A business may achieve a strong position through investment, innovation, efficiency or customer preference. Competition law does not prohibit that success. The prohibition is against abusing a dominant position, rather than possessing one.
Section 3 of the Competition Act, 2010 addresses the misuse of market power through practices that prevent, restrict, reduce or distort competition. Applying it requires separate consideration of the relevant market, dominance and the alleged abuse. (CCP: Dominant position)
First Define the Relevant Market
Dominance cannot be assessed meaningfully without identifying the market in which the undertaking operates.
Under section 2, the relevant market has product and geographic dimensions. The product inquiry examines whether customers regard goods or services as interchangeable, considering characteristics, prices and intended uses. The geographic inquiry concerns the area in which competitive conditions are sufficiently similar.
For example, a broad description such as “telecommunications” may conceal a much narrower issue concerning access to a particular facility or infrastructure. Conversely, defining a market around the complainant’s preferred product can make competition appear weaker than it really is. The CCP’s guidance treats market definition as an analytical exercise directed towards identifying genuine competitive constraints. (CCP: Section 3 guidelines)
A useful starting point is therefore to ask: What alternatives can customers realistically use, and what would prevent them from switching?
What Amounts to Dominance?
The statutory concept concerns an undertaking’s ability to behave to an appreciable extent independently of competitors, customers, consumers and suppliers.
An undertaking is presumed dominant where its share of the relevant market exceeds 40%. The word exceeds matters: the statutory formulation is not simply “40% or more”. However, market share is not the entire inquiry. The CCP’s published explanation recognises that an undertaking below that level may nevertheless possess substantial market power in the particular market. See section 2.
Relevant considerations include entry barriers, access to infrastructure or inputs, customers’ bargaining strength, the durability of the position and the availability of alternative suppliers. A high share in a readily contestable market raises different questions from control of infrastructure that competitors cannot realistically duplicate. (CCP: Section 3 guidelines)
The Act also contemplates dominance by several undertakings. That does not mean that adding together the shares of unrelated businesses automatically establishes collective dominance; the claimed collective position requires its own economic and factual foundation.
Dominance Is Not Proof of Abuse
A complainant must identify the challenged conduct and explain why it amounts to an abuse within section 3. Losing customers to a more efficient rival is different from being excluded through unlawful use of market power.
The principal categories include the following.
Unfair prices, trading conditions and discrimination
Section 3 addresses unreasonable price increases, unfair trading conditions and unjustified price discrimination. It also covers dissimilar conditions imposed on equivalent transactions where trading parties are placed at a competitive disadvantage.
The comparison must be meaningful. Differences in quantity, credit risk, delivery costs, service obligations or other objective circumstances may matter. A complaint based solely on two different invoices may leave the essential questions unanswered. (CCP: Section 3 guidelines)
Tying and unrelated contractual obligations
A dominant undertaking may raise concerns by requiring a customer to obtain another product or service as a condition of obtaining the product actually sought. Section 3 also addresses supplementary contractual obligations unconnected with the transaction’s subject matter.
The analysis should identify the products or obligations involved, the customer’s practical freedom of choice and the reason advanced for the arrangement. Bundling that has a genuine commercial justification should not be assumed to have the same effect as exclusionary tying. (CCP: Dominant position)
Predatory pricing and exclusion
Section 3 identifies predatory pricing directed at driving out competitors, preventing entry and monopolising the market. It also covers boycotts and exclusion from production, distribution, sales or services.
Low prices are not automatically predatory. An allegation should be supported by evidence concerning costs, pricing behaviour, duration, market conditions and the alleged exclusionary mechanism. Otherwise, a complaint risks confusing vigorous price competition with conduct that undermines competition. (CCP: Section 3 guidelines)
Refusal to deal
A refusal to supply or provide access can attract scrutiny where a dominant undertaking uses its position to exclude competitors. However, section 3 should not be presented as requiring every business to contract with every applicant.
The nature of the facility, available alternatives, technical constraints, creditworthiness and other objective explanations require consideration. The relevant question is whether the refusal constitutes an abusive exercise of the established market power.
A Reported Example: Access to Telecommunications Infrastructure
In In the matter of Show Cause Notice issued to Defence Housing Authority Islamabad/Rawalpindi, 2022 CLD 31 (CCP), the Commission examined the treatment of a telecommunications provider seeking right-of-way access. The dispute included alleged denial and discriminatory access terms, while an affiliated provider enjoyed preferential treatment.
The CCP found contraventions of section 3 and directed remedial access arrangements. The order illustrates how control of a narrowly defined access market can affect competition in related services. It also considered the inter-provincial spillover issue arising from the Lahore High Court’s jurisdictional ruling. (2022 CLD 31 (CCP))
This is a CCP determination, not a Supreme Court judgment establishing that every landowner’s refusal of access is unlawful. Its significance lies in the market definition, control, discriminatory treatment and competitive consequences established in that case.
Objective Justification and the Evidence Required
A respondent should explain the actual commercial or technical basis for the conduct. Merely asserting “business discretion” may not answer a substantiated exclusion complaint. Equally, an allegation of abuse should engage with a genuine explanation rather than ignore it.
For practical preparation, relevant material may include supply policies, cost records, capacity information, comparable contracts, customer-switching evidence and contemporaneous reasons for the decision. A complainant should identify the particular barrier or disadvantage and connect it to harm to competition.
The CCP’s guidance recognises objective justification and proportionality as relevant to the assessment. The evidence should therefore show not only the asserted legitimate objective but also how the chosen restriction relates to it. (CCP: Section 3 guidelines)
What Can the CCP Order?
Under section 31(a), the CCP may require action necessary to restore competition and prevent repetition. Depending on the established violation, the appropriate order may concern access, contractual conditions or cessation of a particular practice.
Section 32 provides for interim intervention where its requirements are satisfied. Final liability and penalties remain subject to the prescribed proceedings and opportunity to be heard.
For a Chapter II contravention, section 38 permits a penalty of up to PKR 75 million or up to 10% of annual turnover, as decided in the circumstances. The statute does not express this as an automatic “whichever is higher” formula. Separate consequences can arise from non-compliance with an order. (Competition Act, 2010 — official text)
Conclusion
A strong dominance case connects three elements: a properly defined market, demonstrable market power and identified abusive conduct. An impressive market-share figure or a serious commercial grievance, without that connection, is not a complete case.
Legum Law Firm’s competition and antitrust lawyers in Pakistan advise on distribution policies, access disputes, pricing practices and responses to CCP investigations and proceedings.
This article provides general information and should not replace advice on the market, evidence and applicable legal framework in a particular dispute.
