Dec 31, 2018

Supreme Court Rejects Appeal on Cartel Investigation against Airtel, Vodafone and Idea

On December 5, 2018 the SC dismissed CCI’s appeal against an order of the Bombay High Court (‘BHC’) setting aside CCI’s order directing the DG to investigate allegations against Bharti Airtel Limited, Vodafone India Limited, Idea Cellular Limited (‘IDOs’) and the Cellular Operators Association of India (‘COAI’) (‘Impugned Order’).[1]

It was alleged that IDOs had cartelized to deny Reliance Jio Infocomm Limited (‘RJIL’) entry in the telecom sector by not providing it adequate Points of Interconnection (‘POIs’), resulting in calls failures between RJIL and other networks. POIs are “points between two network operators which allot voice calls originating from the work of one operator to terminate on the network of the other operator.” Further, a smooth connectivity amongst different telecom service providers is ensured by unified licenses, which put an obligation over the telecom service providers to interconnect with each other on POIs. This is subject to compliance of regulations and directions issued by the Telecom Regulatory Authority of India (‘TRAI’).

Meanwhile, RJIL had also filed letters to the TRAI complaining against the conduct of the IDOs. It was alleged by RJIL that IDOs were inter alia denying mobile number portability (‘MNP’) to customers who wanted to switch to RJIL, and that the COAI was acting against RJIL at the behest of the IDOs.

On the basis of four separate writ petitions filed before it, the BHC set aside the Impugned Order on September 21, 2017. The BHC had held that the telecom sector is governed, regulated and controlled by certain special authorities i.e. the TRAI Act and the Indian Telegraph Act, 1885 (‘Telegraph Act’), and CCI does not have the jurisdiction to deal with interpretation or clarification of inter alia contract clauses, unified license, interconnection agreements, quality of services regulations, which are to be settled by the TRAI/ Telecom Disputes Settlement and Appellate Tribunal. The BHC further held that the powers of CCI are not sufficient to deal with the technical aspects associated with telecom sector which solely arise out of the TRAI Act.

The SC held upheld the BHC’s finding that the relevant market in the present case being the telecom market, was therefore regulated by the statutory regime under the TRAI Act. The TRAI Act establishes the TRAI as the regulator exercising supervision and control and providing guidance to the telecom market, and telecom service providers are bound by license agreements between the central government and the service providers. Further, the functioning of telecom operators, who are granted license under Section 4 of the Telegraph Act, is regulated by the provisions in the TRAI Act.

TRAI’s functions include: (i) ensuring technical compatibility and effective inter-relationship between different service providers; (ii) ensuring compliance of license conditions by all service providers; and (iii) settlement of disputes between service providers. In this regard, the SC noted that RJIL’s disputes were captured within TRAI’s functions. Moreover, RJIL had also specifically approached the TRAI for settlement of these disputes.

The SC further stated that unless the TRAI were to find fault with the IDOs on the allegations raised by RJIL, the matter could not be taken further even if one were to assume that CCI has the jurisdiction to deal with the matter.

The SC also noted that if CCI were allowed to investigate matters that are already being decided by the TRAI, it may lead to conflicting views being given by the two bodies. However, the SC also noted that TRAI does not have the exclusive jurisdiction to deal with competition law issues in the telecom sector. The specific purposes of the TRAI Act and Competition Act have to be kept in mind before deciding on jurisdiction; while CCI has the sole jurisdiction to address allegations of anti-competitive agreements, and investigating against cartels, a comity has to be maintained between CCI and TRAI’s roles in the present case. Therefore, once the TRAI deals with the issues of RJIL with a prima facie finding of cartelization between the IDOs, the CCI would be allowed to investigate the case.

Separately, while discussing the decision in Competition Commission of India v. Steel Authority of India Limited (‘SAIL’), the SC disagreed with the BHC’s conclusion that the Impugned Order is quasi-judicial. The SC held that a jurisdictional challenge is maintainable in writ petitions even against an administrative order. However, given that the Impugned Order is administrative in nature i.e. it only contemplates a direction to the DG to investigate, the SC held that BHC would not be competent to adjudge the validity of such an order on merits.

In light of the above, the SC upheld the BHC’s direction to set aside the Impugned Order passed by the CCI.

[1] Civil Appeal No(s). 11847-11851 of 2018.




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