Competition Law- What is Relevant Market?

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June 24, 2019

While discussing the concept of dominant position under the Law of Competition, one of the most intriguing question which lingers our minds is what does relevant market connote? ‘Relevant market’ is one of the primary concerns while determining dominant position as well as abuse of dominant position by an enterprise.

Section 2(r) of the Act renders an exclusive definition for the term ‘relevant market’. It states that it means the market which may be determined by the Commission with reference to the relevant product market or the relevant geographic market or with reference to both markets.

Relevant product market is defined as a market comprising all those products or services which are regarded as interchangeable or substitutable by the consumer, by reason of characteristics of the products or services, their prices and intended use.

Relevant geographic market refers to a market comprising the area in which the conditions of competition for supply of goods or provision of services or demand of goods or services are distinctly homogenous and can be distinguished from the conditions prevailing in the neighboring areas.

M/s Saint Gobain Glass India Ltd. v. M/s Gujrat Gas Company Limited– In this case, the CCI in order to determine the ‘relevant market’ took note of factors to be considered while determining relevant product market and relevant geographic market. The CCI stated that to determine the “relevant product market”, the Commission is to have due regard to all or any of the following factors viz., physical characteristics or end-use of goods, price of goods or service, consumer preferences, exclusion of in-house production, existence of specialized producers and classification of industrial products, in terms of the provisions contained in Section 19(7) of the Act.

To determine the “relevant geographic market”, the Commission shall have due regard to all or any of the following factors viz., regulatory trade barriers, local specification requirements, national procurement policies, adequate distribution facilities, transport costs, language, consumer preferences and need for secure or regular supplies or rapid after-sales services, in terms of the provisions contained in Section 19(6) of the Act.

Section 19(6) enlists the factors to be considered by CCI while determining ‘relevant geographic market’:

  1. Regulatory trade barriers;
  2. Local specification requirements;
  3. National procedure policies;
  4. Adequate distribution facilities;
  5. Transport costs;
  6. Language;
  7. Consumer preferences;
  8. Need for secure or regular supplies

Section 19(7) of the Act enlists the factors to be considered by the CCI while determining ‘relevant product market’:

  1. Physical characteristics or end-use of goods;
  2. Price of goods or services;
  3. Consumer preferences;
  4. Exclusion of in-house production;
  5. Existence of specialized producers;
  6. Classification of industrial products;

When does an enterprise engage in an abusive conduct or abuse its dominant position?

An undertaking in a dominant position is entitled also to pursue its own interests. However, such an undertaking engages in abusive conduct when it makes use of the opportunities arising out of its dominant position in such a way as to reap trading benefits which it would not have reaped if there had been normal and sufficiently effective competition. For the purposes of this section, the conduct of a party would be tested on the basis of the end effect i.e. whether access to a market has been denied not. In other words, the same conduct by different parties may attract provisions of Section 4(2)(c) of the Act depending on whether the conduct of the parties results into denial of market access in any manner. As per Section 4(2)(c) of the Act, there shall be an abuse of dominant position if any enterprise indulges in a practice resulting in denial of market access in any manner.

In the case of Jupiter Gaming Solutions case, the CCI while determining alleged abuse of dominance by Government of Goa stated that dominance per se is not bad, but its abuse is bad in Competition Law in India. CCI further opined that abuse is said to occur when an enterprise uses its dominant position in the relevant market in an exclusionary or /and an exploitative manner.  In the case the Government’s tender bid of lottery contained certain conditions which apparently restricted the size of bidders such as, minimum gross turnover of the participating entity, participating entity should have experience of at least three years. The CCI held that the Government of Goa by imposing such conditions abused its dominant position denial/restriction of market access to the other parties in the relevant market.