Introduction:

In competition law, monopolists have always been considered the villains – towering giants accused of squeezing rivals, locking in consumers and stifling entry of newbies in the market – but what happens when the villain is not one, but a band of giants who never act in collusion, yet march to the same drumbeat? This is the puzzle of collective dominance that faces most competition authorities in contemporary markets. With oligopolistic markets on the rise, where a group of entities exercise significant control over the market, abuse of collective dominance has become a significant issue. The European Union (EU) has long tussled with this problem under Article 102 TFEU recognising that two or more firms can abuse their collective dominance in the market independently without colluding per se. The General Court in Italian Flat Glass and Court of Justice in Compagnie Maritime Belge have acknowledged the need for extending Article 102 TFEU to include abuse of collective dominance as well.

India, however, has declined to do so outrightly by restricting section 4 of the Competition Act 2002 to “abuse of dominance’’ by a ‘single enterprise’, creating by and large a collective dominance gap in the Indian competition landscape. This becomes a huge setback for competition law enforcement in India, as major players in the market are able to bypass regulation by not being, by themselves, the dominant player in the market.

Abuse of Collective Dominance: What’s the fuss all about?

Collective dominance refers to conditions where two or more firms jointly hold position of dominance in the relevant market. In the digital advertising market, for instance, there is no one dominant enterprise, but Google, Meta and now Amazon together hold the major market shares, collectively holding a dominant position. 

Economists usually prefer the term ‘oligopoly’ for such a highly concentrated market, where players are few and the product is homogenous. However, competition law concerns are not with just the dominance itself, but with abuse of this dominant position. Abuse of collective dominance implies that two or more enterprises holding dominant positions in the market, act in a way that reduces competition in the market without colluding with each other. Such individual conduct of enterprises is difficult to penalise as the current competition law frameworks only penalize joint conduct like cartelization and not individual firm behaviour in the market (see Section 3 of the Competition Act, 2002, Article 101 TFEU). Under collective dominance, on the other hand, the mischief lies in the individual but parallel conduct of the dominant enterprises. 

The Indian Silence on Collective Dominance and What it Entails?

In India, abuse of dominance is strictly considered to be a one-man show. Section 4 of the Competition Act, 2002 states that only an ‘enterprise’ or a ‘group’ can abuse its dominant position in the relevant market. Moreover, ‘group’ is construed narrowly in the Act to mean entities linked by control or shareholding. Independent rival enterprises acting parallelly in the market to restrict competition do not count. 

The Competition Commission of India (CCI) has also strictly depended on the narrow construction of section 4 in the Act. The Commission has flatly refused to recognise abuse of collective dominance on multiple occasions. The end-result is major players escaping liability in major markets. In Delhi Vyapar Mahasangh v Flipkart International Private Limited and Amazon Sellers Services Private Limited, the Commission investigating in allegations of violations of section 4 against Amazon and Flipkart, held that since joint abuse of dominance is not recognised in the Indian Competition Law regime, Amazon and Flipkart would not be liable for creating an anti-competitive E-commerce market with numerous barriers to new entrants and exclusionary conduct. In the radio taxi service market, allegations against Uber and Ola for joint abuse of dominance by imposing unfair conditions and predatory pricing were also dismissed by the Commission. More recently, in the copper supply market, CCI refused to entertain allegations of violation of section 4 against Hidalco and Vedanta for abuse of their joint dominance. 

The implications of this silence are gravely concerning considering the rise of multiple oligopolistic markets in India. From digital advertising, food delivery, digital marketing to even production and supply market, competition is coming to be defined as not one firm’s dominance but joint dominance of multiple players who manage to bypass the law due to their independent but parallel actions. It is very clear that the current framework needs to be equipped to handle this gap in enforcement. However, regulators are still persistent to maintain the status quo.

In fact, the 2019 Competition Law Review Committee recommended not to include collective dominance in the Competition Act, insisting that this is aptly covered under existing regime of section 3 of the Act which penalises horizontal and vertical agreements restricting competition in the market. This reasoning, however, ignores the core nature of collective dominance which is that firms may independently align their strategies, through parallel pricing, similar exclusionary terms or coordinated entry barriers without an explicit or tacit agreement. The burden of proof under section 3 specifically requires proof of an agreement between enterprises which is absent in the concept of collective dominance. The mischief sought to be curbed by section 3 is entirely different from the mischief under collective dominance. 

There is also this lingering fear that recognising the doctrine of collective dominance will make CCI run wild, and penalise enterprises for even having similar competitive strategies. However, this is hardly a deal breaker as fear of over-regulation is not an excuse for leaving a policy gap open. Setting clear thresholds and standards of proof for making out abuse through a multi-tiered test which firstly, identifies the market structure, secondly, identifies the dominant firms in the relevant oligopolistic market and thirdly, assesses objective harm caused in the by anti-competitive conduct by the dominant firms, similar to that of the test already under section 4 can be efficient methods to curb over-regulation. Moreover, safe harbours, granting leniency if market shares of firms below a certain threshold also prevent over-regulation in this regard.

The EU Method: Key Lessons for filling the Enforcement Gap under Competition Act, 2002

Unlike India, the European Union (EU) had long ago recognised that highly concentrated markets controlled by multiple dominant firms cannot be left outside regulation. Article 102 of the Treaty of Functioning of the European Union (TFEU) deliberately refers to abuse of dominance by ‘one or more undertakings’, allowing regulators to catch parallel action of multiple dominant undertakings. In Compagnie Maritime Belge, the Court of  Justice of the EU clearly demarcated that two or more firms could abuse their collective dominance through parallel conduct. The EU has recognised collective dominance in merger control as well, ascertaining a three-pronged test for a finding of collective dominance in Airtours.

The EU’s method of tackling abuse of dominance has also not been static. The Digital Markets Act of 2023 (DMA) seeks to curb similar action with ex ante application. The DMA identifies ‘gatekeepers’ which prevent enlarging consumer choices and indulge in data sharing. In fact, it has already started fining major companies like Meta and Apple for restricting developers to main channels and preventing consumer choice to alternative channels for cheaper offers. Hence, the EU has managed to keep the law up to terms with dynamic changes in the markets.

For India, the EU model offers at least two sharp takeaways: firstly, to give a purposive interpretation of abuse of dominance under section 4 to penalise abuse of singly or jointly dominant firms and secondly, to keep the regime in touch with the needs of the markets. Considering that the ultimate aim of competition law is to protect the well-being of the market, the law will need to cater to the evolving needs of the market. The point is not to transplant the EU framework wholesale but to recognise that without a sound regime to prevent abuse of collective dominance, the present competition law framework risks becoming redundant in the markets that matter most right now.

Conclusion 

By refusing to change the status quo, Indian Competition law regulators have boxed themselves into a corner. The CCI is left with sharp tools for cartels and monopolists but blunt edges for two or three giants splitting the throne collectively and while this gap in enforcement may have been sensible in the 2000s or even 2010s, in non-digital and clear-cut markets, in today’s highly diluted and digital markets, the refusal to penalise such abuse becomes highly unsustainable for Indian Competition Law. 

Meaningful reforms in the Competition Act, 2002 would be ideal in such a context. However, with the recent decision to withdraw the much-debated Digital Competition Bill, scope of dynamic changes in India’s competition law regime remain few and slim.