Competition Commission of India's Jurisdictional Subjugation

The Supreme Court of India made a remarkable blow on the jurisdictional capacity of the CCI in the CCI vs Bharti Airtel case[1] of 2019, deferring CCI’s jurisdiction in matters that correspond to a specific sector. This case settled the long drawn jurisdictional conflict between he Competition Commission of India (CCI) and the Telecom Regulatory Authority of India (TRAI), which has been no less than a Shakespearean saga: a prolonged conflict with a tragic ending. The tragic ending being the undue setback for competition regulation in India.

The Landmark Judgment in CCI vs Bharti Airtel : Facts and Findings

In the CCI vs Bharti Airtel case, CCI had passed a prima facie order to investigate into an alleged telecom cartel between Airtel, Vodafone and Idea, who were stated to be acting in concert and declining Points of Interconnection to RJIL, the new entrant in the telecom sector. Cellular Operators Association of India (COAI), the association of telecom operators was also alleged to be aiding this cartel. The Bombay High Court set aside the CCI order holding TRAI to be the appropriate authority to adjudicate upon the issue. Upholding the Bombay High Court’s judgement partially, the Supreme Court held that since the matter was concerned with interpretation and fulfillment of contract clauses and license agreements- matters that are specifically regulated by the TRAI Act, TRAI should adjudicate upon the matter in the first instance and decide the ‘jurisdictional aspects’. Post its adjudication, if TRAI finds a ‘prima facie conclusion’ that there have been anti-competitive practices, the CCI’s investigation can be ‘activated’. Consequently, it can be inferred that CCI will also have to deliberate upon the possibility of transgression upon jurisdictions of other regulators in its ‘well-reasoned’ prima facie orders under Section 26, Competition Act, 2002.

Overlaps between specific sectors and the all-encompassing CCI are natural, accordingly there has been a long drawn jurisdictional tussle between the sectoral regulators and the CCI.[2] This case settles the matter making CCI’s jurisdiction secondary and effectively reliant on the discretion of the sectoral regulator, setting a very dangerous course for the future.

Concerns

The mandate of prima facie assessment of anti-competitive actions by the sectoral regulator and the subsequent forwarding of the case to the CCI creates concerns on two fronts- 1) If the sectoral regulators are equipped with the expertise to make such an assessment? and 2) Will these regulators actually make the reference to the CCI?

With India’s transition to privatization, the increasing need for regulation has led to the mushrooming of sector specific regulators with different mechanisms (such as Statutory or Self- Regulation) and capacities that vary greatly over different sectors. Many regulatory bodies lack basic investigative and technical capacities and the need for their capacity building has been often emphasized. Competition analysis can often be sophisticated and complex, and also require considerable expertise, experience and a broader economic perspective. It is very likely that many regulators, especially the young and underdeveloped ones, will fail to appreciate facts that correspond to anti-competitive behavior on counts of both capacity and understanding. It is rather irresponsible to expect the sectoral regulator to form an opinion on competition aspects, and to rest the CCI’s jurisdiction upon such opinion could be devastating.

The entire premise of the institutional deference of CCI’s jurisdiction seems to be that ‘jurisdictional facts’ (here, the provision of inadequate POIs) need to be first established before an authority can act upon it. However, it must be noted that Section 3 of the Competition Act, 2002 deems mere collusion itself (irrespective of absence substantial violations) to be anti-competitive. The domain of enquiry for both the regulators i.e. TRAI and CCI, thus would be different. Practically, if sectoral regulators upon their enquiries, do not find significant violations, the matter is very unlikely to reach the CCI, and thus anti-competitive acts and patterns in the concerned sectors are likely to continue flying under the radar.

Yet another alarming concern is situations of regulatory capture that might impede the sectoral regulator from making any references to the CCI. In practice, the sectoral regulators are often subjected to pressures and economic incentives by the firms they regulate. The regulators’ interests also come to align with the economic prosperity of the sector instead of the health of the economy. The continual contact between the regulator and regulated can lead the former to develop sympathies for the latter and interfere with the former’s required unbiased perspective. Thereby, the regulated firms come to manipulate and influence the regulator, and in such circumstances, it is highly unlikely that the regulator will make any reference to the CCI of any anti-competitive actions that the regulated firms engage in. The Report of the Working Group on Competition Policy, Planning Commission of India resonates this concern over regulatory capture.[3] The court does not appreciate this argument and merely sheds off the concern with a rather righteous answer that such an allegation is ‘not appropriate’[4].

Under ideal circumstances, even when the reference is made to the CCI, one cannot overlook the unnecessary delay in the entire process. The court holds that CCI can exercise jurisdiction once TRAI’s proceeding have attained ‘finality’[5]. However, TRAI’s directions, decisions or orders are appealable before the Telecom Disputes Settlement and Appellate Tribunal (TDSAT)[6], and thus arises a question as to when is this ‘finality’ reached. Can TDSAT obstruct CCI’s investigation? Such issues are bound to arise with other regulators and their appellate bodies too.

The court emphasizes on comity between the TRAI and CCI, but has essentially reduced CCI to a subordinate body dependent on another’s jurisdictional assessment. While the Court rightly expresses concern over parallel investigations leading to contradictory findings, the issue could have been efficaciously addressed by adopting a consultative or joint committee approach to facilitate true comity, autonomy, and effective and timely investigation. The UK is a leading example of such approach. The Office of Fair Trading (OFT, UK’s competition regulator) and the sectoral regulators work cooperatively by jointly deciding the best way to investigate a situation. The OFT, however, has the right to final say in such matters.[7] South Africa also follows a concurrent system of regulation. In Australia, the Australian Competition and Consumer Commission has been entrusted with the administering industry specific rules.

What Lies Ahead

A glimmer of hope arose recently when the Delhi High Court rejected the stay application on CCI’s suo moto cognizance of WhatsApp’s alleged abuse of dominance dated June 4, 2021. In an earlier judgement, Vinod Kumar Gupta vs. WhatsApp, the CCI refused to concern itself with the privacy matters as they are specific to the Information Technology sector and would be outside its purview. CCI, in its evolved perspective, has recognized in its market study of telecom 2021 that privacy violations can play an important role in non-price competition. While CCI seems to be taking a proactive approach in recognizing competition issues across sectors, the CCI vs Bharti Airtel case has settled the law for now. It is likely that CCI’s jurisdiction will remain secondary to the sectoral regulators until there is a change in the prevailing law.

Efficient competition regulation is imperative for the economy and consumer welfare. If not overriding jurisdiction, CCI’s jurisdiction should not be subjected to another regulator’s findings, on accounts of their incapacity, regulatory capture, delay and other impediments discussed above, these could lead to severe damage to competition regulation in India.

[1] (2019) 2 Supreme Court Cases 521 [2] Disputes between the CCI and Intellectual Property Appellate Board, Petroleum and Natural Gas Regulatory Board etc. [3] Para 28, Supra 1 [4] Para 92, Supra 1 [5] Para 99, Supra 1 [6] Section 14A, Telecom Regulatory Authority of India, 1997 [7] The Competition Act 1998 (Concurrency) Regulations, 2000 (U.K.).

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About Author

Shruti Dahlan

The author is a final year law student, and a competition and IP policy enthusiast.