Preserving the Sanctity of Settlements: Lessons from JCB v. CCI on Mediation in Antitrust Cases

Introduction

“Mediation processes and settlements have to be recognised and acknowledged by all Courts/fora where disputes are pending. Regulatory authorities such as the CCI are no exception to the same. It is imperative that the CCI and similar bodies honour the outcomes of mediation and respect the settlements reached between parties.” ¶47 

The Delhi High Court (“DHC”), on 14th August 2024, delivered its judgment of JCB India Limited and Anr. v. The Competition Commission of India and Anr. (“judgement”), a dispute that hits close to the heart of the existing jurisprudence of Competition Law in a direct tussle with the settlement of disputes in the form of mediation settlement, which might reek of antitrust issues but signals a path fraught with procedural hurdles. The judgement seems to settle the controversy surrounding the impact of mediation settlement on antitrust enquiries, which only began due to the dispute already settled. 

This piece explores the intersection of antitrust oversight on mediation settlement and analyses the locus of the Competition Commission of India. The piece further evaluates the power of the Competition Commission of India (“CCI”) to continue proceedings on an already extinguished cause and underscores the possible consequences of the CCI’s curtailed power.  

Facts of the case

This case originates from a suit in infringement of design introduced by JCB India Limited (“JCB”) against Bull Machines Pvt. Ltd. (“BMPL”). BMPL’s product was claimed by JCB, alleging infringement of its registered design rights. JCB contended that BMPL’s product, the "Bull Smart" backhoe loader, unlawfully replicated the design of its own "3DX BHL" model. Consequently, JCB sought an injunction against BMPL, which was granted by the Delhi High Court (DHC), restraining BMPL from manufacturing or selling the allegedly infringing product. In this response, BMPL had filed information with the CCI stating that JCB had engaged in anti-competitive practices by holding a dominant position u/s 4 of the Competition Act and initiating predatory litigations to discourage competition.

When complaints were laid with the CCI, it launched an investigation, but the issues arising from the dispute between the parties were resolved through mediation. Nonetheless, the CCI sought to continue the probe further by claiming that the mediation settlement did not exonerate the commission from the responsibility to prevent anti-competitive practices from the market. The DHC reasoned that allowing the CCI to continue an inquiry post-mediation settlement undermines the very concept of mediation and leads to discouragement in parties in choosing mediation. Thus, the regulatory bodies should refrain from interfering. 

Why did the Mediation Settlement override Proceedings under the Competition Act?

The CCI proceedings only came into existence due to the Intellectual Property dispute surrounding BMPL’s use of JCB’s design and subsequent want of injunction. The Parties, through the Supreme Court, got to a mediation settlement putting an end to the original Intellectual Property(“IP”) dispute and the same was allowed. Therefore the DHC was of the opinion that there was little to no cause left for the CCI to pick, which led to the information being filled, basing the allegation on sham litigation. Thus, when there was no sham litigation pending due to the mutual settlement, the enquiry u/s 26 of the Act made no sense. This conclusion drew power from the DHC’s ruling in Telefonaktiebolaget LM Ericsson (PUBL) v. Competition Commission of India, which prohibited further enquiry when settlement was reached in the dispute causing the enquiry. 

As far as the locus of the CCI under the Act is concerned, it is worth mentioning despite being the antitrust regulator, the CCI is not empowered to probe into mediation settlements reached between the parties, let alone begin a full-fledged investigation on the consequence of the settlement unless there has been an allegation of abuse of dominance u/s 4. Further, under CCI’s power to analyse the anti-competitive agreements lies a clear-cut exception u/s 3 of the Act, which places agreements for protection of one’s IP rights out of the bounds of CCI’s power to investigate. 

The Question of Public Interest

In Competition Law proceedings, the role of public interest is crucial because these cases are not only sui generis between the parties, but they also impact the performance of market functions and consumer interest. Mediation is primarily a private dispute resolution system and becomes contentious when it shields anti-competitive practices in competition law by facilitating parties to agree on settlements. This challenge is rooted in the in rem character of the competition law proceedings that are directed to abate an unlawful practice from the market to maintain fair and competitive market conditions.

The CCI’s Position on Public Interest and the Response

The CCI, through its submission, stressed that the proceedings of CCI are by their very nature in rem and are concerned with the welfare of society at large beyond the mere dispute of the two parties. The CCI proposed that mediation settlements between the parties could be used as a tool to mask abuse of dominance or cartelization, which would be detrimental to fair competition and consumer welfare. Therefore, the CCI attempted to carry out the investigation even after the settlement on the basis that the task given under the statute was to investigate and prevent any possible anti-competitive impacts.

The DHC held a balanced outlook on the problem of the clash between the mediation settlements and public policy. The Court acknowledged mediation as an appropriate technique of settlement and suggested that any intention to legally challenge the settlement should only be done where there is ‘sprinkling of solid empirical evidence that the settlement violates public interest’. The court noted that mediation settlements, such as those fostering cartels or perpetuating monopolistic behavior, may warrant judicial scrutiny. Lastly, the court highlighted that challenges to the effectiveness of mediation settlement without reasonable causes prejudice not only private autonomy but also generate a threat of instability and discourage parties from choosing mediation as an alternative process.

Comparative Analysis with Other Jurisdictions

The recent judgement of the DHC recommends that the virtues of mediation decisions should be respected unless compelling proof of anti-competition activities are available. This resonates with the practices carried out by other jurisdictions in the matter of balancing mediation settlements and judicial scrutiny in their anti-competitive nature. The United States (“US”) adopted an approach which supports mediation settlements but actively examines the nature of settlements. In the case of FTC v. Actavis, Inc., the US court observed that ‘reverse payment settlement’ could be scrutinized if they could hamper the competition, but it does not interfere with other mediated agreements where there are no competition concerns.

The methodologies of the European Commission comprise a structured antitrust system exercising Articles 101 and 102 of the Treaty on the Functioning of the European Union (“TFEU”), where consumers’ welfare is evaluated concerning the settlement system. In the Perindopril (Servier) case, the Commission penalised settlement agreements, which impacted the pharmaceutical market. Thus, the European Union approach emphasises the enforcement of competition law alongside the final nature of settlements.

In the United Kingdom, the institution of mediation is promoted by the United Kingdom’s Competition and Markets Authority (“CMA”), which intervenes in cases where settlements are anti-competitive. This vigilance is well illustrated by the 2016 case of GlaxoSmithKline PLC v Competition and Markets Authority, where the issue was around the ‘pay-for-delay’ agreements. However, the CMA acknowledges that to uphold business confidence, there is a need to respect genuine settlements.

Way Forward

The intersection of mediation and competition law has grown significantly, with courts and regulatory bodies, especially those of quasi-judicial stature like India’s CCI, coming face to face in quest of determination of power and jurisdiction to enquire. The DHC’s judgment in JCB v. CCI offers critical insights into this balance and tells a cautionary tale about the future of settled disputes and the possibility of probing their antitrust impacts. As far as policy implications are considered, the DHC’s decision puts great focus on making mediation mainstream in IP disputes; while anti-competitive concerns take backseat, primacy to party autonomy comes to fore. It is essential to note that the ratio is fact-heavy; to cull out a proposition for shielding mediation settlements that are in CCI’s radar would be a risk in terms of the undeveloped Indian jurisprudence on predatory litigation. 

In India, the discussion on effects of predatory litigation is non-existent. While the settlement may overtly hide what the litigating party may have thought, the framework remains unequipped to handle motivated litigation in the name of protection of business rights. Scenarios apart from core IP disputes, like allegations of trade secret misuse, remain unprotected in terms of India’s IP framework and laws. Consequential Antitrust oversight is excluded thanks to exceptions under Section 3, where more substantiation is required in terms of where IP agreements might be investigated. The blanket exclusion in the Act prevents CCI from devising allied regulations that could prescribed a tiered screening process. 

Suggestions in this regard can be in terms of High Courts taking charge to establish prima facie case of litigation used to coerce competitor to agree, instead of CCI ordering enquiry. Now that IP Appellate Board has been abolished and High Courts have taken jurisdiction, the measure would be easy to apply. 

While the DHC has ousted the CCI’s power to analyse the dispute for the lack of concerns on public interest, the CCI must be allowed to at least keep a vigilant eye on such mediated disputes. It cannot end without saying that the regulator is more well-equipped to tell what is anti-competitive and what is not, probably more than the courts.