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India – CCI Orders Investigation Against Ericsson For Alleged Abuse Of Dominant Position.

27 January, 2014

 


On November 12, 2013, CCI directed DG to investigate into the allegations made by Micromax Informatics Limited (‘Micromax’) and determine if the conduct of the opposite party, Telefonaktiebolaget LM Ericsson (Publ) (‘Ericsson’) violated any provisions of the Act.
Specifically, Micromax alleged that Ericsson, the holder of a number of Standard Essential Patents (‘SEPs’) in 2G, 3G and 4G technologies, had abused their resultant dominant position by demanding unfair, discriminatory and exorbitant royalty for use of such SEPs. It further claimed that Ericsson is the sole licensor for the SEPs of globally acceptable technology standards, and was well aware that there was no alternate technology available. Micromax further alleged that the royalty demanded by Ericsson was excessive when compared to royalties charged by other patentees for patents similar or comparable to the patents held by Ericsson.


In the information submitted to CCI, Micromax argued that the royalty rates imposed by Ericsson were not product based i.e. the royalty was not being charged on the cost of products licensed, but on the value of the phone in which the patented technology was being used. It was further argued that such arbitrary imposition of royalty was likely to hurt consumers. In turn, it was argued by Ericson that the Delhi High Court (‘DHC’) had issued an interim ex-parte order in its favour, and since the present dispute was of a commercial nature, CCI should not acquire the role of a price setter or concern itself with excessive prices.


CCI observed that Ericsson was a member of the European Telecommunications Standards Institute (‘ETSI’), which is a non-profit organization producing globally applicable standards for information and communication technologies. Holders of SEPs, like Ericsson, are required to grant irrevocable licenses on Fair, Reasonable and Non Discriminatory (‘FRAND’) terms to similarly placed players. CCI held that the relevant market, in the present case, would be the market for ‘SEPs in GSM compliant mobile communication devices’, and opined that the large number of SEPs owned by Ericsson with respect to 2G, 3G and 4G technologies gave it a dominant position in this relevant market.


CCI further observed that Ericsson appeared to be acting contrary to FRAND terms by imposing royalty rates which had no linkage to the value of the patented product. CCI also drew an adverse inference from the fact that Ericsson had not refuted any of the allegations made by Micromax in its complaint to CCI. With respect to the pendency of the matter before DHC, CCI opined that such pendency does not take away its jurisdiction to proceed under the Act against anti-competitive conduct.


In light of the above, CCI, under Section 26(1) of the Act, ordered an investigation by DG into the allegations made by Micromax and violations, if any, of the provisions of the Act.

 

AZB

 

For further information, please contact:

 

Zia Mody, AZB & Partners
zia.mody@azbpartners.com

 

Abhijit Joshi, AZB & Partners 
abhijit.joshi@azbpartners.com


Shuva Mandal, AZB & Partners 
shuva.mandal@azbpartners.com

 

Samir Gandhi, AZB & Partners
samir.gandhi@azbpartners.com


Percy Billimoria, AZB & Partners 
percy.billimoria@azbpartners.com

 

Aditya Bhat, AZB & Partners 
aditya.bhat@azbpartners.com

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