Fairness enterprises. The term ‘Dominant Position’ or ‘dominance’

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Fairness and the level
playing field for all the participants in the market is essential for its
sustainability and development. When there’s a perfect competition in the
market, the consumer is sovereign and his welfare is maximized, however in
reality the markets are imperfect and the Invisible Hand in the Adam Smith
theory not always favours the consumer’s interest. Consequently, we require an
external regime to maintain contestability and fairness in the market. Thus,
all modern competition law contains specific prohibition against anti competitive
and monopolistic behaviour.

The Sherman Act, 1890 to
which the origin of competition law can be traced, contains specific
prohibition against monopolisation. Also, Art 82 of the EU treaty prohibits
abuse of dominance.

One of the most important objectives
of competition Act 2002 is to detect and prevent abusive conducts by the
dominant enterprises.

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The term ‘Dominant Position’
or ‘dominance’ has been defined U/S 4(2)(a) of the Competition Act which states
” Position of strength which is enjoyed by an enterprise in the relevant market
which enables it to operate independently of the competitive forces prevailing
in the market and affect its competitions, consumers or relevant market in its
favour.” However, in simple words it means, it’s the ability of enterprise to
behave or act independently of the market forces that determines its dominant
position.  Nonetheless, Dominance is not
illegal per se as such enterprises are entitled to receive the same benefits as
other enterprises in the market.

According to many cases
decided by courts across various jurisdictions, it is clearly established that
the undertaking enjoying a dominant position has a special responsibility of
not allowing its conduct to impair genuine distorted competition in the
relevant market.

Actions that are considered
abusive are- Unfair or Undiscriminatory Price ( S – 4(2)(a)), Restricting
production of goods and services ( S – 4(2)(b)), Denying Market Access (S –
4(2)(c) , Using dominant position to enter the market ( S- 4(2)(c)) etc.

One such important case
dealing with the issue of Abuse of Dominance is the case of Telefonaktiebolaget
LM Ericsson (PUBL) Vs. Respondent: Competition Commission of India and Ors. The dispute in
the present case pertains to Ericssons’ SEP’s for which Ericsson had tried to
negotiate a Patent Licensing Agreement (PLA) with Micromax and Intex on FRAND
terms but its efforts were unsuccessful. Subsequently, Ericsson
initiated infringement proceedings alleging that the products
manufactured and dealt with by Micromax and Intex violate its patents and that
Ericsson was entitled to royalties in respect of the SEPs held by it.

The Single Judge of DHC passed
an ad-interim order
against Micromax and Intex, upon which both Micromax and Intex filed complaints
before the CCI alleging abuse of dominant position (Section 4, Competition Act,
2002) by Ericsson on account of it demanding an unfair royalty from Micromax
and Intex.  CCI observed that, based on
the strength and large number of its patents, Ericsson had a dominant position
in the market for devices that implement the GSM or CDMA standards.
However, the CCI  noted that the
practices as adopted by Ericssons was contrary to FRAND terms and discriminated
directed the DG to investigate any violation of the provisions of the
Competition Act Being Aggrieved by the order of CCI, Ericssons filed a writ in
Delhi HC.

The HC while entertaining
the question of whether there is any abuse of dominance, concluded that it is
solely within the scope of the Competition Act and not  Patents Act and a civil court cannot decide whether
an enterprise has abused its dominant position and passed orders as envisaged
under Section 27 of the Competition Act. However, few other cases like the
decision of the Supreme Court in General Manager Telecom v. M. Krishnan &
Anr1 and Chairman, Thiruvalluvar
Transport Corporation v. Consumer Protection Council2   were
also referred in this regard by the petitioner whereby it was referred, in
support of his contention that the Patents Act was a specific law and a
complainant could not resort to provisions of the Competition Act for any
alleged abuse of dominant position by a patentee.

The Court asserted, “In the
given facts and circumstances, it is difficult to form an opinion that the
conduct of Ericsson indicates any abuse of dominance considering the fact that
it does appear that Ericsson had made efforts to arrive at a negotiated
settlement with Micromax and Intex, who on the other hand, appear to have been
manufacturing/dealing with products using the patented technologies without
either obtaining a licence from Ericsson or approaching the Controller of
Patents for a compulsory licence. However, it is not open for this court, in
proceedings under Article 226 of the Constitution of
India, to supplant its views over that of the concerned authority; in this case
the CCI.” 

Nevertheless, as decided by
CCI in an independent case3, while determining alleged
abuse of dominance by Government of Goa stated that “dominance per se is
not bad, but its abuse is bad in Competition Law in India”.


1 MANU/SC/1597/2009
: JT (2009) 11 SC 690

2  MANU/SC/0263/1995 : (1995) 2 SCC 479

3 Jupiter Gaming Solutions Pvt. Ltd. v.
Government of Goa & Ors 

Categories: Government


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