conducts specifically prohibited by
the statute or amounting to abuse of dominant position / monopoly of attempt to monopolize
under the applicable law.

III. Abuse of dominant position

U/s 4 of The Act,enlightens us on the Prohibition of abuse of dominant position.
After an enterprise is shown to be enjoying a dominant position within this act and on consideration
of factors set out in U/s 19(4), the next step would be to prove that the enterprise has abused its
dominant position. This section is mentioned below:

U/s 4(1) No enterprise or group shall abuse its dominant position.

Basically this sub section of the act prohibits the abuse of dominant position by an
enterprise,statutorily an abuse of dominance is required to be treated a 'per se' violation

U/s 4(2) (a) to (e), set out what conduct would be an abuse of the dominant position.
4(2)There shall be an abuse of dominant position U/s4(1) if the enterprise group
 a) Directly or indirectly, imposes unfair or discriminatory-
i. Condition in purchase or sale of goods or services; or
ii. Price in purchase or sale (including Predatory Price) of goods or service; or
12
Basically U/s4(2)(a) talks about imposition of unfair or discriminatory conditions or price as an
abuse of dominant position. Price discrimination between companies or industries in the same
situation not based on objective criteria is prohibited.Also rebates and discounts which are not
based on objectively quantifiable criteria or loyalty payments to customers who stock only the
products of the dominant enterprise, i.e loyalty inducing rebates are prohibited.Unfair selling price
or purchase-When excessive prices are set, which do not have any reasonable relation to the
economic value of the product are prohibited. Also predatory pricing which involves charging
below cast of production in short term, in order to eliminate competition and gain market share and
make market entry more difficult.So this section lays the groundwork and defines the subject of
what is predatory pricing and later on helps us in figuring out how dominance in Relevant market is
necessary for predatory pricing.

Predatory pricing
As per Explanation (b) of Section (4), ‘predatory price’ means the sale of goods or provision of
services at a price below cost with the subject to reduce competition or eliminate competitors. In
real life, situations Predatory pricing is a method of other players,where the dominant players in the
market, using their dominant position, create barriers for the new entrants or try to drive them out.
Predatory pricing is the practice of pricing one’s goods i.e selling price below the production cost,
so that the other competitors in the market, who aren’t dominant, cannot compete with the price of
the dominant player and will have to leave the market. So to successfully implement Predatory
Pricing an accused enterprise must have dominance in the relevant market. In the Johnson and
johnson case7, it was held that the essence of predatory pricing is pricing below one’s cost with a
view to eliminating a rival.Primarily the concept of Predatory pricing in india has been taken from
U.Ks Competition Act of 1998 & Clayton Act, 1914 of the USA.Traditionally Predatory Pricing is
that when a predator which is an already dominant firm, sets prices so low for a sufficient period of
time that its competitors leave the market and others are dettered from entering the market and the
losses incurred due to low prices, like an investment are recovered from future gains and the
benefits of predation were not limited to the market where it predated.It is basically a specific form
of exclusionary conduct in which the predatory firm sacrifices short term profits in order to achieve
long term gains.

This generation of revenues and profits in the future will more than offset the losses incurred during
7 Johnson And Johnson Ltd., (1988) 64 Comp Cas 394
predatory pricing also known as recoupment. Predatory behaviour may be implicit i.e implied
through discounts and rebates or explicit.

13
Predation is exploitive behaviour and can be indulged in only by enterprises having dominant
position in the concerned market by indulging in:
 Eliminating or substantially damaging a competitors
 Preventing entry of a competitor into that or any other market
 deterring or preventing a competitor from engaging in competitive practices
Major elements involved in the determination of Predatory Behaviour are
 Establishment of dominant position of the enterprise in the relevant market
 Pricing below cost for the relevant product in the relevant market by the dominant enterprise
 Intention to reduce or eliminate competition, competitors

b) Limits or restricts-
i. Production of goods or provision of services or market therefor; or
ii. Technical or scientific development relating to goods or services to the
prejudice of consumers;
Basically U/s4(2)(a) talks about limiting or restricting production, market, technical or scientific
development relating to goods or services as abuse of dominant position.
The dominant enterprise has been prohibited form limiting production,market or technical
development to the detriment of consumers.Production and market restrictions may also occur
through exclusive dealing agreements and similar practices that tie-up suppliers and distribution
networks.

c) Indulges in practice or practices resulting in denial of market access; or

Basically U/s4(2)(c) talks about, how indulging in practices causing denial of market access are
abuse of dominant position.Basically any practicve by the dominant enterprise which forecloses the
market access to other players or deters entry of new players shall be considered as abuse of
dominant position by CCI. Therefore long term exclusivity having effect of causing denial of
market access to other enterprises in the relevant market are prohibited. For example a vertically
integrated dominant firm may refuse to supply to a competitor downstream an essential input that it
controls, this refusal to deal in such case can impede the development of competition in the
downstream market.Two pertinent case laws which illustrate this are:
Kapoor Glass Ltd case8 & the Multiplex Association of India case9, In the later case, due to growth
in multiplexes there was an increase in power of Multiplex Association of India(MAI) allowing

14
them to extract more lucrative terms from producers and distributors in order to gain maximum
revenue share. MAI had in violation of U/s 4(1)(c), denied market access to some of the films
which were not agreeing to their unreasonable demands; by not releasing these films in their
theaters. This conduct was found to be abuse of dominant position in the relevant market of
multiplexes. According to H.K. Saharay, “such abuse of dominant position, inter alia, includes
imposition, either directly or indirectly, or unfair or discriminatory purchase or selling prices or
conditions, including predatory prices of goods or services, indulging in practices resulting in
denial of market access, making the conclusion of contracts subject to acceptance by other parties
or supplementary obligations and using dominant position in one market to enter into or protect
other market.”10

d) makes 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; or

Basically U/s4(2)(d) talks about how conditional contracts can be a source of abuse of dominant
position. Tie-in clauses occur when a dominant undertaking uses its position to compel a purchaser
to purchase an additional product, which does not have a natural or reasonable connection with the
first product.Contractually tying the purchase of one product or service to the purchase of another,
without the option to purchase each product or service separately could raise serious concerns.The
landmark case in this regards was Microsoft case 11, where it was ruled that Microsoft used its
monopoly power to compel PC makers to pay Microsoft not only to pay Microsoft when they sell
PCs with Microsoft operating system , but also if these PCs did not have this operating system.
This restricted other competitors in the relevant market i.e other Operating system developers eg
Novell from accessing the markets of PCs. Therefore Microsoft had abused its dominant position by
exclusionary licenses, raising prices, slow innovations, depriving customers of an effective choice
among competing operating systems.

e) uses its dominant position in one relevant market to enter into; or protect other relevant
market

8 Kapoor Glass Limited v Schott Glass India P. Ltd(2012) CLA 137 CCI
9 Film & Producers Guild of India v Multiplex Association of India, case no 37/2011, CCI 2013
10 H.K. Saharay, Textbook on Competition Law, (1st ed., 2012w
11 Department of Justice v Microsoft (1990)s
Basically U/s4(2)(e) talks about leveraging, which is the use of dominant position in one relevant
market to enter into or protect its position in other relevant markets.Such a conduct is regarded as
abuse of its dominant position.

15
IV. Abuse of dominant position & predatory pricing
Both these principles are bound together by legal rules and market economics of a dominant player
exerting control over a market and are so intertwined that they can only be separated from one
another by the genus-species disengagement.“Abuse of dominant position is the genus, whereas
predatory pricing is the species.”.So basically a enterprise can, illegally, abuse its dominant
position; predatory pricing is one of the many exploitive ways in which that enterprise may abuse
its position of dominance.With the key word being 'dominance'. So if there is no dominance in the
relevant market a firm cannot indulge in predatory pricing.This verbage has also been upheld in the
JIO case12, where the CCI has ruled that giving access for free itself is not anti-competitive. This
case was filed by Airtel,a market competitor, where it said JIO a new entrant in the mobile
telecommunications business was indulging in 'predatory pricing' with an intention to eliminate
competition in the relevant market of telecommunications.As the free services offered by Reliance
Industries backed JIO amounted to predatory pricing & that Reliance industries had used its
enormous financial strength in other markets to enter telecommunications business. But CCI in its
detailed order has said that in its order said that , “In a competitive market scenario, where there are
already big players operating in the market, it would not be “anti-competitive for an entrant to
incentivise customers towards its own services by giving attractive offers and schemes.Such short-
term business strategy of an entrant to penetrate the market and establish its identity cannot be
considered to be anti-competitive in nature and as such cannot be a subject matter of investigation,
financial strength is relevant but not the sole factor to determine dominant position of an
enterprise.The commission does not find it appropriate to hold Reliance JIO dominant in a scenario
where its customers constitute less than 7 per cent of the total subscriber base at pan-India level,In
the absence of any dominant position being enjoyed by Jio,the question of examining the alleged
abuse does not arise.“Notwithstanding this, the offers of Jio do not appear to raise any competition
concern at this stage,” This case is the latest development(July 2017)in competition law relating to
dominant position and predatory pricing in India and clearly supports the main thesis of this paper
that dominance is necessary to prove predatory pricing.

V. Case laws on quinessentiality of dominance in relevant market for predatory pricing

12 Bharti Airtel ltd v Reliance Industries Ltd( case no 3 of 2017)

Ajay Devgn Films v.Yashraj Films P.Ltd13, in this case Ajay Devgn Films accused Yashraj Film of
being dominant in its relevant market and releasing the film 'Jab Tak hein Jaan' in contravention of
U/s4 and U/s3(4).

16
Yashraj Films has released 'Ek tha Tiger' on Aug 15,2012 & was planning a Diwali release of 'Jab
Tak hei Jaan'.Therefore they improvised a new scheme while distributing licenses to the single-
screen theaters for 'Ek tha Tiger', to agree to exhibit 'Jab tak hei Jaan' during Diwali i.e to exhibit
both or none.Now since both these films were mega starrers, they were bound to be block busters,
therefore majority of theaters agreed to this condition and decided to exhibit both the films. The
grievance of Ajay Devgn Films was that he would not get enough theaters for his film 'son of
sardar'. But CCI turned down his plea and ruled that dominance of Yashraj Films was not found on
the basis of economic strength and other relevant factors U/s19(4) and that out of 107 films released
in 2012 only 2-4 films were produced by Yashraj Films and this was not dominance.
Belaire owners association v DLF Ltd & HUDA case14, CCI held DLF was a dominant enterprise
and violated the terms of contract by entering into a agreement with apartment allotees that was
one-sided, abusive and unfair to allotees.In this case CCI imposed a penalty of Rupees 650 Crores
for abusing its dominant position in the relevant market 'High End Residential Accomodation' by
imposing unfair condition in its agreement and ordered DLF to cease and desist from imposing such
unreasonable conditions with buyers in Gurgaon and modify such conditions.

Surinder Singh Barmi v BCCI case 15, in this case abuse of dominant position by BCCI (Board of
Cricket Control India) was proved, as BCCI restricted entry of competitors in the commercial
cricket market i.e denial of market access.BCCI prevented players from playing in a competing
league (ICL) and used its position to prevent competition in violation of U/s4(2). CCI imposed fines
of USD $8 Million on BCCI for its abuse of dominant position.
16
Shamsher Kataria v Honda SIEL India, Ltd , CCI held that car manufacturers had various
horizontal and vertical agreements with car parts suppliers which were to the detriment of
consumers in violation of U/s3(3), (4) and U/s(4)(2)(d) and held 14 automobile manufacturing
companies guilty of anti-competitive practices and imposed upon them a penalty of INR 2544.65
Crores. The Commission in its order clarified that this case was a locus classicus of abuse of
dominance and anti-competitive agreements

The defining case on predatory pricing and abuse of dominance was the case of :
13 Ajay devgn Films v.Yashraj Films Pltd(2012 Comp LR 1099 CCI)
14 Belaire owners association v DLF Ltd & HUDA (2011)complLR0239 CCI

15 Surinder Singh Barmi v BCCI case 2013) 113 cla 579 CCI

16 Shamsher Kataria v Honda SIEL India, Ltd(case no 3/2011, CCI)

MCX Stock Exchange v National Stock Exchange17,the CCI held that NSE has abused its
dominant position in the currency derivates segment to oust competitors and fined the stock

17

This is another locus classicus on the issue os Abuse of dominant position and how dominance in
relevant market is necessary for predatory pricing. In this case the following requirements were
fulfilled: Relevant market, Dominant position, Abuse of dominance, Predatory Pricing, Leveraging
from other businesses, exclusionary conduct

 Relevant Market- ‘stock exchange services in respect of currency derivatives (CD) segment
in India’ was identified as the relevant market. The CCI noted that the stock exchange
services provided for CD segment are similar to those provided for other segments – such as
‘over the counter’ segment – but they are not ‘interchangeable or substitutable’

 Dominant Position-CCI established NSE's dominant position by relying on the following

data: NSE’s market share of 48% in the CD segment, NSE’s incorporation in 1994 (against
MCX’s incorporation in 2008), Reserves and surplus of Rs18.64 million, Deposits of Rs
9.17 billion, Profit before tax of RS 6.89 billion (against MCX’s net loss of Rs 298.7
million), Presence in 1486 cities and town

 Predatory pricing/predatory intent- CCI held NSE abused its dominant position through
unfair, destructive pricing in the CD segment.

 Past conduct: Involved NSE waiving off the transaction fee in the F&O segment vis-à-vis
BSE and then raising it when liquidity in BSE became practically nil.

 Leveraging from other businesses: CCI held that NSE abused its dominant position by
leveraging its position of strength in the non- CD segment to protect its position in the CD
segment through fee waivers, denial of access interface code and distribution of software for
free.

 Exclusionary conduct: CCI held that NSE abused its dominant position through
discriminatory denial of access interface code for the software for brokerage solution
developed by FTIL, one of the promoters of MCX.

Since the conduct of NSE was found to be of predatory pricing, as it reduced and eliminated
competition and that NSE had abused its dominant position, CCI ordered NSE to cease-and-desist
from unfair pricing and modify its zero price policy in the CD segment and start levying
appropriate transaction cost within 60 days and to pay a penalty of Rs 55.5 Crores (5% of the
average annual turnover of last three years). MCX v NSE was a peculiar case as it involved the

17 MCX Stock Exchange v National Stock Exchange (case number 13/2009, CCI)
zero-pricing aspect of exclusionary conduct and has contributed immensely in the development of
competition law jurisprudence in India which is still in its nascent stages.

18
VI. Conclusion

While discussing on the importance of dominance in relevant market for predatory pricing in
context of The Competition Act, 2002, it is prudent to take cognizance of the international opinion
and law on Dominant Position as the advocacy, development and codification of Competition Law
in India has more or less been dependent on development of key concepts of Competition Law
globally. 'The idea of predatory price cutting is simple; that a dominant enterprise deliberately
reduces prices to a loss-making level when faced with competition from an existing competitor or a
new entrant to the market'.18 The global reach of Competition laws is illustrated by the coming in
force of the International Competition Network(ICN), a virtual organization which brings together
in excess of 100 world competition authorities.This growth of competition law across the globe is
reflective of the intend and desire that competitive markets are beneficial for consumer welfare. At
the same time one must remember that dominant firms, like any other firm have the right to
compete on price and the effect of competition law will be perverse if a dominant firm chooses not
to compete on price for fear that by doing so, it would be held guilty of an infringement. 19Therefore
globally the law on predatory price cutting is treading on a fine line between not condemning
dominant firms for competitive price cutting on one hand and not condoning unreasonable
exclusionary predation on the other. Because if these laws are applied too aggressively, enterprises
may refrain from a conduct which is actually pro-competitive and that would be the ultimate
paradox, if the law designed to promote competition actually throttles or chokes competition.

In context of India, CCI has been doing a wonderful job so far and it would be prudent if it delve s
on such matters by taking assistance not only of legal principles but some economic principles
which are now widely being accepted by international competition authorities across the globe.One
such concept is of 'false positives and false negatives,' wherein a false positive occurs when
competition authority incorrectly concludes that pro-competitive conduct is abusive; which cause a
harm not only to the enterprise found guilty but also to the consumers as pro-competition
behavior.A false negative occurs when a competition authority incorrectly concludes that anti-
competitive behavior is not illegal and therefore permits it, thereby harming consumers.Therefore
the competition authorities and courts should not adopt a 'uncritical sentimentality in favour of the
18 Predatory pricing analysis(2012) and recommended practices for predatory pricing analysis pursuant to unilateral
conduct law, www.internationalcompetitionnetwork.org

19 Matushita v Zenith Radio 475 US 574, 594(1986)

small guy20 and should focus on protecting competition rather than competitors.

19
VII. Bibliography

Select Statutes and Laws

1. The Constitution of India; Articles(19g), 38(1),(2);39(c)
2. The Competiton Act, 2002

Authoritative Texts
1. Competition Law, Oxford University Press, Richard Wish & David Bailey
2. Competition Law, J.H.Agnew
3. Guide to Competition Law, S M Dugar
4. H.K. Saharay, Textbook on Competition Law, (1st ed., 2012)
5. Bork The Antitrust paradox (The free press ,1993)

Other Texts and Sources

1. The intent of enacting a new law on competition was disclosed by the Government through
the Finance Minister’s Budget Speech. 1999-2000(dated 27-2-1999). As a follow up of this
Budget initiative, the Government decided to constitute a committee to examine the existing
MRTP Act, 1969.

2. G.R. Bhatia, Assessment Of Dominance: Issues And Challenges Under The Indian
Competition Act, 2002, http://www.manupatrafast.com/articles/PopOpenArticle.aspx?
ID=8de19f8a-5bbd-42b6-a96a-692a0f376625&txtsearch=Subject:%20Commercial

3. Michael E. Porter, The Five Competitive Forces that Shape Strategy, Harvard Business
Review 86 (1979)

4. Predatory pricing analysis(2012) and recommended practices for predatory pricing analysis
pursuant to unilateral conduct law, www.internationalcompetitionnetwork.org

20 Bork The Antitrust paradox (The free press ,1993)