Keeping up with Competition - June 2025
A monthly newsletter by Axiom5.
Welcome to the twenty-first edition of our monthly newsletter, Keeping Up With Competition. The month of May 2025 saw significant activity from the Supreme Court (SC) in Competition Commission of India vs. Schott Glass touching upon the following key issues:
Emphasis on Effects-Based Analysis: Proving abuse of dominance requires more than identifying certain business conduct falling within the types of conduct listed in Section 4(2) of the Competition Act, 2002 (Act). Only conduct proven to harm the competitive process is prohibited under the Act.
Procedural Fairness is Essential: Procedural fairness, especially the right to cross-examine witnesses, is a fundamental requirement in competition cases. Denying a party the opportunity to challenge testimonial evidence is a serious breach of natural justice that can render the Competition Commission of India’s (CCI) entire decision invalid.
Legitimate Business Justifications are a Valid Defense: Firms found to be dominant can justify their commercial strategies, such as offering volume-based discounts or functional rebates, if they are based on objective business reasons
Additionally, the CCI has also issued a set of Frequently Asked Questions (FAQs) that clarify various aspects of the Indian merger control regime. Our assessment of these FAQs highlights several central themes that we’ve highlighted in our blog post and commentary.
The following sections provide a more in-depth look at these developments.
Supreme Court Sets Precedent on 'Abuse of Dominance' in CCI vs. Schott Glass (SC’s order available here.)
In a landmark decision with significant implications for India's competition jurisprudence, the SC dismissed appeals filed by the CCI and Kapoor Glass India Pvt. Ltd., affirming the decision of the Competition Appellate Tribunal (COMPAT). The judgment, in the case of CCI vs. Schott Glass India Pvt. Ltd., clarifies the components for proving abuse of dominant position under Section 4 of the Act, emphasizing the need for an effects-based analysis and underscoring the importance of the principles of natural justice.
The case originated from a complaint filed in May 2010 by Kapoor Glass India Pvt. Ltd. (Kapoor Glass), a converter of glass tubing. The complaint alleged that Schott Glass India Pvt. Ltd. (Schott India), a subsidiary of the German Schott AG and the principal domestic manufacturer of neutral USP-I borosilicate glass tubing, abused its dominant market position. The core allegations included the imposition of exclusionary volume-based discounts, discriminatory contractual terms, and refusal of supply.
Following an investigation by the Director General (DG), which found that Schott India had abused its dominance, the CCI, in a majority order, imposed a penalty of ₹5.66 crores on Schott India and issued a cease-and-desist order. However, this decision was overturned by the Competition Appellate Tribunal (COMPAT), which found no evidence of abuse of dominant position. The CCI and Kapoor Glass subsequently appealed this decision to the SC.
The SC made the following critical observations:
No abuse of dominant position: The SC affirmed Schott India's dominant position. It identified two distinct upstream product markets: Neutral Glass Clear (NGC) and Neutral Glass Amber (NGA) tubing, with India as the geographic market. It agreed with the CCI and COMPAT that Schott India's market share (61% of NGC+NGA in 2008-2009 rising to over 80% in 2009-2010), combined with its economic strength, technological advantages, and vertical integration, established its dominance in these markets. However, the judgment reiterated a fundamental principle of competition law: dominance itself is not illegal; only its abuse is.
Objective commercial justification for target discounts: The SC upheld Schott India's volume-based rebate scheme, finding it non-discriminatory. The discount slabs were transparent, neutral, and uniformly available to all buyers based on purchase volumes. Variations in rebates reflected differences in volumes, not unequal treatment. The SC accepted the commercial rationale, noting that borosilicate production relies on continuous high-temperature furnaces that require stable, high-volume orders for efficiency. The rebates were thus a legitimate means to share economies of scale with customers. This reasoning aligns with the principles established in European jurisprudence, such as British Airways plc v Commission (Court of Justice of the European Union in Case C-95/04 P), where price differentiation is permissible if it has an objective commercial justification.
No discrimination in relation to functional discounts: The SC upheld the 8% "functional rebate" and Long-Term Tubing Supply Agreement (LTTSA) with Schott Kaisha, finding no price discrimination since all converters meeting objective conditions (annual purchase plans and traceability obligations) received the same rebate, with timing differences justified by audit cycles and order volumes. It held that differential timing alone doesn't amount to discrimination and that the rebate conditions were objectively justified for operational efficiency and brand protection. Allegations of market foreclosure were dismissed due to rising competitor market share, increased imports, and growing output. The SC concluded the arrangement was voluntary, non-exclusionary, and not anti-competitive.
No margin squeeze: The SC applied the three-pronged test for margin squeeze, as detailed in cases such as TeliaSonera Sverige AB v Konkurrensverket (Court of Justice of the European Union, Case C-52/09), which requires the dominant firm to be active downstream, the price spread to be insufficient for an equally efficient competitor, and a threat of competitive harm. The allegation against Schott India failed on all counts - Schott India does not operate in the downstream container market; financial data showed that independent converters remained profitable and even improved their margins during the period; and the market saw no foreclosure, with imports rising and no rivals exiting.
No tying of products: The SC overturned the CCI's finding that aggregating NGC and NGA tube purchases for rebates constituted illegal tying. It held that NGC and NGA, drawn from the same furnace, are more accurately viewed as alternative specifications of a single product. Even if considered distinct, there was no evidence of coercion—converters were not compelled to buy both. The aggregation served only to calculate volume rebates and was justified by the need to balance demand across grades to protect furnace integrity, making it a legitimate efficiency-driven business practice.
Effects-based analysis is necessary for assessing abuse of dominance: The SC declared that an effects-based analysis is an obligatory component of any inquiry under Section 4 of the Act. Merely identifying conduct that falls into one of the categories listed in Section 4(2) of the Act is insufficient; the CCI must demonstrate that the conduct has caused, or is likely to cause, an appreciable adverse effect on competition (AAEC). The SC while drawing this conclusion from the Act's preamble, the definition of "dominant position," and its own precedent in Rajasthan Cylinders v. Union of India, reasoned that if the presumption of harm under Section 3(3) of the Act is rebuttable, then a presumption of harm cannot be treated as conclusive and irrebuttable under Section 4 of the Act, where it is not even explicitly stated. The CCI's failure to conduct a credible assessment of competitive harm was a key reason for vitiating its order.
Denial of cross-examination resulted in a procedural lapse: The SC criticized the DG and the CCI for denying Schott India the opportunity to cross-examine the witnesses whose statements formed the bedrock of the case against it. It held that relying on untested, uncorroborated testimony from commercially adverse parties was a serious violation of the principles of natural justice (audi alteram partem). Citing landmark cases such as Andaman Timber Industries v. CCE and Cadila Healthcare Ltd. v. CCI, the SC affirmed that denying cross-examination, particularly when findings hinge on testimonial evidence, is a fatal procedural flaw that can render an order a nullity. The SC stated that this lapse alone was grave enough to invalidate the CCI's findings.
Conclusion: A Shift Towards an Effects-Based and Fair Process
The SC’s dismissal of the appeals and affirmation of the COMPAT order marks a pivotal moment in India’s competition law. It clarifies that volume-based discounts do not inherently constitute abuse of dominance, cross-examination is a fundamental procedural right during CCI’s adjudication, and an effects-based analysis is essential to prove AAEC on competition under Section 4 of the Act. The judgment shifts the focus from form to substance, requiring robust evidence of actual or likely harm.
It further emphasizes that competition law aims to preserve competitive integrity—not punish commercial success—and recognizes that dominant firms can justify their conduct through objective business reasons and efficiencies. This approach fosters a nuanced understanding of market behavior, protecting pro-competitive practices from undue regulatory intervention. Procedural fairness, including the right to challenge evidence, is reaffirmed as critical to maintaining the legitimacy of enforcement. Additionally, the SC imposed costs on Kapoor Glass, payable to Schott India, underscoring the unsubstantiated nature of the allegations and reinforcing the message that frivolous claims will not be entertained lightly.
Taken together, this judgment significantly advances India’s competition law regime, aligning it with international best practices. It sets a high bar for regulatory intervention, ensuring that enforcement is both procedurally sound and economically grounded.
CCI's New FAQs on Combinations: Key Insights for Businesses
CCI has recently released a comprehensive set of FAQs that provide crucial clarity on India's merger control laws. Published on 27 May 2025, these FAQs delve into complex areas such as the definition of 'control', deal value thresholds, and the application of exemptions, signaling a more nuanced and stricter enforcement approach. For businesses and investors navigating the landscape of mergers and acquisitions in India, understanding these clarifications is essential.
The FAQs represent a significant evolution in India's merger control framework. While they offer welcome predictability in some areas, they also introduce a more demanding and granular compliance burden. The expanded definition of control, stricter aggregation rules, and a focus on the substantive effects of transactions require businesses and investors to adopt a more meticulous approach to transaction planning to ensure regulatory compliance and avoid potential hurdles.
For further insights into the additional nuances in the FAQs, read Axiom5’s blog here.