The overlapping scope of authority concerning India’s antitrust and sector regulators raises the question as to which government body businesses should turn to on competition-related matters. Mihir Rale explores the issue
The recent skirmish on the issue of “predatory pricing” in the telecom space brought into focus a larger issue which had so far escaped scrutiny – that of a jurisdictional intersection between India’s central competition regulator and various sector regulators. This article focuses on the authority of the Telecom Regulatory Authority of India (TRAI) insofar as the subject of competition is concerned and examines why it is imperative for all sector regulators and nodal ministries to confer with the Competition Commission of India (CCI) on matters of competition and deal with such matters in conformity with the Competition Act, 2002.
As a starting point, it is important to set context as to what competition law entails. Simply put, competition policy means regulatory measures that directly affect the behaviour of any enterprise and/or the structure of an industry. Quoting from the Raghavan Committee report which preceded the framing of the act, “There are two elements of such a policy. The first involves putting in place a set of policies that enhance competition in local and national markets. These would include a liberalized trade policy, relaxed foreign investment and ownership requirements and economic deregulation. The second is legislation designed to prevent anti-competitive business practices and unnecessary government intervention – competition law. An effective competition policy promotes the creation of a business environment which improves static and dynamic efficiencies and leads to efficient resource allocation, and in which the abuse of market power is prevented mainly through competition.”
The report analysed parallel legislations globally including reasons for their enactment and in keeping with such legislation, recommended three areas to be covered under the act i.e. anti-competitive agreements, abuse of dominance and the assessment of combinations.
The act was brought into effect (partially) in 2009, by which time several sector regulators had already donned the mantle of regulating competition in their respective sectors, by express or unquestioned authority. That this reality was accounted for by the legislature is evident from section 21 of the act, which gave an option to any statutory authority to approach the CCI if it felt that any of its decisions may be in contravention of the act. Without going into the reasons for such a framework, it might be safe to say that the act consequently entered a compromised space where it was bound to run into conflict.
That the act completely envelops the subject of competition law is evident. Section 18 of the act specifically provides that “it shall be the duty of the commission to eliminate practices having adverse effect on competition, promote and sustain competition, protect the interests of consumers and ensure freedom of trade carried on by other participants, in markets in India.” Section 19 and section 20 of the act list out factors that the CCI must bear in mind when dealing with anti-competitive agreements, abuse of dominance and combination notifications, besides the parameters to be used for arriving at an assessment of “relevant market”.
It would therefore be safe to conclude that: (1) the act was framed upon an analysis of parallel legislations in developed economies with liberalized regimes; (2) on the basis of this analysis, three specific areas were identified to address all issues of competition policy, agnostic of sector/product; and, (3) the act framed specific intelligible parameters.
Telecom Regulatory Authority
The TRAI was constituted under the Telecom Regulatory Authority of India Act, 1997. The preamble and statement of objects and reasons of this act makes an express reference to promoting competition and ensuring orderly growth of the telecom sector.
Further to the statement of objects and reasons, section 11 of the TRAI Act lays out various functions of the TRAI, including the ability to make recommendations on “need and timing for introduction of a new service provider,” and “measures to facilitate competition and promote efficiency in the operation of telecommunication services so as to facilitate growth in such services”. The proviso to section 11 specifically notes that the TRAI recommendations are not binding on the central government. It is pertinent to note that section 11 TRAI the ability to notify rates for all telecommunication services. However, such exercise, especially on an ongoing basis, should not be considered a feature of competition regulation. This is because economic regulation (including by way of price capping) on a continuing basis is generally antithetical to competition law. Further, section 14 of the TRAI Act specifically calls out the inability of the Telecom Disputes Settlement and Appellate Tribunal to look into issues, which are the subject matter of a monopolistic, restrictive or unfair trade practice covered under the Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act). As the MRTP Act has been repealed, the application of section 8(1) of the General Clauses Act, 1897, requires that the reference to the MRTP Act in the TRAI Act be replaced and read as a reference to the Competition Act. Additionally, compared to the Competition Act, the TRAI Act does not lay down any parameters on which to base an analysis of market failure basis in which intervention may be warranted.
Summarily put, aside from the ability to recommend measures to the central government, the TRAI Act does not appear to give TRAI the express ability or adequate tools to regulate competition issues in the telecom sector. Despite this, TRAI has implemented numerous antitrust measures across both the telecom and broadcasting sectors, none of which have been specifically questioned on the basis of a lack of authority to regulate competition.
Foreign regulatory bodies, such as the Federal Communications Commission (FCC) in the US and the Office of Communications (OFCOM) in the UK, have specifically been granted competition-enforcing powers.
This jurisdiction is, however, concurrent with the Federal Trade Commission and the Department of Justice. While each derives its authority from specific enactments, there is significant jurisprudence on the scope and limits of jurisdiction and a collaborative culture which appears to have emerged. Further evidence of this collaborative culture appears to extend to other relevant considerations of competition law as well, e.g. when the FCC proposed certain “pro-competition” changes to a set of broadcast-related regulations, the Copyright Office raised significant copyright concerns after which the proposal appears to have been abandoned. The Copyright Office’s response to the FCC is of significant import, as most competition law jurisdictions recognize or carve out certain exceptions based on intellectual property rights.
The UK mandates concurrent jurisdiction of competition law issues, where the Competition and Markets Authority exercises concurrent jurisdiction with OFCOM when dealing with the “communications” sector under the same statute.
The common principle that emerges is that developed economies have dealt with any overlap or intersectional issues by dialogue, collaboration and consultation, or by a statutory requirement for multiple regulators to decide competition law issues by the same set of principles.
The overlap in functioning of both the CCI and the TRAI has given rise to various contrary positions. By way of examples:
- The CCI when faced with an issue relating to “abuse of dominance” by an entity in the broadcast sector concluded that no case for dominance was made out and therefore no question of abuse arose in that case. The TRAI by a subsequent regulation intervened to effectively change the structure of such type of entities on the basis that they were dominant.
- The CCI determines ‘’relevant market’’ based on the parameters laid out in section 19 of the act, which allow for a distinction based on many factors including technology, geography and resultant differing economic models. The TRAI, however, frames antitrust inclined regulations without reference to these distinctions.
- As noted previously, price regulation on an ongoing basis is antithetical to competition law. However, TRAI had frozen prices of pay channels in December 2004, which effectively continues to date.
Notably, the conflict on this issue recently came into focus in a judgment of Bombay High Court in the case of Vodafone India Limited v. The Competition Commission of India & Ors. Suffice to say that this judgment appears to proceed on the assumption that the TRAI has the ability to regulate competition in the telecom sector and is noted here on this account alone.
There are likely many such decisions taken on a regular basis across sectors which are not in conformity with the Competition Act. By way of an example, the blanket restriction imposed by the Ministry of Information and Broadcasting on broadcasters directly acquiring/holding more than a 20% stake in a direct to home entity and vice versa without any market based analysis for a combination as required under the Competition Act. Such contrary positions taken by regulators or nodal ministries when dealing with an issue covered by competition law will ultimately lead to confusion, dual parameters and possibly double jeopardy.
The central issue to therefore consider is that, if the Competition Act is the authority and a complete code on all matters of competition in India, should any decision which runs contrary to it, even one taken with the stated purpose of protecting or preserving competition, be permissible at all. It is not without cause that section 21 of the act requires sector regulators and the CCI to find consistency and conformity with the act in their decision making. It is imperative that this requirement is given its due. Sector regulators, whether empowered to regulate competition in their sectors or otherwise, should take decisions ideally in consultation with the CCI but always in conformity with the act. This will enable them to not only avail of the jurisprudence developed under the act, but also apply uniform intelligible criteria to arrive at a decision, which will ultimately lead to consistency and provide much needed clarity to the issue.
Competition policy worldwide assumes a free liberalized trade regime where no largesse is available to any entity (state or otherwise) and only market forces determine success or survival. While the act was a natural consequence of opening up of India’s markets, until India fully embraces this regime, conflict will continue unabated, impacting many parameters including the “ease of doing business”.
Mihir Rale is the senior vice president and strategy counsel at Star India. The views expressed are personal and do not represent the views of any organization.