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22 March, 2018
Given the multifaceted economic and legal considerations, fair and effective enforcement of competition law is a complex task. It is rendered all the more daunting with the added requirement for the optimal level of competition law enforcement.
Optimal enforcement is arguably more important in competition law proceedings than in other areas of law enforcement because inadvertent under- and over-enforcement may actually end up harming competition itself. For example, if a competition authority attempts to over-enforce, it can actually make conduct illegal that was otherwise legal and, thus, prevent an enterprise from competing on merits. The result would be counter-productive to the objectives of competition law (by harming level of competition in the markets).
Given this debate, the story of competition law has been the story of competition between tests and concepts that are either presumption or form based (thus, simpler and providing legal certainty) and tests that are effects based – i.e. using economic/ quantitative techniques and are, thus, more accurate (and more conducive to the idea of optimal enforcement).
Recently, although the debate in this regard has surrounded the applicability of the effects-based test to prohibite abuse of dominance, companies need to be able to formulate policies that re-assure them of their legal certainty – stakeholders, therefore, await fast-track consensus.
Effect v. Form – Abuse of Dominance
The debate between ‘effect’ over ‘form’ is even more relevant today. It can be said that there is no clear consensus on this subject in India. The recent judgment of the Supreme Court in the multi-system operators case has also not dealt with the issue of ‘objective justification’. Most recently, though not directly endorsing an effects-based analysis in abuse of dominance cases, the Competition Commission of India (CCI) in a Google[1] minority (dissenting) order has emphasised the need for greater economic evidence and its implications for competition and consumers to consider an alleged conduct as abusive.
The competition authorities in the EU have developed the concept of abuse from jurisprudence laid-down by the European Court of Justice (ECJ) in the Hoffmann-La-Roche case[2]. Hoffman-La Roche is also heavily relied upon in India and is frequently cited by the CCI.
The competition authorities in the EU have also been distinguishing anti-competitive behaviour based on dominance from “normal competition”. The competition authorities recognise that the direct result of the presence of a dominant entity taking recourse to methods different from those governing “normal competition” can have an anti-competitive effect on the market. Interestingly, in more recent cases[3], the ECJ placed a much greater emphasis on whether the impugned conduct has anti-competitive effects.
The nuanced position adopted lately is most evident in the ECJ’s decision in Intel Corporation Inc. vs. European Commission,[4] wherein it expressly endorsed the effect-based approach to abuse of dominance. In terms of the ECJ’s order – where the dominant firm submits evidence that its conduct was not capable of excluding competitors, the competition authorities must analyse the effects of the conduct. It further stated that in the cases relating to abuse of dominance the following factors must be analysed:
- The extent of dominant position of an enterprise/ entity in the relevant market.
- The share of the market covered by the challenged practice as well as the conditions and arrangements for granting rebates in question, their duration and amount.
- The possible existence of a strategy aiming to exclude competitors that are at least as efficient as dominant enterprise/ entity from the market.The above approach seems to accord with the European Commission’s enforcement priorities[5], which suggest moving away from the formalistic approach and stresses effect on consumers.
Key Takeaways
The evolution of jurisprudence in Europe may have an effect on interpretation of provisions in India, as well. The Competition Act, 2002 does not expressly state that abuse of dominance requires an evaluation of the appreciable adverse effect on competition (which is specifically required in the case of anti-competitive agreements). During the early years of enforcing the provisions of the Competition Act, the CCI interpreted the above provision to mean that if an enterprise found to be dominant indulges in specified conduct that is considered abusive, it would resultantly, be “bound to cause”[6] an appreciable adverse effect on competition. Though the CCI recognises that the objective of the Competition Act is to protect the process of competition and not the individual competitors (owing to the inherent economic nature of competition law); it becomes all the more important for the CCI to consider the application of economic quantitative techniques by applying effect-based principles (as also considered in the minority order of Google).However, with various substantive cases on abuse of dominance currently pending before the Supreme Court of India, it is likely that the above issue will come up for debate and decision by the Supreme Court soon.
* The author was assisted by Anu Monga, Director – Competition Practice
[1] Matrimony.com Limited v. Google LLC & Others (Case No.07/2012) & Consumer Unity & Trust Society (CUTS) v. Google LLC & Others (Case No.30/2012) [Order dated 31 January 2018]
[2] [1979] ECR 461
[3] Deutsche Telekom [2010] ECR I-9555 and Telesonera [2011] ECR I-527
[4] Case C-413/ 14 P
[5] C 45/7 dated 24 February 2009
[6] MCX Stock Exchange Ltd. & Ors. v. National Stock Exchange of India Ltd. & Ors. (Case No.13/2009) [order under section 27, dated 23 June 2011].
For further information, please contact:
Rahul Goel, Partner, Cyril Amarchand Mangaldas
rahul.goel@cyrilshroff.com
