In a competitive market, firms strive to grow, innovate, and lead. However, when a firm becomes so powerful that it can influence the market and suppress competition, it draws the attention of competition regulators. In India, such conduct is governed by Section 4 of the Competition Act, 2002, which prohibits the abuse of dominant position by any enterprise or group.
This blog explores what amounts to dominance, how its abuse is defined, and how the Competition Commission of India (CCI) evaluates such cases.
What Is a Dominant Position?
Under Explanation (a) to Section 4, a dominant position is defined as a position of strength enjoyed by an enterprise in the relevant market that enables it to:
- Operate independently of competitive forces prevailing in the market; or
- Affect its competitors or consumers or the market in its favor.
It’s important to note that being dominant is not illegal—it’s the abuse of that dominance that the law prohibits.
Identifying the Relevant Market
Before determining dominance, the relevant market must be defined in terms of:
- Relevant Product Market – All products/services considered interchangeable by the consumer.
- Relevant Geographic Market – The area where the conditions of competition are distinctly homogeneous.
The CCI analyses factors like consumer preferences, pricing, availability of substitutes, regulatory framework, and barriers to entry to determine the relevant market.
What Constitutes Abuse?
Section 4(2) of the Act lists specific behaviours that amount to abuse of dominance, including:
- Imposing Unfair Conditions or Prices
- Charging excessive prices (exploitative abuse)
- Imposing discriminatory or one-sided terms in sales or purchases
- Limiting or Restricting Production or Technical Development
- Hindering innovation or slowing down progress in the industry
- Tying and Bundling
- Forcing the purchase of unrelated products as a condition of buying a desired product
- Exclusive Dealing or Refusal to Deal
- Denying market access to competitors
- Imposing exclusive supply or distribution agreements
- Predatory Pricing
- Selling below cost to eliminate competitors, intending to increase prices once the competition is out
Key Case Laws on Abuse of Dominance
Google India (2022)
CCI imposed a penalty on Google for abusing its dominance in the Android ecosystem by forcing pre-installation of its own apps. The case highlighted abuse through tying and bundling.
DLF Ltd. Case (2011)
DLF was found to have imposed unfair conditions in its agreements with flat buyers, demonstrating exploitative abuse of dominance in the real estate sector.
Uber India Case (2019)
CCI ruled that Uber was not dominant in the market despite allegations of predatory pricing, showcasing the importance of first establishing dominance before abuse is assessed.
Assessing Abuse: Factors Considered by the CCI
- Market share of the firm
- Size and resources of the enterprise
- Barriers to entry
- Consumer dependence
- Economic power of the firm
The CCI follows an effects-based approach, focusing on whether the conduct harms competition and consumer welfare, rather than penalizing market success alone.
Defences and Justifications
An enterprise may justify its conduct by demonstrating:
- Business efficiency or innovation
- Consumer benefits
- Lack of exclusionary or exploitative intent
The CCI carefully evaluates such defences in context with economic data and market impact.
Conclusion
Abuse of dominance under Indian competition law is a nuanced concept that balances business success with the need for fair competition. The Competition Commission of India plays a vital role in ensuring that dominant enterprises do not misuse their market power to the detriment of competitors or consumers.
For businesses, this highlights the importance of maintaining compliance, adopting fair pricing strategies, and avoiding conduct that may be construed as exclusionary or exploitative.
Have questions about competition law compliance or facing an investigation by the CCI?
Contact our team at Narendra Madhu Associates for expert legal guidance.
