Supreme Court clarifies the scope of abuse of dominant position under the Competition Act, 2002: Competition Commission of India vs. Schott Glass India Pvt. Ltd. (2025) INSC 668 (13 May 2025)

Date of the Judgment: 13 May 2025
Citation: (2025) INSC 668
Judges: Vikram Nath, J., Prasanna B. Varale, J.

Can a company with a large market share be penalized simply for being successful? The Supreme Court of India recently addressed this question in a case concerning Schott Glass India Pvt. Ltd. The court clarified the circumstances under which a dominant company’s actions can be considered an abuse of its position, emphasizing the need to demonstrate actual harm to competition. This judgment, delivered by Justices Vikram Nath and Prasanna B. Varale, clarifies the application of the Competition Act, 2002, ensuring that it promotes fair competition without discouraging legitimate business practices.

Case Background

The case originated from a complaint filed on 25 May 2010, by Kapoor Glass India Pvt. Ltd. against Schott Glass India Pvt. Ltd. Kapoor Glass alleged that Schott India, a major manufacturer of neutral USP-I borosilicate glass tubing, was abusing its dominant position. The accusations included offering volume-based discounts that excluded competitors, imposing unfair contractual terms, and sometimes refusing to supply the tubing.

The Competition Commission of India (CCI) initially found merit in the complaint and directed an investigation. The investigation report concluded that Schott India had indeed violated Section 4 of the Competition Act, 2002. Subsequently, the CCI imposed a penalty of approximately Rs 5.66 crores on Schott India, along with a cease-and-desist order to prevent further discriminatory practices.

Schott India challenged this order before the Competition Appellate Tribunal (COMPAT). Kapoor Glass also filed a separate appeal, seeking broader relief and reiterating its grievance regarding the refusal to supply tubing. COMPAT ultimately ruled in favor of Schott India, overturning the penalty and stating that the evidence did not sufficiently prove an abuse of dominant position. Kapoor Glass’s appeal was dismissed with costs.

Timeline

Course of Proceedings

The Competition Commission of India (CCI) initially found Schott India guilty of abusing its dominant position based on the Director General’s (DG) investigation report. The CCI levied a penalty of approximately Rs 5.66 crores and issued a cease-and-desist order.

Schott India then appealed to the Competition Appellate Tribunal (COMPAT), which overturned the CCI’s order. COMPAT held that the evidence did not establish any abuse of dominant position and annulled the penalty. Kapoor Glass also appealed, seeking broader relief, but its appeal was dismissed with costs.

Subsequently, the CCI and Kapoor Glass appealed to the Supreme Court, seeking reinstatement of the original order and arguing that COMPAT had erred in its assessment. Schott India defended COMPAT’s decision, leading to the final judgment by the Supreme Court.

Legal Framework

The core legal provision in this case is Section 4 of the Competition Act, 2002, which deals with the abuse of dominant position. The section states:

“Section 4 – Abuse of dominant position.
(1) No enterprise or group shall abuse its dominant position.
(2) There shall be an abuse of dominant position under sub-section (1) if an enterprise or a group —
(a) directly or indirectly imposes unfair or discriminatory —
(i) condition in purchase or sale of goods or service; or
(ii) price in purchase or sale (including predatory price) of goods or service;
(b) limits or restricts —
(i) production of goods or provision of services or market therefor; or
(ii) technical or scientific development relating to goods or services, to the prejudice of consumers;
(c) indulges in practice or practices resulting in denial of market access in any manner;
(d) makes conclusion of 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;
(e) uses its dominant position in one relevant market to enter into, or protect, another relevant market.”

This section prohibits companies from exploiting their dominant market position to impose unfair conditions or prices, limit production, block market access, enforce unrelated obligations, or leverage their position in other markets.

Arguments

Arguments by the Competition Commission of India (CCI):

• Dominant Position: Schott India held a dominant position in the upstream market, controlling over 60% of the supply of neutral USP-I borosilicate tubing.
• Loyalty-Inducing Rebates: The target rebate scheme penalized converters who failed to meet their forecast, coercing loyalty and violating Section 4(2)(a) of the Competition Act, 2002.
• Exclusionary Conduct: The functional rebates and Long-Term Tubing Supply Agreement (LTTSA) with Schott Kaisha foreclosed rivals, breaching clauses (a), (b), and (e) of Section 4(2).
• Tying of Products: Discounts were calculated on the combined quantity of clear and amber tubing, effectively tying the products, which is contrary to clause (d).
• Margin Squeeze: The preferential input price to Schott Kaisha enabled it to sell containers below sustainable costs for other converters, violating clauses (a) and (e).
• Refusal to Supply: Schott India selectively curtailed supplies to converters who sourced from elsewhere, denying market access under clause (c).
• Quality Concerns: The “mixing” rationale was a façade to enforce exclusivity.
• Procedural Fairness: The absence of cross-examination was not fatal, as the converters’ statements were corroborated by documentary evidence.

Arguments by Kapoor Glass:

• Exclusionary Conduct: Schott India engaged in a two-decade exclusionary course of conduct, treating Kapoor Glass as a non-customer since 2000.
• Unlawful Tactics: Espionage and intimidation tactics were used, including poaching employees and gaining access to internal paperwork.
• Refusal to Supply: The absolute refusal to supply constitutes abuse under Section 4(2)(c) of the Competition Act, 2002.
• Quality Concerns: There was a persistent mix-up hazard, with converters potentially mislabeling containers.
• Penalty: The original penalty imposed by the CCI was conservative and should be reinstated with broader remedies.

Arguments by Schott India:

• Unreliable Evidence: The case relied on untested statements from converters openly adverse to Schott India, without cross-examination.
• Legitimate Rebates: Volume rebates were legitimate and non-discriminatory, rewarding quantity lifted in a financial year.
• Objective Justification: The LTTSA was objectively justified to finance capacity expansion and ensure stable offtake.
• Functional Rebates: Functional rebates covered additional services, not loyalty, reimbursing costs for traceability and marketing obligations.
• No Margin Squeeze: Schott India does not operate in the downstream market, and competitors’ margins and output expanded.
• No Tying: There was no tying or bundling of clear and amber tubes, as converters ordered variants based on customer demand.
• Quality Rationale: The “mixing risk” furnished a bona fide rationale for the no-Chinese clause, protecting patient safety and Schott’s reputation.
• Competitive Harm: There was an absence of competitive harm, with no converter exiting the business and stable container prices.

Submissions Categorized by Main Arguments

Issues Framed by the Supreme Court

1. Whether the target-discount scheme of Schott India amounts to discriminatory or exclusionary pricing in contravention of Section 4(2)(a) and Section 4(2)(b) of the Act.
2. Whether the functional-discount / “no-Chinese” scheme (including the later TMLA arrangement) imposes unfair or discriminatory conditions under Sections 4(2)(a) and 4(2)(b) of the Act.
3. Whether the LTTSA with Schott Kaisha produced a margin-squeeze proscribed by Section 4(2)(e) of the Act.
4. Whether Schott India tied or bundled NGA and NGC tubes, thereby breaching Section 4(2)(d) of the Act.
5. Whether an effects-based (harm) analysis is an essential component of an inquiry under Section 4 of the Act, and, if so, whether it was omitted in the present case.
6. Whether the investigation and the Commission’s order are vitiated by denial of cross-examination and allied breaches of natural justice.

Treatment of the Issue by the Court

Authorities

The Supreme Court considered various cases and legal provisions to address the issues at hand. These authorities are categorized by the legal point they pertain to:

On Objective Commercial Justification

• British Airways plc v Commission (Court of Justice of the European Union in Case C-95/04 P, dated 15 March 2007) – The Court observed that a dominant firm must not “favour or disfavour” trading partners. Applying different prices only becomes abusive when it lacks an objective commercial justification or when equivalent customers cannot obtain the same terms.

On Margin Squeeze

• TeliaSonera Sverige AB v Konkurrensverket (Court of Justice of the European Union, Case C-52/09, judgment dated 17 February 2011) – The Court laid down the conditions for margin squeeze, stating that it exists if the spread between wholesale and retail prices is insufficient for an equally efficient competitor to compete.

On Tying and Bundling

• Microsoft Corp. v. Commission of the European Communities (General Court of the European Union, Case T-201/04, judgment dated 17 September 2007) – The Court outlined conditions for abusive tying, including separate products, dominance in the tying product market, no choice for customers, and foreclosure of competition.

On Effects-Based Analysis

• Intel Corporation Inc. v. European Commission (Case C-413/14 P, judgment of 6 September 2017) – The Court affirmed that exclusionary conduct may be condemned only after balancing anti-competitive impact against efficiencies benefiting consumers.
• Rajasthan Cylinders v. Union of India (2020) 16 SCC 615 – The Court held that the presumption of Appreciable Adverse Effect on Competition (AAEC) in Section 3(3) of the Act is rebuttable.
• Excel Crop Care Ltd. v. Competition Commission of India (2017) 8 SCC 47 – The Court emphasized that an administrative body cannot selectively apply an effects test.

On Denial of Cross-Examination

• Raymond Woollen Mills Limited and Another vs. Director General (Investigation and Registration) and Another (2008) 12 SCC 73
• State of Kerala v. K.T. Shaduli Grocery Dealer Etc. (1977) 2 SCC 777
• Andaman Timber Industries v. Commissioner of Central Excise, Kolkata-II (2016) 15 SCC 785 – The Court emphasized that not allowing the assessee to cross-examine witnesses when their statements form the basis of the order is a serious flaw.
• Cadila Healthcare Ltd. v. CCI 2018 SCC OnLine Del 11229 – The Delhi High Court held that denial of cross-examination vitiates the decision where findings depend on oral statements.

Legal Provisions

• Section 4 of the Competition Act, 2002 – Pertains to the abuse of dominant position.
• Section 19(4) of the Competition Act, 2002 – Factors considered while inquiring into whether an enterprise enjoys a dominant position.
• Section 36(2) of the Competition Act, 2002 – The Commission shall have the same powers as are vested in a civil court under the Code of Civil Procedure, 1908.
• Regulation 41(5) of the 2009 General Regulations – Granting opportunity to cross-examine whenever it is “necessary or expedient”.
• Article 102 of the Treaty on the Functioning of the European Union (TFEU) – Prohibition of abuse of dominant position.

Authorities Considered by the Court

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• British Airways plc v Commission: The Court followed this authority, noting that applying different prices only becomes abusive when it lacks an objective commercial justification or when equivalent customers cannot obtain the same terms.
• TeliaSonera Sverige AB v Konkurrensverket: The Court followed this authority, noting that a margin squeeze is abusive if the spread between wholesale and retail prices is insufficient for an equally efficient competitor to compete.
• Microsoft Corp. v. Commission of the European Communities: The Court followed this authority, outlining the conditions for abusive tying, including separate products, dominance in the tying product market, no choice for customers, and foreclosure of competition.
• Intel Corporation Inc. v. European Commission: The Court followed this authority, affirming that exclusionary conduct may be condemned only after balancing anti-competitive impact against efficiencies benefiting consumers.
• Rajasthan Cylinders v. Union of India: The Court followed this authority, holding that the presumption of AAEC in Section 3(3) of the Act is rebuttable.
• Excel Crop Care Ltd. v. Competition Commission of India: The Court followed this authority, emphasizing that an administrative body cannot selectively apply an effects test.
• Raymond Woollen Mills Limited and Another vs. Director General (Investigation and Registration) and Another: The Court followed this authority, on the importance of cross-examination.
• State of Kerala v. K.T. Shaduli Grocery Dealer Etc.: The Court followed this authority, on the importance of cross-examination.
• Andaman Timber Industries v. Commissioner of Central Excise, Kolkata-II: The Court followed this authority, emphasizing that not allowing the assessee to cross-examine witnesses when their statements form the basis of the order is a serious flaw.
• Cadila Healthcare Ltd. v. CCI: The Court followed this authority, noting that denial of cross-examination vitiates the decision where findings depend on oral statements.

What weighed in the mind of the Court?

The Supreme Court’s decision in the case of Competition Commission of India v. Schott Glass India Pvt. Ltd. was influenced by several key factors. The Court emphasized the importance of an effects-based analysis in determining whether a dominant company has abused its position. This means that it is not enough to simply show that a company has a large market share or that it has engaged in certain practices; it must also be shown that these practices have had an appreciable adverse effect on competition.

The Court also highlighted the importance of procedural fairness in competition investigations. In this case, the Court found that the CCI had denied Schott Glass the opportunity to cross-examine witnesses, which the Court held was a violation of natural justice. This procedural defect was a significant factor in the Court’s decision to set aside the CCI’s order.

Furthermore, the Court considered the broader economic implications of competition law enforcement. The Court cautioned against heavy-handed enforcement that could discourage investment and innovation. The Court emphasized that competition law should be used to preserve the process of competition, not to punish successful companies.

Fact:Law

The Supreme Court’s decision was influenced by both factual and legal considerations. A sentiment analysis of the judgment reveals the following ratio:

Logical Reasoning

Here’s a breakdown of the court’s logical reasoning for Issue I – Whether the target -discount scheme of Schott India amounts to discriminatory or exclusionary pricing in contravention of Section 4(2)(a) and Section 4(2)(b) of the Act:

Key Takeaways

• Effects-Based Analysis: Competition law inquiries must focus on actual harm to competition, not just market dominance.
• Procedural Fairness: Companies under investigation have a right to cross-examine witnesses.
• Objective Justification: Business practices can be justified by demonstrating efficiency and consumer welfare.
• Prudent Enforcement: Competition law should be enforced carefully to avoid discouraginginvestment and innovation.

Impact and Implications

The Supreme Court’s judgment in the Competition Commission of India vs. Schott Glass India Pvt. Ltd. case has significant implications for the enforcement of competition law in India. The emphasis on an effects-based analysis means that the CCI will need to provide concrete evidence of harm to competition in order to successfully prosecute abuse of dominance cases. This will likely make it more difficult for the CCI to win such cases, particularly in industries where the effects of business practices are complex and difficult to measure.

The Court’s emphasis on procedural fairness also has important implications for the CCI’s investigative processes. The CCI will need to ensure that companies under investigation have a full and fair opportunity to defend themselves, including the right to cross-examine witnesses. This may require the CCI to revise its procedures to provide for more robust due process protections.

Finally, the Court’s emphasis on objective justification and prudent enforcement sends a message to the CCI that it should be careful not to overreach in its enforcement efforts. The CCI should focus on preserving the process of competition, not on punishing successful companies. This may require the CCI to adopt a more nuanced and sophisticated approach to competition law enforcement.

Concluding Remarks

The Supreme Court’s judgment in the Competition Commission of India vs. Schott Glass India Pvt. Ltd. case represents a significant clarification of the scope of abuse of dominant position under the Competition Act, 2002. The Court’s emphasis on an effects-based analysis, procedural fairness, and objective justification provides important guidance to the CCI and to companies operating in India.

The judgment strikes a balance between promoting competition and encouraging legitimate business practices. It sends a message that competition law should be used to preserve the process of competition, not to punish successful companies. This is essential for fostering a dynamic and innovative economy.

Ultimately, the Supreme Court’s decision underscores the importance of a nuanced and evidence-based approach to competition law enforcement. The CCI must carefully consider the specific facts and circumstances of each case, and it must provide concrete evidence of harm to competition before taking action against a company. By following this approach, the CCI can effectively promote competition without discouraging investment and innovation.