1. While competition authorities have investigated and penalised dominant firms for abusing their strength in relevant markets, such findings have usually been of the more contemporary forms that abuse can take. One unconventional method which has resurfaced recently in developed anti-trust jurisdictions is abuse by initiating frivolous litigation. While the Competition Commission of India (CCI) grapples with its first couple of alleged instances of frivolous litigation, a few issues arise for consideration. Firstly, the legal standards developed to assess whether the litigation is frivolous by other more advanced jurisdictions than the Indian jurisdiction are to be understood from a theoretical perspective. Secondly, the applicability of these legal standards within the framework of the Indian competition legislation, i.e. the Competition Act, 2002 (Act) is to be assessed and may need a detailed exploration.
Frivolous Litigation as an Abuse of Dominance
2. In general terms, litigation is termed as a sham when it is initiated by a dominant undertaking to cause anti-competitive harm, via the inappropriate use of adjudicatory / government processes or legal rights. Usually, the aim behind any ‘sham’ litigation is to either subdue a competitor by increasing operational costs or to delay the entry of a competitor in the market by an abuse of governmental processes. The resultant effect is that the competitor is forced out from the relevant market or its entry into potential markets is foreclosed. When a party’s initiated litigation is not a justifiable recourse under law or may not be backed by a valid cause of action, such litigation is termed as frivolous and may become an abuse of dominance. In cases where sham litigation has been proven, it is seen that the entity abusing its dominance usually has much economic prowess, which remains undaunted by the meagre expense of initiating litigation.
3. In the more mature anti-trust jurisdictions such as the U.S. and the E.U., ‘frivolous litigation’ as a form of abuse has gained a sense of definition from dictums laid down in case laws. It is also seen that the outcry of litigation being frivolous / vexatious in nature arises most in cases entailing an enforcement of intellectual property rights, owing to the contentiously subjective and evolving nature of such rights as well as the huge potential of monetary revenue which can be generated from their usage. Therefore, such cases usually present a complex factual matrix in which maintainability is seldom an issue, as litigations entailing enforcement of intellectual property rights involve contentious questions of law, and are likely to be adjudicated as preliminarily meritorious and as having a basis.
Foundations in the jurisdiction of United States
4. In the United States, the idea of ‘frivolous litigation’ as a form of abuse can be traced back to the Noerr-Pennington doctrine, which derives its name from two cases decided by the Supreme Court in the 1960s, Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc.2 (Noerr) and United Mine Workers of America v. Pennington3 (Pennington). In Noerr, trucking companies and their association sued a group of railroads alleging that the railroads wanted to monopolise the freight business. Truckers alleged that railroads had engaged a public relations firm, to carry out a publicity ‘smear’ campaign, to create distaste in the minds of the general public and influence legislation, eventually getting the government to veto a bill which would have permitted truckers to carry heavy loads across the state. The United States Supreme Court (SCOTUS) held that antitrust laws were not violated by the railroads’ mere attempt to influence the passage or enforcement of laws. Mere solicitation of government activity was not violative of anti-trust laws, irrespective of the incidental effects of such activity being anti-competitive. Similarly, in Pennington, it was held that concerted efforts to influence public officials did not violate antitrust laws even though it might have intended to eliminate competition.