Mandatory Effects-Based Analysis After Schott Glass: Scope and Limits

Viraj Thakur is a fourth-year student at the National Law School of India University, Bengaluru.

The Supreme Court of India (‘SC’) in Competition Commission of India v. Schott Glass India Pvt. Ltd. (“Schott Glass”) analysed whether certain commercial arrangements amounted to an abuse of dominant position (“AoDP”) under §4 of the Competition Act, 2002 (“Act”). Holding that it did not (¶77), the SC observed that a finding of AoDP necessitates an effects-based analysis (¶1). Hard evidence must be used to demonstrate proven harm, balanced against commercial justifications (¶1).

The significance of Schott Glass extends beyond the immediate dispute. By holding that proof of abuse under §4 requires evidence of actual or likely anticompetitive effects, the Supreme Court has moved Indian competition law closer to the effects-based approach followed in jurisdictions such as the European Union (“EU”). Yet this raises an important institutional question. If establishing abuse now requires extensive economic and factual evidence, can an ex-post enforcement regime respond quickly enough in fast-moving digital markets? This question assumes particular significance in light of the proposed Digital Competition Bill (“DCB”), which adopts an ex-ante framework for large digital enterprises. Accordingly, this paper asks whether the effects-based approach endorsed in Schott Glass reduces the need for ex-ante regulation or instead strengthens the case for maintaining both frameworks in parallel.

To demonstrate this, I first cull out the principles for conducting an effects-based analysis. Second, I argue that requiring such evidence may delay proceedings. Consequently, in the specific case of digital markets, I argue that a delay may lead to harms becoming entrenched in the market. Thus, I suggest that a parallel ex-ante framework should exist to regulate AoDP under §4.

Effects-Based Analysis In India

§4 of the Act deals with AoDP by an enterprise or group. Unlike Art. 102 to the Treaty for the Functioning of the European Union (“TFEU”), there is no explicit legislative requirement to conduct an effects-based analysis in the Act (CLRC Report, ¶4.1). Perhaps consequently, in some decisions, the Competition Commission of India (“CCI”) has not inquired into whether there was an appreciable adverse effect on competition (“AAEC”). That is, it has presumed an AAEC. For instance, in XYZ v Association of Man-Made Fibre of India, Grasim Industries, the CCI inferred competitive harm from Grasim’s conduct without evidence of actual or likely effects. Mere losses from higher pricing were treated as sufficient to establish a violation of §4 (¶¶112, 124).

However, the importance of an effects-based analysis has been noted in specific contexts. For instance, demonstrating “anti-competitive effect/distortion” has been held to be necessary (¶¶ 6.23, 6.37, 6.40) to establish an AoDP via denial of market access under §4(2)(c), in the case of In Re: REC Power Distribution Company Ltd. (“REC Power”). In Alphabet Inc. v CCI (Alphabet Inc.), the National Company Law Appellate Tribunal (‘NCLAT’) held that the test to be employed was whether the abusive conduct led to anti-competitive effects (¶66). These effects include both actual harm and harm likely to be caused (¶49). Moreover, given the sweeping power to order structural remedies under §28 of the Act, the absence of an effects-based analysis risks enabling the CCI to mandate breakups without demonstrated competitive harm (p. 42).

Against this backdrop of context-specific reliance on effects, the decision of the SC in Schott Glass marks a doctrinal shift in holding that an effects-based analysis is an obligatory component of every inquiry under §4 of the Act. However, effects-based analysis rarely turns on a single metric, instead demanding a cumulative assessment. The multifactor nature of an effects-based analysis can be seen from the manner in which courts and competition authorities have assessed abuse claims. In Schott Glass, the Supreme Court relied on tonnage and output data showing increased purchases and imports by converters, rising EBITDA margins of independent converters, stable or declining downstream prices, and increases in competitor output and capacity. It also considered qualitative factors such as competitor conduct and the cyclical nature of the industry. In WhatsApp, the CCI examined daily active user data and the revenue advantages arising from larger datasets, alongside evidence relating to excessive data collection, competitor testimony regarding entry barriers, user surveys on multi-homing behaviour, and claims regarding security benefits from data-sharing. Similarly, Alphabet Inc. involved both transaction data concerning Play Store-based UPI payments and a technical assessment of the relevant payment architecture.

Other decisions reflect the same approach. In REC Power, the inquiry relied on rejection-rate statistics and post-entry market-share data, while also considering evidence that consumer preference stemmed from the expertise of the opposite party. In Yogesh Pratap Singh v PVR Ltd., the CCI examined revenue diversification and the absence of foreclosure, together with commercial justifications relating to consumer demand and screen allocation. This approach is consistent with international guidance. The OECD identifies prices, costs, market shares, the duration and coverage of arrangements, and network effects as relevant indicators, while also emphasising production conditions, market functioning, consumer behaviour, demand segmentation, and marketing practices. Similarly, the European Commission's Guidance on Article 82 Enforcement Priorities highlights factors such as affected sales, market share, duration of conduct, and cost-based tests. These examples demonstrate that an effects-based analysis ordinarily requires the consideration of substantial economic, factual, and market evidence before competitive harm can be established.     

In any such analysis, pro-competitive effects must be weighed against the anti-competitive effects i.e. the rule of reason is to be followed (CLRC Report, ¶4.1).

Concerns In A Digital Market

Requiring proof of anticompetitive effects makes detailed evidence essential. However, as in the EU, this may raise the CCI’s evidentiary burden and risk underenforcement (p. 776). In India, the ex-post framework, with multiple investigative and adjudicatory layers, makes delay more likely – especially for digital markets (CDCL Report, ¶2.3). This is because regulating digital markets places substantial demands on the CCI, requiring capabilities that extend beyond traditional legal and economic analysis. Effective oversight of the digital economy increasingly depends on specialised expertise in areas such as big data analytics, algorithmic systems, artificial intelligence, machine learning, and digital market design (Standing Committee Report, p. 89). These demands are likely to intensify if an ex-ante regulatory framework is introduced, necessitating greater reliance on data scientists, technologists, and market analysts alongside legal and economic experts (ibid.). However, even now, CCI presently faces significant capacity constraints. As of 31 March 2024, only 113 of its 195 sanctioned posts were filled, reflecting a substantial staffing shortfall. Similar constraints exist within the Director General's office, where staffing levels declined from 23 filled posts in 2022-23 to only 13 in 2024-25 against a sanctioned strength of 41 (ibid.). Even in a general context, in its evaluation of Regulation 1/2003, the European Commission found that abuse of dominance investigations under Article 102 TFEU lasted on average 5.7 years (EC Evaluation, p. 154).

Digital markets are distinct from traditional markets. Inter alia, they are driven by strong network effects where the value of a product or service increases as more people use it, making them prone to tipping (ibid, ¶¶1.12, 2.2). Incumbents, having access to significant data, are able to establish themselves in adjacent markets and thus foreclose new entrants (ibid, ¶¶2.3, 2.9). Against this backdrop, the requirement of evidence may lead to prolonged investigations during which the market may have tipped or harm may have become entrenched (p. 4). For instance, the CCI initiated its suo motu investigation into WhatsApp’s 2021 Privacy Policy on 24 March 2021, yet the final order was delivered only on 18 November 2024, a period of nearly three years and eight months. Similarly, the Google Android matter originated as Case No. 39 of 2018 and culminated in a final CCI order only on 20 October 2022, almost four years later, before entering further appellate proceedings. Moreover,      evidence in an adversarial system must be carefully perused, being brought by opposing parties.^[1] There may also be a resource gap between well-resourced private actors and capacity-constrained regulators (ibid, p. 5). Therefore, requiring an effects-based analysis for every §4 case is likely to lead to underenforcement.

To prevent underenforcement, the ratio of Schott Glass should be read to account for a parallel ex-ante framework as well. In fact, in the EU, the Digital Markets Act (“DMA”) imposes obligations on designated ‘gatekeepers’, through Article 3. Under this ex-ante framework, once a gatekeeper is recognised, there is no need to show anticompetitive effects (DMA, Preamble 11). Instead, gatekeepers must annually justify their expected compliance, and the Commission may additionally seek ex-post proof of actual compliance (DMA, Articles 11 and 21). From the perspective of businesses as well, the DMA gives dominant platforms clearer ex-ante rules of engagement, reducing reliance on prolonged and uncertain competition litigation. Thus, the effects-based analysis applies in conjunction with the DMA i.e. to digital entities which do not fall under the category of gatekeepers. Similarly in India, the now-withdrawn DCB introduced ex-ante rules for systematically significant digital enterprises (“SSDE”).

Therefore, given the dynamic nature of digital markets, delaying intervention until anticompetitive effects manifest may lead to irreversible harm. In such cases, it is submitted that parallel ex-ante and ex-post frameworks should regulate a claim for AoDP under §4. The point is not to replace or duplicate §4 enforcement, but to interpret Schott Glass as allowing ex-ante regulation to operate in parallel where warranted.

One response is that the Competition (Amendment) Act, 2023 introduced settlements and commitments. These mechanisms may reduce the duration of proceedings by allowing parties to resolve investigations before a final finding of contravention. They therefore partially mitigate concerns regarding delay. However, settlements do not eliminate the need for ex-ante regulation. First, they operate only after proceedings have commenced. Second, they remain dependent upon the regulator identifying and investigating potentially harmful conduct. Third, in rapidly tipping digital markets, significant competitive advantages may already have accrued before a settlement is reached.    

Conclusion

Schott Glass rightly requires proof of competitive harm before imposing liability under §4. The challenge lies not in the doctrinal correctness of an effects-based approach, but in the institutional realities of enforcing it. Digital markets may evolve faster than conventional competition proceedings. Accordingly, the case for ex-ante regulation does not weaken after Schott Glass; if anything, the evidentiary demands introduced by the judgment make a complementary ex-ante framework more important.

^[1] However, in India, the presence of the Director-General as an investigative entity may mitigate this risk (see Competition Act 2002, ss 16, 26(1)).