Beyond Mendel’s Laws Incomplete Dominance Co-dominance and Multiple Alleles.
Collective dominance
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Transcript of Collective dominance
Collective Dominance
An Analysis of S. 4 as it exists and S. 4 as
proposed by the amendment in Competition
(Amendment) Bill, 2012
Summary• Collective dominance can be described as a position of two or more independent entities that
together hold a position of joint dominance where they act or present themselves as one unit.
• The market on which it is most likely for firms to achieve such position is on oligopolistic
market.
• The concept has been developed first in EU regime through the case laws only. The concept
was developed by defining the Article 102 (previously Article 82) of the TFEU.
• In India, the concept is being tried to bring in by amending the present Section 4 of the
Competition Act, 2002.
• Section 4 deals with the “Abuse of Dominant Position” by an enterprise or a group. Here,
“group” refers to two or more enterprises which are related to one another in terms of controlling
power or controlling stake, thus making them, in a way, one big enterprise.
• With the addition of the words “jointly or singly” in S. 4, it is sought to prevent the mischief of
“Collective Dominance” of unrelated entities which had hitherto went unnoticed.
Collective Dominance- Meaning
• Collective Dominance has not been defined anywhere.
However, the concept has evolved through case laws in
EU regime by interpreting present Article 102 TFEU and
its predecessors.
• In terms of this Article, “Dominant Position” may be
held by several undertakings.
• They should be legally independent entities.
• But, from economic p.o.v. must present themselves as a
collective entity.
Collective dominance can be
described as a position of two or
more independent entities that
together hold a position of joint
dominance where they act or
present themselves as one unit.
Dominance- Meaning
• “Dominant Position” has been defined under
Explanation (a) to S. 4 .
• A firm must be in a position of such economic strength
that it can behave independently of its competitors and
customers.
• A dominant firm has a high degree of market power.
• The definition should be understood in terms of
“Substantial impact on the market” and not by specifying
a threshold limit or an arithmetical figure for dominance.
“Dominant Position” means a position
of economic strength enjoyed by an
undertaking which enables it to prevent
effective competition being maintained
in the relevant market by giving it the
power to behave to an appreciable
extent independently of its competitors,
customers and ultimately of consumers
Collective Dominance-Evolution of the concept
• The concept was evolved by interpreting the provisions of
Article 102 (previously Article 82, and before that Article
86)
• The concept is also linked to the Article 2(3) EU Merger
Regulations so as to prohibit the Mergers from taking up on
“collective dominance” if they’re approved.
• The case was basically interpreted by the Europian courts
in the following leading cases:
•Italian Flat Glass case (1992)
•Gencor case (1999)
•Compagnie Maritime case [CEWAL Case] (2000)
•Airtours case (2002)
Article 102 TFEU provides
that any abuse by one or more
undertakings of a dominant
position within the internal
market or in a substantial part
of it shall be prohibited as
incompatible with the internal
market in so far as it may
affect trade between Member
States
Collective Dominance- Conclusions from the case laws
Collective Dominance as
dealt by Courts in Flat Glass case, Gencor case and
CEWAL case
Dominant Position may be held by two or more economic entities; what is
important is their legal independence.
However, from an economic p.o.v. they
must present themselves as a collective entity.
It is necessary to examine economic links or factors that
give rise to a connection between
undertakings.
Mere fact of linkage by way of an Agreement or “Concerted Practice” is
not sufficient unless such practices result in a
“Collective entity”.
Economic assessment of the
“relevant market” is also important to
consider.
Collective Dominance- Tacit Coordination and Airtours case
In this case the Court had laid down 3 conditions necessary for
finding “collective dominance”.
1. Knowledge among the member firms
Each member must have the ability to know the behavior of
other members to monitor that they are adopting the common
policy
2. Sustainable Tacit coordination
The situation of Tacit Coordination must be sustainable over
time; there must be an incentive for no departure from
common policy
3. No reaction from the market
The foreseeable reaction of current and future competitors, as
well as of consumers, would not jeopardize the results
expected from the common policy.
In this case the Court had stated the
ways in which “Collective
Dominance” may be achieved by
way of “Tacit Coordination”:
-As a result of concentration;
-Coming together in common
interests;
- adopting an economically rational
and lasting policy without entering
into any agreement or a concerted
practice.
Collective Dominance- Significance of Proposed Section 4
• With the addition of the words “either jointly or singly”, the
concept of “Collective Dominance” will be brought into force.
• This would be similar as to words of the Article 102 TFEU.
• This section would be able to over come the mischief that may have
been overlooked by Sections 3, Section 4 (present) and Section 5.
• This section would be an express provision for checking on
“Collective Dominance”.
• The Commission wouldn’t have to take recourse to Section 3 or
Section 5.
Proposed Section 4:
No enterprise or group,
either jointly or singly,
shall abuse its dominant
position.
Present Section 4• “Dominant Position” and “Abuse of Dominant Position” are the
two requirements. Dominance itself is not prohibited.
• Prohibits the use of market controlling position to prevent the
individual enterprise or a group in an industry from driving out
competing businesses from the market as well as from dictating
prices.
• Conditions for Abuse of dominance has been given u/s 4(2):
•Imposing Discriminatory or unfair pricing or conditions;
• Limiting or restricting production or R&D;
• Denial of market access;
• Conclusion of unfair contracts or supplementary obligations;
• Entry into another relevant market
Section 4 reads as
under:
“No enterprise or
group shall abuse its
dominant position.”
What Ss. 3, 5 & 6 do not provide
• Explicit provisions for Concerted Practices
and Cartelization in the vertical line of
business.
• Any other situations other than those
provided for in S. 3(4)that may arise in cases
of firms in vertical line;
• Does not consider “Dominance” or “abuse
of Dominance” of parties in concert;
• S. 5 regulate Mergers & Combinations, but,
does not provide expressly for Vertical
Mergers.
• Presupposition that Vertical Combinations
enhance economic efficiencies, but certain
situations were ignored, like fear of
foreclosure, entry blocking, prize squeezes,
etc.
What Ss. 3, 5 & 6 provide
• Anti-competitive agreements, tacit
coordination, Concerted Practices and
Cartelization in the horizontal line of
business.
• Anti-competitive Agreements between
firms in vertical line; agreements like:
• tie-in arrangements;
• exclusive supply agreements;
• exclusive distribution agreements;
• refusal to deal;
• resale price maintenance
•S. 5 & 6 regulate Mergers &
Combinations.
• S. 5(b) expressly provides for
Combinations in horizontal line of
business.
Why new S. 4 when S. 3 , 5 & 6 are present?
• Express provision which would require satisfaction of only 2 conditions, “Dominant Position” and “Abuse of
Dominant Position” of the entities acting collectively.
• Would be able to bring in its purview collective dominance of unrelated firms also.
• While mere concerted action without dominating position would be covered under Section 3, and dominating
position post-M&A will be covered u/s 5, “abuse of dominating position” without entering into any agreement or
any combination will be covered u/s 4.
• Vertical Mergers which may not get covered u/s 5 & 6, can now be covered u/s 4
• Conditions which may not be covered by S. 3 and situations leading to economic inefficiencies in a market which
may be created by a Vertical Merger can now be covered u/s 4(2) for “Abuse of dominance” as follows:
• Fear of Foreclosure: Clause (b) Limiting or restricting production or R&D;
• Entry Blocking: Clause (c) Denial of market access;
• Price squeezes: Clause (a) Imposing Discriminatory or unfair pricing or conditions;
• Besides, S. 4 will also cover prohibitions on Vertical Mergers in these cases:
• Conclusion of unfair contracts or supplementary obligations;
• Entry into another relevant market
Will the proposed Section 4 be able to achieve more?
A Hypothetical Situation on proposed S. 4
• Suppose there are three firms, A, B and C.
• A and C already hold a dominant position in their respective sectors in
production chain. And, B is doing just good in its sector.
• Enterprise ‘A’ decides to sell bread and buys bread from a firm ‘B’
which buys its raw material from firm ‘C’.
• A and C by using their dominant positions, and promising B to get him
too a dominant hold over its market, are able to make an impact over B
and convince B to enter into an informal agreement that they (A and C)
will fix (increase or decrease) prices of their as well as B’s products in
consultation with each other every month irrespective of whether there
are any market fluctuations.
• However, there is no agreement as given under Section 3(4) so as to
make it void under Section 3(2). This is a simple agreement to sell at
fixed prices for every other player except that they are fixed by the
dominant firms in vertical chain in collusion with each other (and by
abusing their dominance over one other firm), which has not been
included under Section 3.
• This could also give an opportunity to the dominating firms to enter
into another relevant markets.
Solution here will be amended S. 4:
• A and C hold “dominant position”;
•A and C are “abusing” their
“dominant position”, jointly (or
singly) over B;
• Abusing elements are
• imposing unfair prices
(Clause (a));
• Entry into another relevant
market (Clause (e))
Situations of Conflict while applying to real cases
• There may arise situations where apparently a particular case may fall
into the purview of both the sections 3, i.e. for cartelization or concerted
practice, and the amended S. 4, i.e. collective dominance. The CCI may
then find itself in a dilemma as to under what section the case be
considered.
• In such cases, the CCI may bring proceedings under either of these
provisions as is the practice in the EU regime.
• Besides, the penal provisions for the cases falling under S. 3 and S. 4 are
same and are given under S. 27 of the Competition Act.
• Except that, the provisions of S. 28 are exclusively applicable to cases
involving dominant entities. S. 28 provides for the division of enterprise
enjoying “dominant position”.
Conclusion• With the amendment in S. 4 as proposed by the Competition (Amendment) Bill, 2012, the
concept of Collective dominance will be put into force.
• Section 4 will be an express provision to deal with “Abuse of Collective Dominance”.
• Section 4 will also allow dealing with the anti-competitive issues that may arise out of any
Vertical Merger.
• Even though on proper interpretation of the words “jointly or singly”, the concept of
“Collective Dominance” will be put into action, yet the exact words have not been used.
• These words, in simple literal sense, would mean a firm together with any other firm (whether
related or unrelated and whether on the horizontal level or the vertical level of an industry) “abuses
its dominant position”.
• This would increase the reach of the CCI in maintaining the competitive markets in India.
• Hence, it is only in the benefit of the Country’s Competition law regime that the amendment be
brought in keeping in view of the policy laid down in the Preamble to the Competition Act, 2002.
Thank-you
Presented By:
SHASHANK
AGARWAL