Introduction:

The advent of mediation proceedings in alleged non-cartel or abuse of dominance cases was introduced in section 48A of the Competition Act (‘Act’) vide the Competition (Amendment) Act, 2023, and elaborated subsequently in the Competition Commission of India (Settlement) Regulations, 2024. Internationally, statistics suggest that between 2015 and 2020, settlements have become a general norm in both OECD and non-OECD countries. While the widespread deployment of private enforcement tools enhances procedural efficiency and helps mitigate excessive litigation, these tools require regulatory oversight to assess potential harm in the market.

In December 2024, the Hon’ble Supreme Court (‘SC’) of India, via its appellate jurisdiction, upheld the verdict of the Hon’ble Delhi High Court in the case of JCB vs Competition Commission of India. The High Court of Delhi emphasised that the substratum of the proceedings by the Competition Commission of India (‘CCI’) is lost once the informant and the person against whom the information is filed have accorded a settlement. However, the court underscored that the settlement itself shall undergo antitrust scrutiny, clarifying that the aim is not to disregard the ‘in rem’ nature of proceedings before the CCI. 

While the ruling determined certain key issues, the larger issue that remains unresolved is: How can mediation proceedings be effectively balanced with the persisting anti-competitive threats in the market? The fundamental challenge lies in ensuring that mediation proceedings facilitate pro-competitive effects in the market. This article explores relevant precedents and ongoing malpractices associated with mediation proceedings in the antitrust sector. Further, it shall also examine the existing mechanisms aimed at fostering efficient mediations between parties.

The Strategic Use of Settlements: Between Compliance and Concealment:

Private settlements in India can expedite procedural intricacies of litigation and advance new mechanisms of out-of-court arrangements. However, the impact of such settlements falls heavily on market structures, ultimately causing their distortion. Internationally, the Federal Trade Commission estimated that pay-for-delay settlements cost taxpayers, insurance companies, and consumers $3.5 billion per year. This market distortion facilitates increasing concerns of dominant firms abusing small firms and escaping accountability as a result of mediation. In instances of non-judicial intervention, any dominant firm with a greater share in the relevant market can easily influence or coerce the small firm to comply with anti-competitive practices, which can potentially reduce competition in the market. Furthermore, if market dominance by larger firms goes unaddressed, it could potentially slow the pace of innovation and make it more difficult for smaller firms to sustain themselves in a competitive environment.

With the looming threats of appreciable adverse effects on the competition, the Hon’ble Madras High Court in the case of Tamil Nadu Film Exhibitors vs CCI delved into the permissibility of private settlements under the Act. The court affirmed the importance of scrutiny of settlements in CCI proceedings and recommended a three-fold step : (i) The settlement must not result in continuation of anti-competitive practices; (ii) It should not allow the abuse of a dominant market position to persist, and (iii) the settlement must not harm consumer interests or restrict freedom of trade. This three-pronged test endorses mandatory regulatory oversight of settlements to avoid the perpetuation of anti-competitive practices. 

Although the Delhi High Court in JCB vs CCI followed the Madras High Court’s three-fold step, it was misconstrued to be suggesting the removal of CCI intervention from the settlement. Instead, the ruling only restricted CCI’s role to reviewing the settlement, rather than adjudicating the case that had already been resolved privately between the parties. The goal was to balance the parties’ autonomy to choose a mechanism for resolving the issue and uphold the rules of fair competition under the Act. The Delhi High Court directed CCI to dispose of the application since any future deliberations on a settled issue shall be against the rights of the parties. However, this doesn’t deprive CCI of its power to review the settlement applications as submitted and decided by the parties.

The misinterpretation of the JCB vs CCI was seen as diluting CCI’s authority and effectiveness as a market watchdog. The position can be observed through the bare reading of section 48(A)(5) of the Act, which gives powers to the CCI to reject any application being submitted under settlement provisions if the Commission finds the proposal offered by the party not suitable, and it can proceed with its inquiry under section 26 of the Act. These powers aim to establish an equilibrium between CCI’s scope of powers and the autonomy of the parties involved. Therefore, courts have not taken a contradictory approach to the settled principles of law in the recent past.

Before proceeding further, it is pertinent to understand the common causes of mediation concerns under the antitrust regime. While identification of abuse of dominant position as one of the impediments in mediation is acknowledged by the courts, the narrower causes behind the exploitative practices of dominant firms have not yet been developed in the Indian jurisprudence. One of the causes that shall be discussed is Sham Litigation.

Sham litigation refers to frivolous anti-competitive lawsuits often initiated by dominant firms not to secure legal relief, but to harass smaller rivals, inflate their costs, or create entry barriers. Even the mere filing of a suit can damage a smaller non-dominant firm’s market standing. When these disputes are privately settled, often through mediation, the anti-competitive intent remains concealed. Settlements allow dominant firms to avoid scrutiny, masking bad faith under no-fault agreements and leaving market harm unaddressed, thereby eroding the deterrent function of competition law enforcement. 

Referring to the JCB v CCI, the allegations of litigation were treated as a valid ground for judicial review. Any settlement that is a result of a ‘sham litigation’ or an abuse of process is against the public interest and shall be prima facie construed as anti-competitive. Therefore, sham litigation is a practice employed by the dominant firms to exploit their position in their relevant market, and any settlement in pursuance of such practices shall invite a judicial probe.

The approach to mediation under antitrust regimes is more advanced in other countries than in India. The following section explores the prominent jurisprudential perspectives concerning the interplay between antitrust enforcement and settlement proceedings. 

Global Perspectives:

The global jurisprudence surrounding settlements between parties in competition law has evolved significantly over time. The European Commission and the United States have, in several instances, permitted private settlement between the parties which shall be discussed in this section.

The European Commission, in the case of AstraZeneca AB v. EU Commission, has upheld that private settlements will not negate a regulator’s duty to ensure the competitive health of the market. The Court of Justice of the European Union ruled that the private resolutions between the parties should not be a shield against regulatory oversight. However, in contrast, the UK has recognised private settlement in the British Marine Federation, and British Waterways case, where scrutiny was limited to preventing anti-competitive conduct, rather than upholding the entirety of competition law. While US jurisprudence has allowed private settlements between parties, these settlements often eliminate market competition. This is clarified in the ruling of AOL’s Antitrust lawsuit against Microsoft, where the settlement was concluded in favour of AOL, resulting in the distortion of competition in the market. Nevertheless, the US district court in re New Mexico Natural Gas Antitrust Litigation has affirmed that parties will be responsible for the antitrust conduct in consequence of their settlement. It clarified that immunity does not apply if legal action is a sham used to mask anti-competitive behaviour rather than to pursue a legitimate claim. 

The global competition law framework illustrates that while private settlements can facilitate efficient dispute resolution, they cannot operate outside the scrutiny of competition authorities. The inherently public nature of competition law arises from its objective to preserve market structure and protect consumer welfare, and private agreements that escape oversight risk undermining these objectives. The above discussed jurisprudence of several countries demonstrates the competitive effects of settlements, rather than merely the intent of parties, are critical for evaluation. This reflects that settlements that foreclose market access, distort pricing, or impede innovation invite regulatory intervention. Moreover, institutional safeguards are essential to prevent dominant firms from exploiting settlements to suppress rivals or entrench market power. Consequently, the regulatory framework must strike a careful balance between permitting efficiency benefits of settlements while maintaining the vigilant oversight as a watchdog, thereby reinforcing the broader objectives of competition policy in Indian markets. 

Way Forward:

Following the above discussions, the CCI’s role as an interventionist asserts the position of the judiciary in evaluating the effects of settlement on the market. The core legal issue is to establish a nuanced approach that balances efficient mediation with mandatory competition requirements.

Steps taken ahead of rising antitrust concerns can aid in mitigating this issue, and a more procedurally compliant solution can be adopted. One of the adopted measures can be to formulate a public interest test that mandates the ex-ante requirement of the settlement application under Section 48A to qualify basic conditions like: (i) Does the settlement restore Competition? (ii) Is there transparency about market impact? and (iii) Are third-party interests protected? Such an ex-ante approach will enable the CCI to scrutinise the settlement proposal in its preliminary stages alongside the process-driven compliances.

Another ex-ante measure to aid settlement proceedings is the establishment of a screening mechanism alongside the provisions of section 48A of the Act. On receipt of the Director General’s report under section 26 of the Act, this screening mechanism can look into the various alleged antitrust contraventions as suggested by the investigation. This provides a double-tier process to ensure quality compliance and scrutiny. 

In conclusion, while mediation serves as a viable dispute resolution mechanism, its alignment with competition law mandates remains critical. Ensuring regulatory oversight, transparency, and public interest safeguards shall uphold market integrity. As jurisprudence evolves, India must tailor its antitrust approach to preserve competitive fairness without undermining the value of efficient settlements.

About the Author

Ananya Singh and Nandini Srivastava are fourth-year B.A. LL.B. (Hons.) students at the Institute of Law, Nirma University, Ahmedabad. They have a keen interest in antitrust law.