[Harshita Verma and Nardeep Chawla are fourth-year and fifth-year students, respectively, at Maharashtra National Law University, Mumbai]
Introduction
The permissibility of private settlements in antitrust cases presents a complex intersection of competition law objectives and consumer welfare. The Competition Act, 2002 (the Act) governs the competition law in India and aims to prevent practices that may have an adverse effect on market competition in India. While private settlements can expedite dispute resolution and reduce litigation costs, their impact on public interest and market integrity remains a point of concern. This article argues that the Competition Commission of India (CCI) needs to have regulatory powers when it comes to private settlement and draws comparisons between international competition authorities and their practices.
This article is divided into three parts: The first part delves into the evolving jurisprudence around private settlements under the Act, emphasising the aspects that can be settled privately between the parties. It also explores international perspectives on private mediation in antitrust disputes. There is a further discussion regarding violations that should not be permitted to be settled privately due to their significant potential to harm consumer interests, such as exploitative abuse of dominance and cartelisation. By analysing these aspects, the article seeks to provide a nuanced understanding of private settlements’ role and limitations within the competition law framework in India and abroad.
Can Antitrust cases be allowed to be settled privately?
The issue of settlements in competition law, particularly under the Act, has been the subject of various judicial interpretations. Indian Courts have examined the feasibility of settlements or compromises between the parties and under what conditions such agreements are permissible within the regulatory framework of the CCI in the following cases:
The Tamil Nadu Film Exhibitors Case: Conditions for Mediation
In the Tamil Nadu Film Exhibitors vs Competition Commission of India, 2015 (Tamil Nadu Exhibitors Case), the court delved into the permissibility of private settlements under the Act. The court asserted that the CCI’s role in such instances is to determine whether the compromise serves as a cover to evade an investigation into anti-competitive practices such as the abuse of the dominant position.
The court ultimately concluded that the Act allows settlements and compromises between parties, but these must be scrutinised by the CCI to ensure they do not compromise public interest or defeat the broader objectives of competition law. First, the settlement must not result in the continuation of anti-competitive practices. Second, it should not allow the abuse of a dominant market position to persist. Third, the settlement must not harm consumer interests or restrict the freedom of trade. This three-pronged test to determine whether mediation should be allowed to result in a private settlement is necessary to avoid harm to the consumers and thereby uphold the basic tenets of the Act however a similar approach could not be applied to private settlement mechanisms in other jurisdictions such as United States of America (USA) and European competition regulator because the private settlement in these jurisdictions do not require the regulator’s approval.
JCB v. CCI: Revisiting the CCI’s Role
In JCB India Limited vs CCI (JCB Case), the Hon’ble Delhi High Court acknowledged that parties have the ability to resolve disputes through settlement agreements. In this case, the informant had alleged the violation of Section 4(2) of the Act by JCB on the allegation of initiating sham patent litigation against the Informant, who was also a player in the same relevant market. After multiple civil suits and subsequent appeals, the Apex Court ordered mediation between the parties, which resulted in an agreement. However, the investigation by CCI was not quashed, and the parties approached the Delhi High Court, which resulted in a half-baked precedent since the court allowed the parties to privately settle without giving CCI power to examine the settlement to check for anti competitive elements, which was a safeguarding power given by Madras High Court in Tamil Nadu Exhibitors Case earlier in 2015, this clearly creates a gap in the regulatory framework by not allowing CCI to review the settlement in JCB Case, leaving room for anti-competitive behavior to potentially go unchecked.
The Indian jurisprudence so far has allowed private settlement in rare cases and with little safeguards. In contrast, international frameworks permit settlements among the private parties explicitly and with better safeguards, unlike the Indian jurisprudence.
Private Settlement in the European Union and the United States
In the European regime, mediation in competition law disputes, as analysed in the OECD-2010 report, applies primarily to follow-on or collective claims for damages. It is useful for companies aiming to restore normalcy and profitability. In general, there is no binding aspect, if no agreement is reached, the process simply concludes without a resolution.
The parties have privately mediated in a few cases, like the UK mediation between the British Marine Federation and British Waterways, which resolved market concerns in the marina and mooring sectors along the inland waterways. In these mediations, the focus is only limited to ensuring that the agreement does not allow illegal or anti-competitive conduct rather than upholding the entirety of competition law.
In the USA, the antitrust laws can be either publicly or privately enforced. While the Antitrust Division of the Department of Justice (DOJ) and the Federal Trade Commission (FTC) enforce these laws on behalf of the public, private parties can also sue for damages under Section 4 of the Clayton Act. Private Antitrust Litigation is preferable as it allows firms harmed by anticompetitive practices to seek treble damages.
Private Antitrust litigation is sometimes used to secure profitable settlements from competitors, as we can see in AOL’s Antitrust lawsuit against Microsoft. In 2002, shortly after Microsoft settled with the DOJ over antitrust violations stemming from a 1997 government lawsuit, AOL filed its case through its subsidiary, Netscape. The lawsuit concluded with a $750 million settlement in AOL’s favour, along with a seven-year royalty-free license to use Microsoft’s browser technology. Although AOL claimed the lawsuit addressed reduced competition in the browser market, the settlement effectively eliminated any remaining competition.
In other cases, Private Antitrust litigation may be used to stifle legitimate competition from rival firms, further complicating the competitive landscape. Although antitrust laws are intended to promote fair competition, they can sometimes be misused to gain competitive advantage rather than to amend anti-competitive behaviour.
What should not be allowed to settle privately?
After discussing what kind of violations of the antitrust law can be mediated or privately settled, it is imperative to understand the counter arguments as well. The first argument that was raised by the commission in the JCB Case was that the proceedings before the commission are in rem, as well as the impact of the decisions. This argument can be backed by the judgment of the Hon’ble Supreme Court in Samir Agrawal vs CCI, where the court held that proceedings under the Act are in the public interest as the commission deals with practices that have an adverse effect on competition in derogation of the interest of consumers. The important takeaway from this line of argumentation is that the commission’s only prerogative is not to protect the competitors but rather protect the consumers as well; this is also one of the objectives mentioned in the preamble of the Act. Therefore, the following types of antitrust violations should not be allowed to settle privately:
Exploitative Abuse of Dominance violations
Exploitative Abuse of dominance violations is most likely to result in consumer harm as the dominant firm chooses to exploit its position unilaterally because the conduct of the dominant firm is independent of its competitors and consumers. What segregates ‘Exploitative’ abuse of dominance from the ‘Exclusionary’ one, in the JCB Case, the abuse of dominance stemmed from a sham litigation strategy. While this conduct did not cause immediate harm to consumers, it led to the exclusion of competitors from the market. This exclusion can ultimately harm consumers in the long run, though the direct impact is not immediate. Hence, cases involving allegations of excessive pricing, self-preferencing, tying, etc., are the best examples that should not be allowed to be settled between the informant and the opposite parties.
B. Cartelisation
Cartelisation in most jurisdictions is considered to be a ‘criminal’ violation in nature.” Hence, they are not treated with leniency unless the cartel members apply for a lesser penalty, which is codified in Section 46 of the Act, and cooperate with the commission by giving true and vital disclosures. However, the fact that the ‘settlement’ mechanism under Section 48A of the Act, which allows an accused to negotiate the penalty with the commission, is not available to cartel-accused firms/persons, shows that mediation is not only undesirable but also prohibited even if done with the regulator.
Conclusion
The JCB case has set a precedent for mediation in antitrust litigation when it comes to the exclusionary conduct of the dominant entity and if the concept of difference between exclusionary conduct and exploitative practises is not carefully applied and delineated by subsequent judgments, mediation in the antitrust landscape could challenge the authority of CCI as well as fair market dynamics in the country. Another alternative is to follow the Madras High Court judgment, which gave CCI the power to approve the settlement after a thorough examination of the agreement and the situation.
