The Competition Commission of India (hereinafter referred as CCI), yet again took the same stand that has been observed since the very beginning, i.e. not deliberating upon the issue pertaining to Collective dominance in any case. This stand has been always backed by a single rational which is, ‘because the Act does not recognize this concept, we shall not deliberate upon it’. In the recent case of Delhi Vyapar Mahasangh v. Amazon Seller Services Pvt. Ltd. (hereinafter referred as Amazon) and Flipkart Internet Services Pvt. Ltd. (hereinafter referred as Flipkart),[i] the CCI dismissed allegations under §.4 of the Competition Act, 2002 (hereinafter referred as the Act) against Flipkart & Amazon on the grounds that, that Collective dominance is not contemplated under the Act, hence an assessment under §.4 cannot be undertaken.
This Article puts forth that there is an urgent need to include this concept in the jurisprudence of the Act, the absence of which renders CCI, as a toothless tiger. Hence, firstly the Article provides brief of the case given above.
BRIEF OF THE CASE
In the present case, a group comprising of MSME dealers of smartphones and related accessories approached the CCI with a grievance against Amazon and Flipkart with allegations pertaining to firstly, §.3(1) read with §.3(4) of the Act, under which it was alleged that there is an existence of vertical arrangements between (i) Flipkart and their preferred sellers; and (ii) Amazon and their preferred sellers on the platforms, the result of which was ‘Deep discounting’, ‘Preferential listing’ and ‘Exclusive tie-ups & Private labels’. Secondly, §.4(2) read with §.4(1) of the Act, under which the informants alleged that, Flipkart and Amazon are jointly dominant in the market, on the basis of their Market power and as they were repositories of huge customer data, high entry barriers were created. And using this dominant position they have abused it through ‘predatory pricing resulting from deep discounting’ and ‘restriction of service in the market through preferential listing’.
The CCI taking into account these allegations, warranted an investigation with respect to the first allegation but dismissed the second. To understand the demerits of such dismissal, we shall firstly understand the concept of Collective dominance.
COLLECTIVE DOMINANCE
Collective dominance can be described as a position of strength that two or more enterprises hold in a market.[ii] It can also arise in a situation where in the enterprises may not individually be dominant in the market, but are dominant collectively and which are legally and economically independent of each other, behave in a manner through adoption of common policies that they act a collectively dominant entity from the market perspective.[iii] This situation is observed in an oligopolistic market, i.e. a market in which few competitors are present.
The Article 102 of the Treaty on the Functioning of the European Union (TFEU), envisages this concept through the its very language stating the words ‘one or more’.[iv] Such a provision is absent in the Indian Competition law regime, which harms the market. This concept has evolved in the European jurisprudence through several cases, and what we can understand from the factors for the determination of a Collective entity laid down by the court in the Sony/BMG case,[v] and Airtours case,[vi] is that;
(a) The Market must have a transparent nature (monitoring the market and adoption of a common policy can be done by the firms).
(b) Sustainability of Tacit co-ordination over time & agreements not coming under the meaning of Article 101 of TFEU, (i.e. no incentive to eject from the common policy on the market should be present).
(c). The foreseeable reactions of competitors (potential and actual) & customers would not
jeopardize the results expected from the common policy.[vii]
CASE ANALYSIS WITH RESPECT TO COLLECTIVE DOMINANCE
In the present case, by analysing the facts, it can be easily inferred that both the E-commerce giants have adopted the same policy on the market, and the same has been ascertained by the commission, i.e. both had the similar business model of ‘preferential listing of seller’, also both the platforms encouraged deep discounting, which is detrimental to offline retailers. Moreover, it was observed that, the firms had exclusive tie-ups with smartphone brands for the retail of certain smartphones. It was alleged that the preferred sellers are connected to Amazon and Flipkart, respectively, through common investors, directors, shareholders, operating through different ‘proxy’ entities having the support of these marketplaces. Therefore, it can be observed that the two E-commerce giants, having the maximum market share jointly, along with being large repositories of customer data, in such a transparent market were strategic business policy affect the competitors have adopted similar policies. This satisfies the first factor needed to ascertain the collectively dominant position.
Furthermore, there is not an explicit agreement between Amazon and Flipkart, rather a ‘Tacit-collusion’ can be inferred.
Collusion can be described as a conduct in which the enterprises present in the market, who have to compete, instead, start cooperating with each other.[viii] Explicit collusion is illegal and generally come under the meaning of ‘agreement’ of the Act. The focus here is on Tacit collusion, in which neither do they engage in express communication nor in an agreement,[ix] moreover, Actions in Concert, in which even though an explicit collusion or agreement has not been done there exists some kind of communication and Conscious Parallelism in which parallel behaviour such as maintaining similar prices is seen, can come under the ambit of Tacit collusion.[x] While Actions in concert are illegal, Conscious parallelism is legal and from time to time it has been established by the Commission that some circumstantial evidences detrimental to the market competition are required over and above the proof of Parallel behaviour to deem it illegal (Parallelism plus approach).[xi]
Therefore, clearly the absence of an explicit collusion and yet adoption of similar business strategy by both the firms indicate the presence of tacit collusion, which satisfies the second factor for determining a joint entity. Furthermore, the factors conducive to such collusion are high entry barrier, oligopolistic market, high product/service homogeneity, price transparency and distributed buyer power,[xii] are present in this E-commerce market and acts as the very reason that the strategy to adopt a common policy, will not be jeopardised. Hence all the factors required to establish a Collective entity are satisfied by the facts of this case.
DEMERITS OF EXCLUSION OF THIS CONCEPT
The present case shows that the exclusion of Collective dominance from the Act, is defeating the very purpose of the Act. In such similar case where the enterprises are not individually dominant but they come together through certain economical links, which do not come under the ambit of ‘agreement’ and hence go unpunished and undetected under §.3, for such cases justice will be served under §.4 only if Collective dominance is included in the jurisprudence of the Act. It wouldn’t be incorrect to say that Amazon and Flipkart have achieved duopoly in the market. Moreover, this investigation ordered has been criticized on the grounds that, it is focusing only on one sector of the platform and on exclusive arrangements pertaining only to some brands and smartphones, and CCI is disobeying its principle which it had set in 2015 that such exclusive arrangements are not harming competition. The Article hence proposes that if Collective dominance was included in the ambit of the Act, the case would have been investigated with respect to §.4 because it is evident that these giants are growing rapidly in a rapidly growing market and as Mr. Galloway says Amazon is “going under water with the world’s largest oxygen tank, forcing other retailers to follow it, match its prices and deal with changed customer delivery expectations”.[xiii]
The then Chairperson of CCI during the a discussion on the Competition (Amendment) Bill, 2012,[xiv] was of the opinion that in situations wherein multiple entities in a oligopolistic market were structurally unrelated to each other and not forming a cartel as there is no evidence, yet economically acting in concert, if we had Collective dominance in the Act, then it would empower CCI to look at these cases where there may be no clear cartelisation evidence but there is a sort of de jure cartel in operation.[xv]
As Tacit collusion falls outside the reach of competition laws on cartels,[xvi] jointly dominant enterprises are operating freely in the market. Analysing the oldest substantial case involving the allegations on Joint dominance which was the Royal Energy v. OMCs,[xvii] or the latest landmark case of Meru Travels v. Uber India & ANI Technologies,[xviii] activities in contravention of the Preamble of the Act have walked away from the Commissions catch.
CONCLUSION
This Article tries to bring into the notice that, the absence of this concept renders the Commission less powerful than envisaged, and despite the circumstances pointing at the offender, only because the language of the Act doesn’t allow, the offenders are freed, to the breach of the Preamble.
[i] Delhi Vyapaar Mahasangh v. Flipkart Internet Pvt ltd & Amazon Seller Services Private Limited. CCI Case no. 40 of 2019
[ii] Liza Lovdahl Gormsen, Collective dominance: An overview of national case law, e-Competitions National Competition Laws Bulletin, https://www.biicl.org/documents/10061_554_collective_dominance.pdf.
[iii] Hans Henrik Lidgard, Legal Test for Finding of a Collective Dominant Position under Article 102 TFEU, Faculty of Law, Lund University.
[iv] Article 102 of Treaty on the Functioning of the European Union (TFEU) [2016] OJ C202/1.
[v] C-413/06 P Bertelsmann AG v Independent Music Publishers & Labels Association (Impala) [2008] 5 CMLR 17 [hereinafter Sony/BMG ]
[vi] Case T-342/99, Airtours v Commission [2002] ECR II-2585.
[vii] Félix E. Mezzanotte, Interpreting the Boundaries of Collective Dominance in Article 102 TFEU, Kluwer Law International: European Business Law Review (2010)
[viii] Antonio Capobianco, Unilateral Disclosure of Information with Anticompetitive Effects (e.g. Through Press Announcements), DAF/COMP/WP3(2012)1, (OECD, Working Party No. 3 on Co-operation and Enforcement).
[ix] Joseph E. Harrington, Jr., A Theory of Tacit Collusion (2011), https://www.tse-fr.eu/sites/default/files/medias/stories/SEMIN_11_12/ECONOMIC_THEORY/harrington.pdf
[x] Ibid.
[xi] Avinash B. Amarnath, The Oligopoly Problem: Structural and Behavioural Solutions under Indian Competition Law, Journal of The Indian Law Institute, Vol. 55 No. 3 July-September 2013.
[xii] Jaime Eduardo Castro Maya, The Limitations on The Punishability Of Tacit Collusion in EU Competition Law, Rev. Derecho Competencia. Bogotá (Colombia), Vol. 13 N° 13, 195-240.
[xiii] Mihir Dalal, The Amazon, Flipkart antitrust case files, LIVEMINT, 04 Mar 2020
[xiv] Standing Committee on Finance, ‘The Competition (Amendment) Bill, 2012’ Eighty-Third Report.
[xv] Ibid.
[xvi] Supra Note viii.
[xvii] Royal Energy Ltd v. IOCL and others, 2012 Comp LR 563 (CCI).
[xviii] In Re: Meru Travel Solutions Pvt. Ltd. v. M/s Uber India Systems Pvt. Ltd. & Ors. CCI case No.25-28 of 2017
This article is written by Alay Raje of Institute of Law, Nirma University.
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