Jurisdiction - India
India – COMPAT Upholds CCI’s Penalty Upon NSE For Abuse Of Dominance.

12 September, 2014


On August 5, 2014, the Competition Appellate Tribunal (‘COMPAT’) upheld CCI’s order dated June 23, 2011, penalising National Stock Exchange of India Limited (‘NSE’) for abusing its dominant position. COMPAT, however, did not agree fully with CCI’s decision, and repudiated some of the reasoning advanced by CCI in support of its decision. However, COMPAT refused to alter the quantum of penalty (i.e., approximately INR 550m) that had been imposed by CCI.

CCI’s decision held NSE guilty of abusing its dominant position in the market for stock exchange services in the Currency Derivatives (‘CD’) segment in India, by not charging any transaction cost for its trading services in the CD segment. COMPAT did not agree with CCI’s definition of the relevant product market finding it too narrow and broadened it to the market for services offered by stock exchanges across all segments. COMPAT distinguished between the market for CDs and the market for stock exchange services in relation to the CD segment. Although the market for CDs may be different from the market for equities, the market for CD-specific stock exchange services is not different from the market for equity-specific stock exchange services. COMPAT distinguished between defining a relevant market for assessing merger decisions, vis-à-vis, examining the possible abuse of dominant position. According to COMPAT, the former being, ex ante, in nature, must be tailored narrowly when compared to the market definition for abuse of dominance investigations, which are, ex post, in nature.

COMPAT agreed with CCI’s finding that NSE is a dominant player because of its significant market share, financial strength, and tremendous size and resources. Examining the allegedly predatory zero-transaction-cost policy of NSE, COMPAT held NSE’s conduct to be predatory and in violation of Section 4(2)(a)(ii) of the Act. COMPAT did not find any merit in, and rejected NSE’s submission that there was no pricing below average variable cost to justify a finding of predatory pricing as NSE’s average variable cost for providing stock exchange services for the CD segment was zero. Further, COMPAT also reached a finding of predatory intent by examining historical behavior by NSE in other segments, where NSE had also waived transaction costs when faced with a new entrant in the segment. However, COMPAT rejected CCI’s finding that NSE had practiced anti-competitive leveraging of its market power in the non-CD segment to enter into, or protect its position in the CD segment and thus, found no violation of Section 4(2)(e) of the Act.

On penalties, COMPAT once again agreed with CCI’s order and did not alter the quantum of penalty imposed. While NSE prayed that only its turnover from the CD segment, i.e., the ‘relevant turnover’, be considered for computation of penalty, COMPAT’s rejection of the narrower CDsegment specific market definition in favour of the broad market for all stock exchange services across all segments implied that the ‘relevant turnover’ would be NSE’s total turnover.




For further information, please contact:


Zia Mody, AZB & Partners
[email protected]


Abhijit Joshi, AZB & Partners 
[email protected]

Shuva Mandal, AZB & Partners 
[email protected]


Samir Gandhi, AZB & Partners
[email protected]

Percy Billimoria, AZB & Partners 
[email protected]


Aditya Bhat, AZB & Partners 
[email protected]

Comments are closed.