The Jurisdiction of the Competition Commission of India (CCI):
As the common perception goes, the CCI was set up as the authority to regulate competition and check anti-competitive practices in India through the new Competition Act of 2002, as amended in 2007.
The preamble of the Competition Act of 2002 along with Section 18 of the Act, entrusts the CCI with the principal duty of promoting and sustaining competition in the Indian economy. Further, the provisions of the Act will be given primacy in case of inconsistency with provisions of any other legislations in force and will be read in conjunction with other statutes and not be read in derogation of the same. A combined reading of these sections shows that the CCI has the principal jurisdiction to regulate conditions of competition in the economy as a whole.
The Jurisdiction of Telecom Regulatory Authority of India (TRAI):
Set up under the Telecom Regulatory Authority of India Act, 1997, TRAI oversees regulation of telecommunication services in India. The objective of TRAI is to create and nurture conditions conducive to growth of the telecommunications industry in the country. Under section 11 (1) (a) (iv) of the TRAI Act, 1997, TRAI has powers to “facilitate competition and promote efficiency in the operation of telecommunication services so as to facilitate growth in such services”.
Section 14 specifically excludes from the mandate of TRAI “matters related to monopolistic, restrictive or unfair trade practices” that fell under the jurisdiction of the Monopolies and Restrictive Trade Practices Act, 1969 before it was substituted by the Competition Act of 2002. However, this substitution of the MRTP Act has not been accompanied by a parallel amendment to the TRAI Act.
The Conflict in Jurisdiction:
Among its objectives, TRAI seeks to provide a “fair and transparent policy environment which promotes a level playing field and facilitates fair competition”. In fulfilling its objectives, the work of TRAI overlaps with that of the CCI.
However, despite sharing a common goal, it is also true that sector regulators and competition authorities differ in their mandates and approach. Sectoral regulators co-exist and provide specialized regulation for their respective sectors as they possess extensive domain knowledge for the same. Competition laws seek to protect competition in the market, not the participants in the market, and aim to prevent anti-competitive activities in the same. Their goal is to maximise productive and allocative efficiency. The chief point of divergence between regulation of a sector and competition is that the approach of the sector regulator is direct while that of the CCI is indirect. In case of TRAI, its activities seek to pre-empt the possibility of market failure by instructing telecom service providers the actions that must be taken; the CCI on the other hand emphasises the need to inform market players about actions that should not or cannot be taken with a view of preserving competitive conditions, only intervening to remedy possible market failure (except in the case of merger review).
When TRAI regulates the tariff rates set by telecom service providers, one of the principal aims is to keep the tariffs reasonable for the consumer and prevent monopolistic practices. However, the same issue, when under the purview of the CCI, would have different implications. The CCI will look into the long-term effects of low tariffs which may become a restriction on the entry of new firms in the market who do not possess the same economies of scale as the current service providers, leading to inhibition of competition in the market. In order to protect competitive practices, the CCI would be in favour of keeping the tariffs at a rate higher than what could be provided to the consumers in the short run.
The difference in the approach of the CCI and TRAI towards the same issues and the fact that their jurisdictions overlap due to legislative oversight leads to cases of jurisdictional conflicts. This overlapping jurisdiction predates the current Competition Act and existed even in the era of the MRTP regime. In Star India Pvt. Ltd vs Sea T.V. Network Ltd. & Another, TDSAT made a ruling in an attempt to clarify the jurisdictional challenges between the MRTP Commission and TRAI. It observed that the MRTP commission had no jurisdiction over a dispute based on violation of a regulation made under the TRAI Act, even though the Regulation pertains to the subject of monopoly and restrictive trade practice. However, it also acknowledged that as given under the TRAI Act, anti-competitive practices would remain under the jurisdiction of the MRTP Commission.
More recently, in the Consumer Online Foundation v. Tata Sky Ltd. & Other Parties, Dish TV submitted that the CCI could not claim jurisdiction over this matter as TRAI and TDSAT were already vested with the “jurisdiction and responsibility to govern and regulate the telecommunication industry covering telecom, broadcasting and cable TV services…” The CCI held that any matter that raises competition concerns would fall within the purview of the Competition Act, thereby enabling CCI to exercise its jurisdiction.
Here, it is pertinent to note that the Competition Act limits the jurisdiction of the CCI to issues pertaining to competition alone. Therefore, TRAI is the sole regulating authority in the technical and economic matters of the telecommunication industry. The emergence of conflict is due to the fact that regulation of competition in such sectors often necessitates that the CCI also look into the technical matters. For example, in the COF v. Tata Sky case, the allegation was that the DTH service providers deliberately prevented interoperability and thereby the consumers had no option but to avail the DTH services of the company that sold them the hardware for the Set Top Box. The technological issue was with regards to the lack of technical interoperability amongst DTH providers. TRAI in fact, recommended the upgradation of technology in Set Top Boxes as well as the BIS standards for the same. This being a technical matter, the CCI looked into recommendations by TRAI before its decision. However, the overlap between the jurisdictions occurred due to the fact that this technical issue had to be looked into by the CCI in order to decide on matters of anti-competitive practices.
The CCI, in 2007, raised concerns over conflicts in jurisdiction due to the issue of TRAI’s recommendations on spectrum allocation and its consultation process on capping of number of service providers. The CCI strongly opposed the unilateral view taken by TRAI on the issue as and noted in a a letter dated July 13 that “the approaches mentioned in TRAI’s consultation paper are at variance with the Competition Act 2002 or even with generally accepted elements of competition analysis.” This is just one example of the ways in which the legislative ambiguity regarding overlap in the mandates of the CCI and TRAI affects the telecommunication sector and its regulation.
There are many other points of conflict that can be identified. Not only is the current legal position on jurisdiction ambiguous, there is no clarity with regard to choice of forum. The consumer may file his petition before either TRAI or CCI and approach the other if he is unsatisfied or his petition rejected by one forum. With respect to the setting of tariff rates, TRAI, under its objective of consumer protection, aims to ensure maximum consumer satisfaction. Thus, the low prices set by TRAI are in view of consumer benefit. However, this step to achieve a short term goal could be viewed by the CCI as a case of predatory pricing causing foreclosure of market to potential service providers. In the past, large telecom operators have made allegations of predatory pricing against new entrants. (Bharti Airtel asked the CCI to look into the matter of rock-bottom pricing by new entrants such as Telenor.)
Mergers and Acquisitions are another source of conflict between the sectoral regulator and the CCI as they have varying threshold for the same. TRAI allows for mergers and acquisitions where the total market share of the merged entity is less than 35% (in terms of Adjusted Gross Revenue or subscriber base or both) and does not allow the same if the share is more than 60%. The CCI looks at the possibility of an abuse of dominance situation or any anti-competitive results that may follow a merger rather than at a fixed percentage formula. The objective of the CCI and TRAI when approving mergers is also not exactly the same. Therefore, there may arise a situation where the CCI may allow mergers which violate the threshold set by TRAI or vice versa.
The overlapping jurisdictions between CCI and TRAI is a contentious issue. However, for the efficient functioning of the telecommunication sector, there is an urgent need for clarity on the mandate of both the CCI and TRAI.
Conclusion:
The role of sectoral regulators and the CCI may have overlaps, but neither can replace the other. Each has its own area of specialisation and expertise and more importantly, utility. Since both these bodies must co-exist, it is important that clarity in their mandate be brought about through concrete steps in that direction.
Various countries, having faced similar challenges, have evolved mechanisms to ensure a smooth functioning of the market. These models could be tailored to suit the needs of the Indian market and economy. For example, countries such as Ireland and Canada have adopted an approach whereby the Competition Authority and the sectoral regulators sign Memorandums of Understanding (MoUs) which effectively set out the roles of both.
The efficient utilisation of existing provisions of the Competition Act would also be of assistance. Under section 21 of the Competition Act, ‘Reference by Statutory Authority’, a statutory authority like TRAI can ask the CCI for its opinion on any issue which might be in contravention of the Competition Act and then take into consideration the opinion of the CCI before giving its final judgment. This could be made a mandatory practice where decisions of any sectoral regulator involve issues relating to competition and vice versa, through an amendment of the Competition Act.
Various procedural, administrative and legislative changes and modifications are required to ensure a formal mechanism of co-operation between the CCI and sectoral regulators. This would help bring in such a framework for interface as would provide us with the benefits of both the sectoral regulation and competition review and minimise the negatives of duplication of effort, inefficiency and conflicting jurisdictions.
Sources and References:
Interface between Competition and Sector Regulators, Ishita Gupta, Project Report, CCI, July, 2012, available at: <http://cci.gov.in/images/media/ResearchReports/Interface%20between%20CCI%20and%20Sector%20Regulators.pdf>
“TRAI And CCI Fighting Turf War”, Harsimran Singh, The Economic Times, 18 July, 2007, available at: <http://articles.economictimes.indiatimes.com/2007-07-18/news/28461865_1_consultation-paper-number-portability-trai-chairman>
Harmonising Regulatory Conflicts: A Study for the Indian Institute of Corporate Affairs, New Delhi, CUTS International & IICA, July, 2012, available at: <http://www.iica.in/Images/Regulatory.pdf>
“CCI and TRAI — Regulating in Harmony”, Samir R. Gandhi and Rahul Rai, Business Line, The Hindu, 24 April 2009, available at: <http://www.thehindubusinessline.com/todays-paper/tp-opinion/cci-and-trai-regulating-in-harmony/article1049961.ece>
This post has been authored by Sushruti Tripathi, SITC member and third year student at the West Bengal National University of Juridical Sciences.
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