This blog explores the risks in India’s Competition Act 2002, which views consumer welfare narrowly through price and market share metrics. Accounting for how predatory practices, deep discounting, market consolidation, and mergers challenge this framework, the paper advocates for a more comprehensive approach, emphasising diversity, innovation, and long-term implications.
The preamble of The Competition Act 2002 (the Act hereinafter) includes the protection of consumers’ interests. This objective is paramount, and the ultimate raison d’être of the Act is to safeguard consumer interests: free market competition must be sustained to prevent a single enterprise—or multiple enterprises acting collectively—from engaging in practices that harm consumers.
Overemphasis on Low Prices and High Output
The status quo interpretation of consumer welfare prioritises low prices further equating it with consumer benefits. Authorities often assume that low prices are always beneficial as they drive demand and benefit consumers. While focusing on price and output offers quantifiable benefits to consumers, it is important to recognise that below-cost pricing by a dominant firm—though seemingly beneficial in the short term—can be detrimental, as it often leads to higher prices in the long run. It blocks the opportunity for equally efficient rivals to serve consumers without incurring losses. This perspective often overlooks risks like predatory pricing, and market manipulation where artificially low prices falsely inflate outputs or create an illusion of competition. This leads to market concentrations and obscures long-term threats to consumer choice and market competition.
To support this argument, the MCX v. NSE case serves as a prominent example. The National Stock Exchange charged zero transaction fees, which initially seemed to boost output and benefit consumers. However, the strategy was to eliminate the competition which, like MCX, ultimately led to consumer dependency and market monopolisation. This case highlights the importance of the Competition Commission of India to have a forward-looking approach focusing on long-term consumer welfare and choice rather than simplified metrics by looking into both short- and long-term strategies when assessing cases.
Exclusion of Non-Dominant Entities from Scrutiny
Another significant issue is the overemphasis on market share as the sole determinant of a firm’s dominance. This allows financially strong companies with lower market shares to escape antitrust scrutiny. Such companies can engage in deep discounting strategies, which are considered pro-consumer. But engaging in such tactics, escaping scrutiny, can lead to exit and blockage of even efficient players from the market, which is harmful to the consumer and competition in the long run.
The Competition Commission of India (“CCI”) on several occasions has declined to initiate investigations and even dismissed cases holding that the concerned entity is not “dominant enough” under Section 19(4). Courts have often overlooked anti-competitive approaches like deep discounting, and predatory pricing with high funding aimed at diminishing the competition and gaining substantial market share over time.
For instance, in the case of Fast Track Call Cab Pvt. Ltd. & Meru Travel Solutions Pvt. Ltd. v. ANI Technologies Pvt. Ltd., giant ride-hailing platforms initially had little to no market share. They adopted strategies such as deep discounts and operating at a loss, making them appear saviors by offering cheap rides and generous incentives to consumers. However, as consumer dependency grew, prices soared—at times exceeding flight fares—while discounts gradually disappeared. What initially seemed harmless turned out to be a Trojan horse. Consumers realised too late that the true cost was the loss of their freedom to choose, ultimately leaving a once-thriving market in the hands of a duopoly.
Similarly, in cases such as All India Online Vendors Association v. Flipkart India Pvt. Ltd. & Flipkart Internet Pvt. Ltd. and Delhi Vyapar Mahasangh v. Amazon Seller Services Pvt. Ltd., e-commerce giants employed aggressive discounting, sometimes offering up to 98% off, to rapidly build their consumer base. These practices were not scrutinised as both of these companies had not yet acquired enough market share to be considered dominant in the market. However, over time, it became evident that they had effectively established a duopoly—limiting consumer choice, increasing consumer vulnerability, creating entry barriers, and driving up prices.
A similar pattern has emerged with food service platforms like Swiggy and Zomato, which now dominate the industry. This duopoly affects not only consumers but also restaurant owners and small local shops. The CCI’s failure to recognise early patterns and investigate due to insufficient market share evidence contributed to this market concentration.
The issue lies in the overemphasis on market share and the failure to recognise patterns in antitrust evaluations. Given these examples, it is clear that early intervention is necessary. By the time a company gains significant market share, it has already established dominance and created substantial consumer dependency. A holistic approach is required where factors such as innovation, quality, and market diversity are integrated into analysis and avoid the risk of overlooking nascent anti-competitive practices and long-term implications. This shift in focus would allow competition authorities to effectively prevent anti-competitive practices that could undermine consumer interests in the future.
Challenges in Enforcement
Penalty Collection and Procedural Delays
One of the major challenges faced by the CCI is the ineffective enforcement of monetary penalties. Since 2011, INR 18,351.64 crore in penalties have been imposed, yet only INR 425 crore (2.3%) has been collected. The lack of mandatory penalty deposits during appeals allows corporations to contest fines without immediate financial consequences, delaying enforcement. In Ultratech Cement Ltd v. CCI, judicial discretion, while safeguarding appellant rights, delayed enforcement.
Procedural inefficiencies further hinder quick enforcement. In MRF v. CCI, compulsory prior notice for unnamed third parties during investigations complicated procedural timelines, prolonging resolutions for cases. Additionally, in Telefonaktiebolaget LM Ericsson v. CCI, jurisdictional overlaps highlighted the need for clearer legislative boundaries to prevent regulatory conflicts and delays.
Another pressing issue is the CCI’s operational capacity. Since 2014-15, the commission has functioned at only 67% of its sanctioned strength, limiting its ability to expedite investigations and adjudications. Addressing these structural shortcomings is crucial for improving enforcement efficiency and ensuring timely market interventions.
Challenges in Merger Control
The traditional view of mergers often assumes enhancing competition and consumer welfare. Courts often evaluate whether a proposed merger will increase overall efficiency, which is normally equated with high output and low prices for consumers. However, this approach overlooks the potential long-term harm to consumer welfare. Courts fail to account for the risk that the merged company might leverage its dominant position to suppress competition, reduce innovation, and limit consumer choice. When mergers lead to increased market concentration, the ultimate result is reduction in competition and choice enabling merged entities to raise prices.
For example, Facebook’s acquisitions of WhatsApp and Instagram initially seemed beneficial, but competition diminished all around the world and concerns about data privacy, user manipulation, reduced consumer choice, and increased user dependency became more apparent.
In Federal Trade Commission (FTC) v. Facebook, Inc., date dominance, particularly in the digital economy, became a key concern highlighting a need for a more holistic view of mergers, especially when the companies merging have access to such sensitive digital footprints and influence to disrupt consumer choice over the world. In India, the merger between Air India and Indian Airlines, seen as beneficial initially later, raised concerns about reduced competition and fewer choices for consumers, particularly in regional routes. Hence, it’s important to look beyond short-term gains and focus on how the merger will affect competition in the long run.
Recommendations
India’s Competition Act, 2002, aims to promote fair competition and protect consumer welfare. Modern antitrust cases, especially in the digital and technological economy have become more difficult to navigate and require refined analysis of algorithms and data-driven practices. For instance, Google’s search bias investigation highlighted the need for technical expertise within the CCI. Without this, the regulatory assessments risk being incomplete, undermining the effectiveness of interventions. To make strides in navigating antitrust, rules like mandating partial penalty deposits during appeals to ensure compliance and discourage frivolous challenges are required along with simplification of investigation procedures to reduce unnecessary delays caused by red tape and judicial jurisdictional overlaps while ensuring full bench strength and allocation of sufficient resources for timely adjudication of cases. This measure, already adopted in jurisdictions such as the European Union (“EU”), helps deter frivolous challenges and ensures compliance. In the EU, companies appealing competition fines are often required to provide financial guarantees, preventing them from using prolonged litigation as a delay tactic while continuing potentially anti-competitive practices. Lastly, there is a need to incorporate technology and digital analytics to understand the digital economy and competition. Developing AI-powered tools for real-time monitoring, as seen in the US and UK, will help detect algorithmic collusion and market distortions. There is a need for complete technical competence to figure out early signs of antitrust activities happening digitally by developing tools and frameworks for real-time monitoring of market trends, particularly in today’s technology-driven market.
Conclusion
While the Competition Act has made significant strides in ensuring fair market conditions, by focusing too narrowly on market share and short-term price benefits, competition authorities risk overlooking the long-term consequences of anti-competitive practices. Section 19(4) considers factors like market share, size, resources, and supply chain control but lacks an explicit focus on deep discounting and long-term risks. The CCI should adopt a dynamic approach that accounts for the potential anti-competitive effects of certain strategies that seem consumer-friendly in the short term but harm consumer welfare in the long run.
This blog is written by Ritika Bansal, 2nd year law student at Rajiv Gandhi National University of Law