Asymmetric Substitution vis-a-vis Relevant Market: A Conundrum Unresolved

[Yatin Gaur is a 3rd year B.A. L.L.B (Hons.) student and Priyal Jain a 4th year B.A. L.L.B (Hons.) student, both at Hidayatullah National Law University, Raipur]

The concept of ‘relevant market’ is one of the most essential analytical tools employed by the Competition Commission of India (CCI) to analyse competition law concerns. However, defining a term in the statute is just a small step towards solving a bigger challenge of interpreting it under different facts and circumstances.

The confusion regarding the scope of relevant markets is increasing with each case due to diminishing global boundaries and the rapid development of the internet and other technological advancements. Consequently, the CCI is called upon frequently to define the scope of ‘relevant market’ precisely. One such confusion has arisen due to the concept known as asymmetric substitution.

This post aims to discuss the concept of relevant market vis-a-vis asymmetric substitution with the aid of a few available cases from the European Commission as well as the CCI. The authors also pose certain questions regarding asymmetric substitution that need to be answered through the competition policy of India. 

Relevant Market

A relevant market in competition law is a defined area, be it geographic or product-based, within which the competitive effects of the act in question is to be ascertained by a competition authority. The Indian Competition Act 2002 (Act) defines the term ‘relevant market’ under section 2(r) as a market determined by the CCI with reference to either the ‘relevant product market’ or the ‘relevant geographic market’ or both.

The determination of a relevant market by a competition authority is of paramount importance because assessing the market power of an enterprise directly, without first defining the scope of relevant market, is extremely difficult and rarely possible. Therefore, this market power of an enterprise is to be evaluated by first determining the ‘relevant market’, and then by analysing the position of an enterprise in that specific market by considering various factors including market share, physical characteristics or end-use of goods or services.

Asymmetric Substitution

The Act provides that the CCI, in order to define the relevant product market, is required to consider the interchangeability or substitutability of the goods or services by the consumers. Therefore, the substitutability of a product or service plays an imperative role in determining the relevant product market such that, if products A and B are substitutable with one another, the relevant market may include both of them.

However, substitutability will not be symmetric when customers tend to “trade-up” but are reluctant to “trade-down”. Consider a situation where A is substitutable by B, but this is not the case when it comes to the substitution of B with A. This implies that whilst product B is in product A’s market, product A is not in product B’s market. These kinds of situations mostly arise when there is a gap in technology leading to the replacement of an inferior product by a superior product over time. However, the lack of precedents and a dearth of legal literature surrounding asymmetric substitution makes it challenging for a competition authority to define the scope of a relevant market accurately and consistently, especially in technology-driven markets.

Foreign Jurisprudence

Since asymmetric substitution has relatively been quite a recent concept in antitrust law, even the European Commission (EC) to which the competition authorities around the world look up to, has dealt with only a limited number of cases on the theme. In Bayer/Aventis Crop Science, there were only two comparable insecticides, namely Jockey and Latitude, available for protecting cereals against a fungal disease known as ‘take-all-disease’. The EC observed that Latitude was only effective against the ‘take-all-disease’ while, on the other hand, Jockey provided protection against the ‘take-all disease’ as well as other diseases. The EC termed this case as a “classic case of asymmetric substitution” since Latitude could always be substituted by Jockey however Jockey was not always interchangeable with Latitude.

Further, in the merger review between Crown Cork & Seal Company Inc. and Carnaud Metalbox SA, the EC observed that the substitution of aluminium cans with tinplate cans was asymmetric. It stipulated that since tinplate cans provided a lower cost as well as recyclability as compared to aluminium cans, the consumers generally did not switch from tinplate to aluminium cans. However, aluminium cans were being replaced by tinplate cans very often. In this case, despite the presence of asymmetric substitution, the EC did not include the ‘market of aluminium cans’ in the ‘relevant market’, opining that the parties to the merger were involved only in the ‘market for tinplate cans’. Thus, the question whether the parties to the merger were involved in the business of aluminium as well as tinplate (or not) became a crucial factor for EC to define ‘relevant market’ narrowly without the inclusion of ‘aluminium can market’.

Another key factor for the determination of relevant market in case of asymmetric substitution has been the ‘user expectations’ from the product. In the case of France Télécom v Commission, the EC stated that the user expectations from low-speed internet and high-speed internet are extremely different. Although the high-speed internet can perform everything that the low-speed internet can, the users do not shift to high-speed internet for the same kind of activities. Therefore, the relevant market, in this case, was not enlarged to encompass both the services citing the “extremely asymmetric” nature of substitution.

Indian Jurisprudence

The Indian competition jurisprudence concerning asymmetric substitution for determining the scope of relevant market has been limited to a handful of cases till date. In the Dish TV and Videocon D2H merger, the CCI, while deciding upon the proposed merger between the two direct to home (DTH) services giants, rejected the contention that the market structure of distribution platform operators (DPOs) is such that they are merely operating a platform to distribute the content of the broadcasters. The CCI observed that the DTH broadcasting service is not substitutable with the services offered by multi system operators (MSOs), local cable operators (LCOs), internet protocol television (IPTV) and over-the-top services (OTTs), on the basis of pricing, packages offered, infrastructure requirements, flexibility, pricing, technology, and similar aspects, and therefore constitutes a separate ‘relevant market.’

However, later in the RIL/Den/Hathway combination, where both Den and Hathway were MSOs and were operating in the cable TV services in India, the CCI opined that the cable TV service is interchangeable with DTH Service. The relevant market was observed to be “the market for aggregation and distribution of broadcast TV channels to homes through cable TV and DTH services”, as the CCI observed that cable TV operations are being constrained by DTH services, since both the services are similar in terms of quality of service and end-use.

In Faridabad Industries Association (FIA) v. Adani Gas Limited, both the CCI and the Competition Appellate Tribunal recognised that piped natural gas (PNG), having superior characteristics to hydrocarbon fuels, is unique and hence not interchangeable. Therefore, the market for PNG as supplied and distributed by Adani Gas Limited constitutes a ‘separate relevant market’, not including the market of hydrocarbon fuels as supplied and distributed by other entities.

Similarly, in House of Diagnostics LLP v. Esaote SpA, the CCI delineated a specific market for “dedicated standing/tilting MRI machines”, emphasising the different technological features and the end-use of these machines by reason of them being less claustrophobic and more effective in diagnosing diseases of specific portions of the body, such as spine and joint. However, the CCI’s chairman wrote a dissent note that the market for standing or tilting MRI machines must not constitute a separate product market because the addition of a few distinct technological features and better end-user experience are not the decisive factors for consumers, and hence must not be identified as a separate relevant market.

Incidentally, apart from their being a dearth of sufficient precedents, the contrasting views reflected from the CCI’s decisional practice has further added to the confusion surrounding the issue of asymmetric substitution. The questions that then emerge are: 

  1. What should be the key parameters, based on which the CCI may decide the fate of future cases concerning asymmetric substitution?
  2. Would every technological addition or superior characteristic substitutable product be viewed as to constitute a ‘relevant market’ of its own?

It will also be interesting to witness in future whether the CCI’s approach towards asymmetrical substitution in determining the scope of ‘relevant market’ will play out differently for different sectors such as pharmaceutical, telecommunication, industrial and high technology sectors. Further authorities may also have to exercise caution regarding risk of identifying the market too narrowly and thereby overlooking the asymmetric substitution.


With an exponential rise in competition cases involving rapidly evolving technology markets ranging such as e-commerce and precision manufacturing, it will be interesting to see how the Indian competition regulator will approach the issue of asymmetric substitution and market definition in the future. According to one report, the issue can be tackled by defining the focal product of the market analysis i.e. the main product under investigation. According to this approach, if the focal product is substituted by another product, then the products belong to the same market. On the contrary, if the focal product is not substitutable by another product, both the products will not fall within the same relevant market.

From the perspective of the Indian antitrust regime, the CCI, while determining the question of relevant market, must be well acquainted with the benefits and disadvantages of each approach and also carry out a parallel analysis of specific factors, such as the method of use, characteristics of the product, the market asymmetry and the preferences of consumers. A requirement of certainty and consistency in competition policy decisions is preferable from the perspective of businesses so that litigation may be avoided. Further, a precise definition of the market in each case involving asymmetric substitution would go a long way in handling technology-driven competition disputes smoothly.

Yatin Gaur & Priyal Jain

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