In its brief 11-year existence, the Competition Commission of India (“CCI”) has investigated anti-competitive conduct across several diverse sectors of the Indian economy. The CCI is the sole quasi-judicial and regulatory body established under the Competition Act, 2002 (as amended) (“Competition Act”). While the Competition Act is sector agnostic and CCI enforces the provisions of the Competition Act across all sectors of industries, several sectors are in fact, also regulated by specific statutory bodies. For instance, the Central Electricity Regulatory Commission (“CERC”), which was established under the Electricity Act, 2002 (“Electricity Act”) regulates the ‘electric power industry’; the Telecom Regulatory Authority of India (“TRAI”), which was established under the Telecom Regulatory Authority of India Act, 1997 regulates the ‘telecommunications sector’; further, the proposed Personal Data Protection Bill which will govern personal data of individuals, also contemplates a data protection authority. On several occasions, the overlap in the scope and functioning of CCI and the various statutory regulators has been raised before various High Courts and the Supreme Court of India (“Supreme Court”).
In addition to sectoral regulators, this issue has also come up in relation to the Controller of Patents (“Controller of Patents”) – a domain regulator under the Patents Act, 1970 (“Patents Act”), most recently in the case of Monsanto Holdings Pvt. Ltd. & Ors. v. Competition Commission of India & Ors.[1] In a writ petition filed before the Delhi High Court (“Delhi HC”), Monsanto Holdings Pvt. Ltd. (“MHPL”) along with its group companies (collectively referred to as “Monsanto”) appealed the common order issued by CCI under Section 26(1) of the Competition Act,[2] directing the Director General (“DG”) – the investigative arm of the CCI, to investigate contraventions of Sections 3[3] and 4[4] of the Competition Act.
Monsanto is a Fortune 500 company engaged in the development and commercialisation of technology for producing genetically modified seeds. One such product is the Bt. Cotton Technology (Bollgard – I or BT-I), which allows for genetic modification of hybrid seeds to make them more resistant to bollworms, a major pest in cotton farming. Subsequently, Monsanto developed the second-generation cotton technology (Bollgard- II or BT-II), to tackle the Pink Bollworms which had become resistant to BT-I. BT-II technology is patented under the Patents Act. Monsanto has licensed BT-II to Mahyco Monsanto Biotech (India) Pvt. Ltd. (“MMBL”), which is a company incorporated in India as a joint venture between MHPL (a 100% subsidiary of Monsanto Company, which also owns a 26% stake in Maharashtra Hybrid Seeds Co. Pvt. Ltd. (“Mahyco”)) and Mahyco. MMBL sub-licenses BT-II technology to various seed manufacturers in India. For sub-licensing BT-II technology to Indian seed manufacturers, MMBL charges consideration in two parts – (i) a non-refundable fee paid upfront, and (ii) a recurring fee (known as the trait fee), which is determined based on the maximum retail price (“MRP”) fixed for the BT-II seeds sold to farmers/buyers by the Indian seed manufacturers.
The competition law issue before the CCI concerns the “trait fee” charged by MMBL and the terms and conditions imposed by it on any company seeking to use its patented technology for manufacturing Bt. Cotton Seeds. It is alleged that MMBL has a 99% share in the market for cotton seeds and therefore, along with its other group companies has been abusing this dominant position and violating Section 4(2) of the Competition Act by charging excessive and unfair prices for its BT technology. Further, MBBL has been imposing the following conditions in the sub-license agreements which allegedly violate Section 4(2)(a)(i) as well as Section 3(4) of the Competition Act:
- requiring the sub-licensees to notify MMBL in case their affiliates enter into negotiations or intend to deal with any competitor of MMBL within thirty days of commencement of such negotiations and failure to give such prior notice entitles MMBL to terminate the sub-license agreement; and
- MBBL also requires its sub-licensees to destroy all parent lines or cotton germplasm, which has been modified to contain Monsanto technology after the sub-license is terminated.
In addition to the above, MMBL also follows a policy of selective licensing and refuses to license BT technology to certain seed manufacturers without any objective criteria for doing so.
Based on the information submitted, the CCI came to the prima facie view that MMBL held a dominant position in the relevant market of “provision of Bt. Cotton Technology in India” as well as the downstream market of “manufacture and sale of Bt. Cotton seeds in India”. The stringent conditions imposed in the sub-licence agreement(s) discouraged the seed companies from dealing with competitors and also amounted to restricting development of alternate technologies. Further, the CCI also found the conditions imposed in the sub-licence agreements to be harsh and not reasonable for protecting the rights conferred under the Patents Act. Accordingly, the CCI passed the impugned order under section 26(1) of the Competition Act directing the DG to investigate into the matter (“CCI’s Order”).
Monsanto challenged the CCI’s Order on the ground that CCI did not have any jurisdiction to examine the issues raised before it as they relate to the exercise of rights granted under the Patents Act, which in turn governs and regulates all practices and contracts that relate to or arise out of exercise of patent rights. It was argued by Monsanto that any remedy against the alleged practices of abuse by a patentee would fall exclusively within the scope of the Patents Act and therefore, by implication CCI would not have any jurisdiction to entertain such disputes. Monsanto argued that for CCI to decide the case, it would be required to return findings that the royalty fee/trait value charged is unreasonable and excessive and the terms of the sub-license agreement are unreasonable. It was submitted that such issues are required to be determined by authorities appointed under the Patents Act, namely, the Controller of Patents and without effective findings returned by the Controller of Patents, the CCI would have no jurisdiction to proceed in the matter.
In the past, this issue of conflict between the jurisdiction of the Controller of Patents and the CCI was addressed by the Delhi HC in Telefonaktiebolaget L.M. Ericsson v. Competition Commission of India & Another[5] (“Ericsson Case”). The dispute related to Standard Essential Patents (“SEPs”) held by Ericsson in respect of 2G, 3G and 4G network technology. Ericsson had tried to negotiate a Patent Licensing Agreement (“PLA”) with Micromax and Intex on Fair, Reasonable and Non-Discriminatory (“FRAND”) terms, but the negotiations were unsuccessful. Subsequently, Ericsson initiated proceedings for infringement of its SEPs, alleging that products manufactured and dealt with by Micromax and Intex violated its patent rights. In response to the infringement suit, Micromax and Intex filed an information before CCI alleging abuse of dominant position by Ericsson in demanding unfair royalty for use of its SEPs. CCI was of the prima facie opinion that the practices adopted by Ericsson were discriminatory and contrary to FRAND terms and therefore directed the DG to investigate further. Aggrieved by this, Ericsson filed a writ petition before Delhi HC, challenging CCI’s order directing the DG to investigate. It was contended by Ericsson that Patents Act being a special act, anti-competitive practices by a patentee in relation to patents would be outside the scope of the Competition Act. After an elaborate discussion on the various provisions of both the enactments, the Delhi HC concluded that the focus of the Patents Act and the Competition Act are different and there was no irreconcilable repugnancy between the two enactments and, therefore, the jurisdiction of the CCI to entertain complaints regarding abuse of dominance in respect of patent rights could not be excluded.
Monsanto challenged the applicability of the precedent in the Ericsson Case to its case, on the basis of the decision of the Supreme Court in Competition Commission of India v. Bharti Airtel Ltd. And Ors.(“Bharti Airtel”).[6] In this case, the Supreme Court examined the issue of overlap between CCI and TRAI. The genesis of the dispute before the CCI was an information files by Reliance Jio (“Jio”) alleging cartelisation between Vodafone India Limited (“Vodafone”), Bharti Airtel Limited (“Airtel”), Idea Cellular Limited (“Idea”), Telenor (India) Communications Private Limited (“TICPL”), Videocon Telecommunications Private Limited (“VTPL”) – for denying Points of Interconnection (“POI”) and mobile number portability to Jio. The CCI found that a prima facie case was made out and ordered an investigation. On the question of complementary jurisdiction between the TRAI and the CCI, the CCI held that the two forums were independent and ought to exercise jurisdiction in tandem with the objects of their respective parent legislation. The said order was challenged before the Bombay High Court (“Bombay HC”), which held that the said matter related most closely to the provisions concerning the TRAI and, therefore, the CCI ought to be bound by the finding of the TRAI. The Bombay HC also distinguished this case from the Ericsson Case and observed that the role of TRAI was different in comparison to the role of a Controller of Patents and, therefore, the decision in Ericsson Case was not relevant in deciding Bharti Airtel.
Aggrieved by this decision of the Bombay HC, the CCI approached the Supreme Court to settle the inter-play between the TRAI and the CCI once and for all. A division bench of the Supreme Court held that CCI could examine the question of abuse of dominance or unfair trade practice only once a finding had been returned by TRAI on the conduct brought to its attention. Since the dispute concerned the interpretation of interconnection agreements, it was squarely upon the sectoral regulator to decide this issue. Accordingly, the Supreme Court did not accept the contention that the jurisdiction of the CCI was ousted by virtue of the telecom industry being regulated by a statutory body (TRAI) as both bodies, i.e., TRAI and CCI enjoyed different mandates. Moreover, if at all in case of an overlap, the CCI’s jurisdiction would be subject to the findings given by TRAI in relation to the subject matter wherein TRAI has the domain expertise. However, this does not mean that the CCI can never exercise jurisdiction, concurrently with a statutory regulator.
In the Monsanto case, the Delhi HC upon a combined reading of the judgments in Bharti Airtel and Ericsson Case rejected Monsanto’s interpretation of Bharti Airtel and confirmed the applicability of its decision in Ericsson Case. Monsanto had also contended that Section 3(5) of the Competition Act provided a blanket exclusion which protected the rights of a patent holders to restrain any infringement of their patent under the Patents Act. In responding to this contention, Delhi HC relied upon its finding in Ericsson Case wherein it was held that while an agreement, which imposes reasonable condition for protecting patent rights is permissible, any anti-competitive agreement which imposes unreasonable conditions would not enjoy the safe harbour of Section 3(5) of the Competition Act.
Accordingly, the Delhi HC dismissed the writ petitions in the Monsanto case and also noted that the orders issued to the DG by CCI under Section 26(1) of the Competition Act were administrative orders which could only be challenged if they were so unreasonable that no sensible person who had applied his mind to the question to be decided could have arrived at it. A review of the merits was not permissible at this stage. Currently, the order of the learned single judge of the Delhi HC stands challenged by way of a letters patent appeal[7] before a division bench of the same court on the grounds that the judgement relied upon by the learned single judge, namely Ericsson is also under challenge before the Delhi HC.[8]
Interestingly, in the case of Shri Anand Prakash Agarwal v. Dakshin Haryana Bijli Vitran, [9] regarding fixation of the fuel cost surcharge adjustment (“FSA”) component, CCI had chosen to dismiss the information and direct the informant to file the matter before the relevant state and/or central electricity regulator under the Electricity Act. CCI noted that FSA charges are computed and levied by the electricity distribution companies as per the regulations issued by the concerned State Electricity Regulatory Commission (“SERC”)and therefore, the issues highlighted in the information essentially related to the functions discharged by the electricity distribution company and the SERC in respect of fixation of FSA. As such, the CCI itself decided that any tariff-related issue would be determined by the relevant authority under the Electricity Act.
In light of the above discussion it appears that the question of jurisdiction between the CCI and other statutory regulators is evolving on a case to case basis over time. Moreover, the scope of CCI’s powers is also being determined in relation to the extent of authority of the sectoral regulators. Given that the objective of all the regulators is to ensure fairness in dealing in their respective domains and consumer benefit at large, it is in everyone’s best interest that the regulators function harmoniously in a consultative manner.
[The authors are Partner and Joint Partner, respectively, in the Competition and Antitrust practice in New Delhi, Lakshmikumaran & Sridharan]
[1] W.P. (C) 1776/2016.
[2] Two separate informations were filed before the CCI, (i) by the Department of Agriculture, Cooperation and Farmers Welfare, Ministry of Agriculture and Farmers Welfare, Government of India; and (ii) by Nuziveedu Seeds Ltd., Prabhat Agri Biotech Ltd. and Pravardhan Seeds Pvt. Ltd.
[3] Section 3 of the Competition Act relates to anti-competitive agreements.
[4] Section 4 of the Competition Act relates to abuse of dominant position.
[5] W.P.(C) 464/2014 – Delhi HC.
[6] Civil Appeal No. 11843/2018 – Supreme Court .
[7] LPA No. 150/2020.
[8] LPA No. 246/2016.
[9] CCI Case No. 01 of 2016.
