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The document discusses the implications of anti-competitive agreements and the abuse of dominant positions under the Competition Act, 2002 in India, emphasizing the protection of consumer interests. It outlines specific sections of the Act that prohibit agreements adversely affecting competition, the role of the Competition Commission of India in regulating mergers, and various case studies illustrating these principles. Key examples include the DLF case regarding unfair contract terms, Excel Crop's bid rigging, and the Hiranandani Hospital's pricing practices, highlighting the ongoing challenges in maintaining fair competition.

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0% found this document useful (0 votes)
7 views9 pages

final notes

The document discusses the implications of anti-competitive agreements and the abuse of dominant positions under the Competition Act, 2002 in India, emphasizing the protection of consumer interests. It outlines specific sections of the Act that prohibit agreements adversely affecting competition, the role of the Competition Commission of India in regulating mergers, and various case studies illustrating these principles. Key examples include the DLF case regarding unfair contract terms, Excel Crop's bid rigging, and the Hiranandani Hospital's pricing practices, highlighting the ongoing challenges in maintaining fair competition.

Uploaded by

Pritha Banerjee
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Notes for the presentation

SLIDE 1
For example if a firm attains a dominant status and starts abusing its position
then it will lead to hike in prices and degradation of quality, etc, thus
affecting the consumers. But competition policy will eliminate the existence
of any such anti-competitive agreement thus subsequently protecting the
consumers by its actions.
SLIDE 2
Section 3 - prohibits agreements that cause or are likely to cause an
appreciable adverse effect on competition within India, making such
agreements void. This includes agreements related to production, supply,
distribution, storage, acquisition, or control of goods or provision of services
Effect of anti-competitive agreements on consumers - An agreement which
attempts to control the market (through measures like fixing prices,
controlling volumes of production so that prices rise artificially, blocking
certain distributors or suppliers, etc.) is an anticompetitive agreement.
Provision of Section 3(1) casts a duty on enterprises to examine the
proposals for agreement or arrangement from its long term effect on
competition in the market. The term „Appreciable Adverse Effect on
Competition‟ has not been defined under the Act. An anti-competitive
agreement must result in an Appreciable Adverse Effect on Competition
(AAEC) to be prohibited. For example, where an agreement between two
business enterprises results in higher prices -it will result in an AAEC and
such an agreement is to be prohibited
PPT - Section 4, Competition Act, 2002: checks the unfair or
discriminatory condition of products or services and ensures that
the price in the purchase or sale of goods or services cannot be to
the prejudice of the consumers. However, applicable only when the
entity is in a dominant position.
Consequence of section 4
The abuse of its position by a dominating firm directly affects the consumer
due to malpractices like predatory pricing and creation of barriers to the new
entrants, thus eliminating competition. This leads to a situation of monopoly
and oligopoly where the consumer gets vulnerable to be exploited. Now
where there is no competition in the market and the dominant firm has no
fear to lose its stand in the market it will start controlling the market, the
demand and supply, the prices, etc, and all this will eventually lead to
harming the consumers. For example Predatory pricing is pricing goods or
services in such a low cost so as to eliminate competitors and afterwards
recoup the loss by increasing prices or decreasing the quality thereby
affecting the interests of consumers.
After section 19
Information received from consumer - Section 19(1) - Commission may
inquire into any alleged contravention of the provisions contained in
subsection (1) of section 3 or sub-section (1) of section 4 either on its own
motion or on— (a) 29[receipt of any information, in such manner and]
accompanied by such fee as may be determined by regulations, from any
person, consumer or their association or trade association; or
Section 19(3) accrual of benefits to consumers;- The Commission shall, while
determining whether an agreement has an appreciable adverse effect on
competition under section 3, have due regard to all or any of the
following factors, namely:— accrual of benefits to consumers
Section 19(4) - the Competition Commission while inquiring whether a firm
in misusing its dominant status shall under Section 19(4) give due regard to
all or any of the factors like market share, size and resources of the
enterprise and its competitors, comparison of economic powers of the
enterprise and its competitors, dependence of consumers, etc. Here as well
we can see that there exists a consideration for consumers in determination
of a firm‟s dominant position by CCI.
19(6) & 7- The Commission shall, while determining the “relevant geographic
market and product market – (g) & (c)consumer preferences

The intent of the person is relevant to the analysis as to whether the conduct
is exclusionary or predatory and it has also been noticed that the conduct
would be found predatory or exclusionary on the examination of the action of
the undertaking concerned in the light of consumer interest, that is, as to
whether it has impaired competition in an unnecessary restrictive way.
PPT - Section 27, Competition Act, 2002 - empowers the commission to pass
any order when after inquiry it finds that any agreement is in contravention
of Section 3 or Section 4.

Merger Control
Competition Act not only empowers CCI to take actions on the
anticompetitive agreements and abuse of dominant position, but also
empowers it to regulate the combinations which may have anticompetitive
effect on the markets in India. Generally, mergers are a legitimate means by
which firms can grow and evolve. Idea of this ex-ante regulation is to pre-
empt the potential abuse of dominance, where it is probable, as subsequent
unbundling can be both difficult and socially costly.
For example, Coca Cola and PepsiCo the two biggest players in India in the
soft drink industry combine then this combination will eliminate the
competition in the market and the industry will be in a position to control the
prices of the goods and thus this will harm the consumers and the economy
of the country. The company formed after combination will try and eliminate
the smaller industries and this will ultimately lead to full market control
which will hamper economic growth and harm the consumers. Thus it is the
duty of the Competition Commission of India to check on such combinations.
SLIDE 2
Belaire –
1) Standard form of contract - even when DLF sent the said agreement for
signing by the allottees, they had absolutely no right to suggest/make
any alteration/modification whatsoever in the said agreement; and if
they refuse to sign the agreement at that point of time the money
deposited earlier stood forfeited. In other words, having deposited the
earnest money, the allottees options to change his choice for any
reason, including not agreeing with the terms of the Agreement, stood
foreclosed, even without having entered into any Agreement till that
stage.
buyer/allottee has to pay almost 95% of the consideration amount
within 27 months of booking, and a bulk of this is often paid
to DLF even before entering into the Agreement. It is also noted that
though DLF provides a stringent time-line for payment of agreed
amount, there is no time-line specified for delivery of possession
by DLF. Agreement was sent after paying the earnest money. In such
cases the buyer who could have made a choice to go to other
real estate service providers, gets locked in with DLF having
paid a substantial amount, with no free exit option, without
even being aware of the terms and conditions being imposed
through the Agreement. The high switching cost not only
destroys the choice, it also reduces mobility in the market.
Essentials – ticked off – dominant entity( Section 4) relevant market –
high end residential societies in Gurgaon – abused its dominance
Competition law had applied because – DLF was a dominant entity
affecting the consumers under section 4(a)(ii)
2 (a) directly or indirectly, imposes unfair or discriminatory— (i)
condition in purchase or sale of goods or service; or

Excel Crop
Excel Crop is a bid rigging case in the sector of Aluminium Phosphide Tablets,
a common insecticide. The CCI took the case based on a complaint by Food
Corporation of India, which said that Excel Crop and three other firms had
indulged in cartel-like behaviour by quoting same prices in tenders for
several years. The CCI found a violation of Section 3(3)(d), which was upheld
by the COMPAT.
DON’T SAY
• Excel Crop Care Ltd. was a manufacturer of chemical products used in
agriculture, specifically pesticides. The company was accused of
engaging in anti-competitive behavior, by indulging in collusive bidding
that restricted competition in the market for the sale of a specific
pesticide.
• The Supreme Court upheld the decision of the CCI, ruling that Excel
Crop Care Ltd. had indeed abused its dominant position in the pesticide
market and that its conduct was anti-competitive. The Court confirmed
that the Competition Act, 2002 was designed to prevent practices that
would harm consumer welfare, particularly by undermining competition
in the market;
SAY
Anti-competitive agreements 3. Any agreement entered into between
enterprises or associations of enterprises or persons or associations of
persons or between any person and enterprise or practice carried on, or
decision taken by, any association of enterprises or association of persons,
including cartels, engaged in identical or similar trade of goods or provision
of services, which— (d) directly or indirectly results in bid rigging or collusive
bidding, shall be presumed to have an appreciable adverse effect on
competition:

CCI v. Artistes & Technicians of W.B. Film & Television, (2017) 5 SCC 17
In the State of West Bengal, M/s Hart Video (‘Hart Video’) was assigned the
rights to
telecast the T.V Serial ‘Mahabharata’ (‘serial’) dubbed in Bengali Language.
For
this purpose, Hart Video entered into an agreement to telecast it on two TV
channels viz., ‘Channel 10’ and ‘CTVN+’. Two associations, namely Eastern
India
Motion Picture Association (‘EIMPA’) and Committee of Artists and
Technicians
of West Bengal Film and Television Investors (‘Coordination Committee’)
(together used as ‘associations’ or “OP”), opposed such screening of an
originally Hindi Serial to one that was dubbed in Bangla. According to them,
serials produced and shown in TV Channels after dubbing them would
adversely
affect the artists and technicians working in West Bengal. Under a lot of
pressure, both
TV Channels decided to call off the telecasting. Thereafter, Hart Video filed a
complaint with the CCI alleging collusion amongst the associations which had
lead
to the foreclosure in telecasting the serial.
An agreement will have AAEC when it limits or controls production, supply,
markets, technical development, investment or provision of services;
Relevant market – film and television industry in WB
Big Cinemas
1. Respondent No.1 in his complaint before the District Forum stated that he
had gone to watch a movie at Big Cinemas, Jaipur. Feeling thirsty, he
purchased an ‘Aquafina’ water bottle sold inside the cinema. The said
Aquafina bottle was being sold for Rs. 30 in the cinema, whereas the MRP
of the same was Rs. 16. It was alleged that the Petitioners were
misleading customers regarding the price of the water bottle and charging
an exorbitant price.
2. The defence of the Petitioners, in a nutshell, is as follows –
(i) The MRP on the water bottle was in fact Rs. 30/-, and when the
bottles were procured for further sale from Pepsico (which owns and
markets the brand ‘Aquafina’) and Varun Beverages (distributor for
Aquafina), this was the MRP. Higher pricing is also sought to be
justified on the basis that sale of beverages is incidental to the main
object of the cinema business, and is in the nature of an additional
or optional service to enhance the customer experience.
(ii) It was alleged that the Respondent No. 1 in fact purchased another
bottle outside the cinema bearing MRP of Rs. 16 and claimed that it
was being sold inside the cinema at Rs. 30, whereas the bottle sold
inside the cinema was at MRP 30 only. It is argued that it is possible
for the same product to have different MRPs, as pricing is
dependent on various factors.
(iii) The consumer in the cinema has the option of availing free drinking
water and is not compelled to purchase a water bottle. This is
however disputed by the Respondent No. 1.

Vivek Sharma case


3. In Vivek Sharma v. Becton Dickinson and Max Super-Speciality
Hospital (Case No. 77 of 2015), is a case concerning sale of a
disposable syringe manufactured by Becton Dickinson, by Max Super
Speciality Hospital, Patparganj at a higher printed MRP than the MRP
printed on the same syringe when brought from a local medical store.
4. The CCI has ordered investigation in the matter, finding Max Super-
Specialty Hospitals to be prima facie dominant in the relevant market for
‘provision of healthcare services by super specialty hospitals in Delhi’,
and noting that in-patients once admitted hardly have any option to
purchase products from open market. Further, the CCI prima facie found
the allegations levelled to be true (the syringe sold by Max Hospital,
Patparganj and as available in the open market, are the same in terms of
quantity, quality, design etc.).
5. The DG, in its investigation report concluded on the facts that the
disposable syringe in question, in this matter, as purchased from Max
Hospital and from the open market, were different products. The DG
however, found Max Super-Specialty Hospital, Patparganj, to be in a
dominant position in the relevant market of ‘provision of healthcare
services/ facilities by private super-specialty hospitals within a distance of
about 12 kms from Max Super Specialty Hospital Patparganj’. The DG
submitted a report concluding that the hospital was abusing its dominant
position in contravention of Section 4(2)(a)(ii) of the Competition Act by
not selling less expensive type of disposable syringe and compelling in-
patients to purchase products only from its in-house pharmacy once they
are admitted.
6. Thereafter, the CCI, noting such after-market abuse based on ‘locked-in
effect’, directed the DG to cause further investigation in relation to super-
specialty hospitals located in the entire relevant geographic market of
Delhi with respect to not only disposable syringes, but all products sold to
in-patients, which are not required on an urgent basis for any medical
procedure/ intervention or which do not involve any high degree of
quality issue and for the purchase of which, the patients have the time
and scope to exercise their rational choice to purchase such products
from open market as well where such products may be available at lower
rates.
7. This matter is currently pending inquiry before the CCI, and no final order
has been passed.
Hiranandani hospital
Facts- The case arose from a complaint filed by a patient who alleged that
Dr. L.H. Hiranandani Hospital, was indulging in unfair trade practices related
to its pricing of medical services. Whether charging exorbitant fees for its
services and abused its dominant position in the market.
The CCI held that the Exclusive Contract was anti-competitive in
contravention of the provisions of Section 3(1) of the Competition Act 2002.
The basis for this finding was that Cryobank had caused appreciable adverse
effect on competition in the market for stem cell banking. The CCI reasoned
that the Exclusive Contract foreclosed an important route to market for stem
cell banking (Hiranandani Hospital). The CCI asserted that consumer harm
might result in the future (e.g., if Cryobank left the market or if its service
quality dropped), and the Exclusive Contract created entry barriers and
reduced patient choice (e.g., by creating a first mover advantage for
Cryobank). The CCI made these findings notwithstanding that the Exclusive
Contract had a short duration (1 year) and was terminable on notice.
Assessment on section 4
Section 4 pertains to the abuse of dominant position, and proscribes five
types of conduct by a dominant enterprise or group. The Commission
employs a three-step process in analysing abuse of dominance: the
determination of the relevant market, the assessment of dominance, and the
assessment of abuse. While agreeing with the DG Report on the definition of
the relevant market as ‘the provision of maternity services by super specialty
hospitals within a distance of 1-12 km’ from the hospital, the Commission
differed in the assessment of dominance. Noting that the market share of an
enterprise is not the only factor in determining dominance, and the existence
of comparable price structures in hospitals in the relevant market, the
Commission opined that the hospital was not dominant, and accordingly held
that the hospital did not abuse its dominant position

COMPAT’s Judgment and Lessons


The CCI’s decision was heavily criticised by the COMPAT.
The COMPAT held that the Exclusive Contract did not restrict the choice of
the service provider in the relevant market (market for stem cell banking).
By virtue of the Exclusive Contract, Hiranandani could provide stem cell
banking services only through Cryobanks but patients remained free to
secure those services from Cryobanks competitors by switching hospitals.
The COMPAT highlighted that there were 13 other suppliers of stem cell
banking services active at the time (excluding two subsequent new entrants)
and patients were free to use those service providers according to their
convenience and financial capacity.
The COMPAT noted that the CCI confused its competitive effects analysis by
presuming that the stem cell banking service was an integral part of the
maternity services (it was not).

Hospital had 1% market share


Relevant market – maternity services at super specialty hospitals
COMPAT – AAEC – rampant practice in all hospitals – exclusive supply
agreement is only with Hiranandani and not only hospitals – therefore, no
appreciable adverse effect in the market
New entrants allowed – 2yrs back – agreement with Life cell
Critique of Hiranandani Judgement
Ambiguity in Defining 'Abuse of Dominance':
 The decision was criticized for its ambiguity in defining and applying
the concept of "abuse of dominance." The COMPAT found that the
hospital’s pricing practices did not amount to unfair trade practices but
failed to provide a detailed explanation of how this aligns with anti-
competitive behavior. the COMPAT concluded that the hospital was not
dominant in the relevant market. However, in its analysis of the
agreement under Section 3, the COMPAT noted that it would be
expensive and inconvenient for patients to switch hospitals after
having developed a ‘trust in the treatment’ of the hospital. The
COMPAT does not alludes to switching costs in its analysis under
Section 3 or under Section 4. It must be noted that switching costs are
a factor that impacts the assessment of dominance under Section
19(4) with lays down the factors for analyzing the abuse of dominance.
Lack of Clear Guidance on Sector-Specific Issues: exclusivity
contracts for the healthcare sector as opposed to any other
sector operates differently
 The healthcare sector operates differently from other industries, and
the decision did not provide much clarity on how to apply anti-
competition regulations in this specific context. issues like hospital
fees, market monopolies in healthcare, and the lack of alternatives for
consumers require more sectoral insight. As such, the decision may not
provide enough practical guidance for future cases within the
healthcare or medical services industry.
In markets with limited alternatives, even if consumer harm is not
immediately visible, such players can still distort competitive dynamics
and have long-term negative effects.
Another issue was the lack of a comprehensive market structure
analysis. In determining whether a company is abusing its dominance,
competition authorities are required to assess the market share of the
company and whether it has the power to control prices, limit market
access, or otherwise suppress competition. However, in this case, the
tribunal did not adequately assess whether the hospital’s market share
(and its control over critical healthcare services) gave it the power to
influence competition in the broader market.
For instance, in markets with limited competition (as is often the case with
healthcare services in urban areas), even subtle practices can
significantly impact market dynamics. By focusing only on the consumer
outcome rather than a more holistic analysis of market dynamics,
the ruling failed to address whether the hospital’s conduct would
discourage new competitors or harm the market in the future.
Whatsapp –
CCI noted that Meta enjoys a dominant position in the relevant market of
both OTT messaging and online display advertising. CCI also noted that
strong network effects in the OTT Messaging Market create a 'lock-in' effects
and thus, results in high entry barriers. It noted that when a dominant user
base (such as WhatsApp) is involved, users face significant switching costs
and other functional issues whilst attempting to migrate to a new platform.
CCI noted that when a messaging app reaches a critical size, the strong
network effects make it challenging for other competitors to gain a foothold
in the market as new users are likely to choose the largest network where
most of their contacts are already synced while existing users are reluctant
to switch to a smaller network.
Was there an abuse of dominant position?
In this regard, CCI noted that 2021 Privacy Policy update by WhatsApp on a
'take-it-or-leave-it' basis amounts to an imposition of unfair condition under
Section 4(2)(a)(i) of the Competition Act, as it compels all users to accept
expanded data collection terms and sharing of data within Meta's platforms
without any option or alternative to the Users. CCI noted that the mandatory
acceptance of terms of 2021 Privacy Policy has compelled all those users to
accept these terms who had chosen to opt-out of the 2016 update of the
privacy policy and that such arbitrary change is unfair because it undermines
users' trust and deprives them of their right to decide. Therefore, absence of
an 'optout' mechanism makes 2021 Privacy Policy one-sided and
exploitative.
CCI Order
The CCI found WhatsApp's "take-it-or-leave-it" policy an imposition of unfair
condition, and without the option to opt-out Meta had undermined the users'
autonomy and constituted an abuse of dominant position and, accordingly,
imposed a penalty upon Meta for abuse of dominance and violation of
Section 4(2)(a)(i), 4(2)(c) and 4(2)(e) of the Competition Act, 2002.
4(2) (i) There shall be an abuse of dominant position 4 [under sub-section (1), if an
enterprise or a group].—- (a) directly or indirectly, imposes unfair or discriminatory— (i)
condition in purchase or sale of goods or service; or
(c) - indulges in practice or practices resulting in denial of market access 5 [in any manner];
or
(e) - uses its dominant position in one relevant market to enter into, or protect, other
relevant mark

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