A dispute between two established television companies and a small player has brought to the fore questions about the jurisdiction of regulators. Rebecca Abraham reports
India’s antitrust regulator on 27 July ordered its investigative wing to ascertain if two television broadcasters had caused an appreciable adverse effect on competition within the sector by indulging in a “refusal to deal by way of price discrimination”. The refusal violates section 3(4) of the Competition Act, 2002.
A distributor of TV channel content, Noida Software Technology Park (NSTPL), had informed the Competition Commission of India (CCI) that broadcasters Star India and Sony Pictures Networks India had refused to provide it with anything other than a reference interconnect offer (RIO)-based agreement, on extremely high and onerous commercial terms. NSTPL alleged that other distributors, which the broadcasters routinely dealt with, were offered deals based on a separate set of interconnect agreements that were on more attractive terms.
This was also in contravention of the Telecommunication (Broadcasting and Cable Services) Interconnection Regulations, 2004, which require all similarly situated distributors to be offered signals of TV channels on similar non-discriminatory terms.
Making this order, the CCI said its investigative wing, the Director General, was at liberty to investigate any other broadcaster it believed was indulging in similar anti-competitive conduct. The investigation was to be completed in 60 days.
New kid on the block
The 27 July order was CCI’s first that was related to ongoing disputes between NSTPL and the broadcasters. Both Star and Sony immediately sought to challenge it in Bombay High Court. The court, through interim orders passed on 16 August and 7 September, ordered that the CCI pass “no coercive orders” against the two broadcasters and effectively tied the antitrust regulator’s hands.
Until the CCI entered the fray, aspects of the dispute between NSTPL and the two broadcasters over the interconnect offers were played out within the Telecom Disputes Settlement and Appellate Tribunal (TDSAT), the high courts and the Supreme Court.
NSTPL entered the market in 2012, armed with the country’s first headend in the sky (HITS) licence. The technology could have proved disruptive in a market that was then dominated by direct-to-home-technology-based distributors, and the company almost immediately found itself in what its counsel, Delhi-based Vivek Chib, described as a “true David versus Goliath fight”, as it sought to obtain TV channels to distribute.
Elephant in the room
However, looming over this dispute is the larger and unsettled question of which regulator has jurisdiction over anti-competitive conduct in the telecom sector. Is it the Telecom Regulatory Authority of India (TRAI) or the CCI?
The CCI is in the process of appealing to the Supreme Court against a November 2017 order of Bombay High Court, which ruled that the Competition Act could not be used to interpret the contract conditions and policies of the telecom sector, industry or market arising out of the Telecom Regulatory Authority of India Act, 1997, and the Telegraph Act, 1885. In effect, this would make the telecom sector out of bounds for the CCI.
In February, the TRAI filed an application of intervention in the case before the Supreme Court arguing it had exclusive jurisdiction on the sector. The CCI’s argument is that the Competition Act is sector-agnostic and that investigations of anti-competitive behaviour and abuse of dominance in the telecom sector are well within its jurisdiction.
“The current issue is whether companies have to abide by rules set by TRAI or those set by the CCI,” says a competition lawyer attempting to sum up the present conundrum. As the matter is still before the courts, lawyers India Business Law Journal spoke to were reluctant to be named.
The turf war between the two regulators began when Reliance Jio’s entrance into the telecom market in 2016 set off allegations about the company indulging in predatory pricing and that dominant players in the market – Bharti Airtel, Vodafone India and Idea Cellular were denying the newcomer points of connectivity.
In April 2017, the CCI had found prima facie evidence of cartelization against telecom service providers, including Airtel and Vodafone. The November 2017 order of Bombay High Court had set aside this order.
While there is no disputing that two regulators can hold sway over similar areas of activity, the issue at stake is how they co-exist. Directions on this will be available when the Supreme Court, which has reserved its judgment, rules on the matter.
Upsetting the apple cart
Clashes between NSTPL and the two broadcasters have been ongoing since 2012, when the former sought an interconnect agreement from Media Pro Enterprises, which was then the authorized agent for around 70 channels, including those of the two major broadcasters, Star and Zee. The agreement was refused because it was claimed that the HITS technology was not secure enough.
A 12 September 2013 order of the TDSAT found no merit in Media Pro’s reasons for refusing the deal and directed it to enter into an interconnect agreement with NSTPL.
Matters did not end there. In 2013, NSTPL returned to the TDSAT after it had executed a RIO-based agreement with Media Pro. NSTPL said it could not get information on the terms and conditions, as well as the rates at which agreements were executed with similarly situated distributors.
As Media Pro had ceased to be an agent of the broadcasters, the TDSAT had ruled in a December 2015 order that broadcasters Star and Taj Television, with which NSTPL had agreements, issue fresh RIOs to NSTPL, to comply with the interconnect regulations. The TDSAT said the RIOs had to reflect “not only the rates of channels but also the different formations, assemblages and bouquets in which the broadcaster wishes to offer its channels for distribution along with the rates of each of the formation or bouquet”. Due to this order, broadcasters cannot enter into any negotiated deal with any distributor unless the template of the arrangement, along with its price, is mentioned in the RIO.
Howver, the order was suspended until April 2016 to allow the TRAI to put in place amendments to regulations that mandated publication of RIOs, and all similarly situated distributors got similar non-discriminatory prices in accordance with the RIO broadcaster.
More of the same?
NSTPL said this too did not yield results as broadcasters continued to use two parallel regimes of interconnect agreements: a RIO-based regime available to all distributors involving high and onerous commercial terms and a second set of interconnect agreements with preferred distributors involving fixed fees or cost-per-subscriber or both, at attractive terms. NSTPL also alleged that broadcasters entered into side agreements with certain preferred distributors, where distributors were paid carriage and placement fees to lower acquisition costs for distributors.
It was this conduct that the CCI took note of when it ordered an investigation into whether Star and Sony have indulged in refusal to deal by way of price discrimination.