VIVEKANADA INSTITUTE OF PROFESSIONAL STUDIES

Department
VIVEKANANDA SCHOOL OF LAW AND LEGAL STUDIES

Case Analysis -Competition Commission of India V.

Submitted by- Reeya Prakash

Enrollment no. - 00717703819

Semester- 6

Section-A

Subject – Investment and Competition

Submitted to-

Prof. Dr. Narender Kumar

On 5th December, 2018 a two judge bench of The Supreme Court resolved the conflict of
jurisdiction between Telecom Regulatory Authority of India (TRAI) and Competition
Commission of India (CCI) and the interplay of roles of two regulators.

The present case analysis attempts to explore the wide- ranging effects of the Supreme Court of
India’s decision on the CCI, while following developments of the case at every level of
proceedings of the case at every level of proceedings from the viewpoint of optimal regulation
and competition.

Facts

In December 2016, Reliance Jio Infocomm Limited (RJIL) filed a case with Competition
Commission of India (CCI)against the three major Cellular Operators i.e. Vodafone, Bharti
Airtel and Idea Cellular ( also known as Incumbent Dominant Operators or IDO) for cartelization
under sec 19 (1) (a) of the Competition Act, 2002. It was further contended that the Cellular
Operators Association of India (COAI) was helping the IDOs in the formation of this cartel.

It was alleged by RJIL that IDO’s were colluding against the new entrant by:

a. By the denial of connection between two providers ( points of interconnection, physical

Procedural History

Telecom Regulatory Authority of India

As a result of denial of requisite number of Point of Interconnections (POIs) by the IDOs before
filing information with the CCI. It was found by TRAI that the IDOs to be in violation of
(Licence Agreements and the Standards of Quality of Service [QoS] of Basic Telephone Service
[Wireline] and Cellular Mobile Telephone Service Regulations, 2009). It therefore recommended
to the Department of telecommunications (DoT) the imposition of a penalty of Rs 50 crore per
licenced area against the three IDOs.
Competition Commission of India

As per section 26(1), the Commission, with a majority of 3:2 , found a prima facie case agsindt
ODOs and directed an investigation into the “cartelization” against them leveled by RJIL. The
dissenting members believed that the Commission had insufficient evidence to justify the
conclusions of anti-competitive conduct. It was observed that the primary compliant of
informants regarding cartelization constituted a violation of section3 of the Act, which fell within
the Commission’s mandate and beyond TRAI’s.

Since the IDO’s conducted “separate trunk groups” to provide only one- way POI’s to the
informant and deny adequate points of connectivity to their customer, violated the technical
development norms and withheld MNP’s from their customers to obstruct the entry of RJIL into
the telecom market. Thus, their conduct constituted anti- competitive conduct and was therefore
contrary to the provisions of the Act.

Bombay High Court

The CCI’s decision was challenged in the Bombay High Court by the IDO’s and the Cellular
operators Association of India (COAI). The High Court set aside order of CCI pursuant to
section 26 (1) of the Act and also all consequential notices which were issued by the Director
General under Section 41 due to lack of jurisdiction of CCI considering TRAI already seized of
the matter.

The High Court observed that the Telecommunications Industry/ Sector/ Market is regulated,
governed controlled and developed by the authorities under the Telegraph Act, The TRAI Act,
and related laws, regulations, rules, circulars, as well as all government policies. The Telecom
Disputes Settlement and Appellate Tribunal (TDSAT), not any authority under the Competition
Act, should resolve any matters concerning the Telecommunications Market, such as the
interpretation or clarification of contract clauses, the interconnection agreements, or the quality
of service regulations.

The court observed that TRAI and the Competition Act are independent statutes, and they should
exercise their functions in light of their objectives.

“The Competition Act governs the anti-competitive agreements and its effect -- the issues about
abuse of dominant position and combinations”. It cannot be used to interpret the contract
conditions/policies of the Telecom Sector/Industry/Market, arising out of the Telegraph Act and
the TRAI Act.”1

1
https://indiankanoon.org/doc/25856636/
As a result, the court held that every majority decision cannot be termed "cartelization" and the
IDOs as well as the COAI have not violated any law.

Supreme Court Decision

Aggrieved by the judgment of High Court, a special leave petition was filed by CCI before the
apex court. The Supreme Court dismissed the appeals and mostly affirmed the findings of the
Bombay High Court which set aside the direction of CCI to investigate allegations of
cartelization by the IDO’s made by RJIL. The court has largely resolved the matter regarding the
jurisdiction of the CCI with respect to telecom regulators.

The court observed that as per the Telecommunication Interconnection (Reference Interconnect
Offer) Regulations, 2002 which comes within the special domain of TRAI, the IDO’s are
required to provide interconnection as a result of a unified licence and the interconnection
agreements they enter into with telecom operators.

"TRAI being a specialized sectoral regulator and also armed with sufficient power to ensure fair,
non-discriminatory and competitive market in the telecom sector is better suited to decide the
aforesaid issues".2

Supreme Court held that TRAI and CCI perform different functions. CCI is responsible with the
functions, power, and duties for addressing anti- competitive conduct that adversely affects
market competition, protecting consumer’s interest, and ensuring the free flow of trade in the
country. On the other hand, TRAI responsible for the regulation of telecom services for the
healthy and orderly expansion of the telecommunications infrastructure as well as for consumer’s
interest protection. Since the present case pertains to the telecom market which is regulated
specifically by the TRAI Act, The court concluded that “balance” would be preserved by
allowing TRAI to decide the jurisdictional aspect in the first instance. However, the court did not
completely oust the jurisdiction of CCI and made its investigation subject to TRAI’s findings by
stating that:

“Once that exercise is done and there are findings returned by the TRAI which lead to the prima
facie conclusion that 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".3

2
https://main.sci.gov.in/supremecourt/2017/40072/40072_2017_Judgement_05-Dec-2018.pdf, p.105
3
https://main.sci.gov.in/supremecourt/2017/40072/40072_2017_Judgement_05-Dec-2018.pdf, p. 114
Analysis

• Interface between Sector Regulation and Competition

Both competition enforcement and sector regulation work toward a common goal of functioning
of a healthy market. The aim of sector regulations is fixing different types of market failure,
ensuring quality of products, safety and services, interest of consumer, and special public interest
such as redistribution. The aim of Competition law is to safeguard consumer welfare against
anti- competitive practices of enterprises. To that end, sector-specific regulation has an ex ante
application in checking the performance of enterprises and competition law has an ex post
function in checking anti-competitive agreements and abuse of dominance by enterprises4.6

Though both have common objective of consumer welfare, the role of competition authorities
and sectoral regulations has been clearly defined. But there can be matters which fall within the
domain of both the competition authorities and sectoral regulators.

As per Section 11(1) (iv) of the TRAI Act, 1997, the functions of the authority shall be to make
recommendations on ‘measures to facilitate competition and promote efficiency in the operation
of telecommunication services so as to facilitate growth in such services.’5 Though this provision
does not create a mandate for TRAI to undertake the competition regulator’s role, but it enables
TRAI for moving towards promoting competition in the telecom sector. Section 21 and Section
21 A of the Competition Act permits a statutory body makes reference to the CCI6. Nonetheless,
neither of the provisions is compulsory on either authority. Likewise, the laws under TRAI or the
Act do not make clear boundaries of probable overlaps between the roles of two authorities.
There is not even a sequence of jurisdiction in case a matter falls at the intersection of
competition and sectoral regulation. These ambiguities pave the way for simultaneous
application of regulation and competition, which may result in conflicting decisions and legal
uncertainty.

Consequently, there is a requirement for clear segregation of roles and seamless distribution of
powers of the sectoral regulator as well as the market wide regulator, at the same time as
preserving the purpose of both the authorities. Some of the measures suggested would include
having a common provision for compulsory consultation between competitive authority and
sectoral regulators under their respective laws. Another resolution could be for the authorities to
themselves come to an understanding on jurisdiction in such matters.

4
https://www.epw.in/journal/2018/38/market-power-and-competition-policy/conflict-between-
regulationand.html
5
TRAI ACT 1997
6
https://www.cci.gov.in/sites/default/files/cci_pdf/competitionact2012.pdf
 • Maintaining Comity between TRAI and CCI

The Supreme Court in its judgment recognized the difference between the functions, duties, and
responsibilities of CCI and TRAI in ensuring healthy competition in the market and ensuring
consumer’s interest. As a result of the Court’s order, CCI’s investigation has been deferred until
a later stage and subject to the results of TRAI’s investigation, with the sectoral regulator in first
instance having jurisdiction to resolve the technical aspects of the matters. Thus, the CCI can
only act after the TRAI finds a violation of its Act. If such a violation qualifies as a concerted
agreement between the IDO’s within the scope of the Competition Act, then the CCI can act
accordingly.

Supreme Court’s order send mixed signals. Although it seems to define a logical flow of
jurisdiction in matters involving specialized regulations and the CCI, it also appears to
circumscribe the authority of the CCI. As a result of the order, although the court stressed the
need to maintain “comity” between market and sectoral regulators, it appears to have taken an
approach based on institutional deference. Additionally, mere collusion is punishable under
section 3 of the Act. However, the CCI’s prima facie view of the case is now subject to the
findings of the TRAI.

To correct competition distortion in market, the CCI performs a regulating role across all sectors.
Its primary role is to monitor and eliminate anti- competitive practices that undermine market
equilibrium. In accordance with the Competition Act, the CCI’s authority must be independent
of other laws and shall not conflict with them. While the TRAI is also responsible for promoting
fair market, neither its knowledge nor expertise should be conflated with that of the CCI. In fact,
interconnection regulation, which is the subject of this dispute, is a useful tool for ensuring
competition in the market. Only the CCI can investigate anticompetitive conduct, such as a
cartelization of service providers to deny adequate points of interconnect, while TRAI can
mandate interconnection between parties and punish them for violating the interconnection
agreements.

The Supreme Court’s verbose order may be commendable in spirit, but in principle, it may
undermine the authority of the CCI, particularly when applied to overlapping jurisdictions
among sectoral regulators and CCI. As a result, it misses an opportunity to institutionalize
cooperation between sectoral regulators and the CCI by using their respective expertise and
knowledge. When competing interests and technical regulations intersect, such as in the present
case, collaborative decision making will not only ensure efficient decisions, but also save
resources for the deciding bodies and the pleading parties.
Conclusion

Innovation and technology are rapidly spreading in all sectors, and policymakers and regulators
are struggling to contain their growing influence and power. Thus, regulators need to develop a
collaborative approach going forward in order to effectively address the novel issues they bring
to the table that blur the lines between regulatory jurisdictions.

The Supreme Court resolved the age-old dispute of jurisdiction between the CCI and the telecom
regulators on who has the authority to decide anti-competitive behavior in the
telecommunications sector. The order, however, seems to weaken the authority of CCI by
subjecting its jurisdiction to the findings of TRAI.