Background

The Supreme Court of India (‘SC’), on December 5, 2018, ruled on the roles of the Telecom Regulatory Authority of India (‘TRAI’) and the Competition Commission of India (‘CCI’) and the interplay between the responsibilities of the two regulators[1]. CCI is a sector-agnostic regulator tasked with preserving and promoting competition in India. In carrying out its mandate, CCI regulates conduct in sectors that are characterized by specialized sector-specific regulators, such as the telecom sector. TRAI is the sectoral regulator tasked with regulating telecom services, and promoting and ensuring orderly growth of the telecom sector in India.

In 2017, the CCI, acting on information filed by Reliance Jio Infocomm Limited (‘Jio’) under Section 19(1) of the Competition Act, 2002 (‘Act’), ordered the Director General, CCI (‘DG’) to investigate (‘CCI Order’) against the alleged cartelization by Bharti Airtel Limited, Vodafone India Limited, Idea Cellular Limited and the Cellular Operators Association of India (‘OPs’). It was alleged that OPs had cartelized to deny Jio entry into the telecom sector by not providing it adequate Points of Interconnection (‘POIs’)[2], resulting in call failures between Jio and other networks. Jio had also filed letters with the TRAI complaining against the conduct of the OPs.

The Bombay High Court (‘BHC’) by way of an order dated September 21, 2017 (‘BHC Order’) set aside the CCI Order and held that the telecom sector is governed, regulated and controlled by certain special authorities, and the CCI does not have the 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/ Telecom Disputes Settlement and Appellate Tribunal (‘TDSAT’). BHC further held that the powers of CCI are not sufficient to deal with the technical aspects associated with the telecom sector, which solely arise out of the Telecom Regulatory Authority of India Act, 1997 (‘TRAI Act’) and related regulations. CCI and Jio, aggrieved by the BHC Order, approached the SC.

Supreme Court’s Verdict

The SC, in its judgment, recognized the specialized nature of TRAI as a regulator and held that TRAI is better suited to decide such cases. It held that TRAI’s functions include: (i) ensuring technical compatibility and effective inter-relationship between different service providers; (ii) ensuring compliance of license conditions by all service providers; and (iii) settlement of disputes between service providers. The SC noted that “[Jio’s] disputes in this case touches upon these aspects”. Moreover, it was noted that Jio itself had also specifically approached the TRAI for settlement of these disputes.

The SC also recognized that the CCI is the experienced body in conducting competition analysis. Further, this specific and important role assigned to the CCI cannot be completely wished away and the ‘comity’ between the TRAI and the CCI is to be maintained. Therefore, the CCI’s jurisdiction is not totally ousted insofar as the telecom sector is concerned but only pushed to a later stage, once TRAI has come to a conclusion.

Blurred Lines

Some sectoral laws do make a broad declaration of competition goals, absent any specification. For instance, the TRAI Act mandates TRAI to take measures to ‘facilitate competition’ and ‘promote efficiency in the operation of telecommunications services’[3]. The Petroleum and Natural Gas Regulatory Board Act, 2006 requires the Petroleum and Natural Gas Regulatory Board to ‘foster fair trade and competition’[4]. The Electricity Act, 2003 (‘EC Act’) empowers the Central Electricity Regulatory Commission to ‘issue directions’ to a licensee if it ‘enters into any agreement or abuses its dominant position or enters into a combination which is likely to cause or causes an adverse effect on competition’[5]. Such legislations have blurred the distinction between ex-ante regulation and ex-post competition assessment, allowing for potential conflicts between these regulators and the CCI.

Approach in Other Jurisdictions

Anti-trust regulators in other jurisdictions have been able to resolve similar conflicts between sectoral regulators and competition authorities by crafting specific exemptions in areas of conflict or concurrent jurisdiction between sectoral regulators and competition authorities.

In the United Kingdom, various sectoral regulators have concurrent power to apply EU and U.K. competition law alongside the national competition agency, the Competition and Markets Authority (‘CMA’). For this purpose, the CMA publishes Concurrency Guidance which gives a basic outline of the concurrency regime. Issues not covered are to be outlined in detail in a Memoranda of Understanding between the CMA and regulators.

South Africa follows a similar concurrent model as the U.K. The perceived benefits of a concurrency system are that it: (a) leverages the regulators’ industry expertise, enabling them to use their sector-specific knowledge when bringing cases in their sectors; and (b) maximizes the enforcement of competition law through working in partnership.

Australia adopted the position that specific rules were preferable to reliance on general competition rules. Administration of industry-specific rules has been entrusted to the Australian Competition and Consumer Commission (‘ACCC’). This was to avoid proliferation of regulatory bodies and to facilitate the transition to more competitive markets. Issues related to telecommunication, gas and electricity, airport postal services, as well as the administration of price control oversight over federally operated utilities, was brought within the purview of ACCC.

Proposed Interaction between the Sectoral Regulators and the CCI

India can benefit from the experience of other regimes by conducting a comprehensive review of the mandate of sectoral regulators and CCI, and identify potential areas of conflict in the legislations.

A system of consultation between the CCI and the sectoral regulator(s) appears to be the best option. It is worth considering that maybe such consultation mechanism should be mandatory and not just discretionary. This would ensure minimum friction between the sectoral regulators and CCI, and the reconciliation of their respective mandates. This will also be in line with the approach of the SC to follow a harmonious approach to resolve conflicts between regulators.

[1] Competition Commission of India vs. Bharti Airtel Limited and Others, available here. [2] Points between two network operators which allot voice calls originating from the work of one operator to terminate on the network of the other operator. Smooth connectivity amongst different telecom service providers is ensured by unified licenses, which put an obligation over the telecom service providers to interconnect with each other on POIs. [3] Section 11 (1) (a) (iv) of TRAI Act. [4] Regulation 7 of the Petroleum and Natural Gas Regulatory Board (Guiding Principles for Declaring or Authorizing Natural Gas Pipeline as Common Carrier or Contract Carrier) Regulations, 2009. [5] Section 60 of the Electricity Act, 2003.