Business

Did the SC Solve the Impasse Between India’s Competition and Telecom Regulators?

The apex court has failed, forcing the CCI to defer to TRAI when it comes to certain types of collusion in the telecom sector.

In Sir Arthur Conan Doyle’s famous novel A Study in Scarlet, there comes a point when Sherlock Holmes’s downright wilful ignorance about the solar system astounds Watson, his loyal friend and sidekick.

While Holmes staunchly maintains that this knowledge makes very little difference to him or to his work, Doyle’s writings are replete with examples of how Watson’s general perspective about the realities of the world help Holmes successfully crack seemingly impossible-to-solve crimes.

It’s safe to say that without the unique collaboration between the general and the specific, Sir Conan Doyle’s stimulating quests would have been incomplete – for the reader as well as for the two protagonists.

This message of teamwork and collaboration holds immense significance for India’s  economic regulators, especially the ones who have overlapping and common objectives.

A typical case in point is the Competition Commission of India (CCI) and the Telecom Regulatory Authority of India (TRAI). Despite sharing a common goal of ensuring consumer welfare for Indians (but by applying different means to achieve the objective), there has been a seemingly endless jurisdictional turf war between the two.

This friction is especially evident when it comes to issues of alleged anti-competitive practices and apparent breaches of regulation in India’s telecom sector.

Just recently, the Supreme Court ruled on the most prominent matter in this regard, which involved complaints filed by Jio with TRAI and CCI. The Mukesh Ambani-led firm had alleged that Airtel, Vodafone and Idea Cellular Ltd were colluding to deny points of interconnection (POIs) and that they were supported by the Cellular Operators Association of India (COAI). 

The CCI had initially determined there was a prima facie case and wanted to investigate. It was eventually held back by a Bombay high court ruling which deemed that it was TRAI and not CCI that had to decide whether POIs were being denied to Reliance through collusion on the part of the operators.

The competition regulator then moved the Supreme Court, in a case that now embodies the apparent tension between promoting sector-specific competition through economic regulation and checking the occurrence of anti-competitive practices..

The overlaps between CCI and TRAI are magnified when it comes to technical matters, such as access to POIs, which explains the jurisdictional turf war between the two regulators.

Addressing the chief bone of contention (whether the CCI has jurisdiction or not), the Supreme Court first took note of the salient features of the Competition Act as well as the TRAI Act.

In essence, it acknowledged TRAI’s role as an expert regulatory body which specifically governs the telecom sector and the CCIs mandate as an overall market regulator established to curb anti-competitive practices in its various avatars. The court further indicated that the nature of the dispute at hand is technical and TRAI, being a specialised sectoral regulator armed with sufficient power to ensure fair, non-discriminatory and competitive market in the telecom sector, is better suited to decide on the matter first.

The underlying issues related to POIs were three-fold:

1. Were Vodafone/Airtel/Idea (called IDOs or incumbent dominant operators) under any obligation to provide POIs;

2. Whether the demand for POIs made by Jio was reasonable or not; and

3. Whether IDOs have provided sufficient number of POIs to Jio in conformity with the licence conditions.

All three were held to be jurisdictional aspects and accordingly, TRAI was given the first instance to investigate. As per this logic, once the jurisdictional aspects are determined by TRAI, the next question would be whether it was a result of any concerted agreement among the IDOs and whether the COAI facilitated the same.

By recognising the distinct functions of the CCI vis-à-vis detection of concerted action, the SC stated that it was within the exclusive domain of the CCI to find out whether the particular case was in fact that of cartelisation and whether it had an appreciable adverse effect on competition within the relevant market in India. In this way, the SC did not oust the jurisdiction of the CCI entirely. According to the apex court, this approach would also prevent TRAI and CCI from arriving at contradictory findings.

In this manner, balance and institutional comity was sought to be maintained by the SC. However, there are several pitfalls to this rationale. 

Firstly, by recognising the distinction between the underlying prerogatives of TRAI and CCI, the Supreme Court seemed to put forth the view that both regulators’ functions are not mutually exclusive – i.e. not substitutable but rather complementary. In principle, this is a good finding.

But at the same time, the court regarded CCIs investigation as being indirectly dependent on that of TRAI’s by stating:

“Once that exercise (investigation of jurisdictional aspects) is done and there are findings returned by the TRAI which lead to the prima facie conclusion that the IDOs have indulged in anti-competitive practices, the CCI can be activated to investigate the matter going by the criteria laid down in the relevant provisions of the Competition Act and take it to its logical conclusion.”

While on one hand, the SC recognised the non-mutual exclusivity of the respective domains of TRAI and CCI and on the other, it deferred CCI’s investigative exercise. Assuming that both investigations can be conducted successfully one after the other, this approach seems to promote a principle of institutional deference rather than comity.

This also raises several questions: what would the course of action be if the telecom regulator does not find any breach? Assuming in principle that the mandates of TRAI and CCI are complementary, then shouldn’t TRAI’s fact-finding exercise be complemented by that of the CCI, instead of being made subject to it?

Secondly, the Supreme Court’s approach seems to have somewhat diluted the per se legal standard accorded to Section 3 of the Competition Act (the mere presence of collusion is in itself punishable) and in effect makes CCI’s statutory prerogative of making its own prima facie view contingent upon the decision of the TRAI.

This trend could also snowball into other sectors and the essential mandate vis-à-vis anti-competitive practices of the economy-wide regulator might be sidetracked and challenged, thereby inciting forum shopping and further litigation. (This previously happened when the Delhi high court stayed the investigation of the CCI when it found a prima facie case against three Petroleum Public Sector Units on the ground that this matter falls under the jurisdiction of the Petroleum and Natural Gas Regulatory Board.)

Thirdly, such an approach of separate investigations, one contingent upon the other would most probably miss the target. This is because despite TRAI having specialised knowledge about the subject matter, it might miss out on clearly identifying the presence or absence of collusion, something that only CCI’s general perspective (cutting across sectors) and experience brings to the table. The SC had recognised this distinction but did not implement it in the remedy that it proposed eventually.

What was required here was a remedial measure that did not just put forth, but also imbibed the principles of harmonious construction (of the TRAI Act with the Competition Act) and institutional comity. These principles would have been better upheld had the court asked CCI and TRAI to actively collaborate in the fact finding process as well as in deciding the appropriate remedies.

This collaborative process would have gone to the heart of the nature of the acts purportedly committed by the IDOs – which have intertwined elements of anti-competition (cartelisation) as well as technical regulatory breaches (technical issues related to access of adequate PoIs).

The case was an opportunity for the apex court to lay down the law that encourages teamwork and institutionalises collaboration amongst sector-specific regulators and the market-wide regulator.

This is a problem that the government is considering solving by having mandatory consultation between the sector regulator and competition authority to be embedded in the Competition Act and the sector regulatory laws. This, however, will take time.

That’s why the Supreme Court’s opportunity to lay down the law on dealing with overlapping conflicts would have put meaning into to our opening statement that it was an opportunity to leverage the collective strengths of Holmes and Dr. Watson.

Sadly, it was missed.

Pradeep S. Mehta and Parveer S. Ghuman work for CUTS International