Widening Of India's Abuse Of Dominance Jurisprudence : Element Of "Effect Based Approach In India- A Corridor To Place India's Competition Regulation In Tune With Global Standards

The 13^th of May, 2025 Supreme Court Judgment in CCI v Schott Glass India 2025 INSC 668 ended a 15 year old battle and paved the way for legal precedents in the Indian Competition Law Jurisprudence in various segments, wherein historically the country had to rely upon the European Council. That this Judgment set the tone for the appreciation of business linked positive initiative of Rebate and Loyalty Programs, that structured discounting mechanisms applied with commercial logic, will not come in the way of competition regulation. This judgment further crystalised the vitality of contractual documents and clauses and the element of transparency and clear wordings to support that not always all product bundling are anti-competitive. Furthermore, what thus far was a Western concept in competition jurisprudence, that of effects based approach in dominance, now finds its stepping stone in the Indian Abuse of Dominance Jurisprudence.

Factual Conspectus and Procedural History

• Schott Glass, a manufacturer of "neutral USP-1 borosilicate glass tubing", popularly used for manufacturing pharmaceutical containers such as ampoules, vials, cartridges and syringes.
• Complainant Kapoor Glass, amongst many was one such manufacturer of pharmaceutical containers and procured borosilicate glass tubing from Schott Glass.
• However, Kapoor Glass had alleged that Schott India, the principal domestic manufacturer of neutral USP-I borosilicate glass tubing, had abused its dominant position by offering exclusionary volume-based discounts, imposing discriminatory contractual terms, and, on occasions, refusing supply.
• That forming a prima-facie opinion under Section 26(1) of the Act, CCI directed the Director General (Investigation) to inquire into the matter.
• The DG's report dated 14^th March 2011 concluded that Schott India had violated Section 4 of the Act i.e., its practices are denoting an abuse of dominant position in the marker.
• After hearing the parties, CCI by majority order dated 29^th March 2012 levied a penalty equal at a rate of 4% of Schott India's average of 3 years turnover equivalent to about Rs 5.66 crores and also issued a cease-and-desist order against Schott India from doing any discriminatory practices to any of the converters.
• Schott India challenged that order before COMPAT by Appeal (presently NCLAT). Kapoor Glass also preferred a separate appeal seeking a broader relief and reiterating its refusal-to-supply grievance.
• By the impugned order COMPAT:
  • allowed Schott India's appeal, annulled the penalty, and held that the evidentiary material did not establish any abuse of dominant position; and
  • dismissed Kapoor Glass's appeal with costs of ₹ 1,00,000/-.
• Consequently. the Competition Commission of India appealed before the Hon'ble Supreme Court seeking revival of its original order and Kapoor Glass supported CCI on the liability of Schott India on the grounds that the erstwhile COMPAT erred in refusing effective relief and in discounting the alleged "mixing risk".

That the prominent issues deliberated upon by the Hon'ble Supreme Court inter alia:

1. Volume Discounts and Margin Squeeze- whether there was any evidence that the differential pricing lacked objective justification in offering equivalent customers similar terms and pricing
2. Validity of Functional Discounts
3. Allegation of Tying In upon determination of the nature of the products
4. Validity and vitality of Cross Examination as a cornerstone of Principles of Natural Justice
5. Appreciation of an "effect based" approach for Abuse of Dominance cases

Analysis

1. Volume-based discounts and market foreclosure

For the purposes of the present matter at hand, the Hon'ble Supreme Court restricted the abuse of dominance test only on the threshold of unfair or discrimination in dealing with conditionality and pricing. The Hon'ble Supreme Court was of the prefatory view that even in differences of pricing, as long as the same is based on cogent commercial justification and as long as the conditions for similarly placed purchaser remains identical, the price point fluctuation alone will not be deemed abusive.

In the present matter, it was evident on record that all the manufacturers of pharmaceutical containers were informed of the rebate ladder (which in the context of the present matter was the threshold of sales volume that was intended to be achieved if a particular discount facility was availed) in advance, and no hidden concessions existed beyond said rebate ladder. Thus, the pricing differentiation based on the volume-discounts that was ultimately between Schott India and Schott Kaisha did not fall within the definition of abusive in the realm of Section4(2)(a) of the Act.

Thus, the Hon'ble Supreme Court for matters of such import crystallized the tests for volume-based discounts and upheld the sanctity in a competition realm on the grounds of:

1. Such mechanism was a neutral criterion for all purchasers alike;
2. Such mechanism promotes efficiency and thus can be commercially justified
3. Such mechanism does not hint at any evidence of distorting the downstream prices nor restricts rival output.

It is relevant to note that in such situations traditionally, the Competition Commission has a history of providing perse opinions whereas it was the erstwhile COMPAT which had crystallized the validity of target discounts on a bedrock of three tests: (a) discount is efficient and balances the scales of economy; (b) like the underlying principle of Article 14 of the Constitution to treat equivalent transactions alike and (c) to not promote distorted competition by disadvantaging buyers that are related to each other.

2. Functional Discounts

Since the rebate ladder in the present case was basis the availment of a specific discount, the Hon'ble Supreme Court even in the appellate jurisdiction had to test the validity of the "No-Chinese" policy of Schott India, to test it on the threshold of Section 4(2)(a) of the Act.

Succintly put, the said Policy incentivised the purchasers merely to avoid the Chinese manufacturing market by allowing the purchasers to use Schott India's brand through a Trademark License Agreement and under specified quality standards. The SC held that both arrangements were voluntary, uniformly applied, and did not impose any manipulative, coercive conditions on buyers and neither the practice hindered market access nor restricted competition. The Hon'ble Court was rather of the view that the conditions imposed by Schott Glass emphasized on brand protection, ensured integrity and safety of public.

3. Margin Squeeze

Another interesting facet the Hon'ble Supreme Court opined was on the issue of predatory pricing under Section 4(2)(e)(b) of the Act while analysing the bulk purchase agreement between Schott India and Schott Kaisha. The Hon'ble analysed the Long Term Tubing Supply Agreement between Schott India and Schott Kaisha to check if the terms of the said agreement had any exclusionary sourcing or pricing because as per the said Agreement, the JV Schott Kaisha had to source 80% of its requirements from Schott India (which as market showed was barely 30% of Schott India's capacity) in lieu of a concession in the form of a 3-year price freeze and priority dispatch.

The Hon'ble Supreme Court on this issue of assessing the prevalence of "margin squeeze" the tests as laid by the Court of Justice of European Union in Telia Sonera Sverige AB v Konkurrensverket, (C-52/09) (as corresponding precedence is lacking in Indian Jurisprudence) which placed three criteria:

1. Enterprise alleged to be dominant would be in the downstream market
2. The Enterprise (wholesaler) pricing to retail has to be marginally insufficient so as to cause other competitors unable to efficiently survive
3. The compression would be harmful to competition

On the above three counts, the Hon'ble Supreme Court observed:

1. Merely because Schott India and Kaisha had the JV of Schott Kaisha, did not remove the fact that the board, management, accounts were completely independent and there was no evidence that Schott India was in the Downstream Market
2. The Agreement did not hinder other buyers to avail the unique discounting policy and other independent buyers also quoted prices equivalent to that of the JV Schott Kaisha
3. That at the relevant time, another notable competitor to Schott Kaisha had expanded its capacity and no players in the Downstream Market had to exit.

4. Tying and Bundling

A cornerstone of Section 4(2)(d) of the Act i.e., for an Enterprise to be abusive of its dominant position, vide its structure of contracts, has to ensure:

• There is a supply of two distinct products,
• The supply of the tying product has to be conditional upon acceptance of the tied product, and
• Such a conditional contract would essentially foreclose competitors in the tied-product market.

In the instant case, the threshold question for examination by the Hon'ble Supreme Court was whether the products of Neutral Glass Clear and Neutral Glass Amber NGA and NGC were in economic terms, separate products.

It was alleged by Kapoor Glass, the Original Complainant that Schott India's rebate scheme that offered discounts based on the combined purchase of both tube types (i.e., NGA and NGC tubes), and such was to coerce buyers into purchasing products they might not have otherwise chosen.

However, the Hon'ble Supreme Court upheld that: (i) the two products were not economically distinct, as both served overlapping functions in pharmaceutical packaging, rather there was no independent market demand for NGA without photo-sensitivity. That NGA and NGC were alternatives of the same product; and (ii) there was no evidence of coercion or conditional sales as Schott India was never permitted to cross-examine the witness Statements, and rather denial of cross-examination repeatedly by CCI, weakened the evidentiary value of these alleged statements. Furthermore, there was no other independent evidence including purchase orders or invoices or even a contractual clause that made the allegation of supply of NGA contingent upon the order of NGC, true.

5. Denial of cross-examination and breach of natural justice

The sections of the Competition Act and regulations implore that the inquisitorial powers of the Director General are bound fundamentally by the principles of audi alterem partem and that every accused the right to challenge its accuser.

In the instant case, the DG had only taken witness statements of those players which were marked by the Original Complainant / Informant i.e, Kapoor Glass, which were in reality commercially hostile to Schott India and the DG failed to undertake any independent verification of these assertions. That the investigation highlighted rather the mischief of picking and choosing inculpatory statements and excluding exculpatory statements that would have otherwise proved that how many buyers had infact increased their output and raised prices independent of that of Schott India. That, Schott India's request for cross-examination was shot down on alleged procedural technicalities as opposed to exercise of judicial mind.

6. Effect-based analysis

An age old Competition Law principle that holds true and is continuously reiterated and upheld that Dominance is not a crime and rather its abuse is, once again finds relevance in this judgement.

The Hon'ble Supreme Court stretched the underlying principle of Section 3 of the Act to that of abuse of dominance test under Section 4 to read that for abuse of dominance as well an Appreciable Adverse Effect on Competition (AAEC) or the likelihood of AAEC has to be proved.

The Hon'ble Supreme Court ending the 15 year old battle ratified the findings of COMPAT and held that the CCI had failed to discharge this obligation, relying on unverified statements, outdated pre-2002 correspondences, and undertook no credible assessment of harm.

Conclusion

A milestone judgment in its own right, this case emphasizes the goal and intention of the Preamble of the Act, that there is a need to assess the effect of harm in the Indian Jurisprudence of Abuse of Dominance cases. That furthermore, in the absence of a precedent in volume linked rebate discounting and its effect on pricing policies, elements of margin squeeze as opposed to the general notion of mere squeeze, this Judgment is a testament to ensure that competition jurisprudence in India, takes into account the strict and specific elements of anti-competitive behavior while striking a balance for efficient and legitimate business objectives and does not deter investments. As rightly stated by the Hon'ble Supreme Court the aim of the statute is to nurture robust rivalry while sustaining the confidence of domestic and global investors.

The article was authored by Ms. Yashodhra B Roy (Principal Associate)

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