According to Section 4 of the Competition Act of 2002, abuse of dominance is deemed to apply in situations where a dominating firm abuses its position to get exceptional benefits. According to the section, abuse of dominance occurs when a dominating corporation imposes unfair or discriminatory terms or prices on the purchase or sale of products and services, either directly or indirectly. While Section 4 has historically shown to be essential in addressing situations involving abuse of authority, it has recently proven to be insufficient in addressing both common and remote issues.
Predatory pricing is a strategy that involves temporarily charging less than what it costs to produce goods in order to harm competitors and, ultimately, increase profits. The use of predatory pricing increases market power. Differentiating between predatory pricing and competitive, pro-consumer pricing is important. Price to compete vs pricing to defeat the competition differs; the goal of predatory pricing is to stifle competition. The pricing strategy may be used to eliminate a competition, limit a possible entrant, or lower the price of acquiring a competitor.
There are three main ways to hold an organisation accountable for misusing its dominating position:
1. Identifying the relevant market is the first step.
2. The next step is to assess the company’s position as the market leader in question.
3. Determining whether the action constitutes an abuse of its dominating position is the third stage.
Establishing the boundary between what is unfair and what is not in a monopolistic pricing structure is challenging. Due to the lack of a clear legal definition of what constitutes fairness, the decision is primarily subject to judicial interpretation.
General Motors v. Commission
The ECJ determined whether a price is fair given its economic worth and, if not, whether it is abusive in character. General Motors (GM) was authorised to examine and issue certificates of conformity for all imported cars bearing their individual trademarks. This authority was granted by Belgian authorities. But GM tacked on a hefty cost for such a service. GM was in a dominating position, according to the Commission. The Court concluded that “the imposition of a fee which is exorbitant in relation to the economic worth of the service given” would constitute abuse when expanding the definition of abuse.
The Monopolies and Restrictive Trade Practices Act, 1969, which the Indian Competition Act, 2002, was based on. Many of the clauses in the previous Act were no longer necessary as a result of the liberalisation of the Indian economy. The Competition Act, a relatively recent piece of legislation, aims to stop business activities that have a negative impact on the market and safeguard the welfare of consumers.
- Reliance Jio, a newcomer to the telecom industry, gained market share by offering free services for three months. Bharti Airtel challenged Jio’s pricing strategy as predatory under Section 4 of the Competition Act. According to the CCI, providing services for no price when provided by a non-dominant firm is not anti-competitive. 8 Furthermore, Jio, a new entrant with a 6.4 percent market share, cannot be considered dominant given the presence of other significant incumbents in the industry, such as Airtel, Vodafone, and others. The aforementioned decision wreaked havoc on the telecom industry, prompting the other carriers to drastically reduce their prices. Using its price strategies, Jio rose to become the market’s second-largest telecom provider.
- In Fast Track Call Cab (P) Ltd. v. ANI Technologies (P) Ltd., the CCI reiterated that in the existence of so many cab aggregators, Ola cannot be deemed to be dominant and dismissed the claims of abuse of dominance against OLA under Section 4 of the Competition Act.
- The All-India Online Vendors Assn. complained to Flipkart and Amazon over their platform’s steep discounts and special treatment for specific vendors, which they claimed amounted to abuse of a dominating position. After analysing the internet market, CCI concluded that the online retail sector is a new business model where no one company can be characterised as dominating. As a result, such firms need to be allowed the opportunity to compete.
- First, the current legal framework, which requires evidence of dominance as a prerequisite for abusive activities under Section 4, should be changed to account for extraordinary circumstances. The Sherman Antitrust Act of 1890 penalises both market monopolisation and “attempts to monopolise” in addition to both. When there is convincing evidence that a company can dominate the market, the standard for “prima facie proof of dominance” should be reduced. And the presence of favourable conditions, such as high switching costs, data storage, varied services, excellent service quality, significant investment, and growth rate, might demonstrate this potential.
- Second, the CCI should adopt a hard posture to combat buyer’s monopoly. Competition law also focuses on the demand side of the market in addition to regulating the supply side. The protection of consumers from sellers must extend to sellers as well. The South African Amendment Bill, 2017, forbids dominant purchasers from placing unreasonable conditions on market sellers, and if there is a reasonable basis for doubt, the buyer must establish that the contract is fair. The Kenyan Competition Law Rules include a variety of circumstances, such as late payments, unilateral termination, risk transfer to the supplier, and the demand for preferred conditions that are unfair to suppliers, that keep the buyer dominant.
- Thirdly, the CCI has to establish standards for identifying the relevant market in situations involving competition. A broad approach should be used by the Commission in identifying relevant markets as well, considering the nation’s increasing technological achievements. The appropriate market should be identified using an effect-based approach rather than a form-based one, with the emphasis being placed on the impact of market variation rather than product alteration. It is sufficient to maintain it as a distinct market if the change results in an entirely new group of buyers and suppliers. Real estate and high technology industries may both benefit from this.