The Competition Act 2002 provides for prohibition of abuse of dominant position. However, the provisions of unfair trade practices earlier covered by the Monopolies and Restrictive Trade Practices Act, 1969,are not covered under the competition law. The apparent effect of the two being quite similar, there is a considerable possibility that a situation very close to unfair trade practices may be held to be an abuse of dominant position. The difference being very close, the article looks at the penalty handed out to DLF Ltd for abuse of dominant position from this perspective.

1. 2011] B-241
Treading the Thin Wedge between “Unfair Trade
Practices” and “Abuse of Dominant position”
Kaushal Kumar Sharma*
On 12th August, 2011, the Competition Commission of India (CCI), by an order
under Section 27 of the Competition Act, 2002 (the Act), held the DLF Ltd
guilty of abuse of dominant position under the Act and imposed a penalty of
Rs. 6,300 million. After holding the concerned enterprise guilty of abusing its
dominant position, the CCI had the option of levying a penalty of up to 10 per cent
of its average turnover for last three years. The CCI has charged penalty at
7 per cent stating that in view of the nature of violations, the penalty should be
harsh. Thus, in the opinion of CCI, the case called for some type of exemplary
penalty.
This article analyses the order of CCI. This includes the entire background in
which the order was passed, the improving track record of CCI, the signal the
order sends, the questions and hopes this order raises.
Last few months have seen the of law has been laid down for the moment.
Competition Commission of India (CCI) If they do not agree, they have the option
pass some affirmative orders after more of going before the Competition Appellate
than two years of its due constitution on Tribunal (COMPAT) under Section 53B
1st March, 2009 under Section 8 of the of the Act. After COMPAT has applied
Competition Act, 2002 (the Act). This is mind and given its finding, the party
good news. Any new law cannot evolve disagreed with—either the CCI or the
unless practiced. The competition law is enterprise(s) involved—may go to
no exception. Who is better placed to set Supreme Court under Section 53T of the
the ball rolling than the CCI? Act, if it so desires. The decision of the
The affected parties have the option to Supreme Court, if the matter reaches there
either agree or disagree with the views of or, in case it stops either at the level, of the
the CCI as expressed in the decisions CCI or the COMPAT is the finally settled
passed under Sections 27, 31 or 33 of the position of law at that particular point of
Act. If they agree, it is fine and the position time.
* Commissioner of Income Tax, Ministry of Finance, Government of India, and former Director
General & Head of Merger Control, Competition Commission of India. The views expressed
are personal.
COMPETITION LAW REPORTS (JUL-AUG 2011) 165

2. B-242 Competition Law Reports [Vol. 2
In this evolutionary process of than adequately amplifies that the higher
competition law, the CCI has an judiciary is quite appreciative of the basic
extremely important role. This role is that principles behind enactment of the
of the initiator of the process of evolution competition law in the country and the
of competition law.. Any hesitation for objectives of this law.
whatever reasons to reach appropriate In the orders passed recently, the CCI has
decisions or delay in pronouncing held the film producers/distributers
decisions for any reasons, whatsoever are guilty of anti-competitive conduct and
going to slow down this evolutionary levied a penalty of Rs. 1,00,000 each on
process. It is said that the “perfect” is the various parties involved. There may be
enemy of “good”. It is better to start than divergent views on the amount of
to keep on fearing a bad start in the form penalty finally imposed and its
of a bad order—just because of the fact justification after a long process of fact
that it has to wade through the appellate finding investigation by Director
machinery. It is especially important in General, entire process of inquiry by the
view of the fact that out of more than CCI, involving hearing a large number
90 orders passed by the CCI, the of parties over a long period of time,
affirmative orders can be counted on resources spent by CCI in defending
your finger despite India – like any other different challenges in various courts
economy in transition - being perceived involving a considerably long time and
a land full of anti-competitive practices. substantial resources. However, one
Therefore, it is heartening to note that the thing stands out and that is that is that
CCI has actually kick-started the process CCI is finally finding it feet and is in a
by passing a number of affirmative position of announcing decisions
decisions in the recent past. This sends a without fear or favour. May be the CCI is
strong message that the provisions of the maturing now.
Act are here to be enforced and the market The other matter adjudicated by the CCI
participants better be aware that the involves a case of predatory pricing — a
referee is watching them play. So long as tough issue generally speaking — even
the game is fair, they need fear nobody. in the developed jurisdictions. The job of
Commit a foul and be ready for a whistle the CCI was made easier by the fact that
and consequent action. In any case, no the enterprise alleged to be indulging in
decision of the Commission is final predatory pricing was not charging a
unless duly confirmed in the appellate finite amount as predatory price but a
structure - first by the COMPAT and then zero price. This was an important factor
by Supreme Court - envisaged under helping the CCI reach finality relatively
the Act. quickly. Compared to the case of film
No doubt, it is a fact that the competition producers/distributers and multiplex
law is new to our country and the association, the cases of DLF and MCX
capacity to understand and apply the have relatively been decided in a little
law would take sometime to develop. quicker manner. Hopefully, this
However, the Courts have shown enough indicates quickening of pace of decisions
mature understanding of the underlying by CCI in future.
philosophy behind the competition law. On 12 th August, 2011, the CCI passed
The decision of Hon’ble Supreme Court another landmark decision in Case No.
in the case of Competition Commission of 19 of 2010, on the basis of information
India v. Steel Authority of India Limited & filed on 5th May, 2010 by Belaire Owners
Another is a case in point which more Association against DLF and Ors. 1
1 MANU/CO/0044/2011
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3. Treading the Thin Wedge between “Unfair Trade Practices”
2011] and “Abuse of Dominant Position”
B-243
Announcing a decision in nearly the views expressed in this order.
15 months time from the filing of Further, while dealing with the
information for a young competition prepayment charges in a fixed pattern
agency is not bad. On the other hand, it printed agreement in which the consumer
would be stated to be rather prompt. does not a choice, the CCI stated:
The actual order of CCI, in case of Belaire …For the banking sector, prepayment
Owners Association against DLF, after charges are part of their overall
having enumerated the background, strategy and asset liability
information and proceedings in the management, while the consumer
previous part, begins from Paragraph 12 tends to look at them as barriers to ease
on Page 155 of the order. The issues of exit…
crystallised by the Commission are (Paragraph 15.1 of order dated
summarised in Para 12.1 of the order. 2nd December, 2010
These are: in Case No. 5/2009)
(1) Do the provisions of Competition In this case, justification for not treating
Act, 2002 apply to the facts and the prepayment penalty adversely
circumstances of the instant case? affecting the competition was that the
(2) What is the relevant market, in the state of competition in banking sector
context of Section 4 read with was healthy – with so many players and
Section 2(r), Section 19(5), the sector still registering growth:
Section 19(6) and Section 19(7) of Though the prepayment penalty is
the Competition Act, 2002? being charged by the banks, it caused
(3) Is DLF Ltd. dominant in the above no negative impact in the growth of
relevant market, in the context of the home loan business &
Section 4 read with Section 19(4) of consequently on competition.
the Competition Act? (Paragraph 18 of the order dated
(4) In case DLF Ltd. is found to be 2nd December, 2010
dominant, is there any abuse of its in Case No. 5/2009)
dominant position in the relevant It is not clear how a similar claim, if made
market by the above party? by developers, that the terms in the
The above would show that the issues agreement are a part of strategy as the
have been correctly identified by CCI in development involves money which, at
its order. Perhaps there may not be any times, is borrowed at huge interests,
two views on the issue. It is the therefore backing out by a person booking
adjudication part where the CCI had to the apartment should involve a fear of
do a tight rope walk between the “unfair forfeiture to ensure certainty for the
trade practices” and the provisions of project, can be countered. It may similarly
the Act. be claimed that, but for small periodic
fluctuations, the real estate sector is
The CCI has also passed a few orders in booming. Can it not be taken as a defence
the past. There has to be a consistency of for no adverse impact on competition of
approach in the decisions. In an earlier all the actions the enterprise is being
case of charging of prepayment penalty accused of?
by banks (Case No. 5 of 2009), the CCI
has given considerable importance to the Another, nearly similar, Case No. 15/2011
contract entered into between the lender of Balabhadra Residency Flat Owners
and the borrower. What needs to be seen Association, Hyderabad, was closed vide
is that how the views of the CCI, as order dated 5 th July, 2011, as not
expressed in that order, reconcile with adversely affecting competition.
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4. B-244 Competition Law Reports [Vol. 2
For legal certainty, it may be advisable Too much has been made out of the
for similar arguments leading to similar practice of giving readymade agreement
results. to the customer who does not have any
The last part of the order of CCI in DLF choice. The same issue came up before
case deals with the practices prevalent the Commission in bank prepayment
in the trade of real estate development. If penalty case referred to earlier wherein,
these are indeed industry practices-these by a majority order, the CCI found
should actually be being part of the order nothing wrong with the practice. On the
itself – it may give another defence to the contrary, it is held in the case of DLF that
enterprise in appellate proceedings. If all the agreements are one sided and this
the competitors are following certain practice, like others, has also been
common practices for whatever reasons, emulated by weak competitors. It has not
how the dominant player can be held been brought on record, if DLF was the
guilty of abuse of dominant position? In first to start the practice. This appears to
a scenario where a consumer willingly be an interesting argument. Para 12.103
chooses one of the available options - of the order in DLF case states:
under whichever circumstances In a competitive scenario, where the
including that of helplessness as all the enterprise indulges in such anti-
participants are following the same trend consumer conduct, there is sufficient
- in the market, can it be said that the competition in the market to provide
dominant player is abusing its position? easy alternatives for the consumers.
Is the consumer a victim in this case of It is not clear if the state of competition in
the prevalent “practices in the trade” or real estate sector is so bad that a buyer of
“abuse of dominant position” of any a premium residential unit in Gurgaon
particular market participant who has no option except to agree to the anti-
happens to come under the gaze of CCI consumer conduct of getting to sign a
either through some information or on printed contract of DLF? May be
its own motion? If that be the case, every elsewhere he may have a choice?
dominant player would be at the mercy However, we are told that it is a nearly
of the CCI. The only thing CCI has to do all India practice. It is not known if the
is to just look at the sectors having some developers claim it to be a mechanism to
“unfair trade practices,” locate the reduce administrative expenses.
dominant player and fasten the liability
“Dominance,” by itself is not bad its
of abuse of dominant position on its
abuse is, is the philosophy of the
shoulders. It has nowhere to go. Is the
competition law which, we are told, is a
dominant player also having the
modern instrument. Do we expect a
automatic responsibility of reforming the
dominant player - or a player which may
sector? Is it the intent of the Act? That,
be one of the few prominent players and
perhaps, was never the philosophy of the
with suitably picking of data or defining
Act. A look at the media reporting the
the relevant market in a particular
order indicates the flavour. Most of the
manner - can be held to be a dominant
reporting in media was on the lines “CCI
player - to be a reformist to purge the
fines DLF Rs. 630 crore for unfair trade
trade of all unfair practices lest it should
practices” little realising that unlike
be accused of abuse of dominant
many other countries, Indian competition
position? If certain practices are
law does not give the authority to CCI to
prevalent in a trade, should the
look into “unfair trade practices”
dominant player follow them to be one
whereas, the same used to be available
amongst the competitors, or to meet the
under MRTP Act, 1969 before it was
competition, or it is supposed to be
repealed.
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5. Treading the Thin Wedge between “Unfair Trade Practices”
2011] and “Abuse of Dominant Position”
B-245
oblivious to the practices and not follow and the other in Gurgaon. These couples
them despite pressure of the competition? decide either Gurgaon or Noida as a place
Do we expect the dominant player to of residence and one of the two
forget the practices adopted by others, commutes to the place of work. Further
dissect these practices and follow only with the spread of Delhi, by leaps and
that portion of practices which may not bounds, where two places within the
be called unfair? territory of Delhi take more than one to
This brings us to the basic paradox on two hours, it is really difficult to
the provisions relating to abuse of understand how the two places - Noida
dominant position. It is often said against and Gurgaon- can not be part of the same
these provisions that despite the basic market- especially for the upwardly
philosophy of the competition law being mobile aspiring for a property of a value
“to protect the competition and not the between 2 and 2.5 crores. These are the
competitor”, how come a player who has people who, more likely than not, may
become dominant in the competitive own comfortable motor vehicles with
process is being sought to be punished chauffeurs.
for a conduct for which others may go This entire issue of geographical market
scot free. Forcibly putting the yoke of has been dealt by the Commission in Para
being a reformist on the shoulders of a 12.38 of the order. While declaring that
dominant player, will strengthen those the Gurgaon is known to possess certain
who, because of the logic given here, find unique geographical characteristics such
the provision of abuse of dominant as its proximity to Delhi, proximity to
position not in tune with the basic ethos Airports and a distinct brand image as a
of competition laws. destination for upwardly mobile families,
In the United Brands2 case, it was held the CCI, in its order has compared the
that “Chiquita” brand of banana was a places such as Surat in Gujrat but not
“must have” brand for any departmental other places in close vicinity possessing
store. Not having that brand would similar characteristics. Except the last
jeopardise the very existence of the factor, i.e. the alleged distinct brand
department store. In the cases of abuse of image as a destination for upwardly
dominant position, what needs to be mobile families, all other factors apply
seen is why the second party had to enter in equal measure to NOIDA/Greater
into an agreement in the first place. In NOIDA/Faridabad/Ghaziabad. The
United Brands case, it was said that the defence of the party alleged to be in a
other party had no practical choice, if it dominant position may be that the
had to survive in the market. Can the relevant geographic market has not been
same be said of a luxury brand premium adequately dealt with. On the contrary,
residential unit? Are there any use of Surat in Gujrat as a comparison
compulsions of those looking for a and not any place close by may be used
premium residential property not to look as a tool by the enterprise held to be in a
for any other developer in Gurgaon. The dominant position to allege bias in
places in close vicinity could offer a appellate proceedings with forceful
comparative choice such as Noida, effect. The reason for the last factor, i.e. a
Greater Noida or the entire NCR region distinct brand image of Gurgaon is not
as a whole. spelt out in the order. Whether it was as
a result of some survey got done by the
There are a good number of working CCI is not clear. At least the order is silent
couples – one of whom work in Noida
2 27/76 [1978] ECR 207
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6. B-246 Competition Law Reports [Vol. 2
on it. If it is not supported by any basis If the enterprise in question argues that
whatsoever, we should remember that the product is marketed all over the globe
unless backed by hard facts and and a large chunk of buyers are
reasoning, no order can survive in appeal Non-Resident Indians, it may altogether
only on the basis of some subjective change the contour of the case.
assertions not backed by hard evidence. Now coming to the last part of the order
Further, the treatment given by the contained in Paragraph 12.112 which
Commission in the past to some similar lists the common practices followed by
cases from Gurgaon/Faridabad in developers in this line of activity. The
information relating to other developers order states that a few of the practices
of repute, holding that the information which the DLF has been following and
were either of consumer nature or did are also followed by other builders. This
not raise any competitive concerns will is a very interesting argument. If this is
be hard put to justify - decisions being true, the DLF can jolly well argue that
on its own website (Girish Batra v. BPTP the CCI has essentially tried to punish it
Ltd and Others, Case No. 42/2010 and for Unfair Trade Practices over which it
many others). has no jurisdiction. It may be really
At this point, it may be instructive to relevant to recall that the MRTPC
remember the judgment of European Act, 1969 was repealed with effect from
Court of Justice in the Continental Can 1st September, 2009. Section 66 of the Act
case. In that case, the ECJ found fault with deals with the work-in-progress before
the definition of relevant market adopted MRTPC under the MRTP Act as on the
by the European Commission in date when the MRTPAct was repealed.
Continental Can3 case. The entire work-in-progress has been
distributed to various agencies including
In the Continental Can case, the European COMPAT, CCI, DG in the CCI or The
Commission had held that the Continental National Commission constituted under
Can and its subsidiary SLW had a the Consumer Protection Act, 1986, etc.
dominant position in three different The part relating to unfair trade practices
product markets - cans for meat, cans for which was till then being dealt under
fish and metal tops - without giving a MRTP Act, 1969, has not yet found a
satisfactory explanation of why these father. Not that the Government is not
markets were separate from one another aware of this missing link, it has been
or from the market for “cans” and repeatedly discussed at various levels
“containers” generally. with an aim to find a solution. As on date,
Similarly, in the case of United Brands the issue remains unresolved.
case, the ECJ stated that the Consequently, unlike at the time before
opportunities for the competition under the MRTP Act was repealed, there are no
Article 82 must be considered. It stated: legal recourses to the area known as
with reference to a clearly defined “unfair trade practices” being dealt by
geographic area in which (the MRTPC earlier. Unlike many other
product) is marketed and where the countries, the law as envisioned under
conditions are sufficiently the Act, in India, does not include unfair
homogenous to the economic power trade practices within its ambit. The word
of the undertaking concerned to be “unfair” used in Section 4(2)(a) is in a
able to be evaluated… different context.
3 JO [1972] L7/25, (1972) CMLR D11
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B-247
Therefore, listing all these practices as Historically, in cases of abuse of
practices of the entire trade in the dominant position, the dominant
decision of the CCI gives another window enterprises imposed terms in their
for the enterprise in question for claiming agreements which were a little more
it to be an “unfair trade practice” and oppressive than the industry practice.
claim defence. The very fact that, The other party entering into the contract
admittedly, there are no provisions to had not much of a choice, for commercial
tackle the “unfair trade practices’” today reasons, except to accept the oppressive
after the repeal of the MRTP Act, 1969, terms which would not had been possible
may be an argument in its favour. If but for the dominant position of the other
indeed all the alleged abuses in the enterprise. The last part of the order
information are a part of the practices alludes to the fact that these practices are
prevalent in the trade, it is a moot point common amongst most of the developers.
whether these practices, even if adversely This observation, if true, is likely to
affecting the competition, should have weaken the case before the first Appellate
been dealt under Section 3 of the Act by Authority, i.e. COMPAT.
CCI or it should have chosen to hold a Another important thing which attracts
dominant player for abusing its dominant attention is the question whether the
opposition for using the very same judgments delivered in the context of
practices and, later, extended the scope of MRTPC Act, 1969, before it was repeal,
inquiry into these practices followed by are of as much relevance in the light of
other developers? Presently, it appears the prominence given to them in the
that the CCI has chosen the later path. decision of CCI.
Perhaps, the Commission could have
considered the possibility of covering the It can be certainly said that the
matter under Section 3 of the Act. It would Commission has made a good beginning
have given more strength to the order- not to make its presence felt. However, it
only against DLF but also other remains to be seen whether the case
developers. Appellate outcome may be survives or is upturned at COMPAT if it
different now that the CCI has held DLF smells more of unfair trade practices or
as violating Section 4 of the Act before consumer nature in the case.
holding the practice as wrong for further
inquiry in case of other developers. Copyright © Kaushal Kumar Sharma
COMPETITION LAW REPORTS (JUL-AUG 2011) 171