CCI AND SECTORAL JURISDICTION
This post has been authored by Nipun Kalra, a second-year student of B.A.LL.B (Hons.) at National Law University, Delhi.
While ushering into the era of globalisation and liberalisation in the 1990s, a lot of business avenues had been setup in India. In these circumstances, private sector was given complete freedom to engage into business activities. Moreover, in order to regulate different sectors, it was deemed necessary to come up with an independent sector-regulatory body, taking into account the public interest. Furthermore, the natural consequence of privatisation was competition amongst the market powers. Therefore, in order to give full effect to the functioning of market powers, Competition Act, 2002 was passed by the parliament to promote healthy competition and to ensure freedom of trade carried on by other participants in Indian markets. As a consequence, the intersection between sector-specific regulation and competition law has been conflictual in the Indian scenario.
With the example of telecom sector, the said conflict can be demonstrated. Over the past decade, telecom sector has witnessed intense growth in terms of competition in India. Yet, the two regulators, Telecom Regulatory Authority of India (TRAI) and Competition Commission of India (CCI), have found it difficult to delineate their respective roles whenever a dispute arises among the private players. The fundamental difference comes in the fact that each case adjudicated by CCI could be seen differently by TRAI, due to the different approaches employed by them. While TRAI works on behavioural remedies such as regulating prices, monitoring the interconnectivity of different operators, CCI functions on striking down unfair marketing conditions. Through this article, the author argues that dividing functions between these two bodies is an inefficient solution. Rather, a complementary approach has to be operated in order to achieve a workable model.
Tracing the law
While framing laws on jurisdiction, there were two options with the policymakers. The first was that in case of overlapping jurisdictions, either of the bodies could be given exclusive authority over the matter. The second was about involvement of both bodies so as to reach a concurring opinion. On bare reading of the Section 21 of the Competition Act, it becomes clear that legislators chose the latter option. Section 21 stipulates that in case a statutory authority’s decision is contrary to the provisions of the Act, then a reference may be made to CCI, which has to respond with its opinion within 60 days of the receipt of the reference. By way of an amendment in 2007, Section 21A was introduced to provide reference to statutory authorities under similar situations. However, when the choice was made, the policymakers, in effect, failed to describe what kind of cooperation had to take place in the process of decision making.
The conflicts relating to jurisdiction have become pronounced with the advent of technological developments. It is often argued that sector regulators handle structural issues which are in most cases, ex ante whereas the issues handled by competition authorities are ex post, mainly involving behavioural aspects. Moreover, it becomes difficult to classify something as either structural or behavioural, given that there is a certain level of interdependence between the two aspects. The CCI might not go into the technicalities of network operators, like determining tariff rates or ensuring uniform standards. However, this should not prevent CCI from exercising its objective of monitoring competitive dynamics which has direct relation with the aspects on which a sector regulator works.
The Lost Opportunity
In this regard, Supreme Court’s ruling in CCI v Bharati Airtel Limited is important. In this case, mobile operator Jio had filed a claim against Airtel, Vodafone and Idea Cellular Ltd. (“IDOs”) for cartelisation and denying interconnectivity to its rising consumer base. This led to CCI passing an order that there was a prima facie case and that an investigation was warranted. In the SC, this order was challenged on the grounds that it surpassed CCI’s jurisdiction to deal with such matters. The SC in its judgment, laid down that the concepts like “test phase”, “reasonable demand”, “reciprocal obligations of service providers” were arising out of TRAI Act and therefore, the matters were under TRAI’s domain. Only after TRAI comes up with a finding on it, can the CCI look into as to whether the agreement between IDOs was anti-competitive in nature.
Where two statutes operate in different fields, it does not mean that use of one implies repealing the other one. The SC later on clarified that CCI’s jurisdiction was not completely ousted. Rather, it only meant that once TRAI has played its role, automatically then CCI will become active and rule on whether the agreement in question has adverse effects on competition in India. The court endorsed the view that for the purpose of competition, a sectoral regulator may not be able to fathom the overall view of the economy in the way CCI does. However, what goes unnoticed is the fact that even after recognising that both bodies perform different functions, the court gave precedence to TRAI in the sense that after a case is made out by TRAI, only then CCI can come into the picture. This is a clear case of institutional preference given to one body over the other without any reasonable nexus. The argument does not sustain because if we assume that the two bodies are independent, which the court in fact did, then there should not arise a need to form a hierarchical setup to solve a dispute.
The Course Ahead
In this backdrop, it is important to attain a workable model which sustains the objectives of both the bodies. In some cases, the use of the word “may” in Section 21 of the Competition Act has been interpreted as non-binding in nature. Indeed, the legislative intent behind this section has been ignored by the decision-making bodies. By the nature of the unilateral decisions taken, cooperation between the sector regulators and CCI still seems to be a distant dream due to the resultant exploitation of the system. Therefore, the main reasons for conflict are the legislative ambiguity, turf war and lack of interface between the technical regulation and competition enforcement mechanisms. An alternative approach can be drawn from the foreign countries for determining the sustainability of a collaborative or concurrent model.
In the UK, the Competition and Market Authority (CMA) was setup to oversee the disputes. In the event that there is a dispute of overlapping jurisdictions, then such body which intends to exercise its powers shall in writing inform the other party of its will. If the parties do not reach an agreement, the CMA determines which body would have the competency. CMA acts as a bridge between the competition and sector regulators in order to ensure that all stakeholders are involved in the discussions. Moreover, a Concurrency Working Party was also set up in order to promote informal meetings for reaching consensus between the regulators regarding the subject matter of the disputes. On similar lines, in Mauritius, Memorandums of Understanding are entered into between competition authority and sector regulators for better governance. Furthermore, cooperative agreements are used in countries like Canada, Ireland and South Africa, in order to provide compulsory consultations in case of adjudicating overlapping jurisdictions.
In India, as discussed above, reference mechanism provided by Competition Act has been grossly neglected. Therefore, the author believes that a concurrent model is best suited for mutual cooperation between sector regulators and CCI. In order to promote a harmonious relationship between both bodies, it is important that transparency is maintained whenever a dispute arises, having direct implications on the competition law policy of the country. The dispute should be communicated between the parties and initiatives be taken to adopt the best possible solutions. Certainty about roles and cooperation at higher levels appears to be the most appropriate model to resolve jurisdictional conflicts.
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