Pradeep S. Mehta, Business Standard, June 21, 2008
Contestability of markets is the adrenaline of all economies. While countries liberalise their economies, an extremely vital concomitant reform is the enactment and implementation of appropriate competition laws so that consumers and businesses get the benefits of liberalisation.
In India, a new competition law was passed in 2002 to replace the archaic Monopolies and Restrictive Trade Practices Act (MRTPA) of 1969. The new law has been further amended in 2007 and will be in operation soon. One of its active agenda will be to curb abusive monopolistic practices by businesses.
Businesses either collude through cartels or abuse their dominance through exploitative and/or exclusionary behaviour. Every other day, cartels are being hauled up by competition agencies around the world.
But a more difficult area for competition authorities is taking action against dominant players abusing their dominance through monopolistic practices.
Abuse of dominance (AOD) is broadly of two types: Exclusionary and exploitative. Exclusionary abuse involves driving out competitors from the market. Exploitative abuse is when a firm is exploiting customers by ignoring their needs as well as those of its competitors.