Author: Basu Chandola
Research Assistant, Jindal Initiative on Research in Intellectual Property and Competition (JIRICO), has worked as a Research Associate at the Indian Institute of Corporate Affairs and is an alumnus of the National Law University graduated in the year 2018 with a B.B.A LL.B (Hons) Degree.
I. Introduction
The Hon’ble Supreme Court of India in the case of Uber India Systems Pvt. Ltd v Competition Commission of India[1] has dismissed an appeal arising out of an order[2] of the COMPAT wherein the COMPAT had struck down an order[3] of the Competition Commission of India (“CCI”) and ordered investigation into abuse of dominance allegations against Uber in the region of NCR. The Hon’ble Court based its findings on the basis of the information which stated that Uber was losing Rs.204 per trip in respect of every trip made by the cars of the fleet owners and that this loss did not make any economic sense other than pointing to Uber’s intent to eliminate competition in the market.
The Hon’ble Court also observed as follows:
‘Dominant position’ as defined in Explanation (a) (of Section 4) refers to a position of strength, enjoyed by an enterprise, in the relevant market, which, in this case is the National Capital Region (NCR), which:
(1) enables it to operate independently of the competitive forces prevailing; or
(2) is something that would affect its competitors or the relevant market in its favour.
Given the allegation made, as extracted above, it is clear that if, in fact, a loss is made for trips made, Explanation (a)(ii) would prima facie be attracted inasmuch as this would certainly affect the appellant’s competitors in the appellant’s favour or the relevant market in its favour.
Insofar as ‘abuse’ of dominant position is concerned, under Section 4(2)(a), so long as this dominant position, whether directly or indirectly, imposes an unfair price in purchase or sale including predatory price of services, abuse of dominant position also gets attracted.[4]
The observations of the Hon’ble Supreme Court, in this case, maybe interpreted to mean that any enterprise which is able to affect the market or its competitors in its favour will be considered to be dominant. In “New chapter in competition law probes”[5], Adv. Somasekhar Sundaresan has argued that per this judgment, any enterprise that is able to consistently price itself below cost would be in a position to dominate. If more than one enterprise were to do so, it would mean that there are more than one dominant enterprises in one relevant market. This piece seeks to build further this observation.
II. Implications of the judgment
As suggested in the article, the judgment of the Hon’ble Supreme Court may change the way Section 4 is interpreted. There are two case scenarios wherein more than one enterprise can be dominant in the same relevant market:
Inclusion of collective dominance
Individual dominance of more than one enterprise
In the next part, the author shall first deal with existing jurisprudence on dominant position followed by the possibility of inclusion of these concepts in the Indian competition law jurisprudence.
III. Existing jurisprudence relating to the dominant position
The jurisprudence on the existence of more than one dominant enterprise can be easily inferred from a bare reading of CCI’s final order in In Re: Fast Track Call Cab Pvt. Ltd v ANI Technologies Pvt. Ltd.[6]. The Commission has observed in this case that Act does not allow for more than one dominant player under Section 4 on the basis of the following reasons:
The term ‘a’/ ‘an’ used in section 4(2) evidently states the singular form, which shows that the intention of the legislature was never to hold more than one enterprise to be in a dominant position, unless they are part of the group within the meaning of Section 5 of the Act.
The usage of words ‘operate independently’ appearing in the definition clearly shows that the concept of ‘dominance’ is meant to be ascribed to only one entity. Further, the whole essence of Section 4 of the Act lies in proscribing unilateral conduct exercised by a single entity or group, independent of its competitors or consumers.
Factors mentioned under Section 19(4) signify that the focal point of such assessment is the alleged dominant entity, around which the assessment revolves. If there was any scope of more than one entity being envisaged by the Act, factors like ‘size and resources of competitors’, ‘economic power of the enterprise including commercial advantages over competitors’ etc. would not have found a place under Section 19(4) of the Act.
Section 28 of the Act, which specifically deals with the division of enterprises enjoying the dominant position, the usage of the words unambiguously indicates that the Act does not provide for more than one enterprise to be dominant in the relevant market.
The Competition (Amendment) Bill, 2012 (Bill No. 136 of 2012) which lapsed due to dissolution of Lok Sabha had provided for the inclusion of collective dominance. Clause 4 of the said Bill stated that the words "jointly or singly" shall be inserted in section 4 of the Act. The amendment further reinforces the proposition that there is no scope in the present scheme of the Act, either expressly or by implication, to contemplate the presence of two independent entities as dominant at the same time in the relevant market. Had there been any scope for such interpretation, this amendment would not have been required.
The Commission further stated that in the presence of more than one dominant entity, none of those entities would be able to act independently of one another. The Commission has further relied on this order in a number of subsequent decisions[7].
IV. Collective dominance in Competition Law
(a) In the EU
In the European Union, Article 102 TFEU prohibits any abuse by one or more undertakings of a dominant position. It follows that the application of Article 102 is not confined to cases where a single undertaking holds a dominant position but is also applicable where two or more undertakings together hold a dominant position.[8] In Italian Flat Glass[9], it was held that two or more independent economic entities will be collectively dominant when they are united by economic links affording them the power to behave to an appreciable extent independently of their competitors, their customers and ultimately of their consumers. In Airtours[10], three conditions were put forward for collective dominance i.e. Market transparency (common understanding of the position), Mechanism of retaliation and Lack of competitive pressure from outsiders to the oligopoly.
(b) In Indian Law
The CCI has in a number of cases held that the scheme of Section 4 of the Act does not envisage or provide for joint or collective dominance.[11] The CCI has observed that the existence of two strong players in the market is indicative of competition between them unless they have agreed not to compete, which also can be only be looked into under Section 3 of the Act, not Section 4.[12] The Commission has observed that the concept of dominance does centre on the fact of considerable market power that can be exercised only by a single enterprise or a small set of market players of a group.[13] That is why the Act includes the term “group” separately because a “group” of firms with joint management control can have collective decision making and can exercise joint dominance.[14] Even the Competition Law Review Committee report states that collective dominance is not recognized by the Act and suggests that the existence of two strong players in the market may be indicative of competition between them unless they have agreed not to compete. The Committee has even agreed not to introduce the concept of collective dominance at this stage.[15] Therefore, the possibility of inclusion of collective dominance seems low.
V. More than one dominant enterprise
In the aforementioned article, it has been suggested that more than one dominant enterprise may exist in the market simultaneously if they are able to price their offering below the cost. For example, if two enterprises A and B are pricing their services below the cost, both of them may be considered dominant as they are affecting the competition in their favour.
The existence of the two dominant enterprises may not be possible as both these operators exert competitive constraints on each other. Each of the two dominant enterprises will have to consider the other competitor’s strategy while deciding on their own policies and therefore will not be actually operating independently. If an enterprise is not acting independently, it cannot be said to be dominant as per the Act. Also, if one of the two dominant enterprises changes its rates to harm the consumers, the consumers will have an option to shift to the other enterprise. Therefore, some degree of constraint will be exerted by the presence of the other strong firm.
Also, if both the enterprises are offering a similar discount and continue in the market for a long time and the market has not tilted towards one of them, none of them is actually able to affect the market in its favour. It is only when one of the dominant enterprises is able to successfully drive the other firm from the market or is able to reduce the other’s market share that the firm would become dominant.
Furthermore, the observations of CCI in Re: Fast Track Call Cab Pvt. Ltd v ANI Technologies Pvt. Ltd.[16] as discussed above seem to suggest that having more than one dominant enterprise is not feasible in the existing framework of the Act. Therefore, the author feels that interpreting the judgment to establish the dominance of more than one enterprise is not viable.
VI. Caveat Lector
The author believes that the judgment will have a far-reaching impact on the competition law jurisprudence in the country. However, it is to be noted that the Hon’ble Court only had to determine the validity of the investigation ordered into by the COMPAT. The Hon’ble Court did not rule on any substantive issue in detail and, reaching to any conclusion on the substantive issue by interpreting this judgment might be jumping the gun. The author hopes that either a clarification order by the Hon’ble Court or a future decision of any of the adjudicatory authorities may shed light on the observations in this case soon which might provide a clearer picture on the implications of this judgment.
[1] Civil Appeal No. 641 of 2017
[2] Meru Travels Solutions Private Limited v Competition Commission of India, Appeal No. 31 of 2016
[3] In Re: Meru Travel Solutions Private Limited (MTSPL) v Uber India Systems Pvt. Ltd., Case No. 96 of 2015
[4] Uber India Systems Pvt. Ltd v Competition Commission of India, Civil Appeal No. 641 of 2017
[5] Somasekhar Sundaresan, “New chapter in competition law probes” https://somasekhars.wordpress.com/2019/09/18/new-chapter-in-competition-law-probes/
[6] In Re: Fast Track Call Cab Pvt. Ltd v ANI Technologies Pvt. Ltd., Case No. 6 & 74 of 2015
[7] XYZ v Indian Oil Corporation Ltd., Case No. 05 of 2018; In Re: Meru Travel Solutions Pvt. Ltd. v M/s ANI Technologies Pvt. Ltd., Case No. 25-28 of 2017; In Re: Mr. Arjun v Vaicom 18, Case No. 57 of 2017
[8] DG Competition, “Discussion paper on the application of Article 82 of the Treaty to exclusionary abuses” https://ec.europa.eu/competition/antitrust/art82/discpaper2005.pdf
[9] Joined cases T-68/89, T-77/89 and T-78/89, Società Italiana Vetro v Commission
[10] Case T‐342/99, Airtours v Commission
[11] In Re: Sun Electronics Private Limited and ElecTek Solutions Private Limited Case No. 02 of 2019; In Re: Noida Software Technology Park Ltd. and Star India Pvt. Ltd., Case No. 30 of 2017; M/s Royal Energy Ltd. v M/s Indian Oil Corporation Ltd., MTP Case No. 1/23 (C-97/2009/3IR)
[12] XYZ v Indian Oil Corporation Ltd., Case No. 05 of 2018
[13] Consumer Online Foundation Informant vs. Tata Sky Limited, Case No. 2 of 2009
[14] In Re: Dish TV India Limited v Hathway Cable & Datacom Limited, Case No. 78 of 2013
[15] MCA, “Report of the Competition Law Review Committee” http://mca.gov.in/Ministry/pdf/ReportCLRC_14082019.pdf
[16] In Re: Fast Track Call Cab Pvt. Ltd v ANI Technologies Pvt. Ltd., Case No. 6 & 74 of 2015