By Ms. Sakshi Garge ~ N.B.T. Law College
MISUSE OF EARNED POSITION = ABUSE OF DOMINANCE
In the world, full of cut throat competition, where on one hand, new entrepreneurs are entering into the race with no back power, and on another hand, the already established renowned entrepreneurs are seen as an obstacle. This can be seen as the Whale and other small Fishes in the same ocean when compared to dominance at large.
The Competition Act of 2002 defines the expression “Abuse of Dominance”. The government of India substituted the previous ‘The Monopolies and Restrictive Trade Practices Act, 1969’ with the Competition Act of 2002. This act governs Competition Law in its intricacy. The Competition Act came into force from 1st September 2009.
The act is to provide for the economic progress of the state and forming the commission (an expert advisory panel) to prohibit practices that have unfavorable effects on competitiveness, to encourage and sustain competition in markets, to safeguard the interests of customers, and make sure freedom of trade and commerce carried on by different participants in markets, in India, and for matters connected to that or incidental to it. The Competition Act came into force from 1st September 2009.
The concept of Dominance is not something new, but a concept from ancient times. As and when the market system worked successfully, dominance was witnessed. Dominance is referred to as the ‘measure of the strength earned within the market by using their name, brand, products, or service’. It is a “Market Value” of any particular business/ trading entity. It means that it is of ‘more value or superior’ than others. Dominance controls market conditions and consumers. But ‘dominance in itself is not an abuse, but the abuse of dominance is an abuse.’ Starting with the License Raj/ Permit Raj system to Competition Commission of India modified laws the term dominance has never been left out of perception.
DOMINANCE AND MONOPOLY
Monopoly is a market condition where there is a sole seller in the market selling his unique product. In a monopoly structure, the seller is free to carry on his business activities the way he wants & sell at the price he decides. Dominance is a situation where there are many sellers in the market selling alike products but the major selling entity governs the market. The basic important distinction lies in the position of the seller. It means in monopoly there is any other driving force to change the market conditions due to no competition and in Dominance due to huge competition, the single or group of business entities control the market as they have earned a reputation, brand, products or services with lots of consumers. Monopoly does not restrict other competitors from being the single one, whereas dominance restricts the other in some ways which will be discussed below.
ABUSE OF DOMINANCE
Section four of the Act, prevents any economic entity or cluster from misusing its influential position.
This Act also lays down the circumstances/ events under which there is an abuse of a dominant position. Section 4 (2) of the Act, it is an abuse of dominant position if an enterprise, –
- (a) Directly or indirectly imposes unfair or discriminatory –
- Condition in the purchase or sale of products or services; or
- Price in purchase or sale (including predatory price) of products or services;
- Limits or restricts –
- Production of products or provision of services or market, therefore; or
- Technical or scientific development about products or services to the unfairness of consumers; or
- Indulges in practice or practices leading to a denial of market access: or
- Concludes contracts subject to acceptance by other parties of supplementary obligations that, by their nature or according to commercial usage, do not have any connection with the subject of such contracts; or
- Uses its dominant position in one relevant market to enter into, or protect other relevant markets.
The Competition Act focuses to provide and develop a healthy and sound environment for fair trading. It aims to protect consumers and other enterprises. The Act has developed the Competition Commission of India (CCI) for the above-stated purpose.
Section 4 (2) (a) of the Competition Act of 2002 defines dominant position as, “dominant position” means a position of strength, enjoyed by an entity, in the relevant market, in India, that allows to –
- Operate independently of competitive forces prevailing in the relevant market; or
- Affect its competitors or customers or the relevant market in its favor.
Section 4 (2) (b) also defines the predatory price as, “predatory price” means the sale of products or provision of services at a price which is below the cost, as may be determined by statutes, of production of goods or provision of services, to reduce competition or eliminate the competitors.
FACTORS DETERMINING THE POSITION AS A ‘DOMINANT’
Dominance is the superiority or some extra power that can be used to influence the market and consumers at large. It is a position where that position indirectly controls the market. Following are some factors which have a part to decide the dominant position; –
- History of the enterprise
- Age of the business entity
- Its market value, in shares or funds
- Its contribution to the market
- Capital and/or financial position
- Contribution in service (number of consumers)
- Entry and exit bars in the market
- Market turnover, business size, and structure of working
- CSR’s and social expenditure
The other important factors are RELEVANT MARKET CONDITIONS and RELEVANT GEOGRAPHIC MARKET, where the relevant economic market conditions and the geographical conditions are looked upon.
The ‘relevant market’ is defined under the Act. “Section 2 (r) defines as the market that is determined by the relevant geographic market and relevant product market.”
Further, the relevant product market means the market of interchangeable goods in terms of prices, characteristics, uses, etc. under section 19 (7) of the Act. Relevant geographic market elaborates the factors determining the geographic conditions under section 19 (6). This means consumer preferences, use of goods and services, prices, other available products.
The Competition Act avails the remedies laid down under section 27 of the Act, 2002. It goes with the procedure followed by the Commission starting with:
- Inquiry into the abuse of dominance
- Powers of the Competition Commission of India.
- Interim orders
ABUSE OF DOMINANCE IN COMPARISON WITH OTHER GLOBAL COMPETITION LAWS
The dominance and its mal use are of no recent origin, but ancient origins of humankind all over the world. The abuse of dominance is majorly or mostly used for exploiting the weaker section of consumers and other emerging entities.
- EVOLUTION AND DEVELOPMENT OF COMPETITION LAWS
As humankind developed, the need for competition laws was seriously felt around the globe. The main reason was to prohibit unfair practices, the mal application of laws, and exploitation by the “dominant” entities and promote healthy competitions to develop the economy with innovative ways by the competition. Competition laws proved more relevant to developing countries than to developed countries, the reason being the scope of interference was different. The developing countries were emerging so the need for competition laws.
India: India has its roots from the British period i.e. from 1600 establishment of the East India Company to the current law in action i.e. Competition Act, 2002. The era had been full of exploration with no or much fewer laws as it was an emerging period on the globe. Not going in deep, as stated earlier British India had a “license raj system”. After Independence, in free India, as and when needed the laws were made. For instance, The Monopolies and Restrictive Trade Practices Act (MRTP) was adopted in 1969. The MRTP Act was the first law in India to control and regulate the economy and competition in the country. The Consumer Protection Act also tried to protect consumers but didn’t prove that fruitful due to numerous cases all over the country.
The Industrial Department and Regulation Act, 1951 (IDRA) empowered the functioning and regulating majorly the private sector. In the era when vital or economic industries were controlled by the State Government, the private sector was difficult even to enter. Thus, the public sector or state-controlled industries were the sources of economic development and economic growth. Till the New Economic Policy and reforms, it was the government policies that were obstacles.
The MRTP Act regulated monopolies, which also gave some directions towards the DPSP in the Constitution of India. The amendments in 1984, 1991 dealt with the adding of Unfair Trade Practices and eliminating the chapters of Mergers and Acquisitions respectively.
The Economic Reforms Laws in 1991, was a revolution in India. It brought Globalization, Privatization, and Globalization permitted international trades and economies to participate which boosted the Indian economy to run. But with these, the clashes of laws also started which in turn exploited the nations. The new law was in need to repeal the MRTP act, eliminating reserved products, privatize the shares and assets and to bring private as well as public industries led to the drafting of a new, modified COMPETITION LAWS in India with forming the COMPETITION COMMISSION OF INDIA in 2002. The advisory panel, Competition Commission of India (CCI) to work as an administrative body, and The Competition Appellate Tribunal (COMPAT) to function adjudicatory.
The Competition Act prevents –
- Anti-competitive agreements as under section 3
- Abuse of dominant position as under section 4
- Mergers and Acquisitions of enterprises as under sections 5 and 6 of the Act.
The United States of America: It can be traced back from the history of the United States that the first modern statute regarding the Competition Law was Sherman Act, 1890 and the Clayton Act, 1914.
The Sherman Antitrust Act of the US outlawed the merging of the entities to form into a monopoly to regulate the particular market. The object of this act was to encourage a fair economy and competition. This act outlawed conspiracies, monopolies, and such practices within the industries.
The Clayton Act defines the vertical and horizontal fusions of market structure. This act defines unethical trading/ business practices. The recent and modern Federal Trade Commission prohibits unfair competition within the markets. It limits price-fixing, monopolies, and elaborates the labor unions, strikes, etc.
The competition law has not specified the tying agreements, amalgamations, price-fixing whereas the US competition law states the provisions about the same.
United Kingdom: The U.K. also had several laws dealing with consumer protection and prohibit unfair competition. Statutes such as the Consumer Credit Act of 1974, the Unfair Contract Terms Act of 1977, the Unfair Terms in Consumer Contract Regulations of 1999, and the Unfair Contract Bill. These laws are in the ambit of the European Union Directives on Consumer Protection.
Even the other European countries, Germany,Canada have their modified laws. Moreover, the base of these laws is to have a sound feasible economic environment, safeguard consumers, and protect the emerging or small economic entities from exploitation.
The above discussion makes it clear that the Competition laws are of the utmost importance in a country like India. However, economic reforms transformed the world into a global market. But the fairness and promoting a healthy economic environment is an effort made by nations all around.
- by Government of India, Ministry of Corporate Affairs, Volume 12 of 2003 http://www.mca.gov.in/MinistryV2/competitionact.html
- Competition Act of 2002, Section 4, No. 12 of 2003.
- Circumstances Under Which There Is An Abuse Of Dominant Position Sec 4 (2) As Under Competition Act, 2002, Indian Kanoon URL: https://indiankanoon.org/doc/1248233/ (Last accessed at 20th November 2020)
- Competition Act of 2002, Section 4(2)(a), No. 12 of 2003.
- Competition Act of 2002, Section 4(2)(b), No. 12 of 2003.
- SiddhantRahu and Pratik Tare, Abuse of Dominance: A Comparative Study of India, U.S.A. and United Kingdom, 7 Pen Acclaims (2017) pp. 1.
- Minali Pathak, Evolution and Development of Competition Law in India, Anubhav Pandey on leaders (2017).
- Will Kenton, Sherman Anti-Trust Act, (2020) URL:https://www.investopedia.com/terms/s/sherman-antiturst-act.asp