COMPETITION LAW PROJECT

[CONSUMER PROTECTION VIS-À-VIS

ABUSE OF DOMINANT POSITION]
AN ANALYSIS

Submitted to: Submitted by

Prof. Priyanka Anand Kartikey Gupta [2012/BBA.LL.B/025]
Assistant Prof. of Law Saurabh Sotwal[2012/BBA.LL.B/045]
National Law University Odisha Akansha Dixit[2012/BBA.LL.B/006]
 TABLE OF CONTENTS
INTRODUCTION....................................................................................................................................... 2

CHAPTER 1: ABUSE OF DOMINANT POSITION ........................................................................................... 4

CHAPTER 2: CONSUMER PROTECTION ACT, 1986 .................................................................................... 9

CHAPTER 3: RIGHTS OF A CONSUMER ..................................................................................................... 10

CHAPTER 4: CONSUMER PROTECTION AND ABUSE OF DOMINANT POSITION ...................................... 12

CHAPTER 5: THE STANCE OF JUDICIARY ................................................................................................ 14

CHAPTER 6: THE CASE OF STANDARD ESSENTIAL PATENTS ................................................................. 17

CONCLUSION ......................................................................................................................................... 21

BIBLIOGRAPHY ..................................................................................................................................... 22

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 INTRODUCTION

In the good olden days the principle of ‘Caveat emptor’ governed the relationship between seller
and the buyer. In the era of open markets buyer and seller came face to face, seller exhibited his
goods, and buyer thoroughly examined them and then purchased them. It was assumed that he
would use all care and skill while entering into transaction.1 The maxim relieved the seller of the
obligation to make disclosure about the quality of the product. In addition, the personal relation
between the buyer and the seller was one of the major factors in their relations. But with the growth
of trade and its globalization the rule no more holds true. It is now impossible for the buyer to
examine the goods beforehand and most of the transactions are concluded by correspondence. 2
Further on account of complex structure of the modern goods, it is only the producer/seller who
can assure the quality of goods. With manufacturing activity becoming more organised, the
producers / sellers are becoming even stronger and organised whereas the buyers are still weak
and unorganised. In the age of revolutionised information technology and with the emergence of
e-commerce related innovations the consumers are further deprived to a great extent. As a result
buyer is being misled, duped and deceived day in and day out.3

Consumer awareness is low due to the apathy and lack of education among the masses. No one
has told them about their rights – to be informed about product quality, price, protection against
unsafe products, access to variety of goods at competitive prices, consumer education etc. What
consumerism lacks here is education and information resources, testing facilities, competent
leadership, price control mechanism, and adequate quasi-judicial machinery. The providers of
goods and services have been reluctant to give due consideration to consumer interest protection.

1
Marco Pistis, From Caveat Emptor to Caveat Venditor - a Brief History of English Sale of Goods Law, (4th June
2006) available at:
http://www.mondaq.com/x/40206/Arbitration+Dispute+Resolution/From+Caveat+Emptor+to+Caveat+Venditor+a+
Brief+History+of+English+Sale+of+Goods+Law
2
Gerrit De Geest, The Death of Caveat Emptor, Washington University School of Law Seminar Paper, available at:
http://www.law.uchicago.edu/files/files/degeest_paper_0.pdf
3
S.Singh and Sapna Chadha, Consumer Protection in India Some Reflection, Accessed April 2, 2015, available at:
httpwww.consumereducation.inmonograms1_consumer_orotection_ in_India.pdf. Indian Institute of public
Administration, New Delhi, Pg. 4-5.

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In present situation, consumer protection, though as old as consumer exploitation, has assumed
greater importance and relevance.4

Promotion of consumer welfare is the common goal of consumer protection and competition
policy. At the root of both consumer protection and competition policy is the recognition of an
unequal relationship between consumers and producers. Protection of consumers is accomplished
by setting minimum quality specifications and safety standards for both goods and services and
establishing mechanisms to redress their grievances.5 The objective of competition is met by
ensuring that there are sufficient numbers of producers so that no producer can attain a position of
dominance. If the nature of the industry is such that dominance in terms of market share cannot be
avoided, it seeks to ensure that there is no abuse on account of this dominance. Competition policy
also seeks to forestall other forms of market failure, such as formation of cartels, leading to
collusive pricing, division of markets and joint decisions to reduce supply.6

This piece of research focuses on this critical interface between the consumer protection and the
law of competition in specific relation to abuse of dominant position. The authors first analyze the
concept of Abuse of Dominant Position under sec. 4 of the Competition Act, then move forward
to explain an overview of Consumer Protection Act, 1986. The authors then state the rights o
consumer and then go on to explain the interface between the abuse of dominant position and the
consumer protection, finally concluding the chapter.

4
Trideep Bhandari, Caveat Emptor or Caveat Venditor: Where are We Heading?, available at:
http://www.legalserviceindia.com/articles/caveat1.htm
5
ASEAN Competition Policy and Law, Competition Law and Consumer Protection Law, available at:
http://www.aseancompetition.org/resources/stakeholder-information/competition-law-and-consumer-protection-law
6
Consumer Protection and Competition Policy, Planning Commission of India, available at:
http://planningcommission.nic.in/plans/planrel/fiveyr/11th/11_v1/11v1_ch11.pdf

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 CHAPTER 1: ABUSE OF DOMINANT POSITION

Section 4 of the Competition Act is the operative provision of the Act dealing with the abuse of
dominant position. This provision is broadly fashioned on the European Union prohibition on
abuse of dominance contained in Article 102 of the Treaty on the Functioning of the European
Union (TEFU).7

Section 4 prohibits any enterprise from abusing its dominant position. The term ‘dominant
position’ has been defined in the Act as ‘a position of strength, enjoyed by an enterprise, in the
relevant market, in India, which enables it to operate independently of competitive forces
prevailing in the relevant market; or affect its competitors or consumers or the relevant market in
its favour’. The definition of the dominant position provided in the Competition Act is similar to
the one provided by the European Commission in United Brand v. Commission of the European
Communities case8. In the United Brands case the Court observed that:

‘….a position of strength enjoyed by an undertaking which enables it to prevent effective

competition being maintained on the relevant market by affording it the power to behave to an
appreciable extent independently of its competitor, customers and ultimately of its consumers.’9

Abuse of dominant position is always considered with respect to the relevant market which is of
two types, namely, the relevant geographic market and relevant product market. On the basis of
these two criteria, a relevant market is signified.

The Act defines the relevant market as ‘with the reference to the relevant product market or the
relevant geographic market or with reference to both the markets’. The relevant geographic market
is defined as ‘a market comprising the area in which the conditions of competition for supply of

7
Kocchar and Co., Introduction of the Competition (Amendment) Bill, 2012 In India: Salient Features and the
Implications Thereof, available at: http://www.kochhar.com/pdf/Rationale%20For%20Competition%20Laws%20-
%20SALIENT%20FEATURES%20OF%20THE%20BILL%20AND%20THE%20IMPLICATIONS%20THEREO
F..pdf , pg. 1
8
European Commission in United Brand v. Commission of the European Communities, 21 Comm. Mkt. L.R. 429
(1978).
9
Margaret H. FitzPatrick, United Brands Company v. Commission of the European Communities: Window to Price
Discrimination Law in the European Economic Community, 1 Nw. J. Int'l L. & Bus. 338 (1979).

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goods or provision of services or demand of goods or services are distinctly homogenous and can
be distinguished from the conditions prevailing in the neighbouring areas’.10

The Act further provides that the CCI shall determine the relevant geographic market having due
regard to all or any of the following factors:

i. regulatory trade barriers;

ii. local specification requirements;
iii. national procurement policies;
iv. adequate distribution facilities;
v. transport costs;
vi. language;
vii. consumer preferences;
viii. need for secure or regular supplies or rapid after-sales services.11

The relevant product market is defined in as ‘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’. The Competition Act
provides that the CCI shall determine the relevant product market having due regard to all or any
of the following factors:

i. physical characteristics or end-use of goods

ii. price of goods or service
iii. consumer preferences
iv. exclusion of in-house production
v. existence of specialized producers
vi. classification of industrial products12

10
Competition Commission of India, Provisions Relating to Abuse of Dominance, available at:
http://www.cci.gov.in/sites/default/files/advocacy_booklet_document/AOD.pdf
11
ibid
12
ibid

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The abuse of dominance analysis under the Act starts with the determination of market, once the
relevant market has been determined; the CCI’s next task is to establish whether the enterprise
enjoys a dominant position.

It is important to note here that the Act does not prohibit the mere possession of dominance that
could have been achieved through superior economic performance, innovation or pure accident
but only its abuse.13

An useful definition that would anticipate the objective of competition law and policy as provided
by the European Court of Justice is that dominance is “a position of economic strength enjoyed by
an undertaking which enables it to prevent effective competition being maintained on the relevant
market by affording it the power to behave to an appreciable extent independently of its
competitors, customers and ultimately of its consumers”. This definition carries 2 elements, one
an ability to prevent effective competition and the other, an ability to behave independently of 3
sets of market players, namely, competitors, customers and consumers.14
Mere dominance in the market does not amount to an offence, but it is the abuse of that dominance
that counts as an offence which invokes Section 4 of the Competition Act.15 Therefore, once the
dominance of an enterprise is determined in a relevant market, the Competition Commission of
India (CCI) looks for abuse of dominance. Section 4(2) sets out a list of activities that shall be
deemed abuse of dominant position:

i. anti-competitive practices of imposing unfair or discriminatory trading conditions or

prices or predatory prices,

ii. limiting the supply of goods or services, or a market or technical or scientific

development, denying market access,

iii. imposing supplementary obligations having no connection with the subject of the
contract, or

13
Sarthak Sood, Abuse of Dominant Position in Indian Competition Law: A Brief Guide, Centre for Internet and
Society, available at: http://cis-india.org/a2k/blogs/abuse-of-dominant-position-in-indian-competition-law-a-brief-
guide
14
Dr. S. Chakravarthy, Dominance and its Abuse, available at: http://circ.in/pdf/CPS-06-Abuse-Dominance-
Ethiopia-Workshop_May08.pdf .
15
In Re Shri Shamsher Kataria v. Honda Siel Cars India Ltd. &Ors, Case No. 03 of 2011

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 iv. using dominance in one market to enter into or protect another relevant market.

The list of abuses provided in the Competition Act is meant to be exhaustive, and not merely
illustrative. This broadly follows the categories of abuse identified under Article 102 of TEFU.16
The Act also exempts certain unfair or discriminatory conditions in purchase or sale or predatory
pricing of goods or service from being considered an abuse when such trading conditions are
adopted to meet competition.17

All these activities amount to abuse of dominant position in the relevant market which not only
affects the other competitors in that relevant market but also the consumers on a large account.
The consumers are always, whether directly or indirectly, affected by the abuse of dominant
position done by an enterprise.

The preamble to the Competition Act, 2002 says that it aims to prevent practices that have an
adverse effect on competition, promote and sustain competition in markets, protect the interests of
consumers, and ensure freedom of trade carried on by other participants in markets, while keeping
in view the economic development of the country.18 So the interests of consumers are clearly set
out in the introduction to this legislation. However this Act in particular and the competition regime
in general does not guarantee anything more than this. It is surely not a panacea for all ills.

In the pursuit of globalization, India has responded to opening up its economy, removing controls
and resorting to liberalisation. The natural corollary of this is that the Indian market should be
geared to face competition from within the country and outside. The Monopolies and Restrictive
Trade Practices Act, 1969 has become obsolete in certain respects in the light of international
economic developments relating more particularly to competition laws and there is a need to shift
our focus from curbing monopolies to promoting fair competition. A broad definition of
competition is a situation in the market in which firms or sellers independently strive for the
buyers’ patronage in order to achieve a particular business objective. The law aims to promote
healthy competition. It bans anti-competitive agreements between firms such as agreements to fix

16
Nishith Desai Associates, Competition Law In India: Jurisprudential Trends and the way forward, available at:
http://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research%20Papers/Competition%20Law%20in%20India
.pdf
17
Supra Note 10
18
Rajkumar Dubey, Indian Competition Act: An Overview, MONDAQ, available at:
http://www.mondaq.com/india/x/33971/Antitrust+Competition/Indian+Competition+Act+An+Overview

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prices or to carve up markets, and it makes it illegal for businesses to abuse a dominant market
position.19

While mentioning protection of interests of the consumer, as one of its objectives, the law then
goes on to define a consumer a bit differently from the definition we find in the Consumer
Protection Act. Unlike Consumer Protection Act, the Competition Act does not exclude
commercial purpose from the definition of a `consumer.’ So a person buying or hiring goods or
services for commercial purposes is also considered to be a consumer by this legislation.

This broadens the definition of consumer and somewhat blurs the line between business interests
and purely consumer interests. In this chapter we are concerned with consumer interests following
the definition of consumer given in Consumer Protection Act while the `business-as-consumer’
interests are discussed elsewhere in this book. It needs to be noted that blurring of interests often
leads to undesired outcomes and may point to vested interests at play. The Raghavan Committee
report on Competition Policy and Law20 sites a note of caution and gives a direction when it says,
`In the name of public interest, many Governmental policies are formulated which are either anti-
competitive in nature or which manifest themselves in anti-competitive behaviour. If the consumer
is at the fulcrum, consumer interest and consumer welfare should have primacy in all
Governmental policy formulations.’ Furthermore the Raghavan Committte report makes a clear
distinction between commercial interests and purely consumer interests when it says, `consumer
is a member of a broad class of people who purchase, use, maintain and dispose of products and
services. Consumers are affected by pricing policies, financing practices, quality of goods and
services and various trade practices. They are clearly distinguishable from manufacturers, who
produce goods and wholesalers or retailers, who sell goods.’21

19
Supra Note 16
20
The Raghavan Committee Reoprt, available at:
http://theindiancompetitionlaw.files.wordpress.com/2013/02/report_of_high_level_committee_on_competition_poli
cy_law_svs_raghavan_committee.pdf
21
Competition Regime and Consumer Welfare, ICRRReport, pg. 16.

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 CHAPTER 2: CONSUMER PROTECTION ACT, 1986

Consumer Protection Act, 1986 is an Act of the Parliament of India enacted in 1986 to protect the
interests of consumers in India. It makes provision for the establishment of consumer councils and
other authorities for the settlement of consumers' disputes and for matters connected therewith.22

Consumer is the purpose and most powerful motivating force of production, yet at the same time
consumer is equally vulnerable segment of the whole marketing system. Attempts have been made
to guard the interest of the consumer. In 1986, Government of India enacted a comprehensive
legislation-Consumer Protection Act, to safe guard the interest of the consumer. The Consumer
Protection Act, 1986, applies to all goods and services, excluding goods for resale or for
commercial purpose and services rendered free of charge and under a contract for personal service.
The provisions of the Act are compensatory in nature. It covers public, private, joint and
cooperative sectors.23

The purpose of the Act is to provide for the establishment of the Commission:

 To prevent practices having adverse effect on competition;

 To promote and sustain competition in markets;
 To protect the interests of consumers and
 To ensure freedom of trade carried on by other participants in the markets, in India

The major focus of the Act is on the following areas24:

 Prohibition of anti-competitive agreements;

 Prohibition against abuse of dominant position;
 Regulation of combinations;
 Advocacy of competition policy.

22
National Consumer Dispute Redressal Commission, Commentary On Consumer Protection Act, available at:
http://ncdrc.nic.in/1_1_2.html
23
Dr. Suresh Patidar, The Consumer Protection Act, 1986 of India- 25 Years of Enactment: A Critical Study,
available at: http://www.pbr.co.in/Dec2013/2.pdf
24
Supra Note 22.

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Thus, the Act focuses on consumer rights by providing regulations against the abovementioned
practices of which abuse of dominant position is one.25 It is necessary for the protection of
consumers that these malpractices are regulated and prohibited so as to provide the consumers
with better products and services and check their exploitation.

Other than such forum for consumer redress that competition policy and law make available, the
Consumer Protection Act provides a three-tier, simple, quasi-judicial machinery, at the national,
State and District levels, for the purpose. While Consumer Protection Act is a comprehensive piece
of legislation it is plagued by inordinate delays in the delivery of justice, enforcement of orders
etc. As of December 2003, about 245,220 consumer cases were pending in the District Forums,
99,295 cases were pending in the State Commissions, while in the National Commission 7,765
cases were pending.26 There are cases at all levels that are pending for more than ten years. A
recent amendment of the Consumer Protection Act among other things deals with rights of
complaint, monetary jurisdiction and enforcement. The amended Act provides for attachment and
subsequent sale of the property of a person not complying with an order. Proceeds from such sales
may go to pay the damages of the aggrieved consumer.

CHAPTER 3: RIGHTS OF A CONSUMER

The Act enshrines the following rights:

 The right to be protected against the marketing of goods which are hazardous to life and
property;
 The right to be informed about the quality, quantity, potency, purity, standard and price of
goods so as to protect the consumer against unfair trade practices;
 The right to be assured, wherever possible access to variety of goods at competitive prices;
 The right to be heard;
 The right to seek redressal against unfair trade practices or unscrupulous exploitation of
consumer; and

25
Avatar Singh, Law of Consumer Protection: Principle and Practice, (4th Edition, 2005), Eastern Book Co.
26
Maninder Jeet, Nidhi Gupta, CONSUMER PROTECTION ACT, 1986: An Analysis of Government’s Initiatives
towards Consumer Awareness, available at:
http://www.theinternationaljournal.org/ojs/index.php?journal=tij&page=article&op=view&path%5B%5D=225

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  The right to consumer education.

Following reliefs are available to the Consumers under the Act27:

 Removal of defects from the goods;
 Replacement of the goods;
 Refund of the price paid;
 Award of compensation for the loss or injury suffered;
 Discontinue and not to repeat unfair trade practice or restrictive trade practice;
 not to offer hazardous goods for sale;
 to withdraw hazardous goods from sale;
 to cease manufacture of hazardous goods and desist from offering services which are
hazardous in nature;
 if the loss or injury has been suffered by a large number of consumers who are not
identifiable conveniently, to pay such sum (not less than 5% of the value of such defective
goods or services provided) which shall be determined by Forum;
 to issue corrective advertisement to neutralise the effect of misleading advertisement;
 to provide adequate costs to parties.28
The Act provides for the establishment of the Consumer Protection Councils at the National, State
and District levels. The objectives of these councils are to help the respective governments in
adopting and reviewing policies for promoting and protecting the rights of the consumers. The
composition of these consumer councils are broad based. The citizens and organisations
representing different interest groups having implications for consumer’s rights protection are
members of these councils. One may like to add, that the Consumer Councils are required to be
constituted on public private partnership basis for better feedback and thereby review of the policy
in the area of consumer’s rights protection.29 The main objective of these councils is to promote
and protect rights and interests of consumers in the society. It also provides for Consumer Disputes

27
Supra Note 25
28
Supra Note 22
29
Aman Chatterjee and Sheetal Sahoo, Consumer Protection: Problems and Prospects, Postmodern Openings,
2011, Year 2, Vol. 7, September, pp: 157-182, available at: http://postmodernopenings.com/wp-
content/uploads/2011/10/PO-7-112.pdf

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Redressal Adjudicatory bodies established at three levels i.e. District, State and National. They are
known as District Forums, State Commissions and National Commission.

CHAPTER 4: CONSUMER PROTECTION AND ABUSE OF DOMINANT POSITION

One of the main objectives of the Consumer Protection Act is to prohibit abuse of dominant
position which is also an objective in the Competition Act. The two Acts thus are in consonance
with each other with respect to abuse of dominant position when it comes to consumer protection.
While the Competition Act focuses on abuse of dominant position in general and covers the rights
not only of the consumers but also of the other competitors in the relevant market so as to keep a
check on the economic activities and corruption level of the country, the objective of the Consumer
Protection Act is rather limited to the protection of consumers and consumer rights. Thus, one
thing common between the two Acts is that they both focuses on the consumer protection when it
comes to abuse of dominant position which is often exercised by the dominant and leading
enterprises in the relevant market.30

These dominant enterprises have the right to enjoy their dominance so long as they are indulged
in lawful practices.31 But the moment they start abusing their power in the relevant market in order
to attain unlawful profits, motives and gains, such practices become unlawful. This is so because
such practices are done at the helm of the consumer rights which adversely affects the consumers
either directly or indirectly.32

The competition regime through standards policy and legislation can play an important role in
buttressing the right to safety, which is an element of the quality cluster. In a cartelised industry,
there would be less innovation and less initiative in improving safety standards. Competition
through its effect on standards can have a positive influence on Quality. However this may not
always be so as standards may be rigged at an artificial low-level by a group of companies to

30
Danish Hasan, A Comparative Understanding of Dominant Position, available at:
http://www.legalservicesindia.com/article/article/a-comparative-understanding-of-dominant-position-1680-1.html
31
Sharma, Sharda Girijesh, An Examination of Abuse of Dominance Under Indian Competition Act (June 16,
2011). Available at SSRN: http://ssrn.com/abstract=1865811
32
Consumer Laws in India, legal services India, available at:
http://www.legalserviceindia.com/laws/consumer_laws.htm

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prevent new entrants with better standards to enter the market and compete (see box from an
example from outside India)

Also producers would be interested to improve the safety and other quality attributes of their
products if consumers are conscious of these. Sadly, in this country, quality awareness still remains
quite low as compared to price awareness. In fact extra-sensitivity towards price on part of
consumers may have a negative impact on quality of products sold on the market. In India price-
competition seems to take a precedence over quality competition for various products. As markets
mature and consumers become more conscious this situation could change. What is needed ideally
is a fine balance between quality and price that reflect the diversity of needs of the Indian
consumer.33

Consumer welfare is not always an automatically generated function of the working of the
competition regime, as it exists in India today. Yet a robust competition regime in tandem with
parallel mechanisms and a strong civil society can go a long way in buttressing the rights of the
consumer. The previous discussions have pointed to the fact that there exist gaps both in policy
design, implementation and structural anomalies that still keep consumers open to abuse. The poor
consumers are at a greater disadvantage. The Consumer Protection Act and the extensive system
of consumer courts does serve the consumer, but this mechanism also runs a huge backlog.34

While a more appropriate umbrella competition legislation has been designed, its implementation
is incomplete while amendments are being discussed. Among these amendments is a suggestion
to do away with regional benches which would mean lesser checks on anti-competitive practices
at regional or local levels.35 Nor is there a formal mechanism for an interface between the
competition authority and the consumer courts mechanism born out of COPRA (which often
handle grassroot competition abuses). This is essential if the two systems should work in tandem
for the protection of the consumer.

33
CA Rajkumar S. Adukia, An overview of provisions relating to competition laws & consumers protection laws in
India, available at: http://www.caaa.in/Image/competition%20laws.pdf
34
Interface between Competition Commission of India and Consumer Protection Law, Indian Bar Association,
available at: https://www.indianbarassociation.org/wp-content/uploads/2013/02/Interface-of-Competition-
Commission-of-India-and-Consumer-Protection-Law.pdf
35
T.Rampappa, Competition Law in India: Policy, Issues and Developments, 57(Oxford University Press, New
Delhi, 2nd edn., 2012).

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There is also a need for wider civil society involvement in the issue of competition and consumer
protection, something, which the new competition law would hopefully foster.

CHAPTER 5: THE STANCE OF JUDICIARY

1. Coal India Case

One of the most significant rulings in 2013 and 2014 is the Coal India Case36 relating to anti-
competitive practices adopted by Coal India and its subsidiaries. Based on the market share of
Coal India, CCI concluded that prima facie Coal India was in a dominant position in the relevant
market. DG noted that Coal India is the largest producer of coal in India, opposite parties had no
competition and consequently held dominant position in terms of the factors set out in section 19
(4) of the Act. The DG examined the FSA and concluded that certain terms were unfair /
discriminatory. The DG noted that:
a) sampling procedure lacked the obligation on opposite parties to incorporate fair and
transparent procedure to match the GCV pricing mechanism;
b) charging the transportation and other expenses from the buyers on supply of ungraded coal
was unfair;
c) unfair and discriminatory conditions regarding the cap on compensation for stones in the
FSA with new power producers;
d) Opposite Parties could unilaterally waive condition precedents in the FSA for new power
producers at their sole discretion and the Opposite Parties enjoyed a dominant position;
e) review and termination of the FSA were found to be unfair and discriminatory;
f) Certain clauses were modified during the course of the DG’s investigation.

The DG concluded that opposite parties imposed unfair/discriminatory provisions and

consequently violated section 4(2)(a)(i) of the Act. On appeal, CCI agreed with the DG’s
conclusion that imported coal was not substitutable with domestic coal. CCI concluded that these
terms were in violation of Section 4 (2) (a) (i) of the Act for imposing unfair and discriminatory
terms on power producers.

36
M/S GHCL Ltd. v. M/s Coal India Limited and anr., Case No. 08 of 2014

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Here again, due to abuse of dominant position, the consumers had to suffer as they had to pay extra
amount for the services they were enrolled to have which was not required. The predatory prices
have lead the consumers to seek redressal against the violation of their rights.37

2. ITPO Case

In Indian Exhibition Industry Association v. Ministry of Commerce & Industry and Indian Trade
Promotion Organization38 (ITPO Case), the informant alleged that opposite parties had imposed
unfavourable clauses on it. The informant claimed to be aggrieved by the alleged time gap
restriction imposed by ITPO between two exhibitions/ fairs primarily as the same is not applied to
ITPO’s own events and is an abuse of its dominant position as a venue provider. Identifying
relevant markets, an extremely contentious exercise was easily resolved in this case by identifying
‘provision of venue for organizing international and national trade fairs/exhibitions in Delhi’ as
the relevant market. The main issue in the case was regarding legality of certain clauses. The
Commission held that:

Imposition of time gap restrictions on a discriminatory basis was violative of section 4(2)(a)(i) and
4(2)) (b)(i) and 4(2)(e) of the Act. Commission noted that with respect to third party events there
was a gap of 15 days while it was nearly 90 days in respect of opposite party’s own events.

In the ITPO Case it is important to note that even delay in processing an application was found to
be unfair. This ruling should make parties that float tenders / process applications to be vigilant
about applications. Additionally, the ITPO Case also demonstrates how relief under competition
law can be used by an aggrieved party to seek redress as other conventional forms of litigation
may not provide sufficient relief.

This case shows that a consumer has the authority to seek redressal for the damage done to it due
to abuse of dominant position by the enterprises as there was discrimatory gap restriction made in
the contract.

37
Press Release CCI, CCI issues order against Coal India Limited and its subsidiaries for abusing dominant position,
(27th Oct. 2014), available at: http://www.cci.gov.in/sites/default/files/press_release/PressReleaseCoalCases.pdf
38
Indian Exhibition Industry Association v. Ministry of Commerce & Industry and Ors Case No. 74 of 2012

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3. Belaires’ Owners Association v. DLF

In Belaire Owners' Association vs Dlf Limited, Huda & Ors.39, DLF has launched a Group Housing
Complex (The Belaire) in Gurgaon, planned to construct 5 multistoried residential buildings. In its
initial plan, DLF designed five multi-storied buildings which would consist of only 19 floors with
a total of 368 apartments to be constructed within a period of 36 months. In May 2010, the
informant filed an instant case under Section 19(1) (a) of the Competition Act, 2002 and alleged
that DLF, by abusing its dominant position, imposed highly arbitrary, unfair and unreasonable
conditions on the informant through its agreements. As a matter of fact, the rights of the informant
in this agreement were affected by the DLF. The Informant further, alleged that the various clauses
of the house agreement had imposed unilateral and one sided clauses and the action of DLF
pursuant thereto was prima facie unfair and discriminatory, thus attracting the provisions of
Section 4 (2) (a) of the Act.

The CCI, held that there was a prime facie case against DLF under the Act, and asked Director
General (DG) to investigate the informant’s allegations on DLF, as a dominant player in market
and whether there exist a relevant market. The DG’s investigation report observed that allegations
made by the informant were true and the Act was applicable in this respective case. The DG report
stated that since the cost of each flat was more than 1.5 cores, DLF constituted the ‘high end
residential market’ in Gurgaon. This was observed that a customer wanting a flat in Gurgaon would
not look for a flat in other area, or go for a lower priced flat still under development in the city.
The DG report further analysed, DLF in exercise of its market power and dominance violated the
Section 19 (4) and also has imposed unfair conditions of sale to consumers, which violated Section
4(2) (a) (i) of the Act.

On this case, CCI held that DLF has contravened the section 4 (2) (a) (i) and (ii), directly and
indirectly, imposing unfair or discriminatory conditions in the sale of services. CCI found DLF
guilty of abusing its dominant position in the market and imposed a penalty of Rs. 630 crores on
DLF. The CCI further directed DLF to cease and desist from formulating and imposing such unfair
conditions in its Agreement with buyers in Gurgaon and to suitably modify unfair conditions
imposed on its buyers as referred to above, within 3 months of the date of receipt of the order on
DLF.

39
Belaire Owners' Association vs Dlf Limited, Huda & Ors., Case No. 19 of 2010

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The buyers in this case suffered as there was abuse of dominant position by DLF due to which
there were unfair terms added to the contract to which the consumers became a prey.

These cases have shown that the consumers have been affected by the abuse of dominance by the
large enterprises, either directly or indirectly, via predatory pricing and increasing the prices to the
level which should not be done showing their abuse of dominance, by introducing unfair conditions
which again affects the rights of the consumers due to which they had to pay an extra amount of
money.40

CHAPTER 6: THE CASE OF STANDARD ESSENTIAL PATENTS

Standard Essential Patents and FRAND terms

An Essential Patent or Standard Essential Patent is a patent that claims an invention that must be
used to comply with a standard. Standards frequently make reference to technologies that are
protected by patents. A patent that protects technology that is essential to comply with a standard
is called a Standard Essential Patent.41 Washington District Court in Microsoft Corp. v. Motorola
Mobility, Inc.42 defined SEP as "A given patent is „essential‟ to a standard if use of the standard
requires infringement of the patent, even if acceptable alternatives of that patent could have been
written into the standard." A patent is also essential “if the patent only reads onto an optional
portion of the standard.” Thus, it is impossible to manufacture standard-compliant products
without using technologies covered by one or more SEPs43.

Patents and standards serve common objectives, insofar as they both encourage innovation as well
as the diffusion of technology. Standards organizations, therefore, often require members to
disclose and grant licenses to their patents and pending patent applications that cover a standard

40
Supra Note 33.
41
Standard Essential Patents." Competition Policy Brief. Competition Occasional Discussion Papers By The
Competition Directorate–General Of The European Commission (European Commission), No. 8 (2014) Available
At Http://Ec.Europa.Eu/Competition/Publications/Cpb/2014/008_En.Pdf
42
Microsoft Corp. V. Motorola, Inc., Motorola Mobility, Inc., And Gen. Instrument Corp. 104 U.S.P.Q.2d 2000
43
European Commission Memo, Antitrust Decisions On Standard Essential Patents (Seps) - Motorola Mobility And
Samsung Electronics - Frequently Asked Questions Available At Http://Europa.Eu/Rapid/Press-Release_Memo-14-
322_En.Htm

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that the organization is developing44. If a standard organization fails to get licenses for all patents
that are essential to comply with a standard, owners of the unlicensed patents may demand or sue
for royalties from companies that adopt the standard.

FRAND Obligations

The relevant standard set out by Standard Setting Organizations gives birth to a body inclusive of
essential features that must be fulfilled by any device to be in conformity with a particular standard.
When a device is found to be in conformity with an essential standard it is allowed to bear a mark
to indicate to the public that the product is compliant with the set standards. In order to produce a
standard compliant device, use of certain patents is required. The main requirement for using a
patent is obtaining license from the owner of the patent concerned45 .

Many SSOs require their members to undertake that they will grant binding licenses to companies
that wish to use the standard in question. In case, a particular member does not provide such
undertaking, the standard may not be adopted. To promote application of the standard and to avoid
any competition concerns, such licenses must be made available under Fair, Reasonable and Non-
Discriminatory (FRAND) terms. Thus, this patent right is not absolute like rest of the patent rights.
Here the owner of SEP is under an obligation to license its patented technology which sets a
standard for the industry and such license must be granted on FRAND terms. Licensing of
Standards Essential Patents (SEPs) on Fair, reasonable and Non Discriminatory (FRAND) terms
is a foundation of the standards development process46. The rationale behind FRAND is that it
benefits the inclusion of patented technology in technical standards while ensuring that the holder
of SEPs should not abuse the dominant market position it gains from widespread adoption of a
voluntary technical standard.

44
J. Gregory Sidak, The Meaning Of Frand, Part I: Royalties, 9 J. Competition L. & Econ. 931, 949 (2013),
Available At Https://Www.Criterioneconomics.Com/Meaning-Of-Frand-Royalties-For-Standard-Essential-
Patents.Html
45
Srivastava, Saumya. "Standard Essential Patents And Competition Law." Internship Project Report, Competition
Commission Of India, Delhi, 2013. Available At:
Http://Cci.Gov.In/Images/Media/Researchreports/Standard%20essential%20patents%20and%20compettion%20law.
Pdf
46
Europe: When Patents Become Standards & Litigation For Essential Patents‘ By Bernd Allekotte And Ulrich
Blumenröder Grünecker Kinkeldey Stockmair & Schwanhäusser, Available At
Http://Www.Iammagazine.Com/Issues/Article.Ashx?G=42b52360-6080-4d09-B92a-122caa87da21

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Standard Essential Patents vis-a-vis Competition Laws

In general, it is well established that Anti-trust regime does not intervene with the exclusionary
Intellectual Property rights (IPR). While innovation is important for amplified competition, once
an enterprise secures IPR protection over its innovated technology, competition laws does not cast
a 'duty to deal'. But many a times, standard setting raises a variety of antitrust/ competition issues.
Standard Setting Organizations involve competitors agreeing on certain specifications of the
product they plan to market which is connected with the competition issues as well as IPRs47 .
However, when it comes to Essential Patents, the distant respect for IPR protected technology
usually in compliance with competition authorities, leads to active intervention. Patents that are
considered essential to implement a chosen industry standard cannot be exploited like any other
patent, and certainly not to the exclusion of other market participants48

In order to ensure that standard setting remains beneficial, it is necessary to ensure that in cases
where adopting a standard necessarily involves the incorporation of a patent into the industry
standard, the relevant patent holder is not in a position to unjustly exploit its market power newly
accrued to it (for example, by extracting exorbitant royalty rates) to the detriment of the entire
industry.

One of the ways by which this may be achieved is by extracting FRAND commitments, where
owners of essential patents commit to make their essential patent available to third parties on
FRAND terms. While this appears to be a mutually beneficial solution, with the patent owner
benefitting from its patent being widely used by the industry, and the remaining stakeholders being
protected from paying exorbitant royalty rates, ultimately, the efficacy of FRAND is determined
by its enforceability.

47
1 Standard Setting, Patents And Hold Up: A Troublesome Mix‘ By Joseph Farrell, John Hayes, Carl Shapiro And
Theresa Sullivan, Available At
Http://Heinonline.Org/Hol/Landingpage?Collection=Journals&Handle=Hein.Journals/Antil74&Div=23&Id=&Page
48
2 India – Competition Law And Frand Commitments, Conventus Law, January 27th, 2014 Available At
Http://Www.Conventuslaw.Com/Archive/India-Competition-Law-And-Frand-Commitments/

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Micromax Informatics Ltd v Telefonaktiebolaget LM Ericsson

Micromax Informatics Limited filed a complaint with the CCI, alleging that Ericsson abused its
allegedly dominant position by imposing exorbitant royalties for the use of its SEPs, thereby
violated the Competition Act, 2002. Micromax further argued that using the sales price of the
downstream product, as the royalty base constitutes misuse of SEPs that would ultimately harm
consumers. Micromax alleged that Ericsson was charging exorbitant royalties as no alternate
technology is available and Ericsson is sole licensor for the SEPs necessarily implemented in 2G
and 3G Wireless Telecommunication Standards.49

CCI in its preliminary order stated that, in the relevant product market, Ericsson was the largest
holder of SEPs for mobile communications like 2G, 3G and 4G patents used for smart phones,
tablets etc. and thus was in a dominant position in the market for devices that implement such
standards. CCI expressed that “FRAND licenses are primarily intended to prevent ―patent
holdup‖ and ―royalty stacking‖ and observed that ―patent hold-up‖ undermines ‘the competitive
process of choosing among technologies‘ and thus threatens ‘the integrity of Standard Setting
activities. CCI also said that Ericsson‘s royalty rates were excessive and discriminatory, given that
they were set as a percentage of the price of downstream products instead of as a percentage of the
price of the GSM or CDMA chip50 . The CCI concluded that the requested royalties had no linkage
to the patented product and were thus discriminatory as well as contrary to FRAND terms‘. CCI
further ordered investigation in the matter by the Director General. Ericsson challenged the order
of CCI in Hon‘ble High Court of Delhi in W.P No. (C) 464/2014. Court vide order dated 21st
January, 2014 restrained Competition Commission of India or its Director General from passing
any Final Order in the matter.

Impact on Consumer Protection

It can be inferred easily that the SEP, FRAND and the allied policies and litigation play a huge
roll in ascertaining the price of the smartphone. A small fluctuation or change in the base of the
royalty calculation method or in its rate can impact adversely on the prices of smartphone,

49
Micromax Informatics Ltd V Telefonaktiebolaget Lm Ericsson, Case No. 50 Of 2013, Competition Comm‘N Of
India (12 November 2013)
50
id

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hampering the market and innovation. Especially in SEP cases, the chances of abuse of dominance
increases many fold, ultimately hammering the rights of consumer and his choice of accessing
products at affordable prices.

CONCLUSION

The Consumer Protection Act, 1986 and the Competition Act, 2002 are in consonance with each
other when it comes to consumer protection and protection of their rights. The sole purpose of the
Consumer Protection Act is to safeguard the consumers from exploitation at the hands of the
enterprises and the purpose of the Competition Act is to safeguard not only the consumers but also
other competitors in the relevant market to safeguard them from the exploitation in the economic
market. Though the approaches of the two Acts are different, COPRA being focussing on the
consumer protection and Competition Act having a economic approach towards safeguarding the
consumers and competitors, the end result of the two remains same, i.e., to safeguard the rights of
the consumers and the avoid any consumer exploitation.

The abuse of dominant position is one such problem faced in today’s scenario. Dominant position
and abuse of dominant position are different wherein the former is lawful and the latter is not. It is
when a dominant enterprise abuses its powers and such activity affects the consumers and other
competitors in the market, that it becomes unlawful. The consumers are the biggest target as any
abuse of dominance would be affecting the rights of the consumers, either directly or indirectly.

There are large numbers of cases pending in different forums because of little awareness about the
reach of the competition law. To stop exploitative business practices and unfair & monopoly
services to the consumers, there is a demand for proper guideline in this sector, which only can be
possible with the positive order by the Supreme Court.

Though these laws have been properly implemented to a great extent, yet vast majority of
population remains unaware of their rights as consumers and that gives the enterprises a bigger
hand at taking advantage of this fact and abusing their dominant position. One such solution to this
is to provide knowledge at a vast level to let the consumers know of their rights.

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 BIBLIOGRAPHY

Cases

Belaire Owners' Association vs Dlf Limited, Huda & Ors., Case No. 19 of 2010 ..................................... 17
European Commission in United Brand v. Commission of the European Communities, 21 Comm. Mkt.
L.R. 429 (1978). ........................................................................................................................................ 5
In Re Shri Shamsher Kataria v. Honda Siel Cars India Ltd. &Ors, Case No. 03 of 2011 ............................ 7
Indian Exhibition Industry Association v. Ministry of Commerce & Industry and Ors Case No. 74 of 2012
................................................................................................................................................................ 16
M/S GHCL Ltd. v. M/s Coal India Limited and anr., Case No. 08 of 2014 ............................................... 15

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Aman Chatterjee and Sheetal Sahoo, Consumer Protection: Problems and Prospects, Postmodern
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Competition Commission of India, Provisions Relating to Abuse of Dominance,....................................... 6
Competition Regime and Consumer Welfare, ICRRReport ......................................................................... 9
Consumer Laws in India, legal services India ............................................................................................ 13
Consumer Protection and Competition Policy, Planning Commission of India ........................................... 4
Danish Hasan, A Comparative Understanding of Dominant Position ........................................................ 13
Dr. S. Chakravarthy, Dominance and its Abuse ........................................................................................... 7
Dr. Suresh Patidar, The Consumer Protection Act, 1986 of India- 25 Years of Enactment: A Critical Study
................................................................................................................................................................ 10
Gerrit De Geest, The Death of Caveat Emptor, Washington University School of Law Seminar Paper ..... 3
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Association.............................................................................................................................................. 14
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the Implications Thereof ........................................................................................................................... 5

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Maninder Jeet, Nidhi Gupta, CONSUMER PROTECTION ACT, 1986: An Analysis of Government’s
Initiatives towards Consumer Awareness, .............................................................................................. 11
Marco Pistis, From Caveat Emptor to Caveat Venditor - a Brief History of English Sale of Goods Law,
(4th June 2006)........................................................................................................................................... 3
Margaret H. FitzPatrick, United Brands Company v. Commission of the European Communities: Window
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(1979). ....................................................................................................................................................... 5
National Consumer Dispute Redressal Commission, Commentary On Consumer Protection Act ............ 10
Nishith Desai Associates, Competition Law In India: Jurisprudential Trends and the way forward ........... 8
Press Release CCI, CCI issues order against Coal India Limited and its subsidiaries for abusing dominant
position, (27th Oct. 2014) ........................................................................................................................ 16
Rajkumar Dubey, Indian Competition Act: An Overview, MONDAQ ........................................................ 8
S.Singh and Sapna Chadha, Consumer Protection in India Some Reflection, .............................................. 3
Sarthak Sood, Abuse of Dominant Position in Indian Competition Law: A Brief Guide, Centre for Internet
and Society, ............................................................................................................................................... 7
Sharma, Sharda Girijesh, An Examination of Abuse of Dominance Under Indian Competition Act (June
16, 2011) ................................................................................................................................................. 13
T.Rampappa, Competition Law in India: Policy, Issues and Developments, 57(Oxford University Press,
New Delhi, 2nd edn., 2012). ................................................................................................................... 14
The Raghavan Committee Reoprt, ................................................................................................................ 9
Trideep Bhandari, Caveat Emptor or Caveat Venditor: Where are We Heading?........................................ 4

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