Regulating regulators: No space for turf wars about institutional primacy

The Competition Commission of India (CCI) recently published its market study on the telecom sector in India. It acknowledges that competition regulation could also involve a breach of data protection rules. This could lead to more than one regulator looking at the same issue. This indicates a trend where several regulators seem to be turfing in on CCI’s jurisdiction.

Nitin Gadkari, for instance, recently suggested that GoI introduce a regulator for the steel and cement industries to tackle collusion in these sectors. Further, GoI invited comments on a draft Indian Ports Bill in 2020 that proposes concurrent jurisdiction of the ports authority and CCI. Similarly, GoI has proposed a new ecommerce regulator whose powers to address issues of access to data and deep discounting may overlap with CCI’s. The new consumer protection authority and its ecommerce rules may also intersect with CCI over issues such as unfair or discriminatory pricing and search ranking.

The Supreme Court had clarified in its Bharti Airtel decision that CCI retains the jurisdiction to assess competition issues involving enterprises regulated by sectoral regulators. However, if a sectoral regulator is reviewing issues necessary for CCI to determine a violation of the Competition Act, CCI must defer its inquiry until these issues are settled. That said, the court did not consider a case where a regulator exercises similar powers as CCI.

CCI has tackled cases where the sectoral laws included competition powers. For example, the Electricity Act 2003 empowers the appropriate commission (state or central) to address anti-competitive agreements, abuse of dominant position and transactions (mergers and acquisitions) related to electricity. While deciding a case involving power discoms in Delhi about allegations of overcharging users through manipulated meters, CCI sought Delhi Electricity Regulatory Commission’s (DERC) opinion over overlapping jurisdiction. In its response, DERC acknowledged competition issues should be addressed by CCI, while DERC should focus on technical matters like power tariffs. Recently, Sebi and CCI were involved in a tussle over a complaint that alleged collusion between credit rating agencies (CRAs). Sebi asked CCI to not examine this complaint as Sebi is the regulatory authority to address allegations of collusion against CRAs. But CCI proceeded to decide this case based on the Supreme Court’s observations in the Bharti Airtel case.

Recognising the challenges of concurrency, Britain enacted the Enterprise and Regulatory Reform Act, 2013, and the Concurrency Regulations, 2014, to design processes to apply concurrent competition powers. The rules established the Competition and Markets Authority (CMA) to enter into formal MoUs (and cooperate informally) with sectoral regulators to allow the exchange of information and staff between the regulators, determine who has jurisdiction in a specific case, prevent simultaneous exercise of authority, etc.

Usually, the factors considered to decide case allocation include the sectoral knowledge required, previous experience of addressing similar issues, previous contacts with the involved parties or complainants, and whether a complaint affects several sectors. Nevertheless, the antitrust regulator retains the ability to exercise jurisdiction even where a case has been allotted to a sectoral regulator if it believes doing so would ‘further the promotion of competition’ (in consultation with the sectoral regulator).

The main issue is the possibility of conflict of decisions and confusion about which regulator has institutional primacy. This would also increase costs for companies and add a regulatory burden of multiple litigations, and ensuring compliance with regulations. Without demarcations of jurisdiction, the existence of multiple regulators also creates a risk of ‘forum shopping’, where a litigant gets to choose where to pursue his case, usually to achieve a favourable outcome.

Several laws like the Competition Act and the draft Indian Ports Bill have an overriding clause that allows provisions in these legislations to be enforced, despite anything inconsistent contained in any other law. This aggravates the existing tussle for jurisdiction.

To address these challenges, India should accord primacy to CCI to address competition enforcement, and sectoral regulators should enforce regulations unique to their sector. CCI has institutional experience in addressing competition disputes. Most sectoral laws in India don’t contain a framework to assess competition disputes. And the Competition Act allows for private enforcement and imposition of damages. Therefore, CCI is better placed to adjudicate competition issues and achieve higher standards of enforcement than sectoral regulators.

India can follow Britain’s example and require formal referrals to sectoral regulators for expertise without delegating the competition enforcement powers. Currently, CCI has a discretionary referral power to seek a non-binding opinion of another regulator. A potential cooperation framework could encourage the exchange of staff between the regulators, the right to participate or observe proceedings, joint market studies, etc. Achieving this legal certainty will stimulate a business-friendly environment in India.

This article was first published on The Economic Times Prime on March 16, 2021.

Authors:

Aditi Gopalakrishnan, Partner
Mohith Gauri, Associate

Published In:The Economic Times
Date: March 18, 2021