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Abuse of Dominant Position (Under The Competition Act, 2002)

Abuse of dominant position occurs when a company with significant market power uses unfair practices to eliminate competition or exploit consumers. The Competition Act, 2002 prohibits such practices to ensure a fair market.

What is a Dominant Position?

A business is said to be in a dominant position when:

  1. It has significant control over the market.
  2. It can influence prices, supply, or demand.
  3. Competitors struggle to enter or compete in the market.

Example of a Dominant Position: A leading e-commerce platform forcing sellers to offer exclusive discounts, preventing them from selling on other platforms.

Types of Abuse of Dominant Position

1. Predatory Pricing

  • Selling products below cost to eliminate competition.
  • Once competitors exit, prices are raised.
  • Example: A large online retailer offering extreme discounts to drive small retailers out of business.

Penalty: Heavy fines imposed by the Competition Commission of India (CCI).

2. Refusal to Deal

  • Restricting supply to certain parties.
  • Preventing competitors from accessing raw materials, technology, or distribution channels.
  • Example: A major mobile OS provider refusing to support third-party apps.

Penalty: CCI can force the company to change policies and impose fines.

3. Exclusive Agreements

  • Making suppliers or distributors sell only one company's products.
  • Example: A leading soda brand forcing stores to sell only its products, excluding competitors.

Penalty: CCI can cancel such agreements and impose penalties.

4. Limiting Production or Supply

  • Artificially creating shortages to increase prices.
  • Example: A major cement company restricting supply to increase construction costs.

Penalty: Heavy fines and possible legal action by CCI.

5. Tying Arrangements

  • Forcing customers to buy one product to get another.
  • Example: A software company making customers buy a package of multiple apps instead of a single one.

Penalty: CCI can impose fines and order companies to stop such practices.

Advantages of Prohibiting Abuse of Dominance

✅ Protects consumers from unfair pricing.
✅ Encourages healthy competition.
✅ Prevents monopolistic exploitation.
✅ Ensures market stability and innovation.

Disadvantages of Prohibiting Abuse of Dominance

❌ Difficult to define and prove dominance.
❌ May discourage large firms from investing.
❌ Complex regulations may slow business growth.

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