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Understanding dominance PDF Print E-mail
Thursday, 07 May 2015 07:28
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CCI does a good job on e-tailers like Flipkart/Amazon

 

More than a decade ago, when Reliance Industries Limited (RIL) began its mobile services and offered huge discounts to attract subscribers, many of the existing telcos argued this was anti-competitive since the services were being offered at below cost. Not surprisingly, given the way e-tailers like Flipkart and Amazon have been discounting to attract customers, the same argument is being made all over again. This time around, small brick-and-mortar stores have petitioned the Competition Commission of India (CCI) on the matter; not surprisingly for such matters, some irrelevant allegations have also been bunged in, such as the e-tailers bringing in FDI while this is illegal. Apart from the issue of massive discounting, it has been alleged that these firms are also entering into exclusive sales agreements that are, by their very nature, anti-competitive. One example given, of Chetan Bhagat’s yet-to-be-launched book being exclusively launched on Flipkart. Various other products, such as Xiaomi and Motorola mobiles have also been exclusively launched on these websites. This, according to the complainants, allowed these e-tailers to manipulate prices, control supplies and distort competition in the market place—an association of computer traders, for instance, complained that e-tailers were buying products from distributors/dealers and selling them at below even their purchase prices.

While dismissing the cases, CCI has adopted classic definitions of what comprises predatory behaviour and has, hopefully, set out useful precedents for the future. CCI has said that even if such exclusive marketing arrangements did exist, it was important to establish whether they were anti-competitive. For one, as the CCI has pointed out, if no barriers are being created—indeed, e-tailers are only increasing the level of competition in the market—there is little question of hurting competition. Equally, if such competition is creating more benefit to consumers —and there can be little doubt about that, both in terms of prices as well as convenience—this also has to be kept in mind. CCI has also said, and rightly so, that dominance is a term that has to be seen in context. If Flipkart is to be accused of dominance, this has to apply to a category (say, books) or even a sub-category (scientific books); it cannot be done for a tiny niche like, say, Chetan Bhagat’s Half Girlfriend or the iPhone 6-plus. This broader definition of what is a relevant market is critical—it could also have implications in other cases such as the DLF one—since, in terms of competition law, only a firm which has a dominant position can be accused of predatory pricing. The reason why Reliance’s Monsoon Hungama in 2003, or any equivalent of it when the divided Reliance launches its foray into telecom, cannot be considered to be predatory is that, though it is a big firm with deep pockets, Reliance does not have any market power in telecom. Also, in a dynamic market, domination is itself a bit of a fluid concept. At a time when Skype is completely changing the market for long-distance telephony, or telcos the market for news, arguing dominance or its abuse, is always going to be a bit of a stretch.

 
 

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