Striking a balance between patents and competition
Competition law is based on the principle that competition is desirable in a free market. National competition laws seek to promote competition by preventing the inappropriate accumulation or exercise of market power with respect to products or services. IP laws, on the other hand, seek to promote innovation and safeguard the interests of inventors by granting monopolies. The intersection between IP law and competition policies has prompted a longstanding debate the world over, with questions being raised as to whether the grant of IP rights restricts innovation and hinders competition, and whether competition law dilutes the rights granted to inventors under IP law. Whereas IP law grants statutory monopoly rights which inhibit competition to a certain extent, competition law promotes competition in the market by prohibiting anti-competitive conduct. In India, the Competition Commission – constituted in March 2009 – is responsible for enforcing the Competition Act, 2002. Despite its relatively short tenure, the commission has proven to be a proactive regulator and has already imposed several headline-grabbing fines on enterprises for abusive conduct. A recent decision of the commission brings to the fore the overlap between competition law and IP law. This article examines this by analysing the decision and highlighting the role played by the commission.
The Competition Act repealed and replaced the earlier Monopolies and Restrictive
Trade Practices Act, 1969, which was passed during India’s ‘licence raj’ period with the objectives of preventing the accumulation of economic power in the hands of a few and prohibiting monopolistic, unfair or restrictive trade practices. With the liberalisation of the Indian economy in 1991, the act’s provisions and objectives were no longer sufficient to ensure competition on the market. In light of this, in 1999 the finance minister stated that the Monopolies and Restrictive Trade Practices Act had become obsolete in light of international economic developments relating to competition law and expressed the need for a modern competition law that reflected India’s new economic policy. Although the Competition Act was enacted in 2002, the provisions relating to two of its substantive aspects – abuse of dominant position and anti-competitive agreements – came into force only on May 20 2009. Further, provisions relating to merger control entered into force in June 2011.
Abuse of dominant position
The Competition Act prohibits any conduct which amounts to the abuse of a dominant position which may have an adverse effect on competition in any market in India. The act defines ‘dominant position’ 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 to influence its competitors or consumers or the relevant market in its favour.