An Analysis of the Abuse of Dominant Position by the

E-Commerce Retailers in India

Priya Prasad
Advocate, Delhi District Court

Abstract The topic titled as “An analysis of the abuse of dominant position by the e-commerce
retailers in India” seeks to analyse the interface between competition law and the e-commerce sector
keeping in view the e-commerce retail market which has been propelled by the rising penetration of
smartphones, laptops, the launch of 4G networks and increasing consumer’s wealth followed by an
increasing acceptance of the idea of virtual shopping coupled by increasing participation of various
enterprises in the electronic sector. However, it is evident that e-commerce has been inciting various set
of anti-competitive issues which may be economic or otherwise, consequently calling for the vigilance
of the Competition Commission of India. Thus a need arises to analyse the e-commerce sector in
the light of the provisions of the Competition Act, 2002. In this regard the research paper seeks to
define the e-commerce industry, explains the concept of dominance and abuse of dominant position
while simultaneously elaborating upon the various practices amounting to abuse in the e-commerce
sector. The research paper has also taken care in analysing the role of the Competition Commission in
regulating the e-commerce sector in India by referring to various case laws.
Keywords E-commerce; Competition Act, 2002, Competition Commission of India, Dominance,
Abuse.

I
Introduction are doing whatever it takes in order to capture
n the last few decades there has been an the market share. Hence, the tool used by them
unprecedented growth in the electronic to achieve this purpose is price. Secondly, the
commerce industry or e-commerce industry Indian e-commerce start-ups have private equity
on a global scale and India is not an exception funds and investors hence, the companies can
to it. This unprecedented growth is on account afford giving heavy discounts because of the
of mushrooming of internet, growth of start-ups excessive funds. Owing to such heavy discounts
and changing customer behaviour. The market the traditional stores are making an effort to
and distribution system has tremendously catch up by the provision of such services and
changed owing to the advent of the e-commerce experiences which have never been offered to
retail market, as it brings along a vast numbers the consumers. Despite, such offers these stores
of buyers and sellers through the medium of witness customers who visit the stores only to
World Wide Web. A large number of e-commerce see the product physically before making a final
industries such as Ola, Caratlane, Uber, Flipkart, purchase online. This factor shows that the
Bigbasket, Snapdeal, Jabong and Myntra are balance is tilting towards the e-commerce sector
based on internet-backed marketing concepts and which naturally is a source of tension between
provide goods at a very low price as compared to the two competing networks, leading to legal
the traditional cement and brick stores. There is a complexities which are to be addressed through
twofold reason for doing so, firstly the e-commerce the antitrust regimes.
market is still in its nascent stage in India and The crux behind an antitrust law is to promote
in the atmosphere of intense competition they a healthy and a positive competition in the

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 An Analysis of the Abuse of Dominant Position by the E-Commerce Retailers in India

economy and to act as a guard against the controlling positions by individual enterprises
misuse of economic power for the welfare of or a group as a preventive measure from out
the consumers. In India the Competition Act, casting competing businesses from the market
2002 has been enacted which seeks to promote and dictating prices.
economic democracy in a free market structure Section 4 (1) of the Competition Act prohibits any
by prohibiting abuse of dominant position enterprise or group from abusing its dominant
among other things and creates a Competition position.1 Such a provision of the act lays down
Commission of India, which is entrusted with two major requirements firstly, the enterprise
the obligation of preventing practices having must enjoy a dominant position and secondly,
adverse effect on the competition, the promotion the enterprise must abuse its dominant position.
and sustainment of competition enforcing and However, dominance in itself cannot constitute
ensuring freedom of trade and protection of the an abuse and hence is not prohibited. It is only
interest of the consumers along with conducting the abuse of dominant position that has been
inquiry in case of violation of the provisions prohibited by the act. As per Section 2 (a) (i) and
of the act and the imposition of the penalty. (ii) of the Competition Act abuse of dominant
However, with the growth of the e-commerce position takes place when the enterprise or the
sector the role of the Commission as a regulator group directly, or indirectly, impose unfair and
represents a new paradigm. discriminatory-
E-Commerce Sector-Defined A). conditions in purchase or sale of goods or
The electronic commerce or e-commerce service; or
simply defined means the sale and purchase B). price in purchase or sale including
of products (goods and services) over an predatory price of goods or service.
electronic medium such as the internet.
It is an emerging model of a selling and However, it is noteworthy to state that the
merchandising tool in which the buyers dominant position must be acquired by legitimate
are able to participate in all phases of a means such as product innovation, superior
purchase decision, while going through the production quality or distribution techniques
processes electronically and not physical or by virtue of greater entrepreneurial efforts.
as done in the store. The various processes The material consideration in determining
involved in the electronic commerce include the existence of dominance is not that there
access of product information to the shall be an increase in price or the exclusion
customers, selection of items for the purpose of competition but the power of hiking price or
of purchase, secure purchase of items and excluding competition when the enterprise has
the financial settlement of the purchase the desire to do so.2
made. There is no universally accepted Hence, determination of dominant position is
definition of e-commerce but, in general it based on two main factors-market share and
can be used to signify a mode of conducting entry conditions. The Competition Commission
business through electronic means against of India has also identified certain conditions
the traditional means such a business needs while determining the dominant status of
internet enabled computer, laptop, smart agreements as per Sections 19 of the Competition
phones for the purpose of facilitation of Act. In the case of Eastman Kodak Co. v. Image
‘click and buy’ method of business. technical Service Inc.3 it was observed that
dominant means market power, which is the
Concept of Abuse of Dominance
Section 4 of the Indian Competition Act talks
1. The Competition Act, 2002 (Act 12 of 2003).
about abuse of dominance or dominant position
2. American tobacco Co. et al vs. United States 328 US
by an enterprise or a group of enterprises. 781.
The act prohibits the utilisation of market 3. 504 US 451.

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 An Analysis of the Abuse of Dominant Position by the E-Commerce Retailers in India

power to force a purchaser to do something that B). Assessing the market strength with a view
he would not do in a competitive market. But in to discover if the undertaking possesses a
majority of the cases the market power is sought certain level of market power.
on the basis of the functional characteristics of C). Considering the question as to whether
the products and on the behavioural pattern of the conduct of the undertaking leads to an
the consumer. abuse of dominant position.
Sometimes, the market shares of specialised
streams of Internet-based businesses are
Relevant Market
unavailable and the self-detailed data According to the explanation (a) of section 4 of
discharged by the market won’t be reliable the Competition Act, dominant position must be
and solid, in such a case market shares may be enjoyed by an enterprise or a group of enterprise
required to be determined on the basis of the in the relevant market making it necessary to
specially commissioned market reports, but define relevant market. Section 2(r) of the act
such a report must follow a steady technique defines relevant market as a market which
of information gathering, examination and the Competition Commission of India may
investigation. determine with reference to the relevant product
market or the relevant geographic market or
In the case of Direct-to-home (DTH) Services with reference to both the markets.5
Case4 it was argued by the informant that each
of the DTH operators were acting as individual In the context of e-commerce, there are two
dominant firms in the relevant market and distinct markets-online markets and offline
hence, had abused their position of dominance. markets where the online market by itself can
Such a contention was however, rejected by the be regarded as a relevant market. In this regard
Commission on the basis that each and every it is worth mentioning the approach made by the
player in any important market can’t be said CCI in the case of Mr. Mohit Manglani v. M/s
to have predominance predictable philosophy Flipkart India Ltd. & Ors.6 where the question
of information accumulation, investigation that whether the e-portals market may be
and examination. Thus, the DTH operator regarded as a different pertinent item advertise
were said to have dominant position as per the or as a negligible sub-fragment of the market
provisions of the act. It was also observed by the for dissemination was left open. However, the
Commission that the concept of dominance does position was clarified by the CCI in the case of
not revolve around the reality of impressive Mr. Asish Ahuja v. Snapdeal.com, 7where the
market control which can be practiced just by CCI clearly stated that both the markets are
a solitary endeavour or a little arrangement of different in matter of discount and purchase
market players. experience. In such cases the consumers look for
the options available in both the markets and
Hence, in order to establish as to whether thereby, decide accordingly. In case if the price
an enterprise acquires dominant position or of the goods in the online market has elevated
not and in case if it is in a dominant position significantly, then there is a likelihood that the
whether or not it is abusing its dominant consumer will shift towards the offline market
position. Thus, the following factors must be and vice-versa. On the basis of such reasoning
established- the Commission is of the opinion that the
A). Define the relevant market, since two markets-online and offline, are divergent
dominance cannot exist in an abstract channels of distribution of the like product and
but in relation to a market where the not two different relevant markets.
establishments compete.
5. The Competition act, 2002
4. Consumer Online Foundation v. Tata Sky Limited, 6. Case No. 80 of 2014.
Case No. 02 of 2009. 7. Case No. 17 of 2014.

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 An Analysis of the Abuse of Dominant Position by the E-Commerce Retailers in India

Defining of relevant geographic market in case available only through online specific shopping
of the e-commerce industry is based upon the sites. Adopting such a practise may be at the
assessment whether the offline retailers or disposal of the manufacture with a view to
sellers are available with a defined service or contact a more extensive group of onlookers in
product or not. The World Wide Web is a giant a savvy way, yet the counter aggressive impacts
network interconnecting numerous smaller of such game plans and concerns with respect
networks and defies any location which can to dispossession of market for other market
be identified with external boundaries. Hence, players keep on predominating. A similar issue
the geographic market cannot be subjected and had emerged before the CCI in the case of Mr.
confined to the clients of a specific administration Mohit Manglani v. M/s Flipkart India Pvt. Ltd.
because there are other people also who access & Ors.8 in relation to the sale of the book titled
the internet and at the same time there are “Half Girlfriend” written by Chetan Bhagat,
other means by virtue of which advertisements which was available for sale exclusively at
to other people can be made. flipkart. It was alleged that such as arrangement
The relevant geographic market can be defined was destroying the other players in the physical
by using the customer’s or the merchant’s market and leading towards the creation of
location as a usable matching tool. Such item particular restraining infrastructure in
geographical segmentation aids in the efficient this way, advancing control of value, control of
distribution of online goods and services the creation and supply, burden of terms and
simultaneously allowing customisation. For conditions which may be inconvenient to the
instance the conditions of demand and supply of enthusiasm of the shoppers and prompt the
online cabs will vary from one place to another. bending of reasonable rivalry in the commercial
centre.
Competition Concerns in the However, such allegations were rejected by the
E-Commerce Sector CCI which opined that a selective plan between
The e-commerce sector adopts various innovative a maker and an e-gateway would not make any
steps and methods to establish a consumer entry obstructions since products sold via online
base and for the acquisition of the market, in portals face competitive constraints. Thus, in
this process it adopts various methods which the opinion of the CCI mobile phones, tablets,
raise competitive concerns such as exclusive books, cameras etc., are not to be trodden by
arrangements, online sales and discounts as imposing business model or predominance.
well as advertisements schemes. Moreover, there was lack of a concrete evidence
to show that it was by reason of the exclusive
Treatment of Exclusive Arrangements
agreements that any of the existing players
and Minimum Resale Price were getting adversely affected. The CCI opined
A market comprises of a large number that the new era of online business went with
of dealers and distributors, however the the passage of new e-entries into the market,
choosing of exclusive dealers/distributors rivalry just gives off an impression of being
and the refusal to deal with other market developing and lessening against aggressive
players has been the medial of conflict under concerns.
competition law. So far as the e-commerce
The lead of producers in their limitations/
sector is concerned the issue has been
refusal to manage online stages/conveyance
constantly surfacing in multiple ways.
verticals is another point of concern. Through
Today’s modern day economy witnesses that internal policies the companies have been
certain products belonging to specific brands forcing bans on online guarantees or sending
are available for purchase only through fliers to their merchants teaching them
e-retailers. To cite an example cell phones
belonging to the brand Motorola and MI are 8. Case No. 80 of 2014.

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 An Analysis of the Abuse of Dominant Position by the E-Commerce Retailers in India

not to give the fabricated items on the web. the policy of restriction in relation to online
Lenovo and Nikon in the past one year have sale and distribution and also highlights the
been issuing public statements stating that bolder stand taken by the CCI in comparison
e-tailers do not qualify as their authorised to other jurisdictions.
agents. However, some of the statements
Maintenance of minimum sale price is also
have been withdrawn while there are some
another point of contention in the e-commerce
retailers such as the Snapdeal which has been
sector. It is only in limited instances that the
witnessed approaching the CCI against such
issue on ensuring parity between online and
discriminatory treatment.
offline sellers, has risen before the CCI yet it
There are also instances where the remains pivotal with regards to future analysis.
companies can refrain their dealers from In the case of ESYS v. Intel Corporation & Ors.,11
dealing with online players. In a case, a Intel was alleged of dictating the retail price of its
complaint had been instituted against products. However, the Commission held that a
Snapdeal and the company Scandisk by a company can monitor its downstream market’s
dealer since it was compelled to acquire a price and such an act would not amount to be
No Objection Certificate (NOC) from the anti-competitive. The CCI in a case had clarified
manufacturer in the absence of which it that offering of distinctive discount to distinct
was unable to list its products on its online consumers i.e., less discount to retail buyers
platform. The CCI opined that the practise and a greater discount to bulk buyers are not to
of requiring the NOC cannot be regarded be construed as being violative of Section 3 (4)
as abusive since each entity has the right of the Act.12
to protect the sanctity of its distribution However, in the case of M/s Ex Enterprise
channels. It also stated that brand image Solutions India Pvt. Ltd v. M/s Hyundai
and goodwill in a quality driven market are Motor India Limited,13 it was concluded
important concerns. 9 by the CCI that confinements forced by
However, a different stand was taken by the Hyundai on the most extreme reasonable
CCI in the case of Snapdeal v. Kaff Appliances,10 rebate that might be given by a merchant
where a suit was instituted by Snapdeal against to the end-client, combined with the act of
a manufacturer which had placed restrictions on value observing by the Hyundai wherein
its dealers in their dealings with e-retailers. It the merchants were punished by virtue of
was alleged by Snapdeal that Kaff Appliances, any deviation added up to a resale value
had imposed a blanket ban on providing after support infringing upon Section 3.
sale warranties with regards to products
Hence, it can be said that under the ambit of the
purchased online from unauthorised sellers. It
Competition Act, 2002, resale price maintenance
was contended by Snapdeal that the ban had no
(RPM) is neither legal nor illegal but its validity
justification and led to the total deprivation of
needs to be analysed by the application of the
consumer choice and also causing the violation
rule of reasoning in the light of pro versus anti-
of Section 3(4) (d) of the Act. In this case it was
competitive effects.
held by the CCI that the conduct of the Kaff
Appliances was by its very nature a unilateral Online Sales and Discounts
policy and involved coercion. Online shopping portals offer a large
The divergence in decision of the CCI is number of discounts such as Black Friday
indicative of the paradigm shift in the
approach made by the CCI with regards to 11. Case No. 48 of 2011.
12. M/s Shubham Sanitarywares v. Hindustan
9. Ashish Ahuja v. Snapdeal and Anr., Case No. 17 of Sanitarywares & Industries (HSIL) Ltd. Ors., Case
2014 No. 99 0f 2013.
10. Case No. 61 of 2014. 13. Case No. 36 of 2014.

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 An Analysis of the Abuse of Dominant Position by the E-Commerce Retailers in India

deals in the US, Big billion day and Diwali brand name and promotion is necessary for
offer in India to lure consumers and expand their growth hence, the Competition law
their consumer base. Simultaneously such provides the necessary tool to showcase
acts of the online players have also invited their visibility in the market place. In this
the fury of the traditional offline sellers context it is noteworthy to state that several
who are lamented by decreasing sales as e-commerce enterprises such as Microsoft,
the customers visit the market just to have Yahoo, Facebook, Yatra, Nokia’s Here Maps
a physical look of the products reducing etc had been requested by the Director
the shops to mere showrooms for customer General (DG) to provide their comments
display and inquiry whereas, the actual with regards to the investigation of abuse
purchase is usually made through online of dominance against Google. Google being
platforms since they offer anti-competitive one of the most popular search engines has
cheaper prices. been alleged to abuse its dominance by
Against such anti-competitive practices offering its own maps, places, Google+ social
numerous instances have been recorded before network which was aiming to compete with
the CCI against several online players such as Facebook. The DG in this regard has laid
Flipkart, Snapdeal, Amazon, Jabong and Myntra down various grounds on the basis of which
alleging predatory pricing. But in the Flipkart Google is said to abuse its dominance. These
Case14 the CCI at the prima facie level rejected points are as follows:
the claim since none of the players enjoyed 1. The unfair imposition of conditions on
dominance in the retail market and in order the sellers to whom Google is selling its
to prove predatory pricing it is fundamental services;
to show that the enterprise has a dominant 2. Reducing and confining technical and
position in the market. The determination of scientific development with regards to
dominance is connected to the refusal made by goods and services to the prejudice of the
the CCI to designate e-market as a different consumers;
space of goods/services.
3. Constraining dominant companies from
In the case of M/s Fast Track Call Cab involving into practices leading in the
Private Limited v. ANI Technologies,15 it was denial of the market access in any manner;
alleged that Ola was providing incentives,
loyalties, rebates, predatory discounts. Here, 4. Constraining a dominant company from
the Commission noted that the act of Ola of utilising its position of dominance in one
providing heavy discounts to its purchasers and relevant market with a view to enter into,
bonus to its employees at the cost of bearing loss or guard, other relevant markets.16
seems to be a well devised plan of the enterprise Conclusion
formulated to exclude other market players out
of the relevant market. This case shows that
The intervention of competition law in the
there has been a transit in the attitude of CCI
e-commerce sector meets multiple purposes.
with regards to the protection of the traditional
It seeks to promote the equality between
taxi service providers.
the e-commerce enterprises and the
traditional bricks and mortar companies
Advertisement Schemes in and dealers. However, it is suggestive
E-Commerce Space that the CCI should take into account the
E-commerce enterprises basically operate unique features of the e-commerce sector
in online spheres, hence their visibility, such as rapid technological advancement,

14. ibid 16. Editorial, “Why did CCI write Google a bad report
15. Case No. 06 of 2015. card?” Live Mint, September 2, 2015.

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 An Analysis of the Abuse of Dominant Position by the E-Commerce Retailers in India

increasing returns, network effects, data the Indian competition law can be said to have
collected from the users while analysing the created enough space so as to allow the novel
position of dominance and abuse. and creative organizations to enter the market
and offer more options to the customers and
The CCI should also employ the essential
organizations. Simultaneously, the interest of
facilities doctrine for mandating compatibility
the traditional bricks and mortar companies
between a dominant player and the other market
is also being safeguarded by the competition
operators. It can also be said that time has come
regime as it seeks to provide protection from
for reviewing and amending the Competition
the harmful effects caused by the e-commerce
regime to keep pace with the rapidly changing
firms. A check-and balance mechanism has also
new economy.
been brought into play in the e-commerce sector
Thus, it can be said that despite of the which prevents them from practising unfair
universality of problems of competition policy pricing.

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