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Collective Dominance-A Concept Still Unknown to the Indian Competition Regime

Updated: Sep 25, 2019


Author: Rohan Bhargava


The author is a student at Ram Manohar Lohia National Law University.

The concept of “Collective Dominance” is still not recognized by the Competition Law Regime in India, unlike the more developed antitrust laws as that of the European Union. According to Article 102 of the Treaty on the Functioning of the European Union (TFEU), ‘collective abuse’ refers to when two or more undertakings which are connected in some way abuse their concentrated market dominance. The concept of collective dominance is used when two or more independent entities together control a dominant part of the market through an economic link and cumulatively abuse the same. The question of Collective Dominance can be raised for the market players who may not in itself be dominant in the market, but are dominant collectively. There may be cases of collective dominance which may comprise of both cases of both horizontal and vertical markets. Therefore, an existence of an anti-competitive agreement or cartelization amongst the parties is not necessary.


The concept of dominance in India is centered on the fact of considerable market power that can be exercised only by a singly enterprise or a small set of market players. The Competition Commission of India is yet to recognize the concept of collective dominance under Section 4 of the Competition Act and has made it clear yet again in its recent judgment on dismissing the allegation of Cartelization by Telugu Film Producers. The CCI in its order dated August 1, 2019, dismissed a complaint filed by a Telugu Film producer and distributor against a number of movie studios who are engaged in the business of distribution of movies in the States of Andhra Pradesh and Telangana.


Background


The informant had contacted the OP’s, who were believed to be having more than 80% of the local theatres in the States of Andhra Pradesh and Telangana, to provide a minimum of 400 screens for the release of his movie “Petta”, a dubbed version of the Tamil movie in Telugu language. The OP’s declined to provide sufficient number of screens. The other Telugu movies which happened to release at the same time were provided with approximately 450 screens per movies, however, the informant was denied and no justifiable reasons were provided to him. A lesser number of screens for the release of the film resulted in an immense monetary loss to the informant.


Allegations


The informant alleged the OP’s of cartelization amongst themselves and thereby, providing only a limited number of screens to the informant. The impugned conduct of the OP’s was alleged to adversely affect the competition not only at the distributor level but would also have a negative effect on the consumers/viewers thereby violating section 3(3)(b) of the Competition Act that deals with acts pertaining to limiting the production, supply, markets, technical development, investment or provision of services.


The informant further alleged that the sole purpose of the OP’s was to monopolize the film industry by preventing the entry of new competitors in the market which is against the objective of the Competition Act. Moreover, the OP’s were in a dominant position in the market and were discriminating between producers/ distributors based on movies in Telugu language and movies dubbed in Telugu language and hence, violating the provision of Section 4 of the Act.


Commission’s View

The Competition Commission of Indian rebuffing the allegations of violation of Section 4 of the Act by the informant upheld the stance that the Competition regime of India does not recognize the concept of “Collective Dominance” and is solely pertaining to the abuse of dominant position by an enterprise or a group. The decision of the CCI is in line with its previous decision in the well-known case of alleged collective dominance by Ola and Uber, wherein the Commission held that “the provisions of Section 4 of the Act clearly stipulate dominant position by only one enterprise or one group.” The commission rejected the contention of the informant that the act allows for more than one dominant player under Section 4.


Further, the Commission also stated that the informant himself has pointed out that a number of players exist in the market and therefore, there can be no single dominant player in the market and so the question of abuse of dominance does not arise.


While deliberating on the allegations of cartelization on the OP’s, the Commission observed that the informant has not produced any documented evidence or has failed to prove in any manner the existence of an agreement amongst the OP’s for the allocation of screens and is making baseless allegations. The Commission concluded that no right exists for a producer/director to claim a particular number of screens for exhibitions of its movies, thereby exonerating the OP’s of any liabilities under Section 3(3)(b) of the Act.


Conclusion


The CCI while dismissing the complaint filed by the informant has once again refused to shed light on the long-standing demand to recognize the concept of “collective dominance” in India, while it is a well-known concept in the EU and even in the Canadian Competition Tribunal. The proponents of the collective dominance have argued that recognizing the concept would allow the Commission to implicate the parties who may be not dominant per se, but are dominant collectively. There was an attempt to increase the scope of Sec 4 of the Competition Act by broadening its ambit to cover cases of collective dominance through the Competition (Amendment) bill, 2012, only to find the bill being lapsed. The bill sought to punish the market players who may not singly be dominant in the market but may be dominant if in a group by adding the words “jointly or singly” after the words “or group” in sub-section (1) of section 4 of the Act.


The CCI in the recently published report by the Competition Law Review Committee has argued that the cases of collective dominance that have surfaced in the past in the countries that have recognized the concept are found of to be of cases involving an anti-competitive agreement amongst the players. It argued that there is no requirement for recognizing the concept of collective dominance at this stage as the cases can be dealt by the provisions provided under Section 3 of the Competition Act. The report relying upon the statistics of the UK that there have been no cases yet where the authorities have founded existence of collective dominance in the market played down the need to recognize the concept in the Indian scenario. Further, it also pointed out the fact that there are countries like the US and Australia that do not recognize the concept of collective dominance. It is further argued by the Commission that the Section 3(1) and sec 3(2) of the Competition Act are already existing that are enough to deal with cases pertaining to alleged collective abuse of dominance, and hence, there is no need to bring an extra legislation to deal with such cases.


However, there have been various instances where the court has to let go off the hook various players in the market due to absence of any law on the subject, e.g. in the above discussed case of Telugu producer or the famous case of Shri Sonam Sharma v Apple, Vodafone and Airtel. Therefore, the view of the Commission is highly problematic because it has time and again expressed its inability to adjudicate upon the cases pertaining to the matter. The provisions provided under section 3 of the Act are not sufficient to deal with the matter as they necessarily require the existence of an agreement amongst the parties which may not always be the case as in cases falling under section 3(4) of the Act. Moreover, the liability under sec 3 is limited to the entities involved in identical or similar trade of goods which narrows down the scope. The current provisions allow the entities implicated for abuse of dominance to escape liability as they may not be dominant in the market individually but dominant collectively.


Further, the argument that the concept has not been recognized by the US and therefore, we also don’t need is flawed due to a vast level of difference between the economies of the Nations. The US is a developed economy while ours is still in the developing stage. Therefore, the authorities must deliberate upon the matter and the concept of “collective dominance” must be recognized in the jurisprudence of Competition Law in India.

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