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This piece has been authored by Ms. Ananya Madhusudan, Partner at INMACS Law Office.
Introduction
Telecommunication Industry in India has always been considered as a prominent accomplishment of the economic liberation during the late 1990’s. The telecommunication sector has seen a drastic change in its holding from being solely dominated by the Department of Telecommunications (‘DoT’) to various private operators entering the sector and providing facilities such as international calling, internet services and expanding into other branches of telecommunications. While the growth of the telecommunication industry has been phenomenal, there exists a feeling of disgruntlement amongst the private operators.
The nation has witnessed multiple allegations against the private operators by the telecom regulator (TRAI) on grounds of cartel formation,[i] predatory pricing,[ii] and abuse of dominance.[iii] The above issues make the Competition Act a very important factor in the telecommunication sector in India. At this juncture, it is necessary to understand that competition law seeks to remove practices which restrict market entry and aims to ensure that the market is conducive to promoting and sustaining competition, it is not limited to one sector but rather overlooks the entire economy. On the other hand, the task of the TRAI is to regulate the telecommunication industry by fixing the standards of terms, tariffs and so on. It is nevertheless true that both these authorities have certain common objective; however they are delegated with different function and levels of supervision. This article aims to analyze the conflict between TRAI and Competition Commission of India (CCI) in light of the recent precedents.
Competition Act, 2002
The Competition Act came into existence in the year 2002 with the object of eliminating any practice which hinders competition, protects the interest of consumers and ensures the freedom of trade as enshrined in the Constitution of India. While, the mandate of CCI is wide spread and is not limited to any specific sector, the Competition Act, 2002 by way of Section 21 stipulates cooperation between CCI and various sectoral regulators. As per Section 21 of the Act, the sectoral regulator may refer any issues to the CCI, if there is any conflict between the Act and the existing sectoral regulations. It is necessary to note at this point, that there is no imposition on the sectoral regulator to abide by the decision of the CCI, the opinion so formed by CCI acts only as non-binding point of view and creates no obligation on the sectoral authority to act upon it.
TRAI
One of the main objectives of TRAI is to provide a fair and transparent policy environment which promotes a level playing field and facilitates fair competition.[iv] As per Section 11 of the TRAI (Amendment) Act, 2000, the broad functions of the TRAI are to provide recommendations on issue arising in the telecom sector, fixing tariffs and rates of telecom services and any other functions as entrusted by the Central Government. At this juncture, it is pertinent to note that the recommendations made by TRAI are not binding in nature on the Central Government. The TRAI Act also has the power to call for information[v] and to conduct investigations and issue any directions depending upon the facts and circumstances of the case.[vi]
CCI v. Bharti Airtel Limited & Others[vii]
The Supreme Court on 5th December, 2018 clarified the roles of CCI and Telecom Regulatory Authority of India while examining the interplay of responsibilities between the two regulators.
The case came into light in the year 2017, when CCI acting on information filed by Reliance Jio Infocom Limited (“Jio”) wherein Jio had alleged that various telecom service providers such as Bharti Airtel Limited, Vodafone India Limited, Idea Cellular Limited and the Cellular Operators Association of India were not acting in accordance with the interconnection agreements in place. Jio, on the basis of above allegation and under Section 19(1) of the Competition Act, 2002 requested the Director General of CCI to investigate the matter. Jio further contended that the abovementioned telecom service providers were not honoring the agreement amongst themselves by not providing access to points of interconnection to Jio which was in turn a violation of the terms and conditions of the Unified License issued by the Department of Telecommunication. Jio further alleged that the abovementioned telecom service providers had colluded in order to deny market access to Jio thereby resulting in call failures between Jio and other networks.
After hearing arguments of both the parties, CCI had directed the Director General to carry out a detailed investigation into the matter under Section 26(1) of the Act. The order of the CCI was thereafter challenged by the abovementioned telecom service providers before the Bombay High Court. Upon further investigation, the Bombay High Court, set aside the order of CCI and held that CCI has no jurisdiction to deal with interpretation or clarification of any “contract clauses”, “unified license”, “interconnection agreements”, “quality of services regulations”, etc., which are to be settled by the TRAI or Telecom Disputes Settlement and Appellate Tribunal (‘TDSAT’).[viii] The judgement of Bombay High Court in this matter rested primarily on the reasoning that Telecom Regulatory Authority of India Act, 1997 and Competition Act, 2002 were two distinct and independent statutes and hence, they are required to discharge their functions in accordance with the provisions of their respective statutes.[ix] The CCI and Jio both filed their respective appeals before the Supreme Court challenging the decision of the Bombay High Court.
The main issue which was to be adjudicated before the Supreme Court was whether the CCI had jurisdiction to look into the allegations of collusion amongst the abovementioned telecom service providers?
The Supreme Court first defined the roles of the two sectoral regulators by stating that:
1. TRAI’s functions are to primarily ensure technical compatibility and effective inter-relationship between different telecom service providers, to ensure that all the telecom service providers are complying with the license conditions and to ensure amicable settlement of disputes between the service providers.[x]
2. On the other hand, CCI has been given the responsibility to eliminate any practices which have an adverse effect on the competition. Its purpose is to promote and sustain competition and to protect the interest of the consumers and ensure freedom of trade, carried on by the other participants, in India.[xi]
The court further observed that TRAI is the most prominent authority in the field of telecom sector and hence has the expertise and power to decide issues related to contractual obligations, concepts of “subscriber,” “test period,” “test phase and commercial phase rights and obligations,” “reciprocal obligations of service providers” or “breaches of contract.”[xii] The Court did not negate the role of CCI in issues arising in the telecom sector but rather stated that the preliminary role is of TRAI and once the jurisdiction issues are answered by TRAI, the CCI can exercise its powers under the Act. Basically, the Court ruled that once TRAI has undertaken the necessary steps in determining the jurisdictional facts, the CCI can thereafter proceed with issues with respect to Competition law. Hence, CCI has been accorded with a role of a ‘follow-on’ jurisdiction by the CCI.
Conclusion
From the above analysis of the provisions of the respective authorities and the relevant case laws, it is evident that both the authorities aim at ensuring fair competition. It is inevitable that there will be certain amount of overlap in the jurisdiction of both CCI and TRAI while exercising their duties. It is evident that they have a similar objective; however, the problem arises in their difference in approach to handle these matters which has resulted in multiple jurisdictional conflicts. While sectoral authority focuses on quality of products/ services, considering public interest, managing market failures; competition authority on the other hand aims protecting the interest of the consumer from anti-competitive practise of organisations.
As reiterated above, while the regulations state that the sectoral authority should take measures to facilitate competition[xiii] and make necessary recommendations to the CCI,[xiv] yet, the respective provisions are not binding on either of the authorities. Neither of the laws have any provision on how to deal with situations in which there is an overlap of jurisdiction such as the case of CCI v. Bharti Airtel,[xv] which has resulted in conflicting views and legal uncertainty.
To conclude, the difference in approach by both the regulatory authorities can be best understood by way of an example. While one of the duties of TRAI is to fix tariffs at a reasonable price keeping in mind the interests of the consumers, the same can be viewed as predatory pricing by the CCI whereby it is assumed as a barrier to market entry. Nevertheless, while the above judgment is a step in reducing the conflicts between the TRAI and CCI, it does not per se put an end to the fight for the regulatory supremacy. The judgement has not provided with a clear demarcation of roles, rather it has undermined the authority of the CCI thereby opening gates to similar jurisdictional issues between CCI and other sectoral regulators. It is necessary to amend the respective laws to insert a provision whereby both the authorities have to mandatorily consult with each other when issues of such nature arise.
It is important to keep in mind that issues comprising of both competition and technical regulations can be best solved by way of a collaborative process between the two authorities which will result in not just efficient decision making but will also be in the interest of public and save resources. The current situation requires the laws to be clear on distribution of roles of the sectoral regulators and the market regulator so as to ensure there is no overstepping of roles by any of the authority. Another practise which can be undertaken is to ensure that if there is a case pending before the CCI or TRAI then the other body waits for the decision of the authority and only participate or pass an order if the decision of the authority is not in the interest of the public or affects the market adversely.
In conclusion, the judgement of Supreme Court has created dubious sentiments in the market. While it has clarified its stance on the logical flow of jurisdiction, it has nevertheless weakened the authority of CCI by putting it in the role of “follow-on” authority. For instance, if CCI receives a complaint regarding collusion in the telecom sector, it would be punishable under the Competition Act, however, this judgement clarifies that the prima facie view of the CCI would be subject to findings of TRAI.
[i] CCI v. Bharti Airtel Ltd, Supreme Court of India, Civ. App. 11843 (2017), available at: https://sci.gov.in/supremecourt/2017/40072/40072_2017_Judgement_05-Dec-2018.pdf.
[ii] Bharti Airtel Ltd v. Telecom Regulatory Authority of India, TDSAT, Telecom Appeal/1/2018.
[iii] Vodafone India Ld. v. The CCI, Bombay High Court, W.P. 8594 (2017), available at: https://bombayhighcourt.nic.in/generatenewauth.php?auth=cGF0aD0uL2RhdGEvanVkZ2VtZW50cy8yMDE3LyZmbmFtZT1DQ0FXMTc3MzYxNy5wZGYmc21mbGFnPU4mcmp1ZGRhdGU9JnVwbG9hZGR0PTI4LzA5LzIwMTcmc3Bhc3NwaHJhc2U9MDExMDE5MTMyMDM2.
[iv] Telecom Regulatory Authority of India, Manual: Under Section 4(1) (b) of the Right to Information Act, 2005, 3, available at: https://main.trai.gov.in/sites/default/files/RTI_Act_Ma_%2016062017_.pdf.
[v] The Telecom Regulatory Authority of India Act, 1997, No. 24, Acts of Parliament, 1997, § 12 (hereinafter TRAI Act, 1997).
[vi] TRAI Act, 1997, § 13.
[vii] Supra note 1.
[viii] Supra note 3.
[ix] Id., ¶ 130.
[x] Supra note 1, ¶ 79.
[xi] Id., ¶ 69.
[xii] Id., ¶ 84.
[xiii] TRAI Act, 1997, §11.
[xiv] Competition Act, 2002, No. 12, Acts of Parliament, 2003, § 20.
[xv] Supra note 1.