Antimonopoly & Unilateral Conduct

Last verified on Tuesday 30th August 2016

India

Naval Satarawala Chopra and Rohan Arora
Shardul Amarchand Mangaldas & Co

    Overview

  1. 1.

    What is the legal framework governing unilateral conduct by companies with market power?

  2. Section 4 of the (Indian) Competition Act, 2002 (the Act) governs unilateral conduct by enterprises with market power and prohibits enterprises which enjoy a dominant position from abusing such a position. ‘Dominant position’ is defined as a position of strength, enjoyed by an enterprise, in a relevant market, in India, which enables it to operate independently of competitive forces or affect its competitors or consumers or the relevant market in its favour. If an enterprise or a group is considered to be dominant in a relevant market, its conduct shall be abusive if, it:

    • directly or indirectly, imposes unfair or discriminatory conditions or prices (including predatory prices);
    • limits or restricts production of goods or the provision of services or market thereof, or technical or scientific development;
    • indulges in practices resulting in denial of market access;
    • engages in tying or bundling; or
    • uses its dominant position in one relevant market to enter into, or protect, other relevant market.
  3. 2.

    What body or bodies have the power to investigate and sanction abuses of market power?

  4. The Competition Commission of India (CCI) is the principal body created under the Act to investigate and sanction abuses of market power. In conducting an inquiry, the CCI is assisted by its investigative arm, the Office of the Director General (DG), which has powers to compel the production of evidence, record sworn statements and conduct dawn raids. Appeals to the CCI’s decisions lie before the Competition Appellate Tribunal (COMPAT) and finally to the Supreme Court of India.

    Monopoly power

  5. 3.

    What role does market definition play in market power assessment?

  6. Market definition is the first necessary step in an assessment of dominance (and subsequently for abuse) as Explanation (a) to section 4 of the Act provides that dominance must be established in the context of a ‘relevant market’.

  7. 4.

    What is the approach to market definition?

  8. The Act defines a relevant market to include both the ‘relevant product market’ and the ‘relevant geographic market’.    

    A relevant product market is defined as a market comprising all those products or services which are regarded as interchangeable or substitutable by the consumer, by reason of characteristics of the products or services, their prices and intended use. While the Act adopts a demand side approach in defining a relevant product market, in practice, the CCI has also at times considered supply side substitutability.

    The relevant geographic market is defined to consist of the geographic areas in which conditions of competition for the supply of goods or provision of services or demand of goods or services are distinctly homogeneous and can be distinguished from the conditions prevailing in neighbouring areas.

    The CCI typically considers India as the relevant geographic market, even where parties have argued that imports impose a competitive constraint or that the market is worldwide. On the other hand, the CCI has not shied away from defining narrower markets within India based on consumer demand and regional barriers. 

  9. 5.

    How is market power or monopoly power defined?

  10. Market power or monopoly power are not defined under the Act. A ‘dominant position’ is defined as a position of strength, enjoyed by an enterprise, in a relevant market, in India, which enables it to operate independently of competitive forces or affect its competitors or consumers or the relevant market in its favour.

    While the test for dominance is as described above, the Act also prescribes various factors that the CCI may consider in assessing whether an enterprise enjoys a dominant position, such as, market share, size, resources, importance of competitors, economic power, commercial advantages, vertical integration, consumer dependence, entry barriers, market structure and size.

  11. 6.

    What is the test for finding of monopoly power?

  12. Assessment of a ‘dominant position’ is based on its definition read with the factors, as mentioned above.

  13. 7.

    Is this test set out in statute or case law?

  14. The test has been set out in Explanation (a) to section 4 of the Act.

  15. 8.

    What role do market shares play in the assessment of monopoly power?

  16. The CCI has recognised that while market shares play an important role in the assessment of monopoly power, they are not the only criteria to be considered while evaluating a dominant position. The Act does not provide a market share threshold beyond which an entity shall be considered to be dominant.

    Interestingly, the CCI and COMPAT have held that a dominant enterprise need not be the leading player in a market in terms of market shares if other factors, such as size, resources, vertical integration, indicate dominance (National Stock Exchange of India v Competition Commission of India and Anr. Appeal No. 15/2011 (the NSE case)). Contrary to the unconventional finding in the NSE case, the CCI in subsequent cases held that the erosion of market shares was indicative that an enterprise was not dominant.

  17. 9.

    Are there defined market share thresholds for a presumption of monopoly power?

  18. There are no defined market share thresholds for a presumption of monopoly power. However, the CCI has, in its decisional practice considered internationally recognised principles. For example, in Kapoor Glass Private Limited v Schott Glass India Private Limited (the Schott Glass case), the CCI applied the Akzo presumption of dominance where an enterprise enjoys a market share of 50 per cent or more and also the finding of dominance in the European Commission’s decision in the United Brands case where a market share of 45 per cent was held to confer a dominant position. The COMPAT affirmed the findings of the CCI on dominance and the reliance placed on the foreign jurisprudence in this case.

  19. 10.

    How easily are presumptions rebutted?

  20. The presumption of dominance on account of high market shares can be rebutted by demonstrating countervailing buyer power, size and importance of competitors, low barriers to entry etc. However, like in most jurisdictions, such a presumption is not easily rebutted.

  21. 11.

    Are there cases where companies with high shares have been found not to exercise monopoly power?

  22. In the case of M/s Saint Gobain Glass India Limited v M/s Gujarat Gas Company Limited (2015), the CCI indicated that companies with high market shares may not be found to exercise monopoly power by default. In this case, even though Gujarat Gas had a market share of over 47 per cent in the relevant market, the CCI analysed various other factors, such as, size, resources and importance of competitors, vertical integration of the enterprises and dependence of consumers on Gujarat Gas and came to the conclusion that the presence of various large competitors ensured that Gujarat Gas did not have the ability to operate independently of competitive forces or affect the market in its favour.

  23. 12.

    What are the lowest shares with which companies have been found to exercise monopoly power?

  24. In the NSE case, even though NSE had a market share of approximately 30 per cent at the time of the alleged abusive conduct, and was not the leading player in terms of market shares, the CCI and the COMPAT found NSE to be dominant in the relevant market on the basis of other factors. 

  25. 13.

    How important are barriers to entry and expansion for the assessment of monopoly power?

  26. Barriers to entry and expansion are important factors for the assessment of a dominant position. Low entry barriers indicate healthy competition in a market and can be used to negate the presumption of monopoly power. For instance, in the case of HNG Float Glass Limited v M/s Saint Gobain Glass India Limited (2011), the CCI held that the entry of new firms and the subsequent erosion of market shares of the older firms demonstrated the presence of low entry barriers and the inability of Saint Gobain to act independently of its competitors in the market. 

  27. 14.

    Can the lack of entry barriers negate a finding of monopoly power?

  28. While the presence of entry barriers is an important factor for consideration in evaluating the presence of monopoly power or position of dominance, the lack of entry barriers does not by itself negate a finding of monopoly power. As set out in the response to question 13 above, section 19(4) of the Act provides a list of factors which are to be considered by the CCI in determining the presence of monopoly power. It is pertinent to note that this list is non-exhaustive in nature and the factors have to be examined by the CCI as a whole in the commercial and economic context of the relevant market. 

  29. 15.

    What kind of barriers to entry are typically considered in the analysis?

  30. Section 19(4)(h) of the Act sets out the types of barriers to entry that should be considered by the CCI in its analysis, and includes regulatory barriers, financial risk, high capital cost of entry, marketing entry barriers, technical entry barriers, economies of scale, and high cost of substitutable goods or service for consumers. 

  31. 16.

    Can countervailing buyer power negate a finding of monopoly power?

  32. Yes, countervailing buyer power can be one of the factors that could negate a finding of monopoly power. In Financial Software and Systems Private Limited v M/s ACI Worldwide Solutions Private Limited (2013) the CCI held that it would be reasonable to expect that in a market characterised by a large number of banks, a software provider supplying to such banks would be subject to countervailing buyer power, and therefore it was one of the factors the CCI looked at in negating a finding of dominance. 

  33. 17.

    What if consumers can easily switch between suppliers?

  34. Dependence of consumers on an enterprise and consequently, the ability to switch easily between suppliers is one of factors mentioned in section 19(4) of the Act to assess dominance. In Udit Gupta v Interglobe Aviation Limited (2015), the CCI, while dismissing a complaint of abuse of dominance filed against IndiGo Airlines considered various factors such as the presence of a large number of players in the market and non-dependence of consumers on IndiGo, in assessing IndiGo’s alleged dominance. 

  35. 18.

    Are there any other factors that the regulator considers in its assessment of monopoly power?

  36. Social obligations and social costs are specifically included in the list of factors to be considered by the CCI for an abuse of dominance analysis. Further, the CCI can also consider any other factor it deems relevant for its inquiry.

  37. 19.

    Are any entities or sectors exempt from the antimonopoly regime?

  38. Under section 2(h) of the Act, any activity of the government, relating to the sovereign functions of the government including all activities carried out by the departments of Central Government dealing with atomic energy, currency, defence and space are not ‘enterprises’ for the purposes of the Act, and therefore, exempt from the antimonopoly regime. 

  39. 20.

    Can companies be deemed to hold collective monopoly power?

  40. The Act does not recognise the concept of 'collective monopoly power' or 'collective dominance' by enterprises that are unrelated to each other by structural or control based links arising from common corporate ownership. 

    In Royal Energy v IOCL, BPCL and HPCL (2012), in determining whether the actions of three oil marketing companies led to an infringement of the Act, the CCI explicitly held that the concept of collective dominance is not envisaged under the provisions of section 4 of the Act. Since each company was an independent, legal entity and no one company exercised control over another enterprise the CCI also found that the three companies could not collectively form a group. 

  41. 21.

    Can the exercise of joint monopoly power or tacit oligopolistic collusion be treated as an infringement?

  42. There is no specific provision in the Act to cover instances of joint monopoly or tacit oligopolistic collusion under section 4 of the Act. Such conduct may, however, fall foul of section 3 of the Act, which prohibits anti-competitive agreements.

  43. 22.

    Has the competition authority published guidance on how it defines markets and assesses market power?

  44. No.

    Abuse of monopoly power

  45. 23.

    Is there a general definition for what constitutes abusive conduct? What does it entail?

  46. Section 4(2) of the Act provides that there shall be an abuse of a dominant position if an enterprise or a group:

    • directly or indirectly, imposes unfair or discriminatory conditions or prices (including predatory pricing) in the purchase or sale of goods or services;
    • restricts or limits production of goods or provision of services or market therefor;
    • restricts or limits technical or scientific development relating to goods or services to the prejudice of consumers;
    • indulges in practices resulting in a denial of market access;
    • makes the 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
    • uses its dominant position in one relevant market to enter into, or protect, other relevant markets (ie, leveraging).
  47. 24.

    What are the general conditions for finding an abuse?

  48. In the absence of dominance there can be no abuse, therefore, as a first step, dominance of an enterprise in a relevant market needs to be established. The CCI has generally considered and applied an object-based approach while finding abuse. However, in some cases, such as in In Re M/s ESYS Information Technologies Pvt Ltd and Intel Corporation (Intel Inc.) & Ors (2014) (the Intel case) an effects-based approach while evaluating abusive conduct has been adopted, which is encouraging. This was further reiterated in XYZ v RECPDCL (2016), where the CCI considered whether explicit conduct amounted to an abuse, and having being satisfied that there was no explicit conduct, also considered the effect of the conduct on the market. 

  49. 25.

    Is there a list of categories of abusive or anti-competitive conduct in the applicable legislation?

  50. Yes, as explained in the response to question 23 above, section 4(2) of the Act provides a list of the types of conduct that are considered to be abusive in nature.

  51. 26.

    Is this list open or closed?

  52. Section 4(2) sets out an exhaustive list.

  53. 27.

    Has the competition authority published any guidance on what constitutes abusive conduct?

  54. No.

  55. 28.

    Is certain conduct per se abusive (without the need to prove effects) and under what conditions?

  56. If a dominant enterprise is found to have engaged in any of the activities mentioned under section 4(2) of the Act, it could constitute an abuse of a dominant position, as the Act does not provide for any objective justification defence, save and except for discriminatory pricing. The Act provides that discriminatory pricing will not be abusive if it is engaged in to meet competition. That said, the CCI is increasingly applying an effects-based approach, which is encouraging.

  57. 29.

    To the extent that anti-competitive effects need to be shown what is the standard to demonstrate these effects?

  58. As a general matter it is not necessary to demonstrate any anti-competitive effects in order to reach a finding of abusive conduct. If an enterprise is found to have engaged in any type of conduct provided in section 4(2) of the Act it could be considered to have abused its dominance, in the absence of an effects analysis. In practice, however, the CCI has in some cases adopted an effects-based approach.

  59. 30.

    Does the abusive conduct need to harm consumers?

  60. Under section 4 of the Act, there is no requirement of demonstrating harm to consumers. However, the scheme of the Act is relevant as the CCI has been established, among other things, to protect the interest of consumers; therefore where there is no consumer harm, the CCI should ordinarily not interfere. The CCI in practice takes greater interest in cases where there is an adverse effect on consumers.

  61. 31.

    What defences are there to allegations of abuses of monopoly power?

  62. The only explicit defence that is contained in the Act with reference to discriminatory prices or conditions on the purchase or sale of goods is the 'meeting competition' defence. 

  63. 32.

    Can abusive conduct be objectively justified?

  64. The Act does not provide for an objective justification defence, however, the CCI has considered justifications in limited circumstances. A finding of the CCI in the Schott Glass case, which has further been upheld by the COMPAT, held that Schott Glass was within its rights to cease supplies to a customer in order to protect its trademarks and that its refusal to supply to such customer was objectively justified. In Faridabad Industries Association (FIA) v M/s Adani Gas Limited (AGL) (2014) (the Adani Gas case), the CCI held that a restriction imposed by a dominant enterprise may not be abusive if such dominant enterprise is imposing such restriction because it is subject to the same restriction by a third party.

  65. 33.

    What objective justifications have been successful?

  66. As set out in response to question 32, very limited objective justifications have been successful and these primarily related to protection of IP rights and imposing the same restriction which are imposed on the dominant enterprise by a third party.

  67. 34.

    How is the burden of proof distributed in an abuse analysis?

  68. In an abuse analysis, the evidentiary burden of proving a dominant position and the alleged conduct lies on the Informant (enterprise filing a case) at the first stage of the proceedings (ie, prior to formation of a prima facie opinion by the CCI). If an investigation is ordered, the DG must establish a dominance finding and then the burden lies on the DG. Subsequently, the accused has the opportunity to rebut the findings of the DG and in any case, the findings of the DG are not final and the CCI is not bound by them.

  69. 35.

    What are the legal conditions to establish an abusive tie?

  70. In Sonam Sharma v Apple (2013), the CCI set out the conditions for an abusive tie under section 3(4) of the Act (which deals with anti-competitive agreements):

    • the presence of two separate products or services capable of being tied. The purchase of a commodity must be conditioned upon the purchase of another commodity;
    • the seller must have sufficient economic power with respect to the tying product to appreciably restrain free competition in the market for the tied product; and
    • the tying arrangement must affect a 'not insubstantial' amount of commerce: A tie-in arrangement is only considered to be abusive if a 'substantial' portion of the market is affected.

    There is no specific guidance for a tie-in arrangement under section 4 of the Act. 

  71. 36.

    What are the legal conditions to establish a refusal to supply or refusal to license?

  72. Refusal to deal has been defined in the context of a vertical arrangement under section 3(4)(d) of the Act as 'any agreement which restricts, or is likely to restrict, by any method the persons or classes of persons to whom goods are sold or from whom goods are bought'.

    Under section 4 of the Act, a refusal to deal by a dominant enterprise may be evaluated under sections 4(2)(a)(ii) and 4(2)(c). In the case of Shri Shamsher Kataria v Honda Siel Cars India Ltd. & Ors. (2014) (the Auto Parts case), a fine of 25.44 billion rupees was imposed on 14 car manufacturers for restricting the sale of car spare parts in the open market. This conduct was held to be both an abuse of dominance and a refusal to deal.

  73. 37.

    Do these abuses require an essential facility?

  74. No, these abuses do not require an essential facility. Unilateral refusals to deal and access to essential facilities would be covered under practices resulting in a denial of market access under section 4(2)(c) and possibly section 4(2)(b), which prohibits limitations or restrictions on the production of goods or provision of services or technical or scientific development relating to goods or services to the prejudice of consumers.

    In Arshiya Rail Infrastructure Ltd. v Ministry of Railways (2013) (the Arshiya Rail case), the complainants had alleged that railway infrastructure was an essential facility and that the Ministry of Railways’ refusal to provide access to this rail infrastructure amounted to an abuse of dominance. The CCI found that the essential facility doctrine could be invoked upon an appraisal of the technical feasibility to provide access, the possibility of replicating the facility in a reasonable period of time, the distinct possibility of lack of effective competition if such access was denied and the possibility of providing access on reasonable terms. However, in relation to access to railway infrastructure, the CCI found that there were no technical, legal or even economic reasons why container train operators could not create their own terminals or similar facilities.

  75. 38.

    What is the test for an essential facility?

  76. As mentioned above, the CCI has held that the essential facility doctrine could be invoked upon an appraisal of the technical feasibility to provide access, the possibility of replicating the facility in a reasonable period of time, the distinct possibility of lack of effective competition if such access was denied and the possibility of providing access on reasonable terms.

    Further, in Shri Surinder Singh Barmi v Board of Control of Cricket in India (BCCI) (2013) the CCI provided interesting insight into the interpretation of the essential facilities doctrine in India. The CCI found that BCCI had misused its role as the regulator of cricket in India to restrict economic competition in sporting events. The CCI appears to suggest that a restriction of access by a dominant enterprise to necessary infrastructure (which may be considered as an essential facility) to the detriment of competitors can amount to refusal to deal. This case has been remanded by the COMPAT to the CCI for reconsideration on certain procedural and natural justice grounds.

  77. 39.

    What is the test for exclusivity arrangements?

  78. Exclusivity arrangements may be assessed under section 4(2)(c) of the Act when such arrangement results in a denial of market access. Further, provisions related to exclusive dealing and exclusive distribution arrangements may be void under section 3(4) read with section 3(1) of the Act (anti-competitive agreements) if they cause or are likely to cause an appreciable adverse effect on competition in India.

  79. 40.

    What is the test for predatory pricing?

  80. Explanation (b) to section 4 of the Act sets out a two-step test for assessing whether a dominant enterprise’s conduct is predatory. First, the price must be below cost (as determined by CCI regulations) and second, the dominant enterprise must have the intention to reduce competition or eliminate competitors.

    The CCI has published regulations on determining the cost of production, which state that the default cost benchmark is average variable cost (as a proxy for marginal cost). However, the CCI and the Director General may consider other cost measures such as avoidable cost, long run average incremental cost, and market value, depending on the nature of the industry, market and technology used, etc with reasons provided in writing.

    In the NSE case, the COMPAT found zero pricing by the NSE in the currency derivatives trading segment to be predatory pricing. In two subsequent cases involving predatory bidding, M/s Transparent Energy Systems Pvt Ltd v TECPRO Systems Ltd (2013) and HLS Asia Limited, New Delhi v Schlumberger Asia Services Ltd, Gurgaon & Ors (2013), the CCI held that predatory pricing had to be assessed on the basis of an appropriate cost benchmark (ie, average variable cost), as reduction of prices was actually the essence of competition. The CCI also observed that the abuse of predatory pricing had to be assessed on the basis of actual prices and not projected prices.

  81. 41.

    What is the test for a margin squeeze?

  82. The CCI is yet to adjudicate on a case involving a margin squeeze. 

  83. 42.

    What is the test for exclusionary discounts?

  84. No separate test has been prescribed for exclusionary discounts.

    In the Intel case, the CCI exonerated Intel’s allegedly exclusionary discounts on an effects-based approach.

  85. 43.

    Are exploitative abuses also considered and what is the test for these abuses?

  86. Exploitative abuses, such as excessive pricing and unfair terms of contract, have been considered in various cases by the CCI.

    In the Auto Parts case, the CCI considered the passenger vehicle market and the aftermarkets comprising spare parts, diagnostic tools, and provision of after sales repair and maintenance services. It found that 14 car companies had abused their dominant positions by requiring customers to purchase spare parts and diagnostic tools solely from the respective car manufacturer or their authorised dealers. The CCI held that this amounted to inter alia, a denial of market access to competitors. The CCI also found that the car manufacturers had engaged in excessive pricing of their spare parts.

    In HT Media v Super Cassettes Industries Limited (SCIL) (2014) (the HT Media case), the minimum commitment charges (MCC) imposed by SCIL were considered exploitative by the CCI because private FM radio stations had to pay the MCC irrespective of their actual playout, which could be lower than the MCC.

    The COMPAT’s decision in DLF Ltd. v Competition Commission of India and Others (2014) (the DLF case) upheld the CCI's decision finding the real estate company to be abusing its dominant position by enforcing unfair and discriminatory clauses in their apartment buyer agreements. 

  87. 44.

    Is there a concept of abusive discrimination and under what conditions does it raise concerns?

  88. Yes, there is a concept of abusive discrimination under the Act. Section 4(2)(a) of the Act specifically provides that the imposition of a discriminatory price or condition in the purchase or sale of goods or services would constitute an abuse.

    The COMPAT, in the Schott Glass case, has found that the abuse of price discrimination involves the satisfaction of two ingredients: (i) dissimilar treatment to equivalent transactions; and (ii) harm to competition or likely harm to competition by which buyers suffer disadvantage against each other. The COMPAT provided further guidance on conduct that may be considered as discriminatory by noting that '[t]he price and conditions could be said to be discriminatory, if and only if, they were different for the same quantities of the same product.' The COMPAT’s approach to discriminatory conduct has been followed by the CCI in the Intel case, where the CCI observed that:

    [I]t appears to be a common business practice to give better discount to the bulk purchase and unless it impedes the ability of the reseller to compete any competition may not probably arise…The Commission, agreeing with the DG, concludes that the alleged pricing policy of Intel does not amount to secondary line price discrimination and has not resulted in foreclosure of any of its downstream customers.

    The decisional practice of the COMPAT and the CCI indicates that they are likely to follow an effects-based approach while evaluating price discrimination by a dominant enterprise.

  89. 45.

    Are only companies with monopoly power subject to special obligations under unilateral conduct rules?

  90. Yes, only companies who enjoy a dominant position are subject to special obligations to ensure undistorted competition in the market.

  91. 46.

    Must the monopoly power exist in the same market where the effects of the anti-competitive conduct are felt?

  92. No, it is not necessary for the monopoly power to exist in the same market where the effects of the anti-competitive conduct are felt. Section 4(2)(e) of the Act provides that there shall be an abuse of a dominant position if the dominant enterprise uses its dominant position in one relevant market to enter or protect another relevant market. 

    Sanctions and remedies

  93. 47.

    What sanctions can the competition authority impose or recommend?

  94. The CCI is empowered to:

    • impose a penalty not exceeding 10 per cent of the infringing dominant enterprise’s average turnover for the preceding three financial years;
    • pass cease-and-desist orders;
    • order the division of a dominant enterprise to prevent an abuse of such dominant position; and
    • pass any orders the CCI deems fit.

    Further, the CCI has the power and jurisdiction to pass appropriate interim orders pending investigation.

    Contravention of the CCI’s orders can invite further financial penalties and even criminal sanctions punishable by additional fines or imprisonment of up to three years, or both. The CCI may also impose significant fines for withholding information and providing false information.

  95. 48.

    How are fines calculated for abuses of monopoly power?

  96. As stated in the response to question 47 above, the CCI is empowered to impose a penalty of up to 10 per cent of the infringing dominant enterprise’s average turnover for the preceding three financial years. There are no separate guidelines for calculation of fines for abuse of a dominant position, and the CCI generally looks at the entire turnover of the infringing enterprise and not the relevant turnover. The COMPAT however in a bid-rigging case has held that, in case of a multi-product company, the turnover arising from the relevant product should be considered for calculating fines. This decision of the COMPAT is in appeal before the Supreme Court of India.

  97. 49.

    What is the highest fine imposed for an abuse of monopoly power?

  98. The highest fine imposed in terms of quantum of penalty, for an abuse of a dominant position to date is 17 billion rupees on Coal India Limited, which amounted to 3 per cent of its average turnover for three years. The highest fine imposed, in terms of the percentage of turnover, was 10 per cent, which amounted to 228,540 rupees.

  99. 50.

    What is the average fine imposed over the past five years?

  100. The CCI has, over the last five years, imposed a wide range of penalties, ranging from 2 per cent of annual turnover to 10 per cent of average turnover of the three preceding years. On average, the CCI has imposed fines at an average of 5 per cent of turnover.

  101. 51.

    Can the competition authority impose behavioural remedies?

  102. Yes.

  103. 52.

    Can it impose both negative and positive behavioural obligations?

  104. Yes. For example, in the Auto Parts case the CCI imposed positive behavioural obligations by directing car manufacturers, inter alia, to develop and operate appropriate systems for training of independent repairer/garages, and also facilitate easy availability of diagnostic tools. In the HT Media case, the CCI directed SCIL to modify its contracts in relation to the abusive MCC.

  105. 53.

    Can the competition authority impose structural remedies?

  106. Yes. To date, no structural remedies have been imposed.

  107. 54.

    Can companies offer commitments or informal undertakings to settle concerns?

  108. The Act does not provide for commitments or informal undertakings to settle concerns.

  109. 55.

    What proportion of cases have been settled in the past five years?

  110. Not applicable.

  111. 56.

    Have there been any successful actions by private claimants?

  112. No. The competition regime in India is relatively young and currently there are only two pending compensation claims. 

    Appeals

  113. 57.

    Can a company appeal a finding of abuse?

  114. Yes, an enterprise found to have abused its dominant position by the CCI can appeal to the COMPAT within 60 days of receipt of the CCI’s order. The final decision by the COMPAT can be appealed before the Supreme Court of India.

  115. 58.

    Which fora have jurisdiction to hear challenges?

  116. Under the scheme of the Act, the appeals arising out of the decision of the CCI lie before the COMPAT. The COMPAT’s order can be appealed to the Supreme Court of India.

  117. 59.

    What are the grounds for challenge?

  118. The final order passed by the CCI can be challenged on both substantive and procedural grounds. In other words, the Act provides for a de novo appeal.

  119. 60.

    How likely are appeals to succeed?

  120. The likelihood of success depends on the merits of the appeal. Among the major cases on abuse of dominant position, the COMPAT has overruled two decisions of the CCI on abusive conduct (M/s Fastway Transmission Limited v Kansan News Private Limited, the Schott Glass case), and upheld two decisions of the CCI on abusive conduct (DLF Limited v Competition Commission of India (the DLF case), the NSE case). It has also remanded a number of cases to the CCI for consideration due to breaches of principles of natural justice.

    Topical issues

  121. 61.

    Summarise the main abuse cases of the last year in your jurisdiction.

  122. In contrast with the previous year, 2015 was a relatively quiet year for abuse of dominance enforcement in India.

    Radio Taxi Services

    The CCI received separate four complaints against two leading radio taxi aggregators – Uber and Ola Cabs – for alleged predatory pricing in the incentive schemes offered to drivers and riders. The CCI defined the market for the provision of radio taxi services and defined the geographic markets to be on a city-wide basis. This led to slight different market definitions in each city, as radio taxis were held to be a different relevant market in Bangalore and Delhi, however, in Kolkata, the CCI recognised the competitive constraint of black and yellow taxis and including them in the definition of the relevant market. This approach towards market definition, reflects reality more accurately.

    In these relevant geographic markets, the CCI has prima facie found Ola Cabs to be dominant in Bangalore primarily based on its market share. The CCI noted that the acquisition of a competitor, Taxi For Sure resulted in a market share of 69 per cent. The Taxi For Sure acquisition was not subject to the merger control regime of the CCI (probably because the jurisdictional thresholds were not met) and it is interesting to note that the CCI is using its powers to review Ola Cabs position under the abuse of dominance provisions.

    This case is interesting as the radio taxi company that has complained against Ola Cabs, owns its own cars and provides radio taxi services at a higher rate than those available on the Ola Cabs platform (where the drivers own their own cars). It will be interesting to note how the CCI assesses the different models of the parties and consequential impact on the relevant cost benchmark.

    The cases against Uber were closed by the CCI at the prima facie stage as the third-party report used by the informant was not held to be reliable enough to establish dominance.

    Rural electrification

    Rural Electrification Corporation (REC) is the nodal agency for administering a central government grant for rural electrification financing. REC Power Distribution Company Limited (RECPDCL), a subsidiary of REC, is engaged in the preparation of Detailed Project Reports (DPRs) and other consultancy services which are required to receive the central government grant. The informant alleged that REC and RECPDL abused their dominant position by ‘using’ REC’s dominance in the market for financing of rural electrification projects, to enter into or protect the market for preparing DPRs. The CCI observed that there was no ‘use’ of any dominant position by the REC group in an anti-competitive manner (ie, REC did not explicitly withhold approvals, etc) and held that in the absence of such explicit conduct, the impact of REC/RECPDCL’s conduct would have to be considered. The CCI noted that RECPDCL’s increased market shares was not significant enough to lead to the conclusion that conduct was anticompetitive.

    Whiskey

    In Global Tax Free Traders v. William Grant & Sons, an interesting case relating to the distribution of spirits, the COMPAT considered whether Scotch whiskey could be defined as a separate relevant market. The COMPAT agreed with the CCI’s market definition that the relevant market in India should be defined broadly to include all whisky imported into India and should not be limited to those manufactured and distilled in Scotland only. The COMPAT noted that scotch whiskey constituted only 3 per cent of the market of imported whiskey, which resulted in a market share of 0.0011029 per cent of the total whiskey market in India. It recognised the need to consider the marginal consumer and not the average consumer when considering the application of the SSNIP test and held that the existence of a group of customers who would never switch in response to a price increase is not sufficient by itself to conclude that the relevant market should be defined narrowly. While this was the first time the whiskey market was under the CCI’s review for an abuse of dominance case, it had previously considered the same in relation to Diageo’s acquisition of United Spirits Limited. The COMPAT reiterated an earlier position that views taken in merger review cannot be relied on directly for deciding allegedly abusive conduct. 

    Chocolates

    In reviewing the conduct of Mondelez, the CCI held that premium and non-premium chocolates formed part of the same relevant market and Mondelez held a dominant position in this relevant market in the state of Karnataka. The allegation that a performance-linked incentive programme that provided an additional commission to distributors for stocking goods in markets that Mondelez wanted to enter (instant fruit-flavoured drinks and biscuits) was not an unfair condition as it was standard business strategy.

  123. 62.

    What is the hot topic in unilateral conduct cases that antitrust lawyers are excited about in your jurisdiction?

  124. Antitrust lawyers in India are excited about the recent focus on the technology sector.

    This focus includes assessing the conduct of standard essential patent (SEP) holders. Ericsson, a leading SEP holder in India is currently under investigation by the DG pursuant to three different complaints.

    There is also palpable excitement regarding the conclusion of the DG’s investigation into Google’s conduct in search and search advertising with news reports indicating a finding of violation in relation to search results being biased towards its own verticals, providing inadequate trademark protection to advertisers, and entering into agreements with unfair terms and conditions resulting in foreclosure to competitors. Antitrust lawyers will be keeping a keen eye on the CCI’s proceedings in this case.

    Finally, online retail markets are also under scrutiny given their propensity to offer steep discounts.

  125. 63.

    Are there any sectors that the competition authority is keeping a close eye on?

  126. Yes, the CCI is closely monitoring the technology sector which includes ongoing investigations into SEP licensing, online search and search advertising and online platforms for e-commerce and radio-taxi aggregation.

    The CCI also tends to focus on sectors such as real estate which directly affect consumers. 

  127. 64.

    What future developments can we expect?

  128. There is potential for a significant overhaul of the Act given the pending constitutional challenge to the Act. In case the government or the courts cause such an overhaul, we would expect structural and procedural changes to the functioning of the CCI. In addition, we would expect the inclusion of the concept of ‘collective dominance’ in India.

    In any case, since coming into being, the CCI has established itself as a competition authority which is not afraid to penalise both private and public enterprises. We expect similar headline grabbing decisions and penalties given the size and importance of enterprises currently under investigation. The power to impose high and wide-ranging penalties also comes with an increased obligation to follow due process. The CCI has been reprimanded by the COMPAT for not following the principles of natural justice and we expect parties to be given a more robust right to be heard.

Interested in contributing to this Know-how?

E-mail our Co-Publishing Manager

Questions

    Overview

  1. 1.

    What is the legal framework governing unilateral conduct by companies with market power?


  2. 2.

    What body or bodies have the power to investigate and sanction abuses of market power?


  3. Monopoly power

  4. 3.

    What role does market definition play in market power assessment?


  5. 4.

    What is the approach to market definition?


  6. 5.

    How is market power or monopoly power defined?


  7. 6.

    What is the test for finding of monopoly power?


  8. 7.

    Is this test set out in statute or case law?


  9. 8.

    What role do market shares play in the assessment of monopoly power?


  10. 9.

    Are there defined market share thresholds for a presumption of monopoly power?


  11. 10.

    How easily are presumptions rebutted?


  12. 11.

    Are there cases where companies with high shares have been found not to exercise monopoly power?


  13. 12.

    What are the lowest shares with which companies have been found to exercise monopoly power?


  14. 13.

    How important are barriers to entry and expansion for the assessment of monopoly power?


  15. 14.

    Can the lack of entry barriers negate a finding of monopoly power?


  16. 15.

    What kind of barriers to entry are typically considered in the analysis?


  17. 16.

    Can countervailing buyer power negate a finding of monopoly power?


  18. 17.

    What if consumers can easily switch between suppliers?


  19. 18.

    Are there any other factors that the regulator considers in its assessment of monopoly power?


  20. 19.

    Are any entities or sectors exempt from the antimonopoly regime?


  21. 20.

    Can companies be deemed to hold collective monopoly power?


  22. 21.

    Can the exercise of joint monopoly power or tacit oligopolistic collusion be treated as an infringement?


  23. 22.

    Has the competition authority published guidance on how it defines markets and assesses market power?


  24. Abuse of monopoly power

  25. 23.

    Is there a general definition for what constitutes abusive conduct? What does it entail?


  26. 24.

    What are the general conditions for finding an abuse?


  27. 25.

    Is there a list of categories of abusive or anti-competitive conduct in the applicable legislation?


  28. 26.

    Is this list open or closed?


  29. 27.

    Has the competition authority published any guidance on what constitutes abusive conduct?


  30. 28.

    Is certain conduct per se abusive (without the need to prove effects) and under what conditions?


  31. 29.

    To the extent that anti-competitive effects need to be shown what is the standard to demonstrate these effects?


  32. 30.

    Does the abusive conduct need to harm consumers?


  33. 31.

    What defences are there to allegations of abuses of monopoly power?


  34. 32.

    Can abusive conduct be objectively justified?


  35. 33.

    What objective justifications have been successful?


  36. 34.

    How is the burden of proof distributed in an abuse analysis?


  37. 35.

    What are the legal conditions to establish an abusive tie?


  38. 36.

    What are the legal conditions to establish a refusal to supply or refusal to license?


  39. 37.

    Do these abuses require an essential facility?


  40. 38.

    What is the test for an essential facility?


  41. 39.

    What is the test for exclusivity arrangements?


  42. 40.

    What is the test for predatory pricing?


  43. 41.

    What is the test for a margin squeeze?


  44. 42.

    What is the test for exclusionary discounts?


  45. 43.

    Are exploitative abuses also considered and what is the test for these abuses?


  46. 44.

    Is there a concept of abusive discrimination and under what conditions does it raise concerns?


  47. 45.

    Are only companies with monopoly power subject to special obligations under unilateral conduct rules?


  48. 46.

    Must the monopoly power exist in the same market where the effects of the anti-competitive conduct are felt?


  49. Sanctions and remedies

  50. 47.

    What sanctions can the competition authority impose or recommend?


  51. 48.

    How are fines calculated for abuses of monopoly power?


  52. 49.

    What is the highest fine imposed for an abuse of monopoly power?


  53. 50.

    What is the average fine imposed over the past five years?


  54. 51.

    Can the competition authority impose behavioural remedies?


  55. 52.

    Can it impose both negative and positive behavioural obligations?


  56. 53.

    Can the competition authority impose structural remedies?


  57. 54.

    Can companies offer commitments or informal undertakings to settle concerns?


  58. 55.

    What proportion of cases have been settled in the past five years?


  59. 56.

    Have there been any successful actions by private claimants?


  60. Appeals

  61. 57.

    Can a company appeal a finding of abuse?


  62. 58.

    Which fora have jurisdiction to hear challenges?


  63. 59.

    What are the grounds for challenge?


  64. 60.

    How likely are appeals to succeed?


  65. Topical issues

  66. 61.

    Summarise the main abuse cases of the last year in your jurisdiction.


  67. 62.

    What is the hot topic in unilateral conduct cases that antitrust lawyers are excited about in your jurisdiction?


  68. 63.

    Are there any sectors that the competition authority is keeping a close eye on?


  69. 64.

    What future developments can we expect?