Competition Law Dominant Position and Its Abuse: Meaning of Dominant Position

Abstract

Competition in markets means rivalry between competitors to attract customers which results in enhanced consumer welfare by way of more choices, newer products and low prices. If there is no competition in markets, one or more firms seek to gain monopoly or oligopoly which allows them to disregard the competitive pressure exerted by the competitors, leading to loss of consumer welfare available in a competitive market. Thus, unfair conduct of a dominant enterprise or the conduct of an enterprise to seek dominance unfairly (monopolization) is under scrutiny under the competition laws. These concepts are variously called “abuse of dominant position” or “monopolization” or “misuse of market power,” or some similar term. Prohibition of ‘abuse of dominant position’ forms an important enforcement area for competition agencies around the world; the other areas usually being prohibition of anti-competitive agreements (horizontal agreements including cartels and vertical agreements) and the regulation of combinations (acquisition or mergers and amalgamations). In India, while the MRTP Act provided for control of monopolies and prohibited ‘Monopolistic Trade Practices (MTP)’, derived from the basic philosophy of prohibition ingrained in the Constitutional Directive of ‘prevention of concentration of economic power to the common detriment’; the Competition Act (hereinafter referred to as ‘the Act’) was enacted keeping in view the economic development of the country post liberalization and privatization era. The shift has been from ‘command-and-control’ triggered policies to an open market policy and thus now ‘monopoly’ itself is not per se bad, however an abuse of this ‘monopoly’ is. The practice of prohibiting ‘abuse of dominance’ is a challenging and complex task for the competition agencies around the world for two simple reasons, i.e. there are several practices which may amount to an abuse of dominant position (predatory pricing, offering rebates etc.) and there is a very thin line of difference between the legitimate practice of an enterprise to become dominant in market, which is perfectly justified from a business perspective, and using the dominant position unfairly to the detriment of the competition in markets. In Verizon , the US Supreme Court recognized this by saying “the opportunity to charge monopoly prices – at least for a short period – is what attracts “business acumen” in the first place, it induces risk- taking that produces innovation and economic growth”. This is what Schumpeter had said in his theory of economic development.