Date: 16/12/2022

Relevance: GS-3: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

Key Phrases: Competition Commission of India (CCI), Dominant undertakings, National Company Law Appellate Tribunal (NCLAT), Competition Act, 2002, Types of abusive conduct, Exclusionary abusive conduct.

Context:

• Recently, the Competition Commission of India (CCI) was among headlines due to its interventions in digital markets against dominant undertakings for their abusive conduct.

What is the Competition Act, 2002?

• The Competition Act was passed in the year 2002 and had been amended by the Competition (Amendment) Act, 2007.
• The law follows the philosophy of modern competition laws.
• The Act prohibits anti-competitive agreements, abuse of dominant position by enterprises and regulates combinations, which causes an appreciable adverse effect on competition within India.
• The Amended Act has facilitated the establishment of the Competition Commission of India and the Competition Appellate Tribunal.
• Later on the government replaced the Competition Appellate Tribunal (COMPAT) with the National Company Law Appellate Tribunal (NCLAT) in 2017.

What is a dominant position under the competition law?

• The Competition Act, 2002 considers certain behavior 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.
• Although holding a dominant position is not per se illegal in the Competition Act, abuse of such position is considered to be against the norms of fair competition.
• Different types of abusive conducts
  • Exclusionary abusive conduct: When a dominant enterprise restricts competition and excludes its competitors from the relevant market.
  • Exploitative abusive conduct: allows a dominant undertaking to exploit consumers, directly inflicting consumer harm.
  • Discriminatory abusive conduct: when a dominant entity discriminates between consumers or intermediate users.
• Examples of abusive conduct
  • Imposing unfair or discriminatory condition or price in purchase or sale of goods or services is an example of exploitative conduct.
  • Resorting to tying in is an example of exclusionary conduct.
  • Refuse to supply the product or service to a customer depriving choice to consumers.
  • Using leveraging, a dominant entity uses its power in one market to induce or foreclose sales in the second market.
  • Although most of the abusive conducts are of exclusionary nature.

What are the consequences of the abusive conduct?

• CCI has powers to correct abusive behaviour using various behavioural and structural remedies.
  • The CCI can issue cease and desist orders.
  • Can impose monetary penalties, besides modifying agreements.
  • In appropriate cases, it can even order division of enterprises enjoying dominant position.
• In DLF case
  • The company through imposition of arbitrary, unfair and unreasonable conditions on flat buyers through Apartment Buyer Agreement was abusing its dominant position.
  • The 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.
• The National Stock Exchange (NSE) case
  • It was 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.
• The latest Google Case of Android
  • 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.
  • These agreements required OEMs to mandatorily pre-install entire Google Mobile Suite (GMS), which included a 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 an imposition of unfair conditions on device manufacturers.
  • The CCI has imposed a penalty of ₹1,337.76 crore on Google.

There are many advantages of the compliance programme

• No legal and regulatory sanctions
  • By adhering to competition laws and competition compliance the dominant undertakings in India can avoid legal and regulatory sanctions.
• Improved market credibility and reputation of firms
  • The dominated entities can avoid imposed penalties and maintain their reputation and credibility in the market.
• Promotion of a level-playing field
  • Competition compliance leads to 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.
• Improved consumer welfare
  • 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 choices 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.
• Innovation and growth
  • 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.

Conclusion

• Adhering to competition laws and regulations is in the interest of dominant undertakings and contributes to the development of a fair and competitive market in India.
• Therefore it is up to the dominant undertakings to align their business practices in conformity with the special and differential obligations of the regulatory architecture under the competition law as the cost for non-compliant behaviour may be high besides damage to business reputation.

Source: The Hindu BL

Mains Question:

Q. Adhering to competition laws and regulations helps avoid legal and regulatory sanctions and encourages innovation and growth in the market. Analyze the statement in light of India’s competition laws and related compliance framework. (250 words)