CASE LAW RESEARCH ON SECTION 3 & 4, THE COMPETITION ACT, 2002 – PREDATORY PRICING

S.No. Case Particulars Holding (Relevant Paragraphs)

01. MCX Stock Exchange Ltd. v. National 8.4.3.8 Before a predatory pricing violation is found, it must be demonstrated that there has been a specific
Stock Exchange of India Ltd. incidence of under-pricing and that the scheme of predatory pricing makes economic sense. The size of
defendant's market share and the trend may be relevant in determining the ease with which he may drive
2011 SCC OnLine CCI 41 out a competitor through alleged predatory pricing scheme-but it does not, standing alone, allow a
presumption that this can occur. To achieve the recoupment requirement of a predatory pricing claim, a
Competition Commission of India claimant must meet a two-prong test: first, a claimant must demonstrate that the scheme could actually
drive the competitor out of the market; second, there must be evidence that the surviving monopolist could
then raise prices to consumers long enough to recoup his costs without drawing new entrants to the market.

02. Transparent Energy Systems Pvt. Ltd. v. 23. In order to find out whether the opposite party resorted to the predatory pricing, the Commission has to
TECPRO Systems Ltd., give a finding that the prices of the goods or services of the OP were at a very low level with the object of
driving out competitors from the market, who due to low pricing would be unable to compete at that price.
2013 SCC OnLine CCI 42 In predatory pricing, there is always a significant planning to recover the losses if any after the market rises
again and the competitors have already been forced out. It is considered that only a dominant company in
Competition Commission of India such a market may have inclination and resources to finance such a strategy.

24. This definition makes it clear that the predatory pricing is based on actual figures and not projected
figures. May be the informant was not having access to its competitors actual costs but definitely the
informant was in possession of its own actual pricing figures for already executed projects which the
informant did not think it proper to share with the Commission. Had the applicant supported its plea with
actual costs in respect of completed projects of its own, the Competition Commission would have had a fair
view of what were the costs involved, what was the level of profit and what would have been the cost of a
WHRPP project. The Commission cannot consider the quotations given by another bidder predatory simply
because the bidder continuously got contracts for five projects. Moreover, all these projects are long time
projects and the projects are not like fast moving consumer goods that the OP would be able to recover the
losses made today from the future goods. According to informant, hardly there were 4-5 projects in a year
throughout India and there were other competitors in this area. The chart filed by the applicant shows that
at least there were seven competitors.
 25. We, therefore, consider that the arguments raised by the applicant that the prices quoted by the OP
were unfair or predatory has no force.

26. We consider that it was not a case of predatory pricing but it seems to be a case of competitive bidding
given by the competitor of the applicant. It is a fit case to be closed under section 26(2) of the Act and the
same is hereby closed.

03. Bharti Airtel Ltd. v. Reliance Industries 19. Coming to the assessment of dominant position, the Commission notes that after the opening up of
Ltd. & Anr. telecommunication market to private players, this market has witnessed entry of a number of players
competing with each other resulting in decrease of tariffs and constant improvements in quality and variety
CCI Case No. 03/2017 of services. As per the TRAI press release dated 17th February, 2017, the wireless subscriber base of private
telecommunication players at pan-India level constitutes 91.09% as against 8.91% held by public sector
Competition Commission of India undertakings. The market is led by the Informant with a market share of 23.5% followed by Vodafone
(18.1%), Idea (16.9%), BSNL (8.6%), Aircel (8%), RCOM (7.6%),OP-2 (6.4%), Telenor (4.83%), Tata (4.70),
Sistema (0.52%), MTNL (0.32%)and Quadrant (0.27%). Further, in none of the 22 telecommunication circles,
the Opposite Party has a market share higher than 7%. As may be seen, the market is characterised by the
presence of several players ranging from established foreign telecom operators to prominent domestic
business houses like TATA. Many of these players are comparable in terms of economic resources, technical
capabilities and access to capital. Further, the market is characterised by the presence of several players
resulting in sufficient choice to consumers who can shift from one service provider to another and that too
with ease. This implies that dependence of consumers on any single telecom operator is not of any
significant extent. Against this background, it is difficult to construe dominant position being possessed by
OP-2 with 6.4% market share, which presupposes an ability to operate independently of the market forces to
affect its consumers or competitors.

22. In the absence of any dominant position being enjoyed by OP-2 in the relevant market, the question of
examining the alleged abuse does not arise. Notwithstanding this, the offers of OP-2 do not appear to raise
any competition concern at this stage. All through the preliminary conference, the learned senior counsel for
the Informant alleged that the impugned offers of OP-2amount to below-cost pricing and has resulted in OP-
2 gaining a huge subscriber base of around 72 million in a period of just 4 months. This, according to the
Informant amounts to predatory pricing. However, the Informant has not demonstrated reduction of
competition or elimination of any competitor nor has any intent to that effect is demonstrated. The
Commission notes that providing free services cannot by itself raise competition concerns unless the same is
offered by a dominant enterprise and shown to be tainted with an anti-competitive objective of excluding
competition/ competitors, which does not seem to be the case in the instant matter as the relevant market is
characterised by the presence of entrenched players with sustained business presence and financial
strength. In a competitive market scenario, where there are already big players operating in the market, it
would not be anticompetitive for an entrant to incentivise customers towards its own services by giving
attractive offers and schemes. Such short-term business strategy of an entrant to penetrate the market and
establish its identity cannot be considered to be anti-competitive in nature and as such cannot be a subject
matter of investigation under the Act.

23. In view of the foregoing discussion, the Commission is of the considered view that no prima facie case of
contravention of Section 4(2)(a)(ii) of the Act is made out against OP-2.

24. The Informant has also made contradictory submissions of the impugned free services of OP-2 as being
an outcome of leverage of dominant position by OP1 as well as an outcome of alleged anti-competitive
agreement between OP-1and OP-2. The Informant has not given any plausible explanation as to how the
impugned free services is an outcome of unilateral conduct of OP-1 as well as an anti-competitive agreement
between OP-1 and OP-2. The Commission notes that no agreement of the nature prohibited under Section 3
of the Act is discernible from the facts and allegations levelled by the Informant. As noted earlier, the
impugned conduct of OP-2 has not been found as prima facie contravening the provisions of the Act
prohibiting unfair pricing including predatory pricing. In the absence of any finding of anti-competitive
conduct by OP-2, OP-1 cannot be held to be in contravention of Section 4(2)(e) of the Act just because it has
made huge investments in OP-2. Mere investments cannot be regarded as leverage of dominant position,
particularly when OP-1itself is not engaged in business of providing telecom services or any activities
incidental thereto. If one were to construe such investment as anti-competitive, the same would deter entry
and/or expansion and limit the growth of markets. In view of the above, no prima facie case of
contravention of Section 3(1) or Section 4(2)(e) of the Act is made out against the Opposite Parties.
04. Fast Track Call Cab (P) Ltd. v. ANI 60. The primary allegation of the Informants in this case is regarding abuse of dominant position by OP, by
Technologies (P) Ltd. way of predatory pricing, in the relevant market, in contravention of Section 4(2)(a)(ii) of the Act. This, as per
the Informants, has distorted fair competition in the market, resulted in business loss to equally efficient but
Case. No. 6/2015 and 74/2015 small players like the Informants and has foreclosed market to potential entrants. For examining the
allegations pertaining to Section 4 of the Act, delineation of the relevant market is essential to ascertain
Competition Commission of India dominance and analyzing the alleged abusive conduct of OP in the present case.

69. In this relevant market, OP is alleged to be engaging in abusive conduct by way of predatory pricing
within the meaning of Section 4 of the Act. The discounts/incentives offered by OP to the commuters/drivers
are alleged to be anti-competitive, as the same are stated to be backed by deep pockets rather than an
efficient pricing model of OP.

70. The scheme of the Act is such that provisions of Section 4 are only attracted when the entity under
scrutiny holds a dominant position in the relevant market. Thus, whether OP holds a dominant position in
the relevant market for radio taxi services in Bengaluru is a key issue for determination.

71. The Act explains dominant position as a position of economic strength enjoyed by the enterprise in the
relevant market, which enables it to operate independently of competitive forces prevailing in the relevant
market or affect its competitor or consumer or the relevant market in its favour. Such ability of the enterprise
to behave independently of competitive forces needs to be assessed in light of all relevant circumstances and
the factors enlisted under Section 19(4) of the Act. A complete and correct assessment warrants
comprehensive examination of the competitive conditions of the market, taking into account the inherent
characteristics of the market, the market structure, nature of competition, competitive strategies adopted by
the market participants and all such factors that strengthen or weaken the market position of the enterprise
under scrutiny. Thus, the assessment of a case would be unique to its own facts and market under
consideration.

97. The Commission further notes that the Informants have stressed upon the circular approach to
dominance and have suggested that the conduct of OP, i.e. predatory pricing, is an evidence of dominance in
 itself. Relying on international jurisprudence and the order of the Commission in the case of MCX Stock
Exchange Ltd v. NSE and other, the Informants have suggested that abusive conduct of the enterprise can
also be relied on as a factor in assessing dominance. In this regard, the Commission observes that the
conduct of the enterprise can only be used as a complement rather than a substitute for comprehensive
analysis of market conditions. Most firms, dominant or not, can engage in practices, such as exclusive
dealing, below cost pricing, loyalty discounts etc. New entrants commonly engage in such practices to gain a
toehold in the market and holding them dominant based on simple observation of conduct may have the
undesirable result of chilling competition. On the issue of interpretation of dominance based on the ability to
affect consumers/competitors/relevant market, it is to be borne in mind that market power is a matter of
degree. In most markets, every enterprise will have some degree of market power, by virtue of which they
can affect consumers or competitors in its favour to some extent. The narrow interpretation of the concept
of dominance offered by the Informant would mean that an entrant armed with a new idea, a superior
product or technological solution that challenges the status quo in a market and shifts a large consumer
base in its favour would have to be erroneously held dominant. To preclude possibilities of such anomalies in
approach in assessing dominance, the Act lays down a holistic framework for assessing dominance and lists
out the relevant factors including relative strength of competitors, entry conditions and countervailing
power. Thus, the Commission is not convinced that conduct of OP, in the absence of other important factors
that determine dominance, can be accepted to be indicative of dominance.

05. Uber (India) Systems (P) Ltd. v. CCI 5. There are two important ingredients which section 4(1) itself refers to if there is to be an abuse of
dominant position -
(2019) 8 SCC 697
(1) the dominant position itself.
Supreme Court of India (2) its abuse.

“Dominant position” as defined in Explanation (a) refers to a position of strength, enjoyed by an enterprise,
in the relevant market, which, in this case is the National Capital Region (NCR), which: (1) enables it to
operate independently of the competitive forces prevailing; or (2) is something that would affect its
competitors or the relevant market in its favour.
6. Given the allegation made, as extracted above, it is clear that if, in fact, a loss is made for trips made,
Explanation (a)(ii) would prima facie be attracted inasmuch as this would certainly affect the appellant’s
competitors in the appellant’s favour or the relevant market in its favour. Insofar as ‘abuse’ of dominant
position is concerned, under Section 4(2)(a), so long as this dominant position, whether directly or indirectly,
imposes an unfair price in purchase or sale including predatory price of services, abuse of dominant position
also gets attracted. Explanation (b) which defines ‘predatory price’ means sale of services at a price which is
below cost.

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