Introduction
Competition law constitutes the most essential pillar in refreshing market discipline and cherishing consumer welfare. Its main concerns encompass exploitative and exclusionary abuses of a dominant market position that represent two separate and yet intertwined forms of anti-competitive conduct. While the exploitative abuses directly injure consumers by means of excessive pricing or discriminatory trading conditions, the exclusionary abuses target market power retention or extension by hampering competition.
Although the difference between these two types of abuse seems clear in theory, in practical terms, it tends to be more difficult, and this dilemma would often face competition authorities and courts. In this article, we seek to analyze the legal framework concerning both types of abuses, as well as provide a general overview of how different jurisdictions treat them, and evaluate the structural effectiveness of the various practices for enforcement currently in place.
Defining Exploitative Abuses
Exploitative abuses happen when a dominant firm exploits its market dominance to extract excessive benefits from consumers or trading partners. They typically appear as:
Excessive Prices
It is a situation where a leading firm offers prices more than the competitive market price. Instance: A pharmaceutical office has a unique drug and charges exorbitant prices to sick patients with no alternative therapy.
Courts apply tests like:
- Cost-price comparison
- Price comparisons with similar markets
- Historical price analysis
Unfair Trading Conditions
Such terms cannot be imposed by a company in a regular freer competition.
Some examples would be:
- Compulsion on buying irrelevant products
- Unreasonable payment terms
Price Discrimination
Charging different customers different prices for the same product without justification. This includes any or a combination of the following:
- Geographic discrimination-which means charging different prices in different regions
- Customer category discrimination
- Timing-based discrimination
Not all price discrimination is illegal; there needs to be abuse of a dominant position for it to be treated as unlawful. In Travel Agents Federation of India v Lufthansa Airlines (2010), the CCI found that the sale of airline tickets through travel agents and Lufthansa’s official website constituted two distinct markets and mediums and, consequently, the different fares did not amount to price discrimination.
Tying and Bundling Practices
Tying: for customers to buy product B to gain access to product A.
Bundling: selling together products at a bargain price so that it would be uneconomical to purchase them individually. The CCI, in Khemsons Agencies v Mondelez India Foods Private Limited (2018), held that given that the coolers to store chocolates were provided free of cost on a voluntary basis, there was no tying of coolers with the sale of chocolates.
The determination of exploitative abuses typically involves a complex economic analysis, especially in terms of what constitutes “excessive” pricing or “unfair” conditions. More recent cases – especially in digital markets – show the CCI expressing concerns about both the exploitative and exclusionary effects of a dominant enterprise’s conduct. For instance, the CCI, on its own motion, initiated an investigation into WhatsApp’s Update to its Privacy Policy (2021) where it is reviewing the extent and scope of user data collection by WhatsApp and the sharing of such data with other Meta (earlier Facebook) companies. Courts and competition authorities have applied several tests and methodologies to such cases, but consensus has not been reached.
HT Media Ltd v Super Cassettes Ltd (2014)
The CCI, in HT Media Ltd v Super Cassettes Ltd (2014), observed that pricing abuses may be ‘exclusionary’ (i.e., pricing strategies adopted by dominant firms to foreclose competitors) or ‘exploitative’ (i.e., which cover instances where a dominant firm is accused of exploiting its customers by setting excessive prices). In this case, the CCI held the minimum commitment charges (MCC) imposed by Super Cassettes Industries Limited to be both exploitative and exclusionary.
Understanding Exclusionary Abuses
Exclusionary abuses are strategies that dominant companies use to push competitors out of the market or prevent new ones from entering. Unlike exploitative abuses that directly harm consumers, these tactics aim to harm competitors first, which ultimately reduces competition and hurts consumers indirectly.
1. Predatory Pricing
A predatory price is one in which products or services are sold below cost levels to create a lack of competition in the market.
The procedure:
The company incurs losses temporarily, waits for companies to go bankrupt or leave the market, and then charges the amount right back while claiming to recoup earlier losses incurred. For instance, a supermarket chain sells milk below cost in order to drive local competitors out of business.
Legal tests usually require proof of the following:
- Cost-based pricing
- Evidence of intent to create a lack of competition
- Recoupment
2. Refusal to Deal
When a person possessing a predominant position does not provide essential products/services to competitors. Example: A telecommunication company with only a network infrastructure is refusing access to other service providers.
Common scenarios:
- Refusal to provide access to essential facilities
- General cutoff of supply from existing customers
- Refusal to grant access to necessary patents or interfaces.
Key considerations:
- Whether the facility is essential or not
- Technical feasibility of providing access
- Validation of business as a basis for refusal.
3. Margin Squeeze
Refers to a situation in which a vertically integrated enterprise sets a price that makes it impossible for a competitor to survive. For example, a broadband provider charges high wholesale rates to competing ISPs but offers low retail prices. In Yogesh Pratap Singh v PVR Ltd (2024), the CCI recognized that all entities have the freedom to choose their business partners and may refuse to deal with certain entities based on reasonable commercial justifications as long as there is no adverse impact on competition in the market.
How it works:
- The company is entirely in control of both wholesale and retail markets.
- Sets high wholesale prices to the competitors
- Sets low retail prices to the consumers
- Competitors cannot compete at either end
Assessment will include:
- The comparison of wholesale and retail prices.
- Analyze the efficient competitor costs.
- Provides an assessment of profit margins.
4. Exclusive Dealing Arrangements
Mandatory purchase agreements between customers and the dominant company to foster direct sales of the company’s products fall under the following categories:
- Long-term exclusive arrangements
- Minimum purchase deals
- Geographic Restrictions
Example: A beverage company requires its chain of restaurants only to serve its beverages.
Concerns:
- Forecloses market to competitors
- Creates artificial barriers to entry
- Reduces consumer choice
5. Loyalty Rebates
Discounts offered to customers who buy most or all of their requirements from the dominant firm can take the following forms:
- Retroactive rebates (applicable to all purchases)
- Target rebates (based on growth)
- Volume-based rebates
For example, Intel offered a rebate to computer manufacturers that buy exclusively their chips. In ESYS Information Technologies Pvt Ltd v Intel Corporation & Ors (2014) (the Intel case), the CCI observed that Intel’s incentive schemes were targeted at increasing sales of low-demand products and offered non-predatory discounts to meet competition, all of which were found to constitute reasonable business practices.
Factors to consider:
- The size and structure of rebates
- Market Coverage
- Effect on efficient competitors
These practices are widely understood as being much more harmful to market structure and competition than exploitative abuses since they may induce longer-lasting distortions in the market and lessen consumers’ choices. While exploitative abuses mainly affect consumers in the short run, exclusionary abuses serve to weaken competition and, in the longer run, harm innovation and efficiency in the market. In Umar Javeed v Google (2022), the CCI held that Google leveraged its dominant position as the only supplier of Play Store to protect its markets for general search services, non-OS specific web browsers and online video hosting platforms (OVHP). The CCI also held that Google had perpetuated its dominant position in the market for online search and prescribed mandatory pre-installation of the entire Google Mobile Suite (GMS), consisting of applications such as Gmail, Google Maps, etc. (with no option to uninstall) and prominent placement of its apps.
Key Differences between Exploitative and Exclusionary Abuses
ASPECT EXPLOITATIVE ABUSE, EXCLUSIONARY ABUSE
DEFINITION Abuses are when a dominant firm exploits consumers or business partners. Abuses where a dominant firm harms competitors to maintain or strengthen its position.
OBJECTIVE Extracting excessive benefits (e.g., high prices, unfair terms), preventing or limiting competition by restricting rivals’ market access.
IMPACT ON MARKET Direct harm to consumers or business partners. Indirect harm by reducing competition and consumer choice.
LEGAL FOCUS Protecting consumers from unfair practices, ensuring a level playing field for competitors.
COMMON SECTORS Utilities, digital platforms, pharmaceuticals. Technology, telecommunications, retail, finance.
JURISDICTIONAL APPROACHES
EUROPEAN UNION: The European Union has been very active in dealing with both exploitative and exclusionary abuses under Article 102 TFEU. The EU approach is distinguished by:
- A strong emphasis on the protection of market structures
- Meticulous economic analysis in abuse cases
- Invention of specific tests for different types of abuse
- Recognition of direct and indirect consumer harm
Significant cases like Google Shopping (2017) and Intel (2009) contributed to shaping the approach of the EU towards exclusionary practices, while others like United Brands (1978) continue to have a lasting impact on the analysis of exploitative abuses.
UNITED STATES: The U.S. methodology stands apart on key counts from the EU, with emphasis mainly falling upon exclusionary conduct under Section 2 of the Sherman Act. Essential characteristics of the U.S. antitrust law might be summarized as follows:
- Focused mainly on exclusionary conduct under Section 2 of the Sherman Act
- Minimum restrictions on cases of pure exploitation
- Higher standards for evidentiary burden to prove anti-competitive effects than in other jurisdictions
- Focus on consumer welfare standard
Recently, high-profile cases involving major technology companies reignited the debate on whether the existing U.S. antitrust framework is adequate in addressing the realities of abuse in modern markets.
INDIA: Section 4 of the Competition Act, 2002 of India prohibits the abuse of dominance. The Competition Commission of India is responsible for monitoring practices that hinder competition. A fine was imposed upon Google in the CCI V. Google case for having search bias in favour of its services as against that of competitors. Section 4(2) of the (Indian) Competition Act (the Act) provides that there shall be an abuse of a dominant position if an enterprise or a group:
- directly or indirectly imposes unfair or discriminatory conditions or prices in the purchase or sale of goods or services;
- restricts or limits the production of goods or services in the market;
- restricts or limits technical or scientific development relating to goods or services to the prejudice of consumers;
- indulges in practices resulting in a denial of market access;
- Concludes contracts subject to acceptance by other parties of supplementary obligations, which, by their nature or according to commercial usage, have no connection with the subject of such contracts or
- It uses its dominance in one market to enter into or protect its position in other relevant markets (i.e., leveraging).
The hybrid approach followed in the Indian scenario is a mixture of the EU and U.S. models emphasizing both consumer welfare and fair competition. In Indian Chemical Council v General Insurance Corporation (GIC) of India (2019), the CCI, while rejecting an allegation of excessive pricing against GIC, held that a pure pricing decision would cause no competition concern unless it showed an abuse of dominant position.
Emerging Markets
Emerging markets, such as South Africa and India, face different challenges in preventing market abuses arising from the ongoing development within their economies. Such economies lack enforcement resources, which makes it difficult for their regulatory bodies to monitor and suppress anti-competitive practices adequately. The sizeable institutional framework with limited resources cripples any hurried and decisive action they could take against monopolistic behaviour, collusion, and other sorts of market distortions. In addition to these, such countries must balance competition policy with broader developmental objectives. While competition law in developed economies is predominantly focused on market efficiency, modern markets integrate competition policy along the lines of economic development objectives such as the promotion of small and medium enterprises, equitable access to resources, and industrial development.
For instance, in sectors such as coal, electricity, and railways in India, SOEs generated such market advantages through historical developments; hence, there were pressing concerns from competition regulators over favouring and committing to fair market access. In South Africa, there have been concerns about the monopolistic power exerted by the utility companies owned by the state, mainly in the energy sector, and calls for additional regulatory oversight.
As a response, competition authorities in such countries adopted distinct regulatory approaches. As an example, the competition commission in South Africa gives substantial regard to public interest considerations, allowing for the approval of mergers and acquisitions on the condition that they do not cause excessive market concentration or infringe the interests of historically disadvantaged groups. In the same vein, India’s competition commission adapted its regulatory framework to deal with market abuses in fast-developing digital markets, changing its position in light of the growth of e-commerce and technology-oriented platforms.
Modern Developments and Future Challenges
The surge of digital markets reinvented economic activity yet introduced the risks of market abuse. One of the major concerns is data-driven exploitation, where digital platforms harvest vast amounts of user data to consolidate market dominance. Firms deploy advanced algorithms and artificial intelligence to personalize pricing and assign targeted advertisements; behavioural manipulations are often performed with little or no transparent consent from users. This stifles competition: consumers have no control over how their data is used, while the advantageous position is augmented by the firms’ superior access to consumer insights.
Another issue is the network effects and tipping points, making digital markets easily monopolized. In platform-based economies, the value of a service increases as more users join. This produces a self-reinforcing cycle where the dominant firm gains more than others in that market. This has been manifested in markets where companies such as Google, Amazon, or Meta are oligopolistic; the new competitor can hardly convince users to try out its services due to the current omnipresence of existing monsters.
New forms of exclusionary practices have blossomed in digital markets as well. They include algorithmic discrimination, self-preferencing, where the owner of the platform favours her product over the competitors, and predatory pricing strategies that specifically target the kill-off of smaller firms. Digital platforms also engage in especially tight data-sharing policies that hold firms against sharing data, which prevents interoperability and locks consumers into their own niches.
Finally, the intersection of competition policy and privacy and consumer protection raises a burning issue. The ever-growing ability of one or several firms to amass power by deepening their data collection from users raises crucial concerns about privacy rights, cybersecurity risks, and autonomy for consumers. Regulators around the world have begun to explore new frameworks for making digital markets competitive while ensuring consumer interest in areas such as data protection, accountability from platforms, and fair competition.
Policy Recommendations
Given the unique challenges posed by both emerging and digital markets, several policy recommendations can help ensure fair competition, prevent abuse, and promote economic growth.
1. Enhanced International Cooperation in Enforcement
Market abuses in the digital century often extend across global frontiers that require more flexibility and cooperation between regulatory authorities across jurisdictions. Building on this, it is worth stressing the importance of international collaboration within the framework of information-sharing, joint investigation, and coordinated enforcement actions that are necessary to prevent anti-competitive practices by multinationals. This would also benefit developing markets in particular, as it would refine their regulatory framework based on the best global practice while staying true to flexible local economic needs.
2. Development of Clear Standards for Identifying and Measuring Abuse
Market abuse is pervaded by the difficulty of its description and proof, especially when the digital market is concerned because traditional antitrust principles may not straightforwardly apply in such cases. Regulators must establish clear metrics with which to assess issues such as self-preferencing, exploitative data practices, or anti-competitive mergers. This means identifying ways in which market power can be measured beyond just price effects, encompassing considerations such as data control, network effects, and restricting consumer choice.
3. Investment in Technical Capacity, Skills, and Resources
Regulatory authorities are expected to enchase capacity to address complex market dynamics in a digital economy where algorithmic pricing, artificial intelligence, and big data analytics shape competition. Investment in skilled professionals data scientists, economists, and technology experts will help regulators carry out the necessary analysis of digital business models and enforce competition laws in these changing industries.
4. Regular Review and Updating of Enforcement Frameworks
Markets evolve so fast, especially with the rapid advancement of technology and globalization. Competition laws and enforcement instruments need to be occasionally looked at to be adequate. This means modernizing existing instruments of antitrust, comprehensively reassessing market definitions, and bringing in pure provisions of policies directing other developing forms of monopolistic behaviour oriented in anti-competitive acts, using digital frameworks, bringing an influx for collusion effects.
5. Striking a Fine Balance Between Ex-Ante Regulations and Ex-Post Enforcement
The ex-ante regulatory approach is geared toward restraining abuses before they occur. This is particularly pertinent in instances where markets are vulnerable to monopolistic tendencies and forces, e.g., in special cases such as digital markets. Excessive ex-ante regulation, however, could end up stifling innovation and market development. A balance is needed with preventive measures to ensure effective post-violation enforcement in ensuring competition, allowing enterprises to innovate and develop.
Conclusion
Dealing with exploitative and exclusionary abuses remains a complex and evolving field of competition law. Although each jurisdiction possesses its peculiarity concerning the regulatory approach, there is growing recognition that orchestrated structures are needed to facilitate the combat against modern market challenges. Successful combat against such abuses would require a combination of unambiguous legal standards, sophisticated economic analysis, and effective enforcement mechanisms.
