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The Supreme Court via the case of CCI vs Bharti Airtel has finally ended the conflict of jurisdiction between two regulators i.e. Competition Commission of India (CCI) and the Telecom Regulatory Authority of India (TRAI) by defining their roles in their respective fields. Through the aforementioned decision, the Supreme Court has also acknowledged the fact that each sector holds great significance because of the advent of globalization and liberalisation in India. Importantly, the Apex Court also rejected the argument put forth by Telecom companies and the TRAI that the jurisdiction of CCI is completely ousted in the Telecom sector. Recently, the Bombay High Court in a judgement dated 16.10.2019 reiterated that CCI must not intervene in the disputes pending before the Telecom Disputes Settlement and Appellate Tribunal (TDSAT). TRAI exercises ex-ante application while the CCI has ex-post stage application. It is argued that this oversimplified theory has, however, very little practical utility, as many cases have arisen which attract the concurrent application of both regulators. Therefore, exclusivity with regards to jurisdiction will be a problematic scenario. In this article, the authors put forth the idea that a consultation model should be developed and used to end the war between the overlapping provisions of the Competition Act and the Telecom Act.
The Jurisdictional Conflict
TRAI uses the market-share model in examining the allegations of predatory pricing. According to the Market-Share Model, only an incumbent telecom operator possessing “significant market power” (‘SMP’) can distort the market. One of the indicators of SMP is to hold directly or indirectly at least 30% of the market, which suggests that TRAI will not start investigation in any matter of predatory pricing against the entity not enjoying SMP, even if it provides its services for free. This also implies that TRAI can start an investigation against the existing big players of the telecom industry for predatory pricing if their tariffs don’t match with the new entrants. Various allegations have been made against TRAI regarding its criterion for SMP due to the fact that the criterion was giving an unfair advantage to Jio. On the other hand, the Competition Act under Section 4 is sufficiently equipped to deal with the new entrants having deep pockets and capability to distort the market. Therefore, to maintain a harmony between the two regulatory bodies, the Apex Court in Bharti Airtel case stipulated the guideline that if TRAI believes anti-competitive activities are practiced by any telecom operator, it will have to refer the issue to CCI for its opinion under Section 21 of the Competition Act. Recently, this guideline was utilised by the Bombay High Court in Star v. CCI, wherein it stayed the proceedings by CCI for non-adherence of procedure laid down under Section 26(1) Competition Act.
At this point, it is also important to mention that the Competition Act was never intended to oust the jurisdiction of other sectoral regulators. A reference in this regard must be placed on the case of M/s, HT Media Ltd. v. M/s Super Cassettes Industries Ltd which involved a conflict between the jurisdiction of CCI and the Board of Copyright. The CCI portraying prudence admitted that determining the license fee was within the jurisdiction of the Board and not CCI. At the same time dealt, the CCI proceeded to deal with the issues falling under Section 3 of the Competition Act.
In Telefonaktiabolaget LM Ericsson (Ericsson) v CCI and Anr, the court held that the power of CCI to deal with issues concerning abuse of dominance or anti-competitive activities cannot be taken away even if the patent act provides remedies for the same through a grant of compulsory license. After looking into the pronouncements mentioned above, it can be said that the approach used by the courts was to distinguish the role of different regulators and allow them to do what they do best. The CCI follows a holistic approach having prowess in wide competition issues for the efficient functioning of the market, whereas other sectoral regulators are experts in areas such as the grant of a license, tariff rates or license fees, entry conditions, technical details and other dynamics about its specific sector.
Therefore, CCI should not indulge in the technicalities of the telecom sector, for example, determining tariffs or setting technical standards for delivery. However, any competition law concern arising from the primary functionaries of the telecom sector should to be left for the CCI to deal with, ensuring competitiveness in the market being their forte.
Further, it must be pointed that most of the sectoral laws in India do not concretely outline competition objectives. At the same time, they also lack parameters for analysis of market failures. The Competition Act is footed on the twin principles of private enforcement and imposing damages. This protection is absent in most of the sectoral laws in India. The twin principles together equip the CCI to achieve higher market standards.
This turf war is not exclusive to India and has been witnessed by several countries including advanced competition law jurisdictions such as the United States and the European Union.
Interestingly, the Trinko case from the United States raised the very same question that arose in Jio. In Trinko, Court noted that the Telecommunication Act is not immune from the application of antitrust laws. Therefore, both laws will be applied simultaneously. The Court also made it clear that the application of Sherman Act is very limited in sector-specific laws.
Deutsche Telecom’s case from the EU also dealt with the similar issue of margin squeeze. The regulatory authority of Germany had approved Deutsche Telecom’s tariff prices to its customers. Despite the approval, the suit was filed before the European Commission regarding margin squeeze. In this case, despite the regulatory body’s subsistence, the Commission under Article 102 of TEFU stepped-in and held the practice to be abusive. This judgment was upheld in appeal by the General Court and Court of Justice of the European Union.
On the face of it, it may seem that these two cases are contradictory. Although, if we carefully scrutinize them, we will find that there is adequate room for the application of both Acts. To put it differently, in the Trinko case, the regulator had provided access to local loops, limiting the scope of competition law. However, in the Deutsche Telecom case, a gap was created by the regulation which could only be fulfilled by the application of competition law. If competition law was not applied, consumer welfare would have been adversely affected.
The legislature after keen observance of the cases deciphered the roles of CCI and other Sectoral Regulators according to their respective mandates. Sections 21 and 21A of the Competition Act, 2002 are to play a huge role in solving the jurisdictional conflicts. Both provisions demarcate the jurisdiction into firstly, economic activity not supervised by any statutory authority and secondly, economic activity supervised by a statutory authority.
At the same time, Section 61 and 62 portray a balanced approach. The former section provides primacy to the act in case of any conflict whereas the latter states that the provisions of the competition act should not be read in derogation of other statutes. Both the sections combined together depict a balanced approach. To elaborate this further, it is imperative to mention a litmus test which was propounded by the CCI in one of its reports which states that, “the jurisdiction belongs to the regulator whose statute is ‘necessary and sufficient’ to inquire into without having to import the provisions of the other’s statute”. This test should be used to allow the CCI to deal with all the spheres concerning market competition because the act is necessary and sufficient in that regard. At the same time, a compulsory requisite for seeking guidance from other sectoral regulators should also be there. In case of a clash between provisions of similar nature, for example: abuse of dominance, both the CCI and the Sectoral Regulators should work together keeping in mind the jurisdictional limits of each other. Therefore, adopting a model of consultation would satisfy the ideology of the legislators with which they incorporated Sections 21/21A and Sections 61/62 in the Competition Act. It would be imperative to state that consultations under Sections 21/21A have to be made mandatory for the proper functioning of this model. The authors also believe that an MOU should be signed between the bodies to enjoy the benefit of each other’s prowess swiftly.
After looking into various judicial precedents and the prevalent provisions in the act, it is clear that the consultation model is the most viable option for putting a full stop to this tussle. An amendment is required in the Competition Act to make the consultation compulsory and binding, as under the current scenario consultation is not a requisite. CCI is well versed in dealing with the complexities to safeguards the interests of the market as well as the consumers and therefore, inclination should be on the shoulders of the CCI whenever issues concerning market competition arise. At the same time, other regulators’ jurisdiction should not be jeopardized.
(This post has been authored by Rohit Shrivastava and Ranjeet Soni, 4th year law students at Institute of Law, Nirma University and RMLNLU, Lucknow respectively)
- The Competition Act (2002), s 4. ↑
- The Competition Act (2002), s 21. ↑
- 2019) 2 SCC 521. ↑
- The Competition Act (2002), s 19(1)(a). ↑
- Telecommunications Act (1996). ↑
- Sherman Anti-Trust Act (1890). ↑