ENFORCEMENT / CONDUCT CASES
Abuse of Dominant Position
CCI holds existence of rights in subject matter a condition precedent to initiate abuse of dominance investigation
In an interesting abuse of dominance precedent, the Competition Commission of India (CCI) has declined to initiate an investigation into the allegation that SPS Steels Rolling Mills Limited (SPS Steels) had abused its position of dominance by restraining the use of its trademark, "Elegant".1
Facts of the case
SPS Steels, a manufacturer and seller of various metals, conducted its business under several trademarks including, "Elegant". SPS Steels had entered into a "brand sharing agreement" with the complainant - Prashant Properties Private Limited - a corporate entity engaged in the marketing and distribution of steel products. Through the brand sharing agreement, the complainant had the right to use the "Elegant" trademark for a period of 21 years.
Subsequently, SPS Steels underwent insolvency proceedings2 before the Kolkata bench of the National Company Law Tribunal (NCLT).
During the proceedings, the NCLT approved the resolution plan3 by Shakambhari Ispat and Power Limited (Ispat Power). As a result, Ispat Powers came to be in control of SPS Steels.
As part of the insolvency proceeding, the resolution professional4 moved an application for avoidance of the "brand sharing agreement" on the ground that it was an undervalued and fraudulent transaction.
Thereafter, Ispat Power issued a public notice stating that persons using the "Elegant" trademark were opening themselves up to civil / criminal liability. Aggrieved by the public notice, the complainant sought recourse before a civil court and the NCLT. However, both dismissed the matter for lack of jurisdiction.
CCI's observations and decision
The complainant approached the CCI claiming that the denial of the use of the trademark resulted in an abuse of dominant position.
Upon perusing the orders / decisions passed by the NCLT and the civil court, the CCI observed that the complainant's legal right over the trademark had been extinguished, pursuant to approval of the resolution plan. Given that the public notice was considered to be a safeguard against misuse of the trademark "Elegant", the CCI did not find any abusive conduct on behalf of SPS Steels and Ispat Power and closed the case.
Click here to access the order.
Key Takeaways
The CCI did not go into the question of defining a relevant market - which is considered the first step in allegations involving an abuse of dominant position. This was because the order of the NCLT pointed towards extinguishing of the right to use the trademark. Therefore, the CCI was of the view that the conduct of issuing the public notice was justified. Interestingly, in terms of India's insolvency and bankruptcy law, the NCLT on facts did not find merit in the resolution professional's claim that the brand sharing agreement was an undervalued and fraudulent transaction.
To view the full article please click here.
Footnotes
1 Prashant Properties Limited v. SPS Steels Rolling Limited (Case No. 17/2020) of 08 July 2020.
2 The insolvency resolution process is a process that may be initiated under India's bankruptcy law i.e., Insolvency and Bankruptcy Code, 2016 (IBC 2016) when a company defaults on making payments to its creditors.
3 A resolution plan is governed by the IBC 2016. In simple terms, it involves a proposal to provide a resolution to the problem of a company's inability to pay off debts.
4 In terms of IBC 2016, a resolution professional is a person appointed to conduct the corporate insolvency resolution process.
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