[Tassawar and Ameya are students at NALSAR University of Law.]
Recently, the Delhi High Court (DHC) in JCB India Limited and Another v. Competition Commission of India and Another (JCB case) precluded the Competition Commission of India (CCI) from proceeding over the alleged misuse of JCB’s dominant position. The DHC held that CCI could not proceed further with the investigation when both parties had ‘settled’ the matter in a private, out-of-court settlement and Bull Machines Private Limited (Bull Machines), the informant had withdrawn its complaint. This direction was taken by the DHC in order to preserve the sanctity of private settlements and also prevent harassment of parties by forcing them to go through multiple proceedings for the same matter.
The DHC firstly curtailed CCI’s jurisdiction to investigate abuse of dominance when a private settlement has been reached between the parties and secondly, dismissed CCI’s prima facie finding of vexatious litigation without looking into its merit. CCI’s prima facie view was based on two factors: (a) the existence of dominant position of JCB in the relevant market; (b) prima facie merit in the averments of false litigation and harassment made by Bull Machines against JCB. This inconsistency between DHC and CCI reflects a lack of uniform framework for how vexatious litigation claims should be decided within India.
In this piece, the authors will present their contestations with the aforementioned holdings of the DHC. First, this post argues that the CCI should be allowed to have jurisdiction over the matter, and a mere private settlement cannot deprive the CCI from investigating concerns raised regarding the market structure at large. Second, the authors propose a new test / framework for deciding vexatious litigation claims in India which would bring uniformity. In connection with this new proposed framework, the authors also provide their views on which statutory authority should exercise jurisdiction over a vexatious litigation case as well.
The Ambit of CCI’s Jurisdiction is Beyond Private Settlement
The DHC dismissed the proceedings and the jurisdiction claim of the CCI stating that due to the private settlement, the merits of the disputes had already been resolved and there was nothing else left to investigate. However, even if the complaint is privately settled, it could still have been a vexatious litigation.
The DHC’s reasoning appears to conflate the merits of the dispute with the underlying conduct, specifically whether JCB’s litigation was pursued as a sham to stifle competition. While a private settlement may resolve individual grievances, it does not negate the CCI’s duty to address broader market concerns.
The CCI proceedings, under Section 19 of the Competition Act 2002 (Act), are in rem, meaning they address issues that affect the entire market and not just individual parties. This distinction is crucial, as unlike civil proceedings, where disputes concern only the litigants, CCI investigations target broader market practices and structure. In CCI v. Bharti Airtel Limited, the Supreme Court emphasized that the CCI’s role is to safeguard systemic market interests, not just resolve individual disputes, especially when addressing market distortions or anti-competitive practices.
Thus, the CCI’s inquiry in the present case would not merely revolve around the content of the parties' settlement but the nature of JCB’s alleged vexatious litigation. The concern is that by filing frivolous or baseless cases, JCB could effectively stifle competition and prevent smaller firms from challenging its market dominance, even if the litigation is eventually withdrawn. This practice of using vexatious litigation as a strategy could encourage a pattern of anti-competitive behaviour across the market. Therefore, even though the vexatious litigation by JCB may have been dismissed as part of the settlement, the market-wide implications of such behaviour, where dominant firms use litigation as a tool to weaken or neutralize competitors, are significant and require regulatory oversight to prevent systemic harm.
Moreover, DHC prioritized the finality of private settlement over CCI’s jurisdiction, disregarding that settlements do not inherently prevent competitive harm from persisting. In fact, private settlements between competitors, especially in cases of abuse of dominant position, could themselves signal anti-competitive agreements or collusion aimed at preserving dominant positions. This is because the decision could encourage tactical complaints, where parties in a dominant position, like JCB, could file cases with CCI to gain leverage in private negotiations, later withdrawing complaints upon reaching favourable private terms. Such practices would undermine the regulatory purpose of CCI, turning it into a mere bargaining chip for private dispute resolution rather than a market watchdog.
Such private settlements are especially dangerous because a private mediation settlement under Section 28 of the Mediation Act 2023 can only be challenged on limited grounds which does not explicitly include coercion. This insulates private settlements from appeal as compared a judgement passed by a statutory authority, which by nature is appealable under applicable law.
This understanding is supported in international competition law practices. For instance, the European Commission (EC) in AstraZeneca AB v. EU Commission ruled that private settlements do not negate a regulator’s duty to ensure the competitive health of the market.
Significantly, the idea of private settlements superseding complaints of abuse of dominance before the CCI also goes against the DHC’s core concern i.e., “upholding the legitimacy and reliability of the mediation process”. This is because use of mediation as a tool of coercion weakens the trust between parties and erodes confidence in mediation as a dispute resolution mechanism. If the trend of using CCI investigations for leverage continues, it could also discourage parties from engaging in mediation in the first place, knowing that such tactics may be used against them.
Furthermore, the counsel for JCB seemed to suggest that the idea of a prima facie finding by the CCI in cases of vexatious litigation is wrong and the CCI could not have inquired into the same. However, it has been well-established in the case of Google Inc. and Others v. CCI that CCI is well within its rights and must mandatorily pass a prima facie finding in all cases before directing investigation under Section 26(1) of the Act.
Admittedly, while the DHC’s stance does suggest that the CCI could still invoke suo moto powers to continue the investigation after Bull Machine’s withdrawal, this suggestion introduces redundancy into the complaint process. Once a prima facie finding has already been established by a legitimate complaint, requiring CCI to restart the process under suo moto cognizance adds procedural delay and disrupts regulatory efficiency.
Establishing a Framework for Vexatious Litigation in India
Lastly, DHC refused to recognize CCI’s prima facie finding of vexatious litigation in the present case because the dispute had been resolved in a mediation settlement. More importantly, DHC also expressed hesitance in accepting CCI’s prima facie finding because of a concern of overreach of jurisdiction by CCI in intellectual property (IP) related cases.
Interestingly, the Ministry of Corporate Affairs recently recognized the opportunity for competition abuse through IP rights and precluded IP rights as a defence under Section 4 of the Act. Since the JCB case also dealt with IP-related matters, this recognition strengthens the case for CCI to inquire into the matter.
Admittedly, the concept of vexatious or sham litigation is still developing in the Indian context, and the CCI and courts have not dealt extensively with such cases, leading to limited jurisprudence on the matter. Therefore, no clear framework exists for determining vexatious/sham litigation.
On the other hand, jurisdictions such as the United States of America (USA) and the European Union (EU), have developed their respective frameworks for determining vexatious litigation in competition law.
For instance, in USA, the Supreme Court laid down a two-pronged test or ‘two cumulative criteria’ in Professional Real Estate Investors v. Columbia Pictures Industries (PREI) to determine whether litigation is vexatious. The test requires: (i) the lawsuit must be objectively baseless, such that no reasonable litigant could realistically expect success on the merits; and (ii) the court must determine whether the baseless lawsuit conceals an attempt to interfere directly with a competitor’s business relationships through the misuse of governmental processes, as opposed to the legitimate outcome of those processes.
The EU follows a more liberal approach, placing a greater emphasis on the intent behind the litigation. The Court of Justice of the European Union in ITT Promedia NV v. Commission of the European Communities (ITT Promedia) laid out two cumulative criteria: (i) that the action could not reasonably be considered as an attempt to establish the rights of the undertaking concerned and can therefore only serve to harass the opposite party and (ii) that it would be conceived in the framework of a plan whose goal is to eliminate competition. The EC uses these cumulative criteria to determine the nature of the proceedings, which later go to the courts for affirmation. Most importantly, the intent behind the litigation needs to be seen and the unmeritorious litigation cannot be conflated with vexatious litigation.
Interestingly, CCI applied the PREI test in Biocon v. Roche to hold that the civil suit by Roche, the dominant firm, was not vexatious and was not used to throttle the competition. Similarly, CCI more recently used the PREI test in In re: Macleods Pharmaceuticals Limited and Boehringer Ingelheim Pharma GmbH & Co. KG D and Another holding the dominant firm not liable of the vexatious litigation. However, the PREI test is not perfect because it sets the objective bar very high, meaning it requires essentially a zero-percent likelihood of success on the merits from an ex-ante perspective, potentially resulting in false negatives.
The test established in ITT Promedia, on the other hand, appears better suited to the Indian legal framework. It adopts a less stringent threshold, using a reasonable standard to identify vexatious litigation, rather than the objectively baseless criterion employed in the USA. Additionally, this test considers the intent behind the litigation. However, it is also interpreted strictly to prevent the wrongful denial of the fundamental right of access to the courts.
Apart from this test, India should consider other factors that affect its competition market such as the market size of the dominant player and any history of similar IP-related lawsuits against smaller competitors, in cases such as the present one. For instance, JCB controls approximately 80% of the market in the backhoe loader segment, which gives it an edge over the smaller players in terms of control of the market and IP rights.
Currently, the Indian framework considers the prima facie findings of CCI as merely an administrative function which is not subject to appeal. However, if India adopts a framework similar to ITT Promedia, it may also resolve the question of who has the authority to decide whether a case is one of vexatious litigation. This is because in the ITT Promedia test, the EC first makes a finding on whether a claim is vexatious, which can be challenged before the courts. In the Indian framework, CCI usually makes a prima facie finding of vexatious litigation, on the basis of which it orders investigation under Section 26 of the Act. This prima facie finding is separate from the finding of the court on whether the litigation is vexatious, which is what often results in controversies as to who has the authority to decide whether the claim is vexatious. However, if the ITT Promedia approach is followed and the prima facie finding is itself subjected to appeal to the court, it will provide the CCI and the courts a mutual jurisdiction for determining the nature of the proceedings. Therefore, it is prudent to apply the EU framework because it balances the parties’ right to access courts, protects genuine IP, and creates a level playing structure for the smaller players.
Conclusion
In conclusion, the authors contend that while upholding the integrity of mediation proceedings is crucial, however, the DHC should not have adopted an overly one-sided approach. By curtailing the CCI’s jurisdiction, the DHC undermines the CCI’s role in addressing market-wide anti-competitive practices. It is imperative to strike a balance between preserving the sanctity of mediation and ensuring the effective functioning of competition law in India.
To prevent such outcomes, India must adopt a balanced framework, akin to the EU’s ITT Promedia test, which accounts for intent. Besides intent, it should also take into account the market dynamics and systemic harm. This would not only provide clarity on the interplay between private settlements and regulatory oversight but also reinforce the CCI’s mandate to protect the competitive fabric of Indian markets. A balanced framework which could help in classifying cases of genuine IP rights infringements as opposed to those of vexatious litigations is much required due to the meteoric rise of IP sector in India.
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