Jurisdictional Conflicts: Reconciling the Mandates of the Telecom Regulator and the Competition Commission

Introduction and Background

The commercial landscape in India is characterised by the presence of several regulators, each tasked with regulating different types of conduct or different sectors. The mandates of regulators have led to jurisdictional conflicts that have resulted in protracted legal proceedings, evidenced by the ongoing tussle between two regulators – the Competition Commission of India (‘CCI’) and the Telecom Regulatory Authority of India (‘TRAI’) – on regulation of the telecom sector in India.

CCI is a sector-agnostic regulator tasked with preserving and promoting competition in India. In carrying out its mandate, CCI regulates conduct in sectors that are characterised by specialized sector-specific regulators, such as the telecom sector. TRAI is a sectoral regulator tasked with regulating telecom services, and promoting and ensuring orderly growth of the telecom sector in India.

The debate on the appropriate authority to regulate competition in the telecom sector has often been discussed, but has become the subject of some debate recently. In February 2017, when TRAI issued a Consultation Paper on Regulatory Principles of Tariff Assessment (‘TRAI Consultation Paper’) seeking stakeholders’ opinion on various issues such as transparency in tariff offers, non-discriminatory offers and predatory pricing by operators, the Chairman of CCI wrote in response that it was the CCI’s domain to assess market dominance and predatory pricing and that CCI alone had the “technical capacity and the supporting statutory framework” to delineate the relevant market and assess abuse of dominant position.[1]

The tension between the two regulators escalated when the Bombay High Court set aside the order of CCI directing a probe against Bharti Airtel Limited, Vodafone India Limited and Idea Cellular Limited on the basis of complaints of cartelization made by Reliance Jio, alleging that the three telecom operators were preventing Reliance Jio from building its customer base. The Bombay High Court ruled that CCI had no jurisdiction to interpret contract conditions or policies of the telecom sector, which was governed by the Telecom Regulatory Authority of India Act, 1997 (‘TRAI Act’).[2]

CCI moved the Supreme Court of India (‘SC’) in December 2017, claiming that any dispute pertaining to anti-competitive practice or abuse of a dominant position in the market fell within its exclusive domain, regardless of the existence of a sectoral regulator. TRAI then filed an application of intervention before the SC to oppose attempts by CCI to secure exclusive jurisdiction in matters of competition law even in the telecom sector.

Further, on February 16, 2018, TRAI issued a tariff order on predatory pricing (‘TRAI Tariff Order’)[3], which imposed a penalty of ₹ 50,00,000 (approx. US$ 75,000) per circle for each tariff plan that was deemed predatory and changed the definition of significant market power (‘SMP’), giving pricing flexibility only to operators with less than 30% of the market’s subscribers or revenue and scrapping volume of traffic and network capacity as criteria.

Roles of CCI and TRAI

The mandate of CCI, as set out in the preamble of the Competition Act, 2002 (‘Competition Act’), specifies that it must prevent practices having an adverse effect on competition and promote and sustain competition in markets. CCI is a market referee and not a sectoral regulator. An important distinction between a market referee and a sectoral regulator is that CCI’s intervention is usually ex-post, while a sectoral regulator is entrusted with the function of regulating the market ex-ante to ensure that the sector functions efficiently.

The TRAI Act explicitly excludes the jurisdiction of TRAI in relation to matters relating to monopolistic and restrictive practices that fell under the jurisdiction of the erstwhile Monopolies and Restrictive Trade Practices Commission. However, after the enactment of Competition Act in 2009, the TRAI Act has not been amended in relation to anti-competitive agreements and abuse of dominant position. Notably, the Competition Act prescribes for voluntary consultation between CCI and the sectoral regulator, but the opinion of CCI is not binding on the sectoral regulator, and vice versa. It is relevant to note that Section 60 of the Competition Act clarifies that the provisions of the Competition Act should have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force. Further, per Section 62 of the Competition Act, the provisions of the Competition Act are in addition to, and not in derogation of, the provisions of any other law for the time being in force.

Flaws in TRAI’s approach to market regulation

The TRAI Tariff Order reflects adherence to the market-share model in examining allegations of predatory pricing. While the Competition Act allows for the possibility of a new entrant with deep pockets distorting the market, as a result of the TRAI Tariff Order, only an incumbent telecom operator who enjoys SMP can distort the market. TRAI’s observation that a telecom operator will be considered to have SMP only if it has a minimum of 30% share in a relevant market, means that it will not investigate a new entrant for predatory pricing even if it offers its services for free, since the new entrant will not have a minimum of 30% share of the relevant market. This also means that the actions of other more established incumbents, can be investigated for predatory pricing for matching the tariffs of new entrants.

Conclusion

Anti-trust regulators in other jurisdictions have been able to resolve similar conflicts between sectoral regulators and competition authorities by crafting specific exemptions in areas of conflict between sectoral regulators and competition authorities. India can benefit from the experience of other regimes by conducting a comprehensive review of the mandate of TRAI and CCI, and identify potential areas of conflict in the legislations underlying TRAI and CCI. This would ensure minimum friction between the sectoral regulators and CCI, and the reconciliation of the mandates of CCI and TRAI. The Competition Act, in its current form, allows CCI to make a reference to a statutory authority (and vice versa) in case any decision of CCI is on an issue entrusted to a statutory body (and vice versa). Indeed, the Bombay High Court, while setting aside the order of CCI directing a probe against Bharti Airtel Limited, Vodafone India Limited and Idea Cellular Limited on the basis of complaints of cartelization made by Reliance Jio, noted that CCI ought to have invoked the reference power under the Competition Act and consulted TRAI.

Further, the SC’s consideration of the conflicting mandates of CCI and TRAI will result in a conclusive determination of the roles of CCI and TRAI in regulating the telecom market, paving the way for effective utilization of CCI and TRAI’s resources and expertise.

[1]https://www.thehindubusinessline.com/info-tech/turf-war-rages-between-cci-and-trai-over-telecom-tariffs/article9791247.ece
[2] Order dated 21 February, 2017 in Writ Petition No. 8594  of 2017
[3] On 24 April 2018, the Telecom Disputes Settlement and Appellate Tribunal (‘TDSAT’) passed an interim stay order on the TRAI Tariff Order. On appeal by TRAI to the Delhi High Court, the Delhi High Court vide its order dated May 4, 2018 upheld the interim stay order passed by TDSAT.

Published In:Inter Alia Special Edition Competition Law June 2018 [ English
Date: June 13, 2018