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Prohibition of Abuse of dominant position

Prohibition of Abuse of dominant position

The provision relating to abuse of dominant position has been detailed in Section 4 of the Competition Act, 2002.

Meaning of Dominance

Dominance refers to a position of strength, enjoyed by an enterprise, in the relevant market, in India, which enables it to—

(i)  operate independently of competitive forces prevailing in the relevant market; or

(ii)  affect its competitors or consumers or the relevant market in its favour;

As per Section 2(r) of the Competition Act, 2002, “relevant market” means the market which may be determined by the commission with reference to the relevant product market or the relevant geographic market or with refer­ence to both the markets;

As per Section 2(h), “enterprise” means a person or a department of the Gov­ernment, who or which is, or has been, engaged in any activity, relating to the production, storage, supply, distribution, acquisition or control of articles or goods, or the provision of services, of any kind, or in invest­ment, or in the business of acquiring, holding, underwriting or dealing with shares, debentures or other securities of any other body corporate, either directly or through one or more of its units or divisions or subsidiaries, whether such unit or division or subsidiary is located at the same place where the enterprise is located or at a different place or at different places, but does not include any activity of the Government relatable to the sovereign functions of the Government including all activities carried on by the departments of the Central Government dealing with atomic energy, currency, defence and space.

For the purposes of this clause,—

(a)  “activity” includes profession or occupation;

(b)  “article” includes a new article and “service” includes a new service;

(c)  “unit” or “division”, in relation to an enterprise, includes—

(i)  a plant or factory established for the production, storage, supply, distribution, acquisition or control of any article or goods;

(ii)  any branch or office established for the provision of any service;

Abuse of dominant position impedes fair competition between firms, exploits consumers and makes it difficult for the other players to compete the dominant undertaking on merit.

Abuse of dominant position includes –

  • Imposing unfair conditions or price,
  • predatory pricing,
  • limiting production/market or technical development,
  • creating barriers to entry,
  • applying dissimilar conditions to similar transactions,
  • denying market access, and
  • using dominant position in one market to gain advantage in another market.

Section 4 of the Competition Act, 2002 expressly prohibits any enterprise or group from abusing its dominant position.

What constitutes abuse of dominant position

Section 4(2) states that there shall be an abuse of dominant position if an enterprise or a 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

For the purposes of this clause, the unfair or discriminatory condition in purchase or sale of goods or services shall not include such discriminatory conditions or prices which may be adopted to meet the competition; or

(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; or

(c)  indulges in practice or practices resulting in denial of market access in any manner; or

(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

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

The term “predatory pricing” means the sale of goods or provision of services, at a price which is below the cost, as may be deter­mined by regulations, of production of the goods or provision of services, with a view to reduce competition or eliminate the competitors.

Powers of Competition Commission of India

The Competition Commission of India has been empowered to determine –

(i) whether any enterprise or group enjoys a dominant position or not, in the ‘relevant market’ and

(ii) also to decide whether or not there has been an abuse of dominant position.

Prohibition of Abuse of dominant position

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