Author: Devesh Badoliya
Co-author: Gurdeep Singh,
Year & Course: 4th Year B.A. LL.B. (Hons.)
College: Rajiv Gandhi National University of Law, Punjab.
In this blog, we have discussed the issue of dominant position concerning competition law. It is a necessary implication after reading Section 4 of the Competition Act, 2002 that only one group or enterprise can be in a dominant position. The aw is silent that two or more enterprises having the same say in that relevant market would be declared dominant. With the illustration of the Jio case, the author wants to convey that only one dominant position can be problematic. This is one of the lacunae in the law.
Keywords: Predatory Pricing, Single Dominance, Jio, Relevant Market, Oligopoly
Every car owner will give a knowing nod when they talk about the struggle to find relatively affordable spare parts for their vehicles. Although the original parts can only be sold in limited dealerships, a small block of plastic would be worth a fortune once found.[i] As the Indian economy emerges from the woods and begins to grow, tensions over a player in the market abusing his dominant position are likely to be tested in law with increased frequency.[ii]
Competition law prohibits anti-competitive business practices. A dominant firm may engage to maintain or increase its position on the market, as it damages true competition between firms, exploits consumers, and makes it unnecessary for the dominant undertaking to compete with other firms on the merits.[iii] It is unlawful for a company to monopolize or attempt to monopolize trade, meaning a firm with market power cannot maintain its dominant position by excluding competitors or preventing new entry.[iv]
Abuse of Dominant Position
The dominant position is created when one or more undertakings in a particular market use their position by making restrictive practices to determine economic parameters at both the vertical and horizontal levels.[v]
According to Section 4 of The Competition Act, 2002, an enterprise is abusing its dominant position if it performs any of the following acts:
- directly or indirectly, imposes unfair or discriminatory practices
- limits or restricts the production of goods or provision of any services in any form
- indulges in practice or practices resulting in a denial of market access
- concludes contracts subject to acceptance by other parties of supplementary obligations which have no connection with the subject of such contracts; or
- Uses its dominant position in one relevant market to enter into or protect another relevant market.[vi]
According to Section 4, the commission’s first inquiry is about the relevant market, and in that specific market, only a single entity would happen to be in a dominant position. The CCI in the case of Jupiter Gaming Solutions Private Ltd. v. Government of Goa[vii] observed that the dominance by the government is not bad per se, but its abuse is bad under the anti-competitive law. Also, the Commission is further guided by Section 19 of the act titled inquiry into certain agreements by the dominant position of enterprise, laying down parameters to be considered by the authority.
There are primarily three stages in determining whether an enterprise has abused its dominant position, they are-
- Relevant Market.
- Degree of Market Power/Monopoly Power in that relevant market.
- Determining whether the undertaking in a dominant position has engaged in conducts specifically prohibited by the statute or applicable law.
The Indian Competition Act, 2002, expressly provides in Section 19(5) that the Competition Commission shall have due regard to the relevant product market and geographical market in determining whether a market constitutes a relevant market for the Act.[viii]
In Fast Track Call Cab v. ANI Technologies,[ix] the court observed that, under the competition act, 2002, only one dominant player is present in a given market. Hence, given a relevant market there are no dual or multiple dominant positions under the Indian jurisdiction. Although only one dominant player can exist in a market, clause 2 (e) of The Competition Act talks about an entity that uses one dominant position to enter another market. But what would be the case if a businessman so powerful and affluent, not hampered by the free market forces decides to enter an industry? With a sizable investment, any newbie can capture the market forces with the correct amount for resources financial and otherwise. So, should this entity at the outset itself be declared in a dominant position?
Initially, in September 2016, Reliance Jio entered the telecom market, with its customer-friendly offers to the extent that they weren’t even charging a penny for the better part of the year. They also violated the guidelines provided by TRAI about their pricing and extended the free offer post-December till March next year.
The competitors did not appreciate these tactics as they created insecurity and instability in the market, which led to an exit for a few players, who couldn’t cope with the policies brought in the market. This was done by clubbing huge investments in the sector with a predatory policy of pricing. CCI heard the matter in 2017, and it was observed that because Jio is a new entrant in the market and they were not in the dominant position, it would not equate to abuse of the dominant position. I would argue that although Jio was not in a dominant position when the commission applied its mind, the policies applied by them lead to predatory pricing. The effect, in turn, was problematic going further. According to section 4, it is quite clear that only one enterprise or group can have the dominant position in a geographical and product market. While Airtel was already a significant player Jio with just a 10% market share, couldn’t be regarded as a dominant position.
But according to TRAI, Jio’s market share has climbed past 50% in the wireless internet segment, with airtel at 23% and Vodafone at 18%, respectively. According to airtel, they had to increase prices by 40% to compete in the market on their plans. This is precisely what I mean that the CCI did not take a holistic approach to the issue, and this has to lead to an adverse effect on competition, and the repercussions can be felt. Why is it that only one player is gaining all the benefits in the telecom sector, in general, while on the other hand, the said sector is in debt? Whether a more vigilant approach was required under the given scenario?
There has been a request to the TRAI by all the telecom service providers, for once they are on the same page to provide for a minimum subscription charge (MSC) for an interim period of two years. Niti Aayog has also released a statement favouring the move due to the fall in prices and high indebtedness of the telecom sector in India.
The above illustration clarifies that India lacks a fair environment for healthy competition. Although the world’s largest democracy, India has been facing rampant economic disparity and concentration of wealth. The market is a volatile and vulnerable one; however, it doesn’t seem the case with Jio, a part of the conglomerate of the Reliance Group of Industries.
Although the move initially wasn’t anti-competitive, the result or the effect can be adverse in the telecom sector. It has to lead to a fluctuation in market prices, the exit of a few players, and in turn, a loss in general to the telecom sector. This has further acted to the detriment of the customers due to a lack of competition and only one player dictating the terms.
The market has always been a consumer-centric business model that harnesses players’ potential in a fair and healthy competitive environment. Amongst many other challenges present, the most important is to abolish the system of concentration of power. Given the Indian economy’s developing affairs, the market is often vulnerable to new entrants who struggle to establish themselves. However, the same doesn’t seem to be the case with “Jio” a part of the conglomerate of the Reliance Group of Industries.
The ultimate objectives of the law should be to protect the interests of all business enterprises, to create a free and fair market, to prevent authoritative monopoly, to promote foreign investments but also to develop the MSME sector and in all cases prevent concentration of wealth, and to promote a system of the fair and equal mechanism of business that all citizens inherit. This is not sure the case according to recent trends.
[i] Gazala Noor, Abuse of Dominance under Competition Act, <http://www.legalserviceindia.com/legal/article-3928-abuse-of-dominance-under-competition-act.html> accessed 10 February 2021
[ii] The Law on Dominant Position and the Grey Area of Its Abuse (The Hindu Business Line, Dec. 13, 2020) <https://www.thehindubusinessline.com/business-laws/the-law-on-dominant-position-and-the-grey-area-of-its-abuse/article33322010.ece> accessed 10 February 2021
[iii] Abuse of Dominant Position, <https://www.concurrences.com/en/glossary/abuse-of-dominant-position-en> accessed 10 February 2021
[iv] Anti-Competitive Practices (Federal Trade Commission) <https://www.ftc.gov/enforcement/anticompetitive-practices> accessed 10 February 2021
[v] Shilpi, Abuse of Dominant Position, <http://www.legalservicesindia.com/article/729/Abuse-o-Dominant-Position.html> accessed 10 February 2021
[vi] The Competition Act, 2002, sec. 4
[vii] Jupiter Gaming Solutions Private Ltd. v. Government of Goa (2011) CCI 23.
[viii] Supra Note 5
[ix] Fast Track Call Cab v. ANI Technologies (2015) CCI 88.