Fairness and level playing fields for all the participants in the markets are absolutely essential for its sustainability and development. When there is perfect competition in the market, the consumer is sovereign, as his welfare is maximised. However, in reality the markets are imperfect and the invisible hands in the Adam Smith’s theory not always favours the consumer’s interest. Consequently we require a external regime to maintain contestability and fairness in markets.
Thus all modern competition laws contain specific provisions against anti-competitive and monopolistic behaviour. The Sherman Act, 1890, to which the origin of competition law is traced, contains specific prohibition against monopolisation. Again Article 82 of the EU treaty prohibits abuse of dominance. One of most important objective of The Competition Act, 2002 (hereinafter referred as the Act) like other competition regimes in the world is to detect and prevent abusive conducts by dominant enterprises .
2. Abuse of Dominant Position
Section 4(1) of the Act prohibits abuse of a dominant position by an enterprise or group. In order to completely understand this section, we first need to address the issue what the terms enterprise and group means?
Enterprise – Definition
The Act provides a quite lengthy definition been for the term in the following words “Enterprise means a person or a department of the Government, who or which is, or has been, engaged in any activity, relating to the production, storage, supply, distribution, acquisition or control of articles or goods, or the provision of services, of any kind, or in investment, or in the business of acquiring, holding, underwriting or dealing with shares, debentures or other securities of any other body corporate, either directly or through one or more of its units or divisions or subsidiaries, whether such unit or division or subsidiary is located at the same place where the enterprise is located or at a different place or at different places, but does not include any activity of the Government relatable to the sovereign functions of the Government including all activities carried on by the departments of the Central Government dealing with atomic energy, currency, defence and space .
In simple language the term means a person (including an individual and every artificial judicial person) or a government department engaged in any kind of business activity. The definition can be explained using the following diagram –
After the abuse of dominance has been established the competition authorities can pass any of the order listed below –
1. A cease and desist order,
2. Impose penalty which may be up to 10% of the annual turnover,
3. Direct the enterprises concerned to abide by such other orders as the authority may pass and comply with the directions, including payment of costs, if any,
4. Pass any other order as it may deem fit,
5. Direct the division of a dominant enterprise, and
6. Awarding compensation but applicable only on Competition Appellate Tribunal.
After adopting substantial structural adjustment in 1991, India embarked on the path of market liberalization, and consequently it increasingly relies upon market rivalry as the organizing principle for economic activity. The seminal role of markets in ensuring allocation of resources has generally been understood to be efficient. Nevertheless, considering that markets are imperfect and many a time prone to failures, the role of competition law and policy can hardly be overemphasized. In the end, to conclude it can be said that prohibition on abuse of dominant position is absolutely necessary for preserving fair competition in economy and especially for a developing economy like ours.