INTRODUCTION
In an era where new and nuanced forms of abuse of dominance are increasingly being recognized, one form that has gained renewed importance is margin squeezing. Margin squeezing, in both legal and economic contexts, refers to a specific type of anti-competitive conduct, predominantly observed in vertically integrated markets. It occurs when a firm, dominant at an upstream (wholesale) level, supplies an essential input to its downstream (retail) competitors, while simultaneously competing with them in the downstream market. The ‘squeeze’ arises when the spread between the upstream price charged to competitors for the essential input and the downstream price charged by the dominant firm to its own retail customers is either negative or insufficient to allow an equally efficient competitor to cover its specific downstream costs.
Despite its economic significance, margin squeezing has received limited judicial attention in India. In this context, the Supreme Court’s (SC) judgment in Competition Commission of India v. Schott Glass India Pvt. Ltd. (CCI v. Schott Glass) is both timely and consequential. Although the Court ultimately held that the conduct in question did not amount to margin squeezing, it marked the first authoritative judicial recognition of margin squeeze as a distinct form of abuse under Indian competition law.
However, the judgment also reflects certain limitations. Rather than setting clear standards for future cases, the Court appeared to adopt a formalistic approach, narrowly examining the facts without providing deeper guidance. This blog explores the concept of margin squeeze, its judicial treatment in India and other jurisdictions like the European Union (EU) and the United States (US), and offers jurisprudential guidance that could inform and strengthen the evolving Indian competition law framework.
JUDICIAL AND REGULATORY TREATMENT IN INDIA
A. Prior Indian Precedents
The Indian competition law framework, specifically Section 4(2) of the Competition Act, 2002 (the Act), prohibits the abuse of a dominant position. Initially, the approach to determining anti-competitive effects, as exemplified in MCX Stock Exchange Ltd. v. NSE , leaned towards an ‘object-based’ analysis, examining NSE’s zero-pricing policy in isolation, focusing on its consequences rather than the intent or broader market circumstances. This narrow perspective, however, evolved into an ‘effects-based’ approach through subsequent jurisprudence, emphasizing the actual or likely anti-competitive impact of the conduct.
Pricing abuses are indirectly addressed under Section 4(2) of the Act through clauses prohibiting the imposition of “unfair or discriminatory conditions or prices” or practices resulting in “denial of market access.” Such abuses are broadly categorized as either exploitative, where a dominant firm leverages its monopoly to impose high prices on consumers, or exclusionary, designed to foreclose competition. Margin squeezing distinctly falls into the latter category, aiming to exclude rivals.
The CCI is not required to conclusively prove abuse at the prima facie stage; it merely needs to assess if the conduct appears to amount to abuse. Notably, in Anand Prakash Agarwal v. Dakshin Haryana Bijli Vitran Nigam & Ors., the erstwhile Competition Appellate Tribunal (COMPAT) clarified that while discriminatory pricing is generally impermissible, objective justifications or a ‘redeeming virtue’ for varying prices might exempt the conduct from being abusive.
Prior to CCI v. Schott Glass, the Indian competition landscape saw only brief mentions of margin squeezing without leading to established jurisprudence. In Arshiya Rail Infrastructure Limited Vs. Ministry of Railways (MOR) & Ors., Arshiya alleged that MOR’s increased haulage charges constituted margin squeezing, destroying a level playing field for Private Container Train Operators (PCTOs). While MOR was acknowledged as dominant in providing railway lines, the CCI ultimately found that neither MOR nor Container Corporation of India were dominant in the relevant market of “transportation of goods in containers on the Rail Network in India,” thus avoiding a substantive discussion on margin squeeze. Similarly, in Prints India vs. Springer India Private Limited, Prints India contended that Springer India was “completely squeezing the margin of distributors by imposing unfair prices.” However, the case did not delve into the specifics of the margin squeeze allegation as dominance was not established. More recently, in Together We Fight Society vs. Apple Inc., the informant alleged that Apple’s 30% commission on App Store transactions might amount to a margin squeeze, where Apple, dominant in the upstream App Store market, competes with app developers in the downstream market for digital content. While the CCI acknowledged this argument at the prima facie stage to order an investigation, a detailed legal analysis of margin squeezing was not undertaken at that point.
B. Supreme Court in CCI v. Schott Glass
The SC’s decision in CCI v. Schott Glass marked a pivotal moment, being the first instance that directly addressed margin squeezing. The case involved Schott Glass, a manufacturer of borosilicate glass tubing, and Kapoor Glass, a container manufacturer and Schott Glass’s customer. Kapoor Glass alleged discriminatory pricing and margin squeeze, arguing that rebates given by Schott Glass to its group company, Schott Kaisha (a direct competitor of Kapoor Glass), constituted abusive conduct.
Crucially, the Court ultimately found no margin squeeze and its reasoning was multifaceted: Schott Glass was not present in the downstream market where Kapoor Glass competed, a prerequisite for margin squeeze involving vertical integration. Additionally, competitors like Kapoor Glass maintained sustainable margins, indicating no actual market foreclosure. The market also showed no exits or end-customer price increases due to Schott Glass’s volume discounts. The Supreme Court stated that margin squeeze is only abusive if it leads to unsustainable margins for equally efficient competitors, emphasizing the ‘as-efficient competitor’ (AEC) standard. However, the specific factual findings precluded a comprehensive development of margin squeeze jurisprudence, as the case didn’t necessitate a deep dive beyond identifying the unfulfilled foundational conditions.
COMPARATIVE JURISPRUDENCE: EU AND US
In the EU, Article 102 of the Treaty on the Functioning of the European Union (TFEU) prohibits the “abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it”. The first case to recognise margin squeezing as a form of abuse of dominance was in the Napier Brown-British Sugar case (British Sugar Case), where the Commission applied the ‘AEC Test’, using the dominant firm’s own costs as the benchmark, to assess if their pricing left enough margin for downstream rivals, instead of its competitors. The exact contours of margin squeeze as a standalone offence were settled later in Duetsche Telekom AG v. Commission (Duestsche) and Konkurrensverket v. TeliaSonera Sverige AB (TeliaSonera) judgements. In the Deutsche Telekom case, the Court of Justice clarified that margin squeeze itself constitutes a distinct abuse of dominance under Article 102 of TFEU, without the need to prove that wholesale or retail prices are independently excessive or predatory. It emphasized on the already existing AEC Test, and stated that the abuse lied in the unfair spread between vertically related prices. Later, the court in TeliaSonera case, confirmed the Duetsche judgment, and observed that margin squeezing is a standalone offence, and compels efficient competitors of the dominant firms to reduce their profit levels or even run at a loss. Adding to the settled criteria of British Sugar case, it also allowed to use the prices of the competitors in assessment, in exceptional cases where it is impossible to determine the cost structure of the dominant entity.
In contrast to the EU jurisprudence, the US follows a more conservative and restrictive approach towards margin squeezing. In United States v. Aluminium Company of America, it was observed that margin squeeze is a monopolisation offence under Section 2 of the Sherman Antitrust Act, 1890, and the test laid down was the ‘transfer price test’. However, the case was overruled in Pacific Bell Telephone Co. v. linkLine Communications, and the court stated that price squeeze cannot be categorised as a discrete offence, due to administrative challenges in monitoring both wholesale and retail prices, and such conduct is illegal only when accompanied by a refusal to deal or predatory pricing. Additionally, this strict approach is further compounded by the stringent standards for proving refusal to deal and predatory pricing, as laid down in Verizon Communications v. Trinko and Brooke Group Ltd v Brown & Williamson Tobacco Corp. cases, respectively.
CHALLENGES IN RECOGNITION: ANALYTICAL INSIGHTS FOR INDIA’S LEGAL FRAMEWORK
Margin squeezing, despite its significant impact on vertically integrated markets, presents a global challenge for explicit definition and consistent litigation. This hesitation stems from concerns that an outright ban could inadvertently stifle competitive dynamics. An integrated firm, if restricted, might raise retail prices instead of lowering wholesale ones, creating a “price umbrella effect” where competitors also raise prices, paradoxically lessening overall competition.
The core analytical difficulty lies in predicting whether a ban will force lower wholesale prices, boosting demand for the essential input, or simply higher retail prices, burdening consumers – a “double-edged sword.” This balance depends on technology and demand factors. Furthermore, while a ban could encourage efficient new entrants, it might also inadvertently protect less efficient rivals under that “price umbrella.” There’s also the risk of “technology distortions,” where firms might adopt less efficient technologies just to meet regulatory tests by shifting costs upstream. Consequently, margin squeezing cannot be viewed in isolation; its anti-competitive and pro-competitive effects are a culmination of various interconnected factors that demand careful balancing, not extreme measures. Categorizing it as an offense requires a nuanced, contextual understanding, moving beyond a rigid, “isometric” perspective.
Drawing on EU and US approaches, India should explicitly recognize margin squeezing as a standalone abuse of dominance, adopting a more liberal and economically coherent stance. India’s current framework often merges margin squeeze with predatory pricing, refusal to deal, or price discrimination, despite its distinct characteristics. Unlike predatory pricing, margin squeezing doesn’t necessitate below-cost pricing; it manipulates input-output price spreads to exclude efficient rivals. Moreover, it differs from outright refusal to deal by maintaining technical supply while rendering it commercially unviable (“constructive refusal”). It also aims to eliminate downstream competition, distinct from traditional price discrimination’s market segmentation. Given these distinctions, the Indian competition regime must articulate a clear analytical framework—centered on the “as-efficient competitor” (AEC) test and economic foreclosure principles—to assess margin squeeze allegations independently. Recognizing it as a discrete form of abuse under Section 4, in line with the EU’s approach post-Deutsche Telekom and TeliaSonera, will help curb strategic foreclosure without unduly restricting legitimate competitive conduct. This will promote legal certainty and economic efficiency, advancing India’s competition jurisprudence in complex digital and industrial markets.
CONCLUSION
Margin squeeze represents a complex and evolving form of exclusionary abuse that poses serious risks in vertically integrated markets, particularly in the digital and infrastructure sectors. The Supreme Court’s recognition of this abuse in CCI v. Schott Glass is a positive development, but the judgment lacks the analytical clarity and depth needed to set a strong precedent. There is an urgent need for a more coherent legal framework in India—one that treats margin squeeze as a distinct offence, separate from doctrines like predatory pricing or refusal to deal, and draws from the nuanced approach seen in EU jurisprudence. Strengthening this area of law will not only prevent anti-competitive foreclosure but also foster innovation, fair competition, and efficient market functioning in a rapidly transforming economic landscape.
(This post has been authored by Disha Daga, a student at HNLU, Raipur and Meghna Jain, a student at MNLU, Mumbai)
CITE AS: Disha Daga and Meghna Jain ‘RECOGNISING MARGIN SQUEEZE: A MISSED OPPORTUNITY OR A TURNING POINT?’ (The Contemporary Law Forum, 25 July 2025) <https://tclf.in/2025/07/25/recognising-margin-squeeze-a-missed-opportunity-or-a-turning-point/>date of access.