The Supreme Court in Competition Commission of India v. Schott Glass India Pvt. Ltd. & Anr.1 delivered in response to cross-appeals stemming from a CCI2 order, the judgment addresses critical questions on the interpretation of “abuse of dominance” under Section 4 of the Competition Act, 2002. The case concerned allegations that Schott India, a major manufacturer of pharmaceutical-grade borosilicate glass tubing, had used exclusionary tactics to preserve its dominance in the upstream market3, thereby harming competition in both upstream and downstream4 sectors of pharmaceutical packaging.
The dispute began when Kapoor Glass, a downstream converter, filed information before the CCI, alleging that Schott India had abused its dominant position by offering discriminatory and loyalty-inducing discounts, bundling clear and amber glass tubes, and entering into exclusionary long-term agreements with Schott Kaisha, a downstream joint venture. Kapoor Glass contended that these practices distorted market dynamics and effectively prevented competitors from accessing the upstream market on fair terms. Following a DG investigation, the CCI found that Schott India had indeed contravened multiple provisions under Section 4(2) of the Act and imposed a monetary penalty of ₹5.66 crore while directing the company to cease the alleged anti-competitive practices.
The now defunct COMPAT5, however, reversed the decision, finding that the CCI’s conclusions were primarily based on statements that were never subjected to cross-examination and that there was insufficient evidence of actual competitive harm. The Supreme Court was thus called upon to adjudicate not only the substantive elements of abuse but also procedural fairness in regulatory inquiries.
One of the core issues before the Court was whether the volume-based rebate scheme introduced by Schott India amounted to unfair or discriminatory pricing under Section 4(2)(a) and exclusionary conduct under Section 4(2)(b) of the Competition Act. The discount structure offered discounts solely based on the quantum of annual purchases, rising progressively with larger volumes. The Supreme Court concluded that this pricing structure was neutral in design and uniformly applied. All purchasers were eligible for the same rebates provided they met the quantitative thresholds. Furthermore, the Court acknowledged that continuous-fire furnaces used in borosilicate manufacturing require stable, high-volume off-take to remain economically viable, rendering such volume-based discounts both commercially logical and efficiency-enhancing. Consequently, this pricing mechanism was held not to violate competition law provisions.
Another allegation brought forth was that Schott India tied the sale of amber and clear glass tubes, effectively forcing buyers to purchase both to benefit from higher rebate slabs. The Court, opined that although the rebate slabs aggregated the volume of both types of tubes for the purpose of calculating discounts, there was no contractual obligation mandating the purchase of one as a condition for the other. Additionally, the two types of tubes were not economically independent products, as their usage depended on the formulation needs of end-customers in the pharmaceutical industry. The aggregation was therefore viewed as a legitimate volume-discount mechanism rather than coercive bundling. The Court also noted that there was no foreclosure of competitors nor evidence that any converter was compelled to exit or lost market access due to this practice.
Beyond the substantive allegations, the Court addressed the crucial issue of procedural fairness. It observed that the CCI’s refusal to allow Schott India to cross-examine key converter-witnesses significantly weakened the evidentiary value of their testimonies. Regulatory bodies, the Court emphasized, are bound to observe principles of natural justice. Even in inquisitorial settings, the right to confront and test adverse evidence remains fundamental. Therefore, the denial of cross-examination tainted the CCI’s findings, lending further credibility to the COMPAT’s reversal.
The Court’s most insightful holding, however, lies in its affirmation that Section 4 of the Act requires an “effects-based” analysis. Abuse of dominance, it held, must be shown to have caused or to be likely to cause appreciable adverse effects on competition (AAEC). Under the Competition Act, the definition of “dominant position,” and the factors under Section 19(4) collectively reinforce that mere classification under any clause of Section 4(2) does not automatically establish abuse. The Court referred to both Indian and European cases like the Intel Corporation Inc. v. European Commission6 and TeliaSonera Sverige AB v Konkurrensverket7 decisions from the European Union, to emphasize that economic impact—not formalistic labeling—must guide the adjudication of competition claims. In the present case, data revealed rising imports, stable pricing, expanding output, and healthy margins for independent converters all signs of a functioning, competitive market. Accordingly, no adverse effect on competition could be established.
In conclusion, the Supreme Court’s judgment in CCI v. Schott Glass India Pvt. Ltd. demonstrates an economically grounded approach to competition law. By affirming the necessity of procedural fairness and insisting on concrete evidence of harm, the Court has set a high threshold for regulatory intervention. It reminds both regulators and litigants that dominance per se is not unlawful and that only conduct which demonstrably distorts market dynamics or injures consumer welfare merits sanction.
Citations:
- Civil Appeal No. 5843 of 2014
- CCI – Competition Commission of India
- Upstream market – the manufacture and sale of neutral USP-I borosilicate glass tubing, whether clear or amber (raw material) –
- Downstream market – the sale of pharmaceutical containers—ampoules, vials, cartridges and syringes—made by converters (finished goods). The upstream market supplies the raw material and the downstream market transforms it into finished goods. Because the output of the upstream market is the indispensable input of the downstream market.
- COMPAT – Competition Appellate Tribunal
- Case C-413/14 P, judgment dated 6 September 2017
- Case C-52/09, judgment dated 17 February 2011
Expositor(s): Adv. Khushboo Saraf
