Positive fallouts. It helps avoid legal and regulatory sanctions, leads to improved consumer welfare, and encourages innovation and growth in the market
The Competition Commission of India (CCI) was recently in news for its interventions in digital markets against dominant undertakings for their abusive conduct. The Competition Act, 2002 (Act) considers certain behaviour of dominant undertakings as abusive.
Dominant position under competition law means a position of strength enjoyed by an enterprise, which enables it to operate independently of the competitive forces and affect its competitors and consumers or the relevant market in its favour. As per the scheme of the Act, holding of dominant position is not per se illegal, only abuse of such position is considered to be against the norms of fair competition.
The competition law prohibits various types of abusive conduct of a dominant enterprise, which may be exclusionary, exploitative or discriminatory. Through exclusionary conduct, a dominant enterprise restricts competition and excludes its competitors from the relevant market; exploitative practices allow a dominant undertaking to exploit consumers, directly inflicting consumer harm; and through discriminatory conduct, a dominant entity discriminates between consumers or intermediate users.
The typical exploitative conduct is when a dominant undertaking imposes unfair or discriminatory condition or price in purchase or sale of goods or service. However, most abusive conducts are of exclusionary nature. A dominant enterprise may resort to tying-in, which may have the effect of excluding competitors in the tied product market since customers are forced to buy the tied product from it.
Also, such an entity may refuse to supply the product or service to a customer depriving choice to consumers. Moreover, through leveraging, a dominant entity uses its power in one market to induce or foreclose sales in the second market.
CCI has been given vast powers to correct the abusive behaviour of dominant undertakings. The required market correction can be carried out by CCI by issuing various behavioural and structural remedies. Not only can CCI issue cease and desist orders; it can also impose monetary penalties, besides modifying agreements. In appropriate cases, it can even order division of enterprises enjoying dominant position.
Consequences of abuse
In the past, CCI has come down heavily upon dominant undertakings for abusing their market power.
DLF, a real estate major, was found to abuse its dominant position by imposing arbitrary, unfair and unreasonable conditions on flat buyers through Apartment Buyer Agreement. Various clauses of such agreements were found to be one-sided and unfair. CCI imposed a penalty of ₹630 crore on DLF for such conduct, besides directing it to cease and desist from formulating and imposing such unfair conditions in its agreements with buyers.
Similarly, CCI found the National Stock Exchange to be abusing its dominant position to attract business and following unfair pricing policies, negatively affecting competition in the market. CCI imposed a penalty of ₹55.5 crore on NSE for abusive behaviour.
In the recent Android case, CCI found Google to be abusing its dominant position in respect of various agreements executed with smartphone OEMs for licensing of its mobile operating system Android and imposed a penalty of ₹1,337.76 crore. These agreements required OEMs to mandatorily pre-install entire Google Mobile Suite (GMS), which included wide range of key Google apps such as Google Maps, Gmail, YouTube, etc., with no option to uninstall the same. The requirement of prominent placement of such apps was also found to be imposition of unfair condition on device manufacturers.
One of the main benefits of competition compliance for dominant undertakings in India is the avoidance of legal and regulatory sanctions. By adhering to competition laws, dominant undertakings can avoid these penalties and maintain their reputation and credibility in the market.
Another benefit of compliance is the promotion of a level-playing field in the market. Dominant undertakings often have an advantage over their competitors due to their size, resources and market power. However, competition laws ensure that dominant undertakings do not abuse their market power and engage in practices that stifle competition. This helps to create a fair and competitive environment, where all companies have the opportunity to compete and grow.
Furthermore, competition compliance can also lead to improved consumer welfare. Anti-competitive practices, such as price-fixing or market sharing, can result in higher prices and reduced choice for consumers. By adhering to competition laws, dominant undertakings can avoid engaging in such practices and ensure that consumers have access to a wide range of products and services at competitive prices.
In addition, competition compliance can also lead to innovation and growth in the market. By promoting fair competition, competition laws encourage companies to constantly improve their products and services and come up with new and innovative solutions.
It is in the interest of dominant undertakings to adhere to competition laws and regulations and contribute to the development of a fair and competitive market in India. Considering regulatory architecture under the competition law, dominant undertakings will do well to align their business practices in conformity with the special and differential obligations cast upon them as the cost for non-compliant behaviour may be high besides damage to business reputation.
The writer is Economic Adviser & Head, Anti-Trust Division, Competition Commission of India