Definition
A margin squeeze (or price squeeze) is an exclusionary abuse committed by a vertically integrated dominant enterprise that supplies an essential upstream input to downstream rivals while competing with them downstream. The abuse occurs when the spread between the upstream (wholesale) price charged to rivals and the downstream (retail) price charged to end-customers is so narrow that an equally efficient competitor cannot compete profitably, thereby foreclosing the downstream market.1
The Competition Act, 2002 contains no provision expressly naming margin squeeze as an abuse. The conduct is instead analysed under Section 4(2)(e), which addresses the use of a dominant position in one relevant market to protect or enter another, and may also engage Sections 4(2)(a), concerning unfair or discriminatory pricing, and 4(2)(c), concerning denial of market access. In CCI v. Schott Glass India (2025), finding no Indian precedent directly addressing margin squeeze, the Supreme Court adopted the three-limb test laid down by the Court of Justice in TeliaSonera as the governing analytical framework.2
Commentary
A margin squeeze has four working elements: (i) a firm dominant in the upstream market that is also active downstream; (ii) an input supplied to downstream rivals that they need to compete; (iii) an insufficient margin, such that the wholesale-to-retail spread does not cover the dominant firm's own downstream costs; and (iv) a resulting capability to foreclose competition. The core of the abuse lies in the spread, not in the level of either price considered in isolation.
The harm lies in vertical foreclosure. An incumbent uses upstream market power to constrain competition downstream, not by refusing access altogether but by setting the input price and downstream price so that efficient rivals are caught between a high input cost and a low retail price. The standard way of testing this harm is the as-efficient competitor (AEC) test. The authority asks whether the dominant firm's downstream arm could compete profitably if it faced the same wholesale price charged to its rivals, with the resulting margin assessed against the firm's product-specific incremental costs, typically measured by LRAIC. A negative or insufficient margin indicates that an equally efficient rival could be foreclosed.3
The central doctrinal question is whether margin squeeze is a standalone abuse or merely the sum of two others. Under the EU's single-bundle approach, adopted in Deutsche Telekom and TeliaSonera, the squeeze is treated as a single form of abuse. The complainant need not establish that the wholesale price is excessive, the retail price predatory, or the input indispensable in the Bronner sense. Instead, the focus is on whether the resulting margin is insufficient to allow an equally efficient competitor to compete effectively.4 The rival two-legged approach, adopted by the United States after Pacific Bell v. linkLine, requires two independent wrongs i.e. breach of an antitrust duty to deal in the upstream and predatory pricing breach in downstream. If the duty to supply breach is absent, there is no actionable margin-squeeze claim.5
Margin squeeze remained under-litigated in India until Schott Glass. There the CCI had penalised Schott India over a long-term tubing supply agreement with its affiliate; the Supreme Court set the finding aside, holding that all three TeliaSonera conditions must be cumulatively proved and that mere supply to a related entity does not establish downstream participation. On the facts, Schott operated only upstream, rival converters retained positive margins, and imports actually rose; therefore, no foreclosure was proven.6 The Court thus embedded an effects-based standard, aligning Indian doctrine with the EU while setting a tough evidentiary threshold. Earlier, in Together We Fight Society v Apple, the CCI had merely described the concept without deciding it.7
The single-bundle approach raises a distinct concern about the limits of margin-squeeze liability. Critics argue that it lacks a clear limiting principle and risks penalising efficient pricing, particularly where wholesale prices are regulated or approved, as in Deutsche Telekom, thereby blurring the boundary between competition law and sectoral regulation.8 The economic difficulty is even more pronounced in two-sided and zero-price digital markets, where a downstream product offered at zero price may leave the conventional cost-based margin without a meaningful referent. These concerns have particular significance in India. The demanding standard articulated in Schott Glass may leave Section 4(2)(e) available in principle but difficult to invoke where vertically integrated firms can produce foreclosure without satisfying the conditions of the test.9
European Commission, Guidance on the Commission’s Enforcement Priorities in Applying Article 82 of the EC Treaty [2009] OJ C45/7, paras 75–82.↩︎
Competition Act 2002, s 4(2)(e); Competition Commission of India v Schott Glass India Pvt Ltd 2025 INSC 668 (SC, 13 May 2025); Case C-52/09 Konkurrensverket v TeliaSonera Sverige AB [2011] ECR I-527, paras 31–34.↩︎
Case C-280/08 P Deutsche Telekom AG v Commission [2010] ECR I-9555, para 167; Case C-295/12 P Telefónica SA v Commission EU:C:2014:2062.↩︎
TeliaSonera (n 2) para 34; Deutsche Telekom (n 3) para 167; Case C-165/19 P Slovak Telekom a.s. v Commission EU:C:2021:239, para 42; cf Case C-7/97 Oscar Bronner GmbH v Mediaprint [1998] ECR I-7791.↩︎
Pacific Bell Telephone Co v linkLine Communications Inc 555 US 438 (2009); Verizon Communications Inc v Law Offices of Curtis V Trinko LLP 540 US 398 (2004).↩︎
Schott Glass (n 2), applying the three cumulative conditions: downstream participation by the dominant firm; a spread insufficient for an equally efficient competitor; and likely competitive harm.↩︎
Together We Fight Society v Apple Inc, Case No 24/2021 (CCI).↩︎
D Geradin and R O’Donoghue, ‘The Concurrent Application of Competition Law and Regulation: The Case of Margin Squeeze Abuses in the Telecommunications Sector’ (2005) 1(2) J Comp L & Econ 355; R Nazzini, ‘The Margin Squeeze as an Abuse of Dominance’ (2010) 31(5) ECLR 205.↩︎
R O’Donoghue and A J Padilla, The Law and Economics of Article 102 TFEU (3rd edn, Hart 2020) ch 13; M Motta and M Peitz, ‘Big Tech and the As Efficient Competitor Test’ (2020) 16(4) J Comp L & Econ 418.↩︎