In the last 7 years, ever since Competition Law enforcement has started in India under the aegis of the Competition Commission of India (CCI), industries across the board have seen huge penalties being imposed on great many defaulters. Be it the enormous quantum of penalty in cartel cases such as the cement cartel or the several instances in which public sector undertakings (PSUs) such as Coal India were held liable for contravention, CCI has time and again asserted its stronghold in performing its duties as an antitrust regulator across sectors. The penalties may have been exemplary and the application of law may have been for the benefit of developing jurisprudence, but it can be surely said that CCI's endeavours spanned across sectors / industries. This, was until now.
On 21 September 2017, Hon'ble High Court of Bombay brought down the curtains1 on CCI's ambitious effort to investigate a telecom cartel. It was ambitious, because of the incriminating evidence against the incumbents in the market being mostly only in terms of joint representations, albeit, through an association. Where the Bombay High Court judgement marks a mile stone in the legal battle between Reliance JIO and the incumbent telecom operators, the seeds of the same were laid down in the discounted tariff plans and other offers made to consumers back in 2016.
The High Court's decision has been passed deciding a challenge to the 'prima facie' order to investigate passed by the CCI directing an inquiry into the cartelisation by the incumbent telecom operators in the market. It was alleged that the incumbents had, in a bid to thwart the entry of JIO, collectively denied the hardware required to make calls on other networks. This had resulted in a massive rate of calls failing on JIO's network. The role of the association of the telecom operators, i.e. Cellular Operators Association of India (COAI) was also brought under scanner for having coordinated and represented majoritarian interests in its representations to the telecom authorities. It is significant that the hardware to be provided, i.e. Points of Interconnection (PoIs) and their conditions are governed by the licence agreements and rules / regulations issued by the Department of Telecommunications (DOT) and the Telecom Regulatory Authority of India (TRAI).
The significance of the judgement is enormous for the Indian competition regulator as it results in restricting the scope of exercise of investigative powers of CCI. As the agreement clauses of the contract entered into between JIO and the incumbent service providers are controversial and are subject matter of pending litigation, the High Court in its judgement finds the CCI exceeding its powers in forming a 'prima facie opinion' for investigation. The judgement states that when the position of the governing law and regulations in the concerned market is unclear, the CCI cannot order an investigation.
There are several facets of the judgment which may warrant a careful reconsideration.
Revisiting the nature of a prima facie order to investigate
Firstly, the judgement recognises law of the land laid down in the SAIL judgement2 by the Supreme Court of India, per which the position is that CCI, while forming a prima facie opinion, does not exercise an adjudicatory function but merely performs an action purely administrative in nature. The judgement notes that "the parties and their counsel have participated before the CCI with huge number of documents and charts. This is not a case of 'administrative order' only. It is a reasoned order/ direction, therefore, judicial review is permissible."3
The position taken poses significant concerns to CCI's ability to order investigations. The judgement contradicts the position taken by Supreme Court in SAIL, where it was held that an order under Section 26(2) determined the rights of the parties by putting an end to proceedings and therefore, could still be termed adjudicatory. As per SAIL, however, Section 26(1) is merely an administrative direction given internally, to cause an investigation by the DG. The Bombay High Court judgement rakes a controversy by creating a class within the class of administrative orders. The qualifier used is that of evidence and statistics being considered which makes the order not purely administrative. However, what is completely amiss is the fact that the qualifiers used by the High Court are regular features of all Section 26(1) orders – it is the CCI's prerogative to call for information, hold conferences, require evidence which the parties are placing to be analysed and in the absence of the same, dismiss the case for insufficiency of a cause of action. Therefore, the classification done by the High Court is merely formalistic in nature and seems consequential to the decision of terming the order invalid. To accept it would render all directions to investigate by the CCI, a potential subject matter of litigation.
The disrupted jurisdiction of CCI
Secondly, a reading of the judgement hints towards curtailing the CCI's ability to assess whether an agreement is anti-competitive when the agreement has been formed in the midst of contentious regulatory issues. Reliance is placed on the provisions of the Telecom Regulatory Authority of India Act, 1997 (TRAI Act), which merely identifies facilitation of competition and promotion of efficiency in the operation of telecommunication services as a function for TRAI, as a regulator in the most generic sense. The judgement analyses the functions being performed by CCI along with the provisions of Section 21 (A) of the Competition Act, 2002 (Act). This provision gives CCI the power to refer a matter to experts / authorities pending the inquiry / investigation. The High Court found that the CCI should have invoked this provision before initiating the proceedings as a prima facie order could not have been passed until the governing laws of the concerned market were clear.4
Further, the court has laid down that 'if there is non compliance and/or breach of clauses directly or indirectly, the grievance is required to be redressed before the Authority/Tribunal under whose supervision and control such rights and obligations were crystallised.'5 As the controversy arose out of the clauses of the commercial contracts between the parties under the telecom laws, the High Court found that the CCI was not in a position to decide on the issue of 'tacit agreements' between the incumbents and their bid to thwart JIO's entry in the market.6 The judgement finds TRAI as the relevant authority to adjudicate on telecom issues and curtails CCI's powers to investigate any contentious sectoral issues on contract.
TRAI is simply not mandated or equipped to deal with issues of cartelisation to deny PoIs to the detriment of JIO. The scope of CCI's investigation would have been whether the incumbents had breached provisions of the Section 3 and not if the terms of the respective licence agreements were breached. It is understandable that the practice of deciding on contractual clauses intertwined with contentious sectoral issues by the CCI has always been controversial and is still unsettled. This not being the first, there have been several other specific instances of jurisdictional conflicts.
In a proceeding challenging a prima facie order passed against 3 petroleum PSUs, the High Court of Delhi passed an order staying the investigation on the ground that CCI did not have jurisdiction to hear the matter. The matter is pending and the claim that the Petroleum and Natural Gas Regulatory Board is the appropriate authority has to be adjudicated upon. In another case7, where the allegations were of anti-competitive behaviour of electricity distribution companies, the parties asserted that only the Delhi Electricity Regulatory Commission (DERC) had the jurisdiction to deal with issues relating to anti-competitive behaviour of electricity distribution companies. A reference was made by CCI to the DERC which opined that 'matters relating to electricity tariff have to be decided as per the provisions of Electricity Act, 2003 and DERC Regulations. Accordingly CCI may not be the appropriate forum to deal with such issue. However, specific issues alluded to by the Petitioner accusing the DISCOMs of abuse of their dominant position may be looked into by the CCI in terms of Competition Act, 2002'. Basis this, CCI found no overlap between DERC and CCI in terms of the jurisdiction. Such instances can be attributed to the confusing language used in legislations, to quite an extent. For example, the Electricity Act, 2003 as well as the TRAI Act, 2008 in their preambles; identify protection and promotion of competition as a task to be performed by the respective regulators. The Electricity Act, 2003 also enables the DERC to issue directions against enterprises abusing their dominant position as well as entering into agreements which are likely to cause adverse effect on competition in the electricity industry8. The PNGRB Act mandates the board to check restrictive trade practices of entities. These legislations use language identical to the Competition Act and create ground for confusion. The TRAI Act is distinguishable as it provides that the appellate body established to adjudicate on telecom disputes shall not look into matters relating to monopolistic, restrictive and unfair trade practices which are subject to the jurisdiction of the erstwhile MRTP Act, 1969.9 Now, that the sun has set on the MRTP Commission and an effective replacement in the form of CCI exists, these provisions should have been duly amended to exclude matters under the garb of CCI.
It is notable that CCI has once before dealt with jurisdictional claims involving the TRAI. In Consumer Online Foundation10 case, where it was alleged that as TRAI and TDSAT had 'jurisdiction and responsibility to govern and regulate the telecommunication industry covering telecom, broadcasting and cable TV series', CCI stated that any matter giving rise to competition concerns was within its purview. By virtue of the Bombay High Court's judgement, now the issue has been escalated to a whole new level and it would be prudent to wait for the Apex Court's opinion in an impending appeal.
In another instance, the erstwhile appellate tribunal, Competition Appellate Tribunal (COMPAT) adjudicated11 on whether there was an implied immunity12 from competition law in matters of electricity tariff in terms of the Electricity Act, 2003 and therefore, could parties seek relief under the Competition Act. The issue revolved around an enterprise13 charging adjustment costs from consumers unfairly which the CCI did not find abusive. CCI found that the case essentially related to the functions discharged by the State Electricity Regulatory Commission in respect to fixing adjustment costs, and therefore, aggrieved persons could only appeal to the respective authority under the Electricity Act, 2003. The matter was closed under Section 26(2). It is note worthy that the Electricity Act, 2003 has a separate mechanism to address issues of abuse of dominance.14 In the appeal, COMPAT held that the Electricity Act, 2003 was a comprehensive legislation which provided the appropriate regulatory electricity commission, powers to decide on issues of abuse of dominance and anticompetitive behaviour with respect to technical issues. All of this supplemented with the presence of an overriding clause as well as the fact that the competition act wasn't amongst the three specific legislations15 which were given precedence, COMPAT found that no relief lay under the Competition Act. COMPAT went on to do an academic exercise of seeing if a prima facie case was made out, despite acknowledging a lack of jurisdiction.
Interestingly, the issue of sectoral overlaps is yet to be decided by the Delhi High Court in a civil writ16 filed by the Institute of Chartered Accountants of India (ICAI). CCI had ordered an investigation when an individual complained of unfair and discriminatory conditions in allowing only ICAI approved programme organizing units to hold seminars. The ICAI contended that it had been discharging its statutory and regulatory functions under the Chartered Accountants Act. With the investigation stayed, it is anticipated that the Delhi High Court would take cues from the Bombay High Court's judgement.
In another high stakes matter, The Delhi High Court is dealing with a similar question – Whether issues in dispute, being specific to a legislation, can be adjudicated under the Competition Act for checking abuse of dominance when the specific legislation provided some remedies to abuse conduct. In the Ericsson matter17, a single judge bench of the Delhi High Court suggested a harmonious construction between the provisions of the Patents Act and the Competition Act and found that the nature of remedies provided under the two acts were entirely different. Therefore, it would be possible for a party to approach the patent controller as well as the CCI simultaneously. However, in case of an irreconcilable inconsistency between the two legislations despite reading them together, the more specific legislation (the Patents Act in this case) would have an overriding effect. The decision has been appealed and is pending before a larger bench. Even though it did not involve questions of confliction jurisdictions between regulators, the notion of a harmonious construction of provisions could have been applied by the Bombay High Court. Needless to say, it is evident that the jurisdiction of CCI has become a substantial question of law.
Collision and Collusion
Thirdly, in a jurisdiction where jurisprudence on the role of an association is minimalistic, the judgement's approach in dealing with the behaviour of an association is casual. The High Court's finding that 'every majority decision by the Association and/or its members cannot be termed and/or stated to be "cartelisation" 18 is problematic. The factual background begins with COAI's letters to the DOT and TRAI stating that the traffic from JIO's massive subscriber base was impairing the quality of service of other operators. It was contended that JIO's views weren't solicited, despite it being a member of the association and that the three incumbents held majority votes. These facts have been underplayed in the judgement whereas the association's actions in a representative capacity, to deal with the grey legal areas are found to be appropriate. The justification given is that the 'competition act, nowhere debar and/or prevent such Association from acting in the interest of the members and the concerned telecom market within the framework of their law.'19 This position, in isolation is not problematic but it only reveals the tip of the iceberg. The possibility of an association being used to discuss issues/ carry out activities prohibited under the Act is a major concern. Where the sector itself is undergoing a legal turmoil in adapting to changing technology, the role of the association becomes cardinal – either in representing concerns or suppressing the underdog.
Even CCI's 'Compliance Manual for enterprises' entertains a possibility 'that the incumbents tend to use collective power of associations to block a new entrant. This fall(s) foul of the provisions of law.'20 Therefore, JIO's allegation that COAI along with three incumbents would have been sharing information and aligning their arguments to deny entry to JIO could have been a potential contravention of the Act, if the same had been found out by the DG after a thorough investigation. The DG, in course of his investigation, would have ordinarily called for the internal communications as well as Call data records interse, between the association and the parties, as evidence before reaching to a conclusion. Colloquial euphemisms apart, the High Court has jumped the gun by setting aside the prima facie order and shooting down the possibility of evidence being dug up during an investigation.
Even if timely caveats are filed, appeals preferred and the investigation is reinstated, it cannot be assured that the sanctity of the evidence, incriminating or otherwise, will be preserved. The apprehension that the consultation paper of TRAI on the issues under controversy reaffirms the need for representations by an association is a valid apprehension. However, the judgement is short sighted where it only upholds the role of the association as a representative and does not delve into whether there has been misuse of the platform or not. Further, important factors such as the non-participation of members of COAI such as Aircel and Telenor from making representations and their reasons for abstaining were also identified by CCI in the prima facie order. Sadly, they will never be followed up.
From the cartel cases already underway in India such as the Cement Cartel case and the DC brushless fans case, it is evident that incriminating evidence in suspected cartels such as emails, phone call records, price and production data and competing bids in case of tenders is only fond and analysed after an investigation by the DG has concluded and his opinion in terms of the report is submitted. To identify the role of the association beforehand and consequently, not make an evidentiary finding is simply not sufficient. The High Court, alas, has blundered relentlessly leaving the fate of CCI and the telecom industry hanging.
Chandramauli Dwivedi is an associate placed with the competition law practice group of Luthra & Luthra Law Offices. Having graduated from National Law University Odisha in 2016 with Honours, he has acted for clients in ongoing litigation in all major forums. He has represented clients from various fields such as construction equipment, pharmaceuticals, airlines, cement and paper industry. Chandramauli can be reached at email@example.com.
1 Vodafone India Limited vs. The Competition Commission of India, 2017 SCC OnLine Bom 8524
2 Competition Commission of India vs. Steel Authority of India, 2010 CompLR0061 (Supreme Court)
3 Supra note 1, Para 86
4 Supra note 1, Para 104
5 Supra note 1, Para 101
6 Supra note 1, Para 101
7 Shri Neeraj Malhotra, Advocate v. North Delhi Power Ltd. & Ors., Case No. 6/2009 decided on 05.11.2011
8 Section 60 of the Electricity Act, 2003
9 Proviso (A), Section 14(1)(a), The TRAI Act, 1997.
10 Consumer Online Foundation v. Tata Sky Limited & Ors., Case No. 02/2009 decided on 24.03.2011.
11 Anand Prakash Agarwal v. Dakshin Haryana Bijli Vitran Nigam and Ors., Appeal No. 33 of 2016 decided on 16.02.2017
12 Ibid, para 18
13 Dakshin Haryana Bijli Vitran Nigam
14 Section 60 of the Electricity Act, 2003 authorises the Harayana Electricity Regulatory Comission to issue such direction as it considers appropriate to a licensee, if it abuses its dominant position or enters into a combination which is likely to cause or causes an adverse effect on competition in the electricity industry.
15 Consumer Protection Act, 1986 or Atomic Energy Act, 1962 or the Railways Act, 1989.
16 Institute of Chartered Accountants of India v. CCI, W.P. (C) 2815 of 2014.
17 Telefonaktiebolaget LM Ericsson (PUBL) v. Competition Commission of India, W.P. (C) 464/2014 & 1006/2014 was decided on 30.03.2016and is pending in appeal in L.P.A. 550/2016.
18 Supra note 1, Para 120
20 Pg. 17 of The Competition Compliance Manual for Enterprises, available at http://www.cci.gov.in/sites/default/files/manual_compliance/manual_booklet.pdf
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