Download abuse of dominance in fact and in law

ABUSE OF DOMINANCE
IN FACT AND IN LAW
Presentations:
G.R.Bhatia,
Addl.Director General
Competition Commission of India
• “DCA reforms rabbit has not been
allowed to become turtle”
DCA opted for –
incremental updation in Company Law
Stock approach to Competition Law
The shepherd drives the wolf for which
sheep thanks the shepherd as his
liberator while wolf denounces him for
same act as destroyer of liberty. In
plain words, the sheep and wolf are not
agreed upon the definition of “Liberty”
- ABRAHAM LINCOLN
Preamble and Section 18:
To prevent practices which have
adverse effect on competition, to
protect the interest of consumers and
to ensure freedom of trade carried on
by other participants, in markets, in
India.
Hesitations and hic-cups are
inherent
while driving on
untravelled path. It is better to
explore life than to play safe.
Companionship
competitiveness
governance
and
between
corporate
Govt. proposes to set up National
Manufacturing Competitiveness Council
(NMCC)
Positive
co-relation
competitiveness and corruption
between
COMPETITION OR RIVALRY is key to
competitiveness
♥ promotes efficiency;
♥ encourages innovation;
♥ punishes the laggards;
♥ facilitates better governance;
and
♥ ensures availability of goods
in abundance of acceptable quality at
affordable price
UNIQUE FEATURES OF COMPETITION
•
We teach and preach competition but invariably
do not practice
•
Competition does not have a human face
•
Competition kills competition
•
Competition is unstable
•
Nature has created monopolies
•
Competition is not an exact science.
Areas focused under the M.R.T.P.Act
(i)
Prohibition of concentration of economic power to
the common detriment.
(ii) Control of monopolies; and
(iii) Prohibition of monopolistic, restrictive & unfair trade
practices
M.R.T.P.Act
From 1970 to 1984
From 1984 to 1991
From 1991 onwards
Theme areas of Competition Act:
•
Prohibition of anti-competitive
agreements;
•
Prohibition of abuse of dominant
position;
•
Regulation of combinations;
•
Competition Advocacy
Dominant undertaking under the
M.R.T.P.Act
An undertaking which by itself or
alongwith inter-connected undertakings
produces, supplies, distributes or other
controls not less than 1/4th of the total
“goods” or “services” produced or
rendered in India.
The dominance is to be determined
on the basis of figures published by
such authority as is specified by the
Central Govt. and is to be reckoned
in
terms
of
the
M.R.T.P.
(Classification of Goods) Rules,
1971.
Dominant position under the Competition
Act:
A position of strength enjoyed by an enterprise
in the relevant market, in India which enables it
to (i) operate independently of competitive forces;
or
(ii) affects its competitors or consumers or the
relevant market in its favour.
No specific test of market share or assets
or turnover is prescribed to determine
dominance in most of the developed
competition regimes including:
Belgium,
France
Italy
Netherlands
Switzerland
Cyprus
India
Japan
Spain
Turkey
Finland
Ireland
Mexico
Sweden
Presumption of dominance or triggering point to
scrutinize dominance in some of the competition
jurisdictions is as under:
Brazil
-
20%
Canada
Denmark
Germany
Israel
Poland
Norway
Russia
South Africa
U.K.
USA
-
60%
40%
50%
50%
40%
60%
65%
45%
40%
70%
Under European Law a dominant
market position is ‘……a position of
economic strength enjoyed by an
undertaking which enables it to prevent
effective competition being maintained
on the relevant market by affording it
the power to behave to an appreciable
extent independently of its competitors,
customers
and
ultimately
of
consumers’.
STAGES INVOLVED TO DETERMINE
ABUSE OF DOMINANCE
• Relevant market
• Existence of dominant position
• Identification of specific harmful
conduct
A firm may achieve dominance
through –
• Innovation
• Superior product
•
•
•
•
Affordable price
Efficient distribution system
Satisfactory after sale service
Entrepreneurial efforts
VIRTUES OF DOMINANCE
- CAPABILITY TO LEAD
- UNDERTAKE R & D
-
HEAVY ADVERTISEMENT
Factors to be taken into account to
determine dominance:
•
Market share of the enterprise
• Size and resources of the enterprise
• Size and importance of competitors
• Commercial advantage over competitors
• Service network,
• Dependence of consumers
• Dominant position as a result of statute or Govt.
company.
• Entry barriers
• Countervailing buying power
• Market structure
• Contribution to economic development and
• Any other factor
Circumstances are beyond one’s control
but conduct is within our power”
-
Jesus Christ
Inter-link between
Anti-competitive agreements and
mergers
Joint Dominance
Single Dominance
Situations when abuse of dominant position is
prohibited:
•
Imposition of unfair or discriminatory condition in the
purchase or sale of goods or services or their prices
•
Limiting or restricting
development,
•
Denial of market access
•
Supplementary obligations
•
Use of dominant position in one market to protect or
enter into another
production
or
technical
Powers of the Commission in
respect of abuse of dominance
•
•
•
•
•
To grant such interim relief during the enquiry.
To award compensation
To impose penalty on the guilty
To recommend division of
undertaking.
To issue “Cease & Desist” Order
Under Section 27 & 27A
of the M.R.T.P.Act, the
Central Govt. is vested
with power to “Divide an
Undertaking”
or
severance
of
interconnection
on
the
recommendation
of
M.R.T.P. Commission.
• The Central Govt. on
the recommendations of
CCI continues to be
vested with power to
give
directions
of
“Division
of
an
Enterprise”
enjoying
dominant position.
• “Marriage”
and
“Divorce”
amongst
undertakings forms part
of law.
The Competition Act with many innovative
concepts coupled with power to impose
penalties is likely to let in harsh glare of
sun light to disinfect pernicious AntiCompetitive Practices.
Cases decided by Canadian Competition
Tribunal
• Nutrasweet – 95% share in artificial sweetener market;
imposed exclusivity, allowed discount only to those who
will use logo & name, compelled customers to make all
their purchases.
• Laidlaw – 87% market share, engaged in commercial
waste
services,
imposed
non-compete
clause,
intimidation through litigation.
• Interac – 100% market share in services associated with
electronic banking network, prohibited new members
entry and higher membership fees for competing financial
service providers.
•
Tele Direct - Engaged in telephone directory advertising
having 96% advertising space, compelled tied selling
space of yellow pages directory, adopted discriminatory
practices relating to accounts and commissions, directed
to ‘Cease & Desist’ order against these practices.
• Canadian Yellow Pages Service (Canpys) - Publishes
national yellow page advertising, enjoys 90% market
share in Canada, required customers to arrangement all
such advertisements which can serve the province where
its head office is located,
it was prohibited from
maintaining head office rule.
Cases decided by European Commission
• Unilever - Provided freezer cabinets to Irish distributors
free of charge on the condition that they will stock only
Unilever products in the cabinets.
• British Airways - It offered extra commission to British
Travel Agencies only if they equaled or exceed their
previous years sale of tickets.
• Football World Cup & CFO - The CFO organized
football world cup in France and the European
Commission found the arrangement of ticket
discriminatory in as much as those who gave residential
address in France were given preference vis-à-vis those
who were residing out side France
Microsoft Corporation - A world’s largest software
company found abusing its dominant position in the
marketing of personal computer operating system. The
European Commission has imposed fine of US$612
million equivalent to 2630 crores
Sun-Microsystems, a rival was refused to provide interface information and consequently it contended unable
to compete in work group server operating system
(WGSOS). The other allegation relates to tying of WMP
with Window-2000.
Microsoft’s contention is it is
intellectual property.
European Commission feels that in view of
over whelming dominance, the veil of
intellect property need to be lifted and as
directed Microsoft to disclose within 120
days
complete
and
accurate
documentation so as to allow NonMicrosoft Group Servers to achieve full
inter-operatability.
It has also been
directed to develop PC Operating System
without WMP within 90 days.
Japan Fair Trade Practice Commission
• Microsoft – JFTC has recently warned
Microsoft to scrap a provision in its
licensing contracts with PC makers that
prevents
them
from
filing
patent
infringement suits if they find Microsoft
Software features similar to their own
technology.
Cases decided by Italian Anti-Trust
Authority
Sign Vs.Stetship - National Tele-communications Company
enjoys exclusive right over the production and distribution of
subscribers lists and holds dominant position in down stream
activities that use these lists to sell services to consumers and
businesses. Refusal to sell subscriber list on CD-Rom was
found to be abuse of dominant position by Italian Anti Trust
Authority.
Telesystem Vs.Sip - The Italian National Tele-communication
Company enjoyed legal monopoly over the net work and refused
to release lines to smaller company who wish to compete in
providing close user group services. It was found to be denial of
access to potential competitors. The Italian Anti-Trust Authority
ruled it as unjustified refusal aimed at preserving a dominant
position in the relevant market.
Case before the Brazilian Competition Authority
• Mcdonald Corporation: - The Pizza Giant has entered
into franchises agreement with 28 Brazilian parties from
whom it collects 24% of gross sales by way of rents in
respect of premises and use of its recipes. It has
acquired all most all locations and premises around its
restaurant so as to restrict the entry of rival brands. The
formal administrative proceedings have been opened
after preliminary investigation and the case is under
adjudication by CADE