Navigating the Contours of Dominance: An Analysis of Abuse of Dominant Position under Indian Competition Law

Introduction

The Competition Act, 2002 (hereinafter "the Act") fundamentally aims to prevent practices having an appreciable adverse effect on competition (AAEC), promote and sustain competition in markets, protect the interests of consumers, and ensure freedom of trade. A cornerstone of this regulatory framework is Section 4, which proscribes the abuse of a dominant position by any enterprise or group. Unlike the existence of a dominant position itself, which is not per se prohibited, its abuse triggers scrutiny and potential penalties under the Act. This article undertakes a comprehensive analysis of the concept of 'abuse of dominant position' within the Indian legal landscape, drawing upon seminal case law and statutory provisions to elucidate its various facets and implications.

Defining Dominant Position and Relevant Market

Section 4(1) of the Act states, "No enterprise or group shall abuse its dominant position." The prerequisite for an inquiry into abuse is the establishment of 'dominant position'. Explanation (a) to Section 4 defines "dominant position" as a position of strength, enjoyed by an enterprise, in the relevant market, in India, which enables it to: (i) operate independently of competitive forces prevailing in the relevant market; or (ii) affect its competitors or consumers or the relevant market in its favour. As the Supreme Court noted in Uber (India) Systems Private Limited v. Competition Commission Of India And Others (2019 SCC 8 697), there are two important ingredients to Section 4(1): the dominant position itself, and its abuse.

The determination of a dominant position is inextricably linked to the delineation of the "relevant market". Section 2(r) of the Act defines "relevant market" as the market which may be determined by the Competition Commission of India (hereinafter "CCI" or "Commission") with reference to the "relevant product market" or the "relevant geographic market" or both. Sections 19(5), 19(6), and 19(7) provide factors for determining the relevant product market and relevant geographic market. For instance, in Aditya Automobile Spares Private Limited v. Kotak Mahindra Bank Ltd. (2017 SCC ONLINE CCI 46), the CCI defined the relevant market as "the market for the provision of banking services for corporate entities in India," and found the Opposite Party (Kotak Mahindra Bank) not to be dominant due to its insignificant market share (nearly 3% in terms of net-worth value for 2015-16).

The CCI in (07/2012) Matrimony.com Limited Vs. Google LLC & Others (2018 SCC ONLINE CCI 30) held Google to be dominant in "Online General Web Search" and "Web Search Advertising Services" markets in India. Similarly, in Mr. Umar Javeed and Others v. Google LLC and Another (2022 SCC ONLINE CCI 61), Google was found dominant in markets for licensable smart mobile device operating systems and app stores for Android OS in India.

Manifestations of Abuse under Section 4(2) of the Act

Section 4(2) of the Act enumerates practices that constitute an abuse of dominant position. These are not exhaustive but illustrative of conduct that is proscribed.

Unfair or Discriminatory Pricing and Conditions (Section 4(2)(a))

Section 4(2)(a) prohibits a dominant enterprise from directly or indirectly imposing unfair or discriminatory conditions in the purchase or sale of goods or services, or unfair or discriminatory prices (including predatory prices). "Predatory price," as defined in Explanation (b) to Section 4(2)(a), means the sale of goods or provision of services at a price below the cost, as may be determined by regulations, of production of the goods or provision of services, with a view to reduce competition or eliminate competitors.

In Shamsher Kataria v. Honda Siel Cars India Ltd. (2014 SCC ONLINE CCI 95), the CCI found several Original Equipment Manufacturers (OEMs) to be abusing their dominant position in the aftermarket for their respective brands of spare parts and diagnostic tools. The practices included restricting the availability of genuine spare parts and technical information to independent repairers, and imposing unfair prices. Specifically, Toyota and HML were found in violation of Section 4(2)(a)(ii) for imposing unfair prices. The Commission also found that clauses in agreements requiring authorized dealers to source spare parts only from OEMs or their approved vendors were anti-competitive.

The concept of unfair pricing was central to Mcx Stock Exchange Ltd., Informant v. National Stock Exchange Of India Ltd. (2011 SCC ONLINE CCI 52). The CCI held that NSE abused its dominant position in the Currency Derivatives (CD) segment by adopting a zero-price policy (fee waiver) which was deemed unfair and exclusionary, aimed at eliminating competitors. The DG's report noted the total cost for the CD segment for NSE was substantial, indicating the zero-price policy was not sustainable without cross-subsidization or anti-competitive intent.

The Supreme Court in Uber (India) Systems Private Limited v. Competition Commission Of India And Others (2019 SCC 8 697) observed that if Uber was making a loss per trip (Rs. 204 per trip as alleged), it could prima facie attract Explanation (a)(ii) to Section 4 (affecting competitors) and Section 4(2)(a) concerning predatory pricing. The Court affirmed that imposing an unfair price, including predatory price, constitutes abuse.

In Adani Gas Limited v. Competition Commission Of India (2020 NCLAT), and similarly in Faridabad Industries Association v. Competition Commission of India & Anr. (2020 NCLAT), the NCLAT dealt with allegations of unfair conditions in Gas Supply Agreements (GSAs) imposed by Adani Gas Limited (AGL), indicating scrutiny of contractual terms under Section 4(2)(a)(i).

In the Google cases, such as (07/2012) Matrimony.com Limited Vs. Google LLC & Others (2018), the prominent display and placement of Google's Commercial Flight Unit, depriving users of additional choices, was found to be an unfair imposition upon users, contravening Section 4(2)(a)(i). Similarly, in Mr. Umar Javeed and Others v. Google LLC and Another (2022), Google's imposition of broad limitation of liability clauses on app developers was considered unfair and arbitrary under Section 4(2)(a)(i).

Limiting Production, Markets, or Technical Development (Section 4(2)(b))

Section 4(2)(b) addresses conduct that limits or restricts: (i) production of goods or provision of services or market therefor; or (ii) technical or scientific development relating to goods or services to the prejudice of consumers.

The practices in Shamsher Kataria (2014) also fell foul of this provision. By not making genuine spare parts and diagnostic tools freely available, the OEMs were effectively limiting the provision of repair and maintenance services in the aftermarket and restricting technical development accessible to independent repair workshops, to the prejudice of consumers who were denied choice and potentially faced higher costs.

Denial of Market Access (Section 4(2)(c))

Section 4(2)(c) prohibits a dominant enterprise from indulging in practices resulting in the denial of market access in any manner. In Shamsher Kataria (2014), the denial of access to diagnostic tools and spare parts was considered a denial of access to an "essential facility," thereby amounting to an abuse of dominant position and denial of market access to independent repairers. Similarly, warranty conditions being invalidated if a car was repaired by independent repairers (as with Tata branded cars) also served to deny market access.

In (07/2012) Matrimony.com Limited Vs. Google LLC & Others (2018), the majority found that Google's restrictive clauses in direct search intermediation agreements, which asked publishers not to implement search technologies similar to Google's, denied market access to competitors in the online search syndication services market, contravening Section 4(2)(c). However, the dissenting members argued that this market was not properly defined and Google's dominance therein not established, and there was no evidence that partners would have opted for multiple search functionalities otherwise.

In Mr. Umar Javeed and Others v. Google LLC and Another (2022), the mandatory pre-installation of the entire Google Mobile Services (GMS) suite, which could not be uninstalled, and tying of the Play Store with Google Play Services, were found to deny market access to competing apps and app stores, thereby violating Section 4(2)(c).

Making Contracts Subject to Supplementary Obligations (Tying) (Section 4(2)(d))

This sub-section deals with practices where the conclusion of contracts is made subject to acceptance by other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts. The mandatory pre-installation of a bundle of apps (GMS) as a condition for licensing the Play Store, as seen in Mr. Umar Javeed and Others v. Google LLC and Another (2022), can be viewed as a form of tying in contravention of Section 4(2)(d), as OEMs were forced to pre-install Google's apps to get access to the essential Play Store.

Leveraging Dominance (Section 4(2)(e))

Section 4(2)(e) prohibits a dominant enterprise from using its dominant position in one relevant market to enter into, or protect, another relevant market. This was a key finding in Mcx Stock Exchange Ltd. v. National Stock Exchange Of India Ltd. (2011), where the CCI concluded that NSE used its position of strength in the non-CD (non-Currency Derivatives) segment to protect its position in the CD segment through its zero-price policy.

In Mr. Umar Javeed and Others v. Google LLC and Another (2022), the CCI found that Google leveraged its dominant position in the app store market for Android OS to enter and protect its position in the non-OS specific web browser market through the Google Chrome App, thereby contravening Section 4(2)(e). Google's tying of its search app with the Play Store license also ensured the protection of its dominance in online general search.

The majority in (07/2012) Matrimony.com Limited Vs. Google LLC & Others (2018) also found Google to have leveraged its dominance in the online general search market to strengthen its position in online search intermediation/syndication services through restrictive clauses, a contravention of Section 4(2)(e). The dissenting opinion, however, contested this by stating the second market was not properly defined as a relevant market.

Key Jurisprudence and Emerging Trends

The Automotive Aftermarket: Shamsher Kataria and Access to Spares

The Shamsher Kataria case (2014) remains a landmark decision concerning abuse of dominance in aftermarkets. The CCI's detailed investigation revealed systemic issues where OEMs controlled the supply of spare parts and technical information, thereby restricting competition from independent repairers. The Commission rejected the OEMs' arguments regarding copyright protection over engineering drawings for spare parts, holding that such protection did not subsist for most parts under Section 15(2) of the Copyright Act, 1957, as they were industrial designs capable of registration under the Designs Act, 2000, and had been reproduced more than 50 times. The CCI asserted its jurisdiction to examine this copyright issue as it was incidental to determining anti-competitive conduct. A penalty of 2% of the total turnover in India was imposed on the OPs.

Exclusionary Conduct in Financial Markets: The NSE Case

In Mcx Stock Exchange Ltd. v. National Stock Exchange Of India Ltd. (2011), the CCI's decision to penalize NSE with Rs. 50 crore for its zero-price policy highlighted the Commission's stance against exclusionary abuses by dominant players, even if the "price" was zero. The focus was on the effect of such a strategy in stifling competition and deterring entry, particularly when the dominant player had significant financial strength derived from other markets.

Dominance in Digital Markets: The Google Saga

The series of cases against Google underscores the challenges and complexities of applying competition law principles to digital markets. In (07/2012) Matrimony.com Limited Vs. Google LLC & Others (2018), the CCI found Google guilty of abusing its dominance by favoring its own vertical search services (like Google Flights) through prominent placement and biased search results. The Commission ordered Google to desist from such practices and not enforce restrictive clauses in search intermediation agreements. A penalty was imposed based on relevant revenue from India. The dissenting members, however, emphasized the lack of concrete evidence of harm to users or diversion of traffic, arguing that regulatory interventions should be evidence-based rather than perception-based and that dominance itself is not an antitrust concern, but its abusive conduct is.

Subsequently, in Mr. Umar Javeed and Others v. Google LLC and Another (2022), the CCI imposed a significant penalty of Rs. 1337.76 crore on Google for abusing its dominant position in multiple markets related to the Android mobile ecosystem. Key findings included mandatory pre-installation of GMS, tying of Play Store with Google Play Services, and leveraging dominance to protect Google Chrome and Google Search. The CCI issued several remedial directions to Google to change its conduct.

The Supreme Court, in Google Llc And Another v. Competition Commission Of India And Others (2023 SCC ONLINE SC 88), upheld the NCLAT's refusal to grant an interim stay on CCI's directives from the Umar Javeed case, emphasizing the necessity of preserving competitive practices in the digital ecosystem and directing NCLAT to dispose of the appeal promptly. This signals judicial backing for the CCI's robust enforcement in digital markets.

Applicability to State Entities and PSUs

The question of whether the Competition Act applies to state entities and Public Sector Undertakings (PSUs) has been contentious. In Jupiter Gaming Solutions Private Limited v. Secretary, Finance Government Of Goa (2011 SCC ONLINE CCI 24), allegations of abuse of dominant position were made against the Government of Goa for formulating discriminatory pre-qualification terms in a lottery tender. Similarly, in Competition Commission Of India v. State Of Mizoram And Others (2022 INSC 64), the State of Mizoram was alleged to have abused its dominant position as an administrator of state lotteries.

The Supreme Court in COAL INDIA LTD v. COMPETITION COMMISSION OF INDIA (2023 SCC ONLINE SC 740) definitively held that the Competition Act, 2002, applies to Coal India Limited (CIL), a statutory monopoly. The Court reasoned that CIL, despite its nationalization objectives under Article 39(b) of the Constitution, qualifies as an 'enterprise' under Section 2(h) of the Act and is not exempt from its provisions. This ruling clarifies that state-created monopolies engaged in economic activities are generally subject to competition law scrutiny for abuse of dominance.

Procedural and Jurisdictional Aspects

The Investigative Process and Prima Facie Opinion

The CCI initiates an inquiry typically upon receiving information (complaint) under Section 19(1)(a) or suo motu. If the Commission forms a prima facie opinion that a case of abuse of dominance exists, it directs the Director General (DG) to conduct an investigation under Section 26(1). The Supreme Court in Competition Commission Of India v. Steel Authority Of India Limited And Another (2010 SCC 10 744) clarified that a direction under Section 26(1) for investigation is an administrative, preliminary step and not an appealable order under Section 53-A(1)(a). It also held that the CCI is not obligated to provide notice or a hearing at this prima facie stage. The Court further affirmed that the CCI is a necessary or proper party in proceedings before the Competition Appellate Tribunal (now NCLAT).

As noted in Competition Commission Of India v. Grasim Industries Ltd. (2019 Del HC), an investigation into alleged anti-competitive agreements under Section 3 might reveal information indicating a prima facie contravention of Section 4, allowing the DG to expand the scope of investigation accordingly, though the focus and nature of inquiry under Section 3 and Section 4 are distinct.

Jurisdictional Interface with Sectoral Regulators

The interface between the CCI and sectoral regulators can lead to jurisdictional questions. In Competition Commission Of India v. Bharti Airtel Limited And Others (2018 SCC ONLINE SC 2678), the Supreme Court held that the CCI's jurisdiction is not ousted by the presence of a sectoral regulator like TRAI. However, if the issues involve technical or contractual aspects primarily within the sectoral regulator's domain, the CCI should ideally await the findings of the sectoral regulator before proceeding with its own competition assessment. The Court emphasized comity between authorities, with TRAI having exclusive jurisdiction over sector-specific regulatory issues that might be prerequisites to an anti-trust analysis.

Challenges in Proving Abuse and Calculation of Penalties

The Evidentiary Burden

Proving abuse of dominance requires substantial evidence. The dissenting opinion in (07/2012) Matrimony.com Limited Vs. Google LLC & Others (2018) highlighted this, stating, "the onus is on the Commission to establish from the evidence on record that there is either an imposition of unfair or discriminatory condition...or there is a restriction...or indulgence in practice or practices which result in denial of market access..." The dissenters found a lack of evidence to establish abuse as indicated by the operatives used in Section 4 of the Act and cautioned against interventions based on perception rather than concrete evidence of harm to competition or consumers.

Penalty Imposition: Relevant v. Total Turnover

Section 27(b) of the Act empowers the CCI to impose a penalty which shall not exceed ten percent of the average of the turnover for the last three preceding financial years upon each of such persons or enterprises which are parties to such agreements or abuse. A significant debate has been whether "turnover" refers to total turnover or "relevant turnover" (i.e., turnover from the infringing product/service). In Excel Crop Care Limited v. Competition Commission Of India And Another (2017 SCC 8 47), a case primarily concerning Section 3 (cartels), the Supreme Court endorsed the principle of "relevant turnover" for imposing penalties, stating it should be proportional to the gravity of the contravention and the impact on the affected market. This principle is equally applicable to penalties under Section 4. The CCI, in (07/2012) Matrimony.com Limited Vs. Google LLC & Others (2018), noted Google's contention that penalty calculation should be based on relevant revenues generated in India from the allegedly affected markets, referencing the Supreme Court's confirmation of this principle.

It is important to note, as stated in Raghavendra Gupta Fort William Jute Mills Division. v. The Secretary Competition Commission of India (2016 CompAT), a finding of violation of Section 4 is specific to particular goods, products, or services, and the turnover of other products/services cannot be clubbed for penalty if there is no allegation of abuse concerning them.

Conclusion

The jurisprudence surrounding abuse of dominant position under Section 4 of the Competition Act, 2002, has evolved significantly in India. The CCI and appellate courts have grappled with complex issues, from traditional markets like automotive aftermarkets and financial services to the rapidly evolving digital economy. Key principles regarding the definition of dominance, relevant market delineation, types of abusive conduct, and the application of the law to state entities have been established and refined through landmark cases.

While the framework for addressing abuse of dominance is robust, challenges remain, particularly in terms of evidentiary standards in complex, data-driven markets, and ensuring that remedies are effective in restoring competition without stifling innovation. The emphasis on evidence-based decision-making, as highlighted in dissenting opinions and affirmed by the need for proportionality in penalties, will continue to be crucial. As Indian markets become more integrated and technologically advanced, the role of Section 4 in safeguarding fair competition and consumer welfare will only grow in importance, necessitating continuous adaptation and nuanced application of competition law principles.