Factors determining product interchangeability, with emphasis on radial and non radial tyres:
Competition Act and product
inter-changeability
Product
Inter-changeability is the substitutable capacity of a product, i.e. how far
can a product be an alternative to another, thereby replacing it. Relevant
factors that determine product inter-changeability are the price of products,
type of demand satisfied, characteristics of the product, the intended use of
the product and the like.
The
Competition Act, under section 19(7) provides factors to determine relevant
product market. A relevant product market is a market wherein the products are
substitutes to one another, from the consumer’s perception.
Section
2(t) of the Act defines relevant product market as[1]:-
“relevant product market” means a
market comprising all those products or services which are regarded as
interchangeable or substitutable by the consumer, by reason of characteristics
of the products or services, their prices and intended use”
There
is no line of difference between inter-changeable and substitute products.
Factors to determine product
inter-changeability:
1. Consumers
Perception towards product
2.
Characteristics of product
3.
Intended use and End use
PARA16.9,19.20:, as followed in: MCX Stock Exchange Ltd. Vs.National
Stock Exchange of India Ltd., DotEx International Ltd. and Omnesys Technologies
Pvt. Ltd. [2]
4.
Number of existing substitutes
5.
Price elasticity: how
the demand of the product is affected by the change in price
6.
Market constraints, high gestation period, low profits, expensive long
and short term costs
7.
Unique properties of product if any
8.
Belonging to same relevant market
9.
Demand and supply analysis
PARA5.5,5.6,9.1.1,9.1.6,9.1.7,16.9,16.12,
19.2.7, as followed in Kapoor Glass Private Limited V Schott Glass India Private Limited[3]
10.
Findings as per
the Small but Significant Non-transitory Increase in
Price (SSNIP) test
What are radial and non-radial
tyres:
Radial
tyres: in these types of tyres, a symmetrical radial design is used on the base
of the tyres. It is a design, whereby there is reduced rolling resistance,
higher fuel efficiency, reduced tire wear, improved control and better
traction.
Non-
Radial Tyres: such tyres use a standard cross design or bias ply design. It is
very inexpensive and durable.
Characteristic differences between
radial and non-radial tyres[4]:
|
S.No
|
Radial
Tyres
|
Other
Types
|
|
|
Modern materials and man made
fibres such as polyester and glass fibre embedded in the rubber are much
stronger than the cotton fibres originally used.
Radial tyres give the
impression that they have low inflation even though the air pressure is as
recommended by the manufacturer. This is primarily because of the soft
sidewalls. The physical difference between the radial and cross-ply tyres and
in their behaviour on the road is governed by the difference in their
individual carcass construction.
Radial tyres normally give
twice as much mileage as cross-ply tyres and the difference in cost is not
more than 30 per cent sometimes even less and gives a marginally harder ride
but are safer at high speed.
|
Ordinary tyres or cross-ply
tyres are the oldest type of tyre and has a case made of two or more layers
of fabric. A tyre's strength and load carrying ability were at one time indicated
by its number of plies.
|
|
|
Radials make the steering a
little harder than cross-ply tyres, but provide better braking performance.
|
The carcass of cross-ply tyres
consists of textile cord ply fabric, but in a radial tyres it consists of
steel belted cord laid substantially 90{+o} to the centre line of the tread
|
|
|
The radial ply has a stiffness
and resistance in its tread area, so that in motion the tread in the contact
patch retains virtually all of its pattern and grip.
|
Carcass is the rubber-bonded
cord structure of a tyre integral with the bead and contains the inflation
pressure.
|
Applying the factors followed in
the above mentioned cases, to determine whether radial tyres are
interchangeable by non-radial and vice versa, the following can be concluded:
1.
Consumers Perception towards product : consumers who have technical
knowledge of automobile parts, can differentiate between the products
2.
Characteristics of product: there technical characteristics of radial and
non-radial tyres are different and distinguishable
3.
Intended use and End use: the intended and end use are the same
4.
Number of existing substitutes: moderate
5.
Price elasticity: how
the demand of the product is affected by the change in price: demand and sale
of goods not affected by the price, thus price elasticity is low and the good
is relatively inelastic
6.
Market constraints, high gestation period, low profits, expensive long
and short term costs: are high
7.
Unique properties of product if any: the patterns of radial tyres are unique
8.
Belonging to same relevant market: Yes
In
the case of All India Tyre Dealers Foundation v Tyre Manufacturers[1] the
Competition Commission held that radial and non-radial tyres are substitutes to
one another thus interchangeable and fall within the category of homogeneous
products.
PARA 209, 279, 281, 284, 372, 419,
402, 438, 474.
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