Section 4 of the Competition Act, 2002 provides that an enterprise in a dominant position shall not abuse its dominant position. The said Act provides for an exhaustive list of practices which may be deemed to be abusive. A dominant enterprise is deemed to abuse its dominant position, if it indulges in the following practices:
- imposes unfair or discriminatory condition in purchase or sale of goods or services;
- imposes unfair or discriminatory price in purchase or sale of goods or services including predatory prices;
- limits or restricts the production of goods or provision of services or market;
- limits or restricts technical or scientific development relating to goods or services to the prejudice of consumers;
- Indulges in practices resulting in denial of market access;
- Conclusion of contracts subject to unconnected supplementary obligations;
- uses its dominant position in one market to enter or protect other relevant market.
It may be noted that being in a dominant position is not illegal. It is only the abuse of dominance which is punishable under the Competition Act, 2002. The question arises as to what constitutes a dominant position. The Competition Act, 2002 defines a dominant position as a position of strength enjoyed by an enterprise which enables it to operate independently of the competitive forces prevailing in the market and affect its competitors/consumers/relevant market in its favour.
The first step in matters pertaining to abuse of dominant position is to define the relevant product and the relevant geographic market. The definition of the relevant market is a necessary precondition for any judgment pertaining to abuse of dominant position. Market definition is required in order to identify and define the boundaries of competition between enterprises. it serves to establish the parameters within which the competition policy is to be applied by the Competition Commission. The market definition should be very cautiously dealt with as a narrower or broader definition may have completely different consequences and is ultimately crucial for the outcome of a case.
Subsequent to defining the relevant market, it needs to be analysed whether the concerned enterprise is in a dominant position or not. There are various factors which are assessed in order to determine dominance. All such factors shall be discussed in a separate blog entry. Once it has been assessed that an enterprise is in a dominant position then it is analysed whether the said enterprise has indulged in an anti-competitive abuse or not.