Short Synopsis of the Interplay / Conflict between TRAI and CCI in light of recent precedents

  • INTRODUCTION

India’s telecom regulator and anti-trust watchdog Competition Commission of India (CCI) are locked in a showdown in the Supreme Court, with both laying claims to jurisdictional rights on anti-competitive issues in telecom.

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 a 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.

  • OVERLAPPING SCENARIO

Playing down the turf war between the Competition Commission of India (CCI) and the Telecom Regulatory Authority of India (Trai), CCI’s Chairman Devendra Sikri said there are certain overlaps but it is for both regulators to respect each other’s territory. He said such overlaps were present in all the sectors but the CCI engages with these sectorial regulators while investigating companies in those sectors.

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.’[1] 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.[2] The judgment finds TRAI as the relevant authority to adjudicate on telecom issues and curtails CCI’s powers to investigate any contentious sectoral issues on contract.

  • SUPREME COURT CONFIRMS ABUSE OF DOMINANCE BY MSO

In an interesting development, the Supreme Court of India (Supreme Court) has overturned the Competition Appellate Tribunal’s (COMPAT) order and confirmed the Competition Commission of India’s (CCI) order confirming abuse of dominance by multi-system operators (MSOs).

  • Factual Background

The case in question concerns information filed by a broadcaster of a television channel against a group of MSOs (part of the same group) who carried the aforesaid channel to viewers of Cable TV.

Role of MSO

In the cable television market, the role of an MSO is to downlink the broadcasters’ signals, decrypt any encrypted channels and provide a bundled feed constituting of multiple channels to the last-mile cable operators (LCO). The LCO then re-transmits these signals to the subscribers in its area of operation through the cable network.

Proceedings Before the CCI and the COMPAT

When the MSOs unilaterally terminated the Channel Placement Agreement (CPA) with the broadcaster, the broadcaster (Kansan News Private Limited) approached the CCI alleging violation of the Competition Act. The CCI found that the group of MSOs were inter-related and constituted a “group” in terms of the Competition Act. Additionally, the CCI found that the group occupied a dominant position in the relevant market for the provision of cable TV services in Punjab and Chandigarh.

The MSOs raised various preliminary arguments. They contended that the broadcaster had suppressed the fact that it had already approached (without relief) the High Court of Punjab & Haryana and the Supreme Court alleging breach of contract by the MSOs. Additionally, it was pointed out that the broadcaster had also filed a case with the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) challenging the termination of the CPA. Most importantly, the MSOs also challenged the jurisdiction of the CCI claiming that a dispute between a broadcaster and an MSO falls within the exclusive jurisdiction of the TDSAT. On merits, the MSOs contended that their conduct was based on technical and commercial reasons and, thus, could not be considered an abuse of dominance.

Rejecting the contentions on merits, the CCI determined that the MSOs’ conduct amounted to denial of market access and a violation of section 4(2)(c) of the Competition Act. The CCI, thus, held that the MSOs were abusing their dominant position and imposed a penalty of INR 8,40,01,141 (INR 84 million) on the group of MSOs. It may be noted that the CCI, in its order, did not deal with the issue of ‘jurisdiction’.

Against the CCI order, the MSOs approached the COMPAT reiterating their arguments on jurisdiction and merits.

The COMPAT set aside the CCI order on the premise that denial of market access (under section 4(2)(c) of the Competition Act) can be occasioned only by one competitor to another. The COMPAT reasoned that since the broadcaster and the MSOs were not competitors, there could not be denial of market access and, thus, set aside the CCI’s order and the penalty imposed thereby.

Subsequently, the CCI approached the Supreme Court challenging the COMPAT’s decision on the ground that abuse of dominant position as specified in the Competition Act is not dependent on the existence of, or effect on, competitors, but is based on the abuse that the enterprise may indulge in on the basis of its dominant position in the relevant market in any manner.

  • Arguments Before the Supreme Court

The CCI submitted that the COMPAT has construed the Competition Act in a constricted manner which is inconsistent with the positive role of the CCI under the statutory scheme. On the other hand, the MSOs submitted that the TDSAT (in the dispute relating to termination of the CPA) has found the termination notice to be in breach of the Broadcasting and Cable Interconnection Regulations and has consequently set-aside the termination of the CPA. The MSOs also submitted that they have sufficient technical and commercial reasons to terminate the CPA, including:

  • Use of an analogue platform, which limited the channel capacity to 80 channels (as against 550 now).
  • The target rating point (TRP) of the broadcaster was lowest among news channels.

Based on the above, the MSOs contended that the termination of the CPA did not take place because of the dominant position and, therefore, no penalty should have been imposed.

  • The Supreme Court’s Decision

The Supreme Court partly agreed with both the CCI and the MSOs.The Supreme Court took into consideration the Preamble of the Competition Act and its salient provisions to conclude that the CCI has been vested with a positive duty to eliminate all practices that have an adverse effect on competition. Although the Supreme Court did not directly deal with the issue of jurisdiction, it specifically noted the non-obstante clause (section 60) in the Competition Act, which expressly states that the provisions of the Competition Act shall have an overriding effect notwithstanding anything inconsistent therewith contained in any other law.

Accordingly, the Supreme Court noted that once the existence of a dominant position is proved, the question of whether the denial of market access is being done by a competitor or not is irrelevant. The only relevant factor, according to the Supreme Court, is the denial of market access due to unlawful termination of the CPA. Thus, the Supreme Court agreed with the CCI and set aside the COMPAT’s decision in this regard.

However, the Supreme Court also noted that no penalty ought to have been imposed on the facts of the present case. The Supreme Court noted that the CCI had rejected the MSOs’ justification that the TRP ratings of the informant’s news channel was lowest among the news channels holding that the same was factually inaccurate. The Supreme Court found that the said justification was factually correct and, thus, the reason provided for termination of the CPA was otherwise justifiable.

  • INTERNATIONAL & OTHER SECTOR SCENARIO

The Delhi High Court had stayed enquiry by CCI in a complaint on aviation fuel cartel under the premise that the Petroleum and Natural Gas Regulatory Board has the jurisdiction because the PNGRB Act provides for the Board’s duty to promote competition and consumer protection.

The European Union member states too have resolved the overlap issues by providing for mandatory consultation between the competition authority and sector regulators under both the competition law and sector regulatory laws. “Such a proposal is pending in India since 2011 and needs to be adopted”.

This approach has been adopted by several other developing countries also and is required in India too

  • CONCLUSION

The above decision affirms the Supreme Court’s intent on ensuring a balanced approach to competition law enforcement, which suitably reconciles the positive duty of the CCI to protect competition and the need of the industry for fair implementation.

Additionally, by taking note of the TDSAT proceedings regarding the termination of the CPA and the non-obstante clause (section 60) in the Competition Act, the Supreme Court seems to have implicitly recognized that the CCI’s jurisdiction to protect competition under the Competition Act can co-exist with that of sectoral regulators or other authorities (even if the underlying facts are the same). The judgment may have an impact on other cases, pending before the courts, on the issue of ‘jurisdiction’ (especially where the sectoral regulators have been contending exclusive jurisdiction on competition law related issues).

Article Written by

SAMRIDDH GUPTA

4th Year

Bhartiya Vidyapeeth New Law College, Pune

Article Supervised by

Adv. Sushant Chaturvedi

 

[1] Vodafone India Limited vs. The Competition Commission of India, 2017 SCC OnLine Bom 8524 Para 101

[2] Supra note 1, Para 101

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