The Supreme Court of India ruled that volume-based discounts offered by dominant enterprises do not, by themselves, constitute abuse of dominance under competition law.
Schott Glass India Pvt. Ltd. (respondent), a leading domestic manufacturer of neutral borosilicate glass tubing, was accused of abusing its dominant market position by offering exclusionary volume-based discounts and other allegedly anti-competitive practices. The case arose from a complaint filed in 2010 by Kapoor Glass India Pvt. Ltd. (informant), a pharmaceutical packaging converter, under Section 19 of the Competition Act, 2002.
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The Competition Commission of India (CCI) investigated the matter and in 2012 ruled that Schott India had violated Section 4 of the Act. The CCI imposed a penalty of Rs. 5.66 crore and issued a cease-and-desist order against Schott India. The CCI’s decision was challenged before the Competition Appellate Tribunal (COMPAT), which in 2014 set aside the CCI’s order, ruling that the evidence did not establish any abuse of dominance and that procedural fairness was denied to Schott India.
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The CCI and Kapoor Glass then appealed before the Supreme Court, arguing that Schott’s volume-based rebates, functional discounts, and long-term exclusive supply agreements foreclosed market access for rivals and constituted anti-competitive conduct. They argued that Schott’s practices violated clauses (a) to (e) of Section 4(2) of the Competition Act.
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Schott India defended the COMPAT ruling, stating that its rebates were uniformly applied based on objective volume thresholds, its agreements were commercially justified, and no competitor was foreclosed. They also argued that the CCI’s reliance on untested statements from adverse witnesses without permitting cross-examination amounted to a serious violation of natural justice.
Section 4 of the Competition Act, 2002, prohibits abuse of a dominant position but does not penalize dominance itself. It outlines five types of abusive practices, including unfair pricing, tying, limiting production, denying market access, and leveraging dominance in one market to affect another.
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The bench comprising Justices Vikram Nath and Prasanna B. Varale held that Schott India’s discount schemes were based on neutral, volume-linked criteria and were objectively justified by operational efficiencies. The court explained that competition law requires an effects-based analysis, proof that the conduct caused or is likely to cause an appreciable adverse effect on competition (AAEC). In the absence of such evidence, the court ruled that no abuse had occurred.
The Court also found that the CCI’s refusal to permit cross-examination of key witnesses undermined the evidentiary integrity of the proceedings and amounted to a violation of natural justice.
The Supreme Court dismissed both the CCI’s and Kapoor Glass’s appeals, affirming the COMPAT decision in favor of Schott India. The court held that legitimate commercial practices like volume-based discounts cannot be presumed anti-competitive in the absence of concrete evidence of harm to the market.
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