The Supreme Court of India mandates effects-based analysis in Schott Glass- Lagna Panda


A weighing scale, A table lamp, a man in a black suit with blue toe and white shirt writing on a paper

On May 13, 2025, the Supreme Court of India (“Supreme Court”) issued a final decision in proceedings involving allegations that Schott Glass had abused its dominance by offering exclusionary volume-based discounts, imposing discriminatory supply terms, and engaging in refusal to supply.

The Supreme Court ruled that:

  • effects-based analysis is mandatory in abuse of dominance investigations; and
  • differential pricing can be abusive if there is no objective justification and materially different terms are offered to equivalent players for equivalent transactions.

Facts

In 2010, Kapoor Glass Private Limited (“Kapoor Glass”) filed a complaint with the Competition Commission of India (“CCI”) alleging that Schott Glass India Private Limited (“Schott Glass”) has abused its dominance by offering exclusionary volume-based discounts, imposing discriminatory supply terms, and engaging in refusal to supply. Specifically, it was alleged that Schott Glass supplied USP-I neutral borosilicate glass to its joint venture – Schott Kaisha Private Limited (“Schott Kaisha”), on preferential terms. This affected the competitiveness of Kapoor Glass, which was a competitor of Schott Kaisha in the downstream market for the manufacture and sale of tubes.

Decision of the Competition Commission of India

Majority opinion

After a detailed investigation, majority members of the CCI issued a final decision concluding that –

  1. Schott Glass is dominant in the markets for supply of USP-I neutral borosilicate glass and supply of Fiolax glass, and
  2. Schott Glass has abused its dominance by offering preferential volume discounts and functional discounts to its joint venture – Scott Kaisha, which amounted to discriminatory pricing and margin squeeze.

Dissenting minority opinion

Ms. Geeta Gouri issued a dissenting opinion where she concluded that –

  1. volume discounts offered by Schott Glass for USP-1 neutral borosilicate tubes were not discriminatory since the discount slab was (a) “anonymous by design”, (b) made available to all ‘converters’ at the beginning of the transaction period, and (c) quantity-based which was likely to have led to cost efficiencies;
  2. transactions of different volumes cannot be considered equivalent transactions;
  3. offering discounts on the sale of Fiolax glass only to Schott Kaisha was justified since demand (in volume terms) of no other converter was “substantially comparable” to Schott Kaisha’s requirement;
  4. volume-based discount was offered by Schott Glass was objectively justified as it ensured continuous offtake as slowing down could have damaged the production tank used to manufacture USP-I borosilicate glass;
  5. making grant of 8% functional discount conditional upon not using Chinese tubes was not unfair since there was no refusal to supply by Schott Glass;
  6. tubes were sold by converters at prices which were negotiated between converters and pharmaceutical companies. Prices at which multiple converters supplied to a single pharmaceutical company were similar and, sometimes, even identical, which demonstrated that differential did not result in price differential of final products;
  7. no evidence of foreclosure can be found because, during the investigation period, total sales of all converters increased, EBITDA (a financial viability metric) increased for most converters including the converters allegedly disfavoured by Schott Glass, and purchases by all converters from Schott and its competitors increased; and
  8. Schott Glass’ competitor – Nipro, also offered similar discounts to converters and could not show any demonstrable evidence that Schott Glass’ conduct adversely affected Nipro’s growth.

Decision of the Competition Appellate Tribunal

In appeal proceedings, the erstwhile Competition Appellate Tribunal set aside the majority decision of the CCI on the ground that the majority decision relied heavily on statements made by other converters and Schott Glass was not given an opportunity to cross-examine those witnesses. The tribunal also largely agreed with Ms. Gouri’s dissenting opinion and imposed INR 1 lakh (~ USD 1,175/ EUR 1,000) costs on Kapoor Glass.

Decision of the Supreme Court of India

Appeals were filed by Kapoor Glass and the CCI before the Supreme Court. While mandating effects-based analysis, the Supreme Court observed that, “[t]he omission of a proper harm analysis vitiates the CCI’s order in limine.

The findings and conclusions of the Supreme Court are below. The court largely agreed with the conclusions and observations of Ms. Gouri given in her dissenting opinion.

  • Discount schemes not discriminatory: Schott Glass’s volume-based discount scheme was neutral, slab-based, and available to all purchasers. Schott Glass’ offer of 8% functional discount was available to all converters who met their demand forecast, refrained from using Chinese tubes, and sold products at fair prices. Both discount schemes were objectively justified and led to demonstrable efficiencies
    • Given the technical realities of borosilicate production, the production units could not be shut down and continuous offtake was required, which was ensured by both volume-based discounts and functional discounts.
    • Chemical analysis certificates showed that alkali-release values were higher than the USP-I threshold in certain Chinese tubes, which justified Schott Glass’ requirement that converters must not mix Schott Glass’ tubes with Chinese tubes. Further, where Schott Glass’ trademark was licensed for use by converters, inspection rights were included in trademark agreements, which was reasonable since inspections were for short durations and limited to stock verification.
    • Quarterly crediting of volume discounts eased cash flow and did not deter converters from sourcing of USP-I neutral borosilicate glass from multiple suppliers.
  • No demonstrable margin squeeze: Functional discounts offered by Schott Glass i.e., additional 2% discount, base price freezing, and priority dispatch, was offered to Schott Kaisha only if Schott Kaisha purchased 80% of its requirement from Schott Glass. Lower price did not result in margin squeeze as other converters recorded positive EBITDA during the investigation period and Schott Kaisha’s sale prices were similar to or higher than its competitors’ prices. Schott Kaisha’s significantly high offtake allowed Schott Glass to achieve economies of scale.
  • No demonstrable foreclosure: Evidence on record showed that during the investigation period, neutral tubing output expanded, median EBITDA margin of converters increased, imports of tubing increased from 11% to 18%, two new converters entered the neutral tubing market, and Schott Glass’ competitor – Nipro-Triveni’s market share increased from 12% to 14%.
  • Untested witness statements cannot be relied on: According to witness statements, Schott Kaisha received “special terms”. However, without cross-examination, witness statements cannot be relied on, and, in any case, the statements cannot override documentary evidence suggesting otherwise.
  • Lack of documentary evidence supporting tying allegation: No documentary evidence was produced by converters in support of the allegation that Schott Glass made supply of neutral glass (amber) contingent on the purchase of neutral glass (clear). Even if Schott Glass imposed a tying arrangement, both amber and clear neutral tubes were manufactured using a common furnace. Significant volume difference in monthly procurement was likely to affect “furnace integrity”.

The Supreme Court also increased the costs imposed on Kapoor Glass to INR 5 lakhs (~ USD 5,880 / EUR 5,000).

Comments and takeaways

The decision of the Supreme Court clarifies that an abuse of dominance assessment cannot follow a per se standard, and an effects-based approach must be adopted. The court has also, effectively, “read in” objective justifications into the statute.

Volume-based discounts offered by Schott Glass were not transaction-specific. Buyers had to estimate their purchase requirements, and based on their actual offtake, rebates were computed and credited on a quarterly basis. After undertaking effects-based analysis of the discount scheme, the Supreme Court concluded that the discount scheme had objective justifications and did not result in any harm to competition.

The mandate to undertake effects-based assessment will provide greater flexibility in designing discount schemes. Entities can now defend discount schemes by demonstrating that no harm has resulted. In some sense, the Supreme Court has agreed with the observations of the European Court of Justice in Intel that not every exclusion is detrimental to competition.

The decision also gives much-needed guidance on how margin squeeze must be examined. Relying on the decisions of the EU, the Supreme Court observed that for a margin squeeze allegation to sustain, three conditions must be met: the defendant must operate in the downstream market, the wholesale-to-retail spread must be insufficient for an equally efficient competitor, and the margin compression must be likely to result in competitive harm.