Factors Considered by the Competition Commission of India in Determining the Dominant Position of an Entity

Introduction

The criteria used by the CCI to assess dominant positions are essential for ensuring fair competition and preventing monopolistic practices within markets. These criteria provide a comprehensive framework for evaluating dominance and are instrumental in upholding consumer welfare and market efficiency. Understanding how the Competition Commission of India (CCI) assesses the dominant positions of entities is crucial for maintaining fair competition within markets. Section 19(4) of the Competition Act, 2002, outlines the criteria used by the CCI to evaluate dominance. Additionally, insights gleaned from specific CCI orders shed light on various factors such as market share, economic power, entry barriers, network effects, and switching costs, which play pivotal roles in determining dominant position.

Key Factors Considered in Determining Dominant Position by the CCI

• Market Share of the Enterprise:

1. 1. • The CCI examines the market share held by the enterprise as a key indicator of dominance. A significant market share suggests a strong competitive position within the market. Market share is often calculated based on revenue, sales volume, or other relevant metrics.

• Size and Resources Impacting Dominant Position:

1. 1. • The size and resources of the enterprise are evaluated to gauge its economic power and influence within the market. This includes factors such as revenue, assets, workforce size, and technological capabilities.

• Size and Importance of Competitors:

1. 1. • The CCI considers the size and importance of competitors to assess the competitive landscape and the relative position of the enterprise. This involves analyzing the market presence and capabilities of competing firms operating within the same market.

• Economic Power of the Enterprise:

1. 1. • Economic power, including commercial advantages over competitors, is scrutinized to understand the enterprise’s ability to influence market dynamics. This may include factors such as pricing power, brand recognition, and access to resources.

• Vertical Integration or Sale or Service Network:

1. 1. • Vertical integration and the extent of the enterprise’s sale or service network are examined to determine its reach and control within the market. This includes assessing the breadth of the enterprise’s operations and its ability to influence various stages of the supply chain.

• Dependence of Consumers on the Enterprise:

1. 1. • The degree of consumer dependence on the enterprise is evaluated to understand its significance and impact on market dynamics. This involves assessing factors such as brand loyalty, customer switching costs, and the availability of alternative products or services.

• Entry Barriers and Their Impact on Dominant Position:

1. 1. • Entry barriers, such as regulatory barriers, financial risks, and high capital costs, are analyzed to assess the ease of entry for new competitors. High entry barriers can contribute to the establishment and maintenance of a dominant position by limiting competition.

• Countervailing Buying Power:

1. 1. • The presence of countervailing buying power is considered to understand the balance of power between the enterprise and its customers. This involves assessing the ability of customers to negotiate favorable terms and conditions with the enterprise.

• Market Structure and Size:

1. 1. • The market structure and size are evaluated to understand the competitive landscape and the enterprise’s position within it. This includes analyzing factors such as market concentration, market trends, and the presence of dominant players.

• Social Obligations and Costs:

1. 1. • Social obligations and costs are taken into account to assess the enterprise’s impact on society and the economy. This involves considering factors such as corporate social responsibility initiatives, environmental sustainability practices, and compliance with regulatory requirements.

• Relative Advantage to Economic Development:

1. 1. • The relative advantage of the enterprise to economic development is considered, with a focus on its potential adverse effects on competition. This involves assessing the overall impact of the enterprise’s activities on economic growth, innovation, and consumer welfare.

• Other Relevant Factors:

• • • The CCI may also consider any other factors deemed relevant for the inquiry into dominance. This includes specific market conditions, industry dynamics, and unique characteristics of the enterprise under investigation.

Insights from CCI Orders on Dominant Position of an Entity

• Google Play Store Dominance:

1. 1. • The CCI assessed Google’s dominant position in the app store market based on factors such as market share, entry barriers, network effects, and lack of countervailing buyer power. Google’s control over Android and the popularity of the Google Play Store were key considerations.

• Network Effects Impacting MakeMyTrip Dominant Position”

1. 1. • Network effects played a pivotal role in assessing MakeMyTrip’s dominance, creating entry barriers and incentivizing service providers to list on its platform. The wide choice available on MakeMyTrip’s portal and the resulting consumer preference contributed to its dominant position.

• Lock-In Effect in WhatsApp:

1. 1. • WhatsApp’s dominance was attributed to network effects, resulting in a lock-in effect for users. The difficulty of switching to alternative platforms due to network effects reinforced WhatsApp’s position of strength in the messaging app market.

• Switching Costs in Google Android Dominance:

• • • Switching costs associated with shifting to competing operating systems, such as consumer inertia and brand loyalty, reinforced Google’s hegemony in the market. The convenience and familiarity of Android devices deterred users from switching to alternative platforms.

Conclusion 

The CCI employs a multifaceted approach to determine dominant positions, considering various factors outlined in Section 19(4) of the Competition Act, 2002. Insights from CCI orders further elucidate the significance of factors such as market share, economic power, network effects, and switching costs in assessing dominance. By comprehensively evaluating these factors, the CCI aims to uphold fair competition