Abuse of Dominance

Abuse of dominance
 Power corrupts and absolute power corrupts absolutely
 Exploitation of market power through improper means
 Monopolization, abuse of dominant position and misuse of dominant power
 It take number of years to be a dominant enterprise
 Determining the status of the enterprise and evaluating the conduct
 Position of economic strength acquired through natural selection process, position helps the
enterprise to act independently
 When it prevents actual and potential competition by adopting methods causing
anticompetitive harm : Cause of concern
 Product superiority and efficiency itself is not a matter of concern
 Harvard school v Chicago school
 Sec 2 Sherman Act
 Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or
persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall
be deemed guilty of a felony….
 The Historical Meaning of “Monopoly”
 Sir Edward Coke Institutes of the Lawes of England (1664):
 “Institution[s] or allowance[s] by the King by his grant, commission, or otherwise to any person or persons, bodies
politic or corporate, of or for the sole buying, selling, making, working or using of anything whereby any person or
persons, bodies politic or corporate, are sought to be restrained of any freedom or liberty that they had before, or
hindered in their lawful trade.”
 Samuel Johnson’s dictionary of the English Language (3d ed. 1766)
“the exclusive privilege of selling anything”
 Noah Webster’s American Dictionary of the English Language (1828)
“The sole power of vending any species of goods, obtained either by engrossing the articles in market by
purchase, or by a license from the government confirming this privilege
 Monopoly Power and its abuse in U.S.

 Sec 2 of Sherman Act says that monopolization and attempted monopolization

shall be punished by fine and imprisonment
 It covers both Monopolization and attempted monopolization.
 Monopolization must be in the relevant market .
 Monopolist conduct must be causing anticompetitive harm.
 Idea of monopolization is focussed on market share and market power of an
enterprise
 Substantial degree of market power/ market share
 Marker power/ market share is used to create entry barriers/ market foreclosures
 Monopolistic conduct
 monopolistic conduct consists of acts that:
 (1) are reasonably capable of creating, enlarging or prolonging monopoly power
by impairing the opportunities of rivals; and
 (2) that either (2a) do not benefit consumers at all, or (2b) are unnecessary for
the particular consumer benefits claimed for them, or (2c) produce harms
disproportionate to any resulting benefits.
 In addition, the practice must be reasonably susceptible to judicial control,
which means that the court must be able to identify the conduct as
anticompetitive and either fashion an appropriate deterrent or an equitable
remedy likely to improve competition.
 Market share v Market Power
 American tobacco Co. v U.S. , Market power to exclude actual or potential competition and
intent and purpose to exercise that power are key ingredients
 Monopoly exists not when prices are raised and competition is excluded but power exists to
raise prices or to exclude competition when it is desired so is the key elements
 High market share signify market power but market power can be acquired by other means
 Raising the prices, creating entry barriers, market foreclosures and creating other anti
competitive harms are considered to evaluate the conduct of an enterprise
 Relevant market idea based on relevant product market and relevant geographical market
 Effect of the market power is to be seen from not protecting the competitor but protecting
the competiton
 ATTEMPT TO MONOPOLIZE
 Sherman Act Sec 2: “… Every person who shall monopolize, or attempt to
monopolize, or combine or conspire with any other person or persons, to
monopolize…”
 U.S. v. Swift (1905), per Holmes (adapting common law)
1.Specific Intent
2. One or more anticompetitive acts
3. “Dangerous Probability of Success”
 Dangerous Probability: Objective or subjective? Not inferred from intent; today,
“specific intent” requirement has been minimized or perhaps even meaningless
 “dangerous probability” requirement looks market, firm, conduct
 The market must be capable of being monopolized
 Attempt to Monopolize

Phila. Taxi Ass'n, Inc. v. Uber Techs., Inc.

 Contd.
 Being injured by anticompetitive conduct, new technology or more competition
 Should violation of a regulatory provision satisfy the conduct requirement for
monopolization or attempt claim?
 Should Uber be required to share its technology?
 If not, what should the remedy be? Shut down?
 Uber succeeded mainly because customers preferred it; taxi industry failed to adapt
to new technology
 Tension between “Dangerous Probability” and “Antitrust Injury” --- realistic danger of
monopoly, or just more competition?
 Contd.
 The theory of Natural Monopoly (public utilities, transportation utilities, bridges,
pipelines, some public goods): generally assumed:
 1. Costs Decline continuously until output equals at least 50% + 1 of markets. Typically
very high fixed costs.
 2. Direct and Indirect Network Effects, such that the network becomes more valuable
as the number of users on one or both sides increases
 3. A single demand curve – i.e., no product differentiation
 4. When product differentiation is possible, and depending on its extent, competitive
entry is possible: e.g., Facebook has faced several instances of new entry (Instagram,
Twitter, Tik-Tok); but competitors of Google Search struggle because effective
differentiation is harder to pull off
Google
• Alphabet (Google) owns both Android
and Google Search; it does not own
iPhone, but is default search there
only upon payment of a large but
unknown sum
• Will it be attempted monopolization
or abuse of dominance?
Epic Games – playable on many devices
• One can purchase from Epic Games on the
iPhone only by going through the App store, and
Apple takes a significant commission (up to 30%);
but the games themselves are available on
Android and nearly all other major platforms
• App purchases are “wholly derivative” of the
primary product (the iPhone)
• But Epic is sold across numerous platforms: 1)
iPhone and Android; 2) game consoles (xBox
and Playstation); 3) desktops/laptops from
Windows/Apple, and others)
• Court – no antitrust violation (insufficient
power), but a violation of California unfair
competition statute
• Similar case against google
 Microsoft case

IBM 7090 (1959) (Dr.

Strangelove (1964, Peter Sellers) IBM Series 370 (1971) IBM Personal Computer (1981)
 Contd.

Microsoft OS Bottleneck: MS-DOS Microsoft OS Bottleneck

(1981) to Windows (1985)
 United States v. Microsoft
253 F.3d 34 (D.C.Cir. 2001): CONDUCT
 Prevent OEMs from removing Microsoft icons from desktop, start menu, or folders (condemned)
 Prevent OEMs from modifying initial boot sequence (condemned)
 Prevent OEMs from substituting their own desktop for MS desktop (approved)
 Excluding IE from “add/remove” menu (condemned)
 Tying (moot upon settlement)
 Giving IE free to IAPs and some program developers (approved): problem of 2-sided market and
free sales
 Exclusive dealing with IAPs (condemned)
 Agreements with some app developers to use IE exclusively (condemned)
 Pressure on Apple to bundle IE into Mac Office (condemned; Apple then developed Safari)
 Deceiving program developers about “corrupted”Java (condemned)
 Coercing Intel to stop development of “Java enabled chip” ( condemned)
 Abuse of dominance in E.U.

 Art 102 of TEFU prohibits abuse of dominance.

 Such abuse may, in particular, consist in:
(a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading
conditions;
(b) limiting production, markets or technical development to the prejudice of consumers;
(c) applying dissimilar conditions to equivalent transactions with other trading parties,
thereby placing them at a competitive disadvantage;
(d) making the conclusion of contracts subject to acceptance by the other parties of
supplementary obligations which, by their nature or according to commercial usage, have
no connection with the subject of such contracts.
 Contd.
 Three factors, a dominant entity, dominance in relevant market and abuse of
dominance is required
 Large market share, freedom of action which is exercised in these markets with
disregard to other competitors
 In LA Hoffman Roche, position of strength enjoyed by an enterprise which
enables to act it independently as dominance
 In United brands, power to hinder effective competition is considered by the
court
 Dominance in the relevant market has to be established before evaluating the
conduct of the enterprise
 Continued

 La Hoffman Roche v commission

 United Brands v Commission
 Michelin NV v Commission
 Tetra pak 1 and 2 case
 Abuse can be exploitative or exclusionary like
(a) Predatory pricing ( Wandoo interactive case, Brook group company v brown and
Williams tobacco company)
(b) Causing entry barriers
(c) Market foreclosure ( Horizontal v Vertical)
 Contd.
 Agreement ( Form, intent and content ) v Abuse of dominance (Conduct)
 Competitor v Consumer v Competition
 Degree and Onus of proof
 Biases and Prejudices in favour of small and against big may lead to false positives and
false negatives
 Undue intervention may lead to harm to competition
 Exclusionary abuse are further a dilemma ( Continental can v Commission)
 Efficient competitors v non efficient competitors
 Per se rule to be invoked or not
 Causation ( Continental can case ) –use of economic power connection
 Abuse of dominance in India

 Sec 4 of the competition act , 2002 deals with abuse of dominance.

 4. Abuse of dominant position.—
(1) No enterprise shall abuse its dominant position.
(2) There shall be an abuse of dominant position under sub-section (1), if an enterprise,
—
(a) directly or indirectly, imposes unfair or discriminatory—
(i) condition in purchase or sale of goods or services; or
 Contd.
ii) price in purchase or sale (including predatory price) of goods or service; or
Explanation.—For the purposes of this clause, the unfair or discriminatory
condition in purchase or sale of goods or services referred to in sub-clause (i)
and unfair or discriminatory price in purchase or sale of goods (including
predatory price) or service referred to in sub-clause (ii) shall not include such
discriminatory conditions or prices which may be adopted to meet the
competition; or
(b) 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; or
(c) indulges in practice or practices resulting in denial of market access; or
 Continued
(d) makes conclusion of contracts 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; or
(e) uses its dominant position in one relevant market to enter into, or protect, other relevant
market. Explanation .—For the purposes of this section, the expression—
(a) “dominant position” means 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;
(b) “predatory price” means the sale of goods or provision of services, at a price which is 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 the competitors.
 Factors to measure dominance and Powers of CCI
with respect to dominance
Section 19(4) in the Competition Act, 2002
The Commission shall, while inquiring whether an enterprise enjoys a dominant position
or not under section 4, have due regard to all or any of the following factors, namely:—
 (a) market share of the enterprise;
 (b) size and resources of the enterprise;
 (c) size and importance of the competitors;
 (d) economic power of the enterprise including commercial advantages over
competitors;
 (e) vertical integration of the enterprises or sale or service network of such
enterprises;
 (f) dependence of consumers on the enterprise;
 Contd.
 (g) monopoly or dominant position whether acquired as a result of any statute or by
virtue of being a Government company or a public sector undertaking or otherwise;
 (h) entry barriers including barriers such as regulatory barriers, financial risk, high
capital cost of entry, marketing entry barriers, technical entry barriers, economies of
scale, high cost of substitutable goods or service for consumers;
 (i) countervailing buying power;
 (j) market structure and size of market;
 (k) social obligations and social costs;
 (l) relative advantage, by way of the contribution to the economic development, by
the enterprise enjoying a dominant position having or likely to have appreciable
adverse effect on competition;
 (m) any other factor which the Commission may consider relevant for the inquiry.
 Powers of CCI
Sec 27. Orders by Commission after inquiry into agreements or abuse of dominant position.—Where
after inquiry the Commission finds that any agreement referred to in section 3 or action of an
enterprise in a dominant position, is in contravention of section 3 or section 4, as the case may be, it
may pass all or any of the following orders, namely:—
 (a) direct any enterprise or association of enterprises or person or association of persons, as the case
may be, involved in such agreement, or abuse of dominant position, to discontinue and not to re-
enter such agreement or discontinue such abuse of dominant position, as the case may be;
 (b) impose such penalty, as it may deem fit which shall be not more than ten per cent. of the average
of the turnover for the last three preceding financial years, upon each of such person or enterprises
which are parties to such agreements or abuse: Provided that in case any agreement referred to in
section 3 has been entered into by any cartel, the Commission shall impose upon each producer,
seller, distributor, trader or service provider included in that cartel, a penalty equivalent to three
times of the amount of profits made out of such agreement by the cartel or ten per cent. of the
average of the turnover of the cartel for the last preceding three financial years, whichever is higher;
 Contd.
 (c) award compensation to parties in accordance with the provisions contained in
section 34;
 (d) direct that the agreements shall stand modified to the extent and in the manner as
may be specified in the order by the Commission;
 (e) direct the enterprises concerned to abide by such other orders as the Commission
may pass and comply with the directions, including payment of costs, if any;
 (f) recommend to the Central Government for the division of an enterprise enjoying
dominant position;
 (g) pass such other order as it may deem fit.
 Cases

 Belaire's housing association v DLF

 Uber India Systems Pvt. Ltd v Competition Commission of India, Civil Appeal No. 641
of 2017 ( SC 2019)
 Meru Travels Solutions Private Limited v Competition Commission of India, Appeal No.
31 of 2016
 Bijay Poddar v. Coal India Ltd. (2017)
 Google case (2018)