Author name: CBCL

[By Shubhankar Sharan & Soumyabrata Chakraborty] The authors are students of Gujarat National Law University, Gandhinagar.   Introduction Over the latter half of the previous decade, reasonable disputes have arisen concerning the jurisdictional overlap between the Patents Act 1970 (Patents Act) and the Competition Act 2002 (Competition Act). The instant ambiguity centers around the recent judgement of a Division Bench of the Delhi High Court in Tekefonaktiebolaget LM Ericsson v. Competition Commission of India (Ericsson-II), holding the Patents Act to have an edge over the Competition Act. Precisely, the judgement recorded questions about the Competition Commission of India’s (CCI) capacity to ascertain the validity or legality of Fair, Reasonable, and Non-Discriminatory (FRAND) terms in Patent Licensing Agreements (PLAs), however, left it unanswered. Even though the judgement has attempted to clear the jurisdictional overlap, it is fraught with unclear reasoning and has failed to consider several decisive factors. Given the same, this piece would try to outline how FRAND assurances come under the definition of “agreement” stated in the Competition Act. That moment forward, it aims to delineate the powers of the CCI to inquire into such agreements. The piece establishes how CCI needs to hold its ground in adjudicating matters related to FRAND agreements in the likely event of an appeal against Ericsson-II. What has changed? Delhi High Court’s Ericsson-II judgement is diametrically opposite to its single-judge decisions of 2016 and 2020 in similar matters. The Court has now ruled that the Patents Act would prevail over the Competition Act in issues involving a patentee’s abuse of a dominant position in exercising its rights under the Patents Act. The Judgement empowers the Controller of Patents (Controller) to have overriding jurisdiction over CCI in matters of anti-competitive agreements and abuse of dominant position in the domain of exercise of rights by a patentee. The Court adopted a method of examining the legislative intent behind the two statutes (and their amendments) to resolve the jurisdictional conflict. The Court’s reasoning can best be described as restrictive as it relied merely on legislative intent and the precedence of special law over general law or subsequent law over prior law and not a thorough examination of the scope of the two statutes to remedy or prevent anti-competitive practices. The Ericsson-II judgement lacks a thorough comparative analysis of the CCI’s and Controller’s powers to inquire into FRAND terms and their powers to remedy anti-competitive practices. Notably, FRAND assurances in PLAs and the question of them being anti-competitive formed a significant part of the factual matrix before the Court. The Judgement is marked by a lack of reasoning regarding examining and remedying anti-competitive practices in FRAND terms. Instead, it focuses merely on the conflict of jurisdiction. A reading of the two statutes clearly shows that the CCI is better equipped than the Controller to inquire into, remedy, and penalize for abuse of dominant position and anti-competitive agreements concerning FRAND terms. FRAND assurances are agreements by nature FRAND assurances are voluntary agreements that are enforceable in a court of law. Though it is unclear in the Indian jurisprudence, foreign jurisdictions have matured to recognise it. Such reliance on foreign jurisprudence is not detrimental but facilitator of the development of jurisprudence. The same was pointed out by the Delhi High Court in Intex Technologies (India) Ltd. v. Telefonaktiebolaget LM Ericsson (Intex judgement) in paragraph number 38. In the USA, for instance, several courts have observed that Standard Essential Patents (SEP)  implementers or licensees are third-party beneficiaries of agreements between SEP holders and the Standard Setting Organisations (SSOs) and have a right to enforce the SEP holders’ obligations in the Court of Law. Generally, SEPs are granted by the SSOs on specific conditions carried through voluntary agreements requiring the SEP Holder to grant licenses on FRAND terms to the prospective licensees. For instance, Article 6 of the European Telecommunications Standards Institute’s (ETSI) Intellectual Property Rights policy (Article 6 of the IPR Policy) requires the IPR holder or the Declarant to give an irrevocable written undertaking that it would be granting licenses on FRAND terms. Moreover, the Court of Justice of the European Union (CJEU) in Huawei Technologies Co. Ltd. v. ZTE Corp. held that the declaration given by Huawei to ETSI under Article 6 of the IPR Policy for negotiating FRAND terms is binding. The IPR Policy of ETSI, an SSO, has also gained prominence in Indian jurisprudence.  Its reference dates back to 2013 when the CCI touched on Clause 6.1 of the IPR Policy. Additionally, it ascertained the IPR Policy as the overarching framework for companies making a declaration. In furtherance of it, the CCI considered such statements to be binding. Though not the same but similarly, the Delhi High Court (¶36) has rightly recognised the essentiality of FRAND declaration for ensuring access to standardised technologies for SEP Implementers on FRAND terms. However, legislative acts have not recognised or included FRAND agreements in the statutory framework. FRAND agreements and the Competition Act Despite underlining reasonability and fairness, FRAND agreements have often come across as discriminatory. The telecom giants have regularly been hauled to courts for unreasonable terms in FRAND agreements. It must be noted that the Indian position rests possibly on Sections 3 (Anti-competitive Agreements), 4 (Abuse of Dominant Position), and 19 (Inquiry into certain agreements and dominant position of enterprise) of the Competition Act for adjudication over FRAND agreements. While the Competition Act is silent on FRAND Agreements, a cursory reading of the above-mentioned sections indicate their possible application on FRAND Agreements. Section 19(1) of the Competition Act empowers the CCI to inquire into any alleged contravention of Section 3(1) or Section 4(1). Section 3(1) of the Competition Act affirms restraint from entering into agreements causing an Appreciable Adverse Effect on Competition (AAEC). Section 3(2) in conjunction with Section 3(1) of the Competition Act renders such agreement void. Similarly, Section 4(1) proscribes abuse of dominance by an enterprise in the competition landscape of India. In furtherance, Section 3(4) and Section 4(2) list various instances when an enterprise

[By Oorja Newatia] The author is a student of National Law School of India University, Bengaluru.   INTRODUCTION Recently, on the sidelines of the BRICS Competition Conference, the Competition Commission of India’s (‘CCI’) Chairperson has declared that the CCI is looking at ways to integrate sustainability dimensions into the competition law framework. India has declared an ambitious target to achieve carbon neutrality by 2070 and an emissions-intensity target of 45% below 2005 levels by 2030. To achieve these reduction targets, it is necessary to create a society that combines economic growth with the reduction of environmental burdens. Collaborate efforts by enterprises are the only efficient means for companies to achieve their sustainability goals so as to avoid first-mover disadvantages. Thus, to ensure that enterprises build green businesses without having to face anti-competitive barriers, it is critical to have a clear framework to assess ‘anti-competitive agreements having sustainability dimensions’. However, for much of its history, competition law has been largely focused on promoting consumer welfare by promoting competition in the markets. Broader public interest objectives such as sustainability were considered outside the ambit of competition law. This article, by borrowing from various international jurisdictions seeks to argue that environmental concerns can be taken into account to assess the validity of restrictive agreements. In doing so, it first, explores the complex relationship between sustainability and competition, second, analyses the approaches adopted by various competition regimes to integrate sustainability in competition law and finally, suggests amending the Competition Act 2002 (‘the Act’) to make it sufficiently flexible to allow anti-competitive mergers or restrictive arrangements that may have sustainability benefits to proceed without needing to change the objectives of competition law. COMPETITION LAW AND SUSTAINABILITY: A COMPLEX RELATIONSHIP Competition law is not considered the primary policy tool for promoting sustainability because firstly, the OECD has warned that having multiple objectives applied to competition law increases a number of risks including inconsistent application of competition policy and the public interest constraining the independence of competition regulators. Secondly, assessment of sustainability considerations often requires the ability to measure difficult trade-offs between environmental and commercial interests. Thirdly, at times there may be a conflict between sustainability and competition. For instance, a competition agency could decline a merger or take action against an arrangement that has potential environmental benefits because of its likely impact on competition. In essence, competition law is a disincentive to cooperation between firms. In most cases this promotes consumer welfare i.e. where collaboration reduces competition, but it may also prevent industry-wide measures to achieve significant changes in the long-term interests of the public. Collective agreements related to environmental schemes can produce substantial benefits from a sustainability perspective, while simultaneously limiting competition (example; agreements to improve efficiency of refrigerators)  In such cases, the crucial question is whether competition concerns can be balanced with sustainability objectives. INTERNATIONAL APPROACHES TO INTEGRATING SUSTAINABILITY IN COMPETITION LAW The CCI has finally joined the debate on how sustainable dimensions can be integrated within the competition regime. Fortunately, it can benefit by exploring the approach adopted in various foreign regimes. Countries such as Japan, Netherlands, Australia, New Zealand, Greece, Germany have tackled anti-competitive agreements having green dimensions by drafting guidelines. Consider Japan which has recently adopted draft guidelines on how competition law can promote sustainability. These guidelines consider that most activities seeking environmental sustainability are unlikely to restrict competition. However, in cases where business activities have both anti-competitive as well as pro-competitive effects (such as innovation and creation of new technologies resulting in say reduction of greenhouse gas), the guidelines envisage a threefold test: (i) whether the objective of the impugned measure is legitimate; (ii) whether the said measure is reasonable; and (iii) balancing test between the anti-competitive effects and the pro-competitive effects of the measure. However, strict restrictions, such as price restrictions, restraints on new entry and exclusion of existing players cannot be justified in the name of sustainability. Similarly, the Dutch guidelines suggest that in cases where agreements promoting sustainability restrict competition, the sustainability benefits must outweigh the disadvantages caused by such agreements. It necessitates that the parties qualitatively or quantitatively justify the benefits arising. Such an integration of sustainability in competition law can also be viewed in the orders by New Zealand and Australia’s Commerce Commissions (‘NZCC’ and ‘ACCC’ respectively). In Refrigerant License Trust Board (RLTB) case, RLTB sought authorisation for an arrangement under which up to 100% of New Zealand refrigerant wholesalers may agree to supply refrigerants only to customers that are trained and licensed or certified to safely handle refrigerants. The NZCC granted authorisation on grounds that the net benefit of such an arrangement in the form of reduction in the amount of ozone depletion outweighed any detriment to the exclusionary provision. Likewise, the ACCC in 2018 granted authorisation to the Tyre Stewardship Scheme which envisaged dealing with only accredited businesses along the tyre supply chain because it aimed at increasing the recycling of tyres and use of products made from recycled tyres. CRAFTING A FLEXIBLE REGULATORY FRAMEWORK To promote sustainability, the CCI needs to create a competition regime which is sufficiently flexible to look beyond a consumer welfare standard to consider broader wider economic and social impacts. In doing so, it could observe the EU’s approach. The EU Guidelines (2004) read ‘public interest objectives that are pursued by other provisions of European treaties’ into Article 101(3) of the Treaty on the Functioning of European Union (‘TFEU’) which provides exemptions to anti-competitive agreements. Along the same lines, this article suggests that a flexible framework requires restricting the ambit of section 3 of the Act which deals with anti-competitive agreements. This can be done by creating a second proviso to section 3(3). The proviso could be framed as follows: “Provided that nothing contained in this sub-section shall apply to any agreement entered into by two or more entities if such agreement furthers public interest objectives pursued by other existing laws in India.” Public interest covers a broad range of issues including environment, culture, public health and

[By Sanidhya Bajpai & Akash Gulati] The authors are students of Dr. Ram Manohar Lohiya National Law University, Lucknow.   Introduction The award for innovation in the modern world is your commercial exclusivity to that creation. In the pharmaceutical sector, innovation in drugs and consumables is endowed with patents granting a temporary monopoly. However, such temporary monopolies are sometimes virtually elongated with the use of trademark and trade dress rights for foreclosure of competition. All major brands use trademarks and trade dress rights to make a product so distinct that any generic substitute seems like a different drug. Pharmaceuticals contribute 43.2% to the total out-of-pocket expenditure on health in India. While around 17.7% of the pharmaceuticals market in India (in terms of value) is under price regulation, competition is the major source of price control for the rest of the market. This piece delves into trademarks and trade dresses in the healthcare sector, how they affect competition, and the need for a more balanced approach between the two to maintain fair competition in the market. Trademarks and Trade Dress in Pharma Consumers are often caught in a paradox of choosing from a branded manufacturer, seldom being the innovator itself or any other major brand, which ensures safety, or a bioequivalent generic drug, which came later in the market due to patent protection to the innovator drug. The ignorance in consumers often leads to consumers opting for branded high-priced medicines despite the presence of cost-efficient bioequivalent generics. Using color as a distinctive feature is another tool pharmaceutical manufacturers use to indicate their brand. The definition of trade dress under the Indian Trademark Act is found in Section 2 (1) (zb), which encompasses shape, packaging, and color combination in general. The courts have denied trade dress to Pharmaceutical manufacturers in India and the USA in some cases on the grounds that there can be no color monopoly and that the design or color is functional (essential to the use or the purpose of the article without which the cost or quality will be affected), respectively. The significant role of the trademarks and trade dress in this affair is further discussed in toto. How trademarks affect competition As discussed above, a trademark’s function is to attribute the maker’s identification to the product or service. This identification helps the consumer to buy a specific product from a specific maker.  The pharmaceutical sector sees a peculiar case, where the trademark itself becomes the predominant identity of the drug. Branding is used to differentiate identical drugsConsequentially, the consumer seeks that particular trademarked brand in the market. The consumers are generally unaware of the drug’s generic chemical name or international non-proprietary name (“INN”) in most cases. For example, a consumer might know of “Benadryl” as a medicine to a list of symptoms but might not know its generic name, diphenhydramine. For the consumers, the name “Benadryl” is the medicine itself and not the producer’s identification. The patent period establishes the dominance of trademarks Patents inherently “create market power positions that can adversely affect the system’s economic performance.” Moreover, when a product is sold in the market by a single producer and under a particular name for twenty years (being the patent period), the consumer becomes more than familiar with the product’s name (trademarked names in our case).  This familiarization accumulates into consumers assuming the brand trademark as the product’s name. Trademarks elongate the monopoly established by patents post-expiration After the patent’s expiration, consumers and doctors are likely to remember only the trademarked name, even in the presence of bioequivalent generic substitutes. If aware of generic substitutes, consumers would doubt their efficacy due to dissimilar names. Even prescriptions by doctors play a huge role in the dominance of trademarks owned by Big Pharma. A known ill of the sector is that pharmaceutical companies incentivize doctors unethically to prescribe drugs of certain brands. A patient who is availing the services of a doctor would not usually go against the mandated drugs in the prescription. How excessively priced medicines outcompete lesser-priced medicines A monopoly of big brands persists instead of relatively exorbitantly priced branded medicines compared to generics and competing smaller brands. Usually, when a brand charges higher for a similar product, it tends to lose its market share given that other brands are selling the identically same product with lower prices. So, when both brands and generics are available at lower prices in the healthcare sector, why do the top brands continue to dominate? A major part of it may have to do with marketing and advertising, both solidifying their trademarks, establishing trademarked names as distinct drugs. The rest is taken care of by doctors prescribing drugs under the monetary influence of the brands. How Trade dress affects competition In addition to the trademarked name, the shape and color also contribute to giving the innovator firm a competitive edge after the patent expiry. The drugs with distinct colors when associated with the drug’s identity steer consumer choice. How does trade dress affect consumer choices? It is now well accepted through various research and reports that color combinations help shape consumer choices, making trade dress a significant market strategy. The importance of color-coded asthma treatment in patient education is widely accepted. By habit, the patient will stick to the inhalers from the same brand with the same color coding for efficiency and perceived utility. This principle extends to medicines, especially where the patients have to take several medicines regularly, making them recalcitrant to the change in color or shape of medicines as it has an adverse effect on compliance. In Ives Lab., Inc. v. Darby Drug Co. defense of functionality by the generic manufacturers though first reversed, was successfully upheld after several appeals. While upholding appeals, the US courts enumerated several significant findings, including association of appearance of medication with its therapeutic effects, denial of equivalent drugs by some patients even after their doctor’s testimony and benefits of color combination for patients who co-mingle their drugs in a container

[By Sanidhya Bajpai & Akash Gulati] The authors are students of Dr. Ram Manohar Lohiya National Law University, Lucknow.   Introduction Committed to maximizing profits, some mega-hospital chains have adopted unfair measures, and the patients often face the brunt of such measures. Through their numerous manoeuvres, these private super specialty hospitals have gone on to maximize their profits while the patients swallow the pill. Case in point, Max Hospital (“Max”) prima facie found to be abusing its dominant position to exploit the in-patients. In 2015 the Competition Commission of India (hereinafter “CCI”) ordered Director General’s investigation into the matter. The matter still awaits final adjudication by the CCI. This piece delves into the prima facie anti-competitive practices adopted by Max and some general practices of other hospitals to exploit in-patients and distort competition, specifically through their in-house pharmacies and the inherent monopoly over the restricted choices of in-patients; it further proposes rectifying the status quo. How Hospitals Abuse Dominance via In-House Pharmacies To scrutinize the discernible abuse of dominance by Max, CCI considered the market for ‘provisions of healthcare services/facilities for in-patients by private super specialty hospitals in Delhi’ as the relevant market. The private super specialty hospitals including Max enjoy a dominant position in the said relevant market w.r.t Section 19(4) and have been prima facie abusing it through their in-house pharmacies with exploitative pricing of medicines, collusion with pharma manufacturers and seemingly exclusive supply agreements, which is further discussed in detail. Dominance Over The In-Patients Max enjoys absolute dominance over the in-patients, once they are admitted to these hospitals, it becomes obligatory for them to avail the subsequent services from these hospitals even if they are available at a discounted price elsewhere. This creates a locked-in effect for the in-patients and equips the hospitals to abuse their dominant position, which amounts to a contravention of the provisions of Section 4(2)(a)(ii) of the Act. The DG also observed the same in the Max Hospital case. Price Disparity Of Medicines, How Hospitals Collude With Pharma Manufacturers The hospitals abuse their dominant position by charging exploitative prices for the medicines they procure from the pharmaceutical giants at a lower rate than the market, often through exclusive supply agreements. The pharmaceutical manufacturers compete to have their medicines and other products stocked at the pharmacies by offering high retail margins to the pharmacies. The hospital’s in-house pharmacies, from where the in-patients are mandated to buy the medicines, become a blooming ground for such anti-competitive agreements as the in-house pharmacies sheathe the patients from the retail competition, and consequently allow the pharmacies to extract exorbitant profits through exploitative prices. Printing Of Higher MRPs For Medicines To Be Sold By The In-House Pharmacy As mentioned above, the pharmaceutical manufacturers offer a higher retail margin to be stocked at hospitals, and these higher retail margins for non-scheduled drugs that are outside the scope of regulation, are clinched by higher M.R.P.s. An analysis by National Pharmaceutical Pricing Authority (N.P.P.A.) reveals that the most reputed private hospitals are making profits of 1,737% from drugs, consumables, and diagnostics. These profits are extracted by imposing inflated M.R.P.s; the profits on drugs which are not under price control range from 160% to 1200%, on consumables (which are also not under price control) range from 350% to 1700%, and the profits were from 115% to 350% for drugs under price control. The biggest beneficiaries of this trade are the hospitals, who, on the one hand, extract high retail margins from manufacturers and, on the other hand, impose inflated M.R.P.s on the patients. This unequivocally shows that the competition of retail margins at the manufacturing level neither fosters competition at the retail level nor results in competitive prices for consumers; rather, it aids hospitals in making exorbitant profits through anti-competitive agreements and abuse of dominance. Exclusive Supply Agreements Among Hospitals And Manufacturers High-end hospitals such as Max generally have arrangements in exclusive supply agreements with manufacturers. These agreements restrict the patients from availing of other alternatives in the hospital, and the situation becomes even dire when you’re an in-patient and have no recourse but to avail of the available services. The commission in the ‘Hiranandani’ case held that the exclusive contract contravened Section 3(1) of the Act as it had an appreciable adverse effect on competition. The same was criticized by the COMPAT, citing that such exclusive agreements are not anti-competitive as there were other suppliers, and patients were free to avail of their services. However, the present situation is distinct regarding in-patients in context, as they don’t have any liberty to avail the services outside the hospitals. This makes the exclusive supply agreements anticompetitive and aids hospitals in abusing their dominant position. The recent amendments to Section 3(3) and the introduction of the hub and spoke cartels ensure that the selling side is liable for such anti-competitive agreements. A Case for Aftermarket Abuse Apart from a prima facie case of abuse of dominance the current scenario also exhibits the symptoms of an aftermarket abuse. An aftermarket is usually a chronologically succeeding market that emerges to utilize the primary product/service properly or further. In Shamsher Kataria, the CCI explained aftermarkets as a market for complementary goods and services for a primary durable product or service. In conventional scenarios, such aftermarkets are usually of the nature of spare parts and repairs. In the Kodak Case, the US Supreme Court illustrated the market of service & repair as an aftermarket of the primary product of photocopying machines sold by Kodak. Similarly, when we consider healthcare service at a super-specialty hospital as the primary product, the succeeding market complementing the treatment with pharmaceuticals and associated products can be viewed as the aftermarket to the primary market. It is pertinent to note that aftermarket abuse does not necessarily require the perpetrator to be dominant in the primary market. The lock-in effect caused by the provision of the primary product/service provides the perpetrator the ability to acquire a dominant position in the aftermarket. It is this dominant