Competition Act 2002: Abuse of Dominant Position

Abuse of Dominant Position

Section 4 of the Competition Act, 2002 expressly prohibits any enterprise or group from abusing its dominant position. The term ‘Dominant Position’ includes a position of strength, enjoyed by an enterprise or group, in relevant market, in India, which enables it to

a) Operate independently of competition forces prevailing in the relevant market; or

b) Affect its competitors or consumers or the relevant market in its favour.

The terms ‘Dominance’ is also referred to as market power which is defined as the ability of the firm to raise prices or reduce output or does both independently of its rivals and consumers.

As per Section 2(r) of the Competition Act, 2002 ‘relevant market’ means the market, which may be determined by the Competition Commission of India with reference to the relevant ‘product market’ or ‘relevant geographical market’ or with reference to both. 

The Act requires that relevant product market is to be determined by considering; physical characteristics or end-use of goods;

  • The price of goods of services
  • Consumer preferences
  • Exclusion of in-house production
  • The existence of specialized producers
  • And the classification of industrial products

Further the relevant geographical market is determined by considering;

  • Regulatory barriers
  • Local specification requirements
  • National procurement policies
  • Adequate distribution facilities
  • Transport costs
  • Language
  • Consumer preferences
  • Need for secure or regular supplies or rapid after – sales services

In short, there shall be an abuse of dominant position if an enterprise indulges into the below mentioned activities

  • Directly or indirectly imposing discriminatory conditions in the purchase or sale of goods or service, or setting prices in the purchase or sale (including predatory pricing) of goods or services;
  • Limiting or restricting the production of goods or provision of services or market therefore; or limiting technical or scientific development relating to goods or services to the prejudice of customers;
  • Indulging in practice or practices resulting in the denial of market access;
  • Making conclusion of contracts subject to acceptance by other parties of supplementary obligations, which has no connection with the subject of such contract;
  • Utilization of the dominant position in one relevant market to enter into, or protect, another relevant market.

Section 19(4) of the Act empowers the Competition Commission of India to determine whether any enterprise or group enjoys a dominant position or not, in the relevant market and also to decide whether or not there has been an abuse of dominant position. Further mere existence of dominance is not to be frowned upon unless the dominance is abused.

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