Case BriefsSupreme Court

Supreme Court: A Bench comprising of A.K. Sikri and Ashok Bhushan, JJ. dismissed an appeal filed against the judgment of Bombay High Court whereby it held that Competition Commission of India had no jurisdiction to pass order in the instant matter as the issues were covered by Indian Telegraph Act, 1885 and Telecom Regulatory Authority Act, 1997 and the appropriate forum was the Telecom Dispute Settlement and Appellate Tribunal (TDSAT).

In the present matter, the Court was faced with determining the width and scope of the powers of the CCI under the Competition Act, 2002 pertaining to telecom sector vis-a-vis the scope of the powers of TRAI under the TRAI Act, 1997.

Factual Matrix

On 21-10-2013, Reliance Jio Infocomm Ltd. was granted a licence under Section 4 of the Telegraph Act by the Department of Telecom (DoT) for providing telecommunication services in all 22 circles in India. Soon thereafter, RJIL executed interconnection agreements with existing telecom operators including Airtel, Idea and Vodafone. RJIL  requested these companies to augment Point of Interconnection (POIs) for access as the capacity already provided to it was causing huge POI congestion, resulting in call failures on its network. According to RJIL, these companies intentionally ignored the aforesaid request.

Subsequently, in November 2016, RJIL filed information under Section 19 of the Competition Act before the CCI, As per RJIL, the respondent service providers, along with Cellular Operators Association of India, formed a cartel and acted in an anti-competitive manner which is prohibited by the Act. The CCI passed order dated 21-4-2017 under Section 26(1) as per which it came to a prima facie conclusion that case for investigation was made out and directed the Director-General to cause investigation in the case. Aggrieved thereby, respondents filed writ petitions before the High Court which quashed the order of CCI on the ground that CCI lacked jurisdiction to entertain such complaints/information filed under Section 19 as such matter falls within the exclusive jurisdiction of another regulatory authority, namely, TRAI.

Challenging this order passed by the High Court, the appellants were before the Supreme Court.

The Supreme Court considered the matter on following points:

(a) Jurisdiction of CCI

After noting salient features of Competition Act and TRAI Act, the Court concluded that as TRAI is constituted as an expert regulatory body which specifically governs the telecom sector, the aforesaid aspects of the disputes were to be decided by TRAI in the first instance. These were jurisdictional aspects. The High Court was right in concluding that the concepts of “subscriber”, “test period”, “reasonable demand”, etc, arising out of TRAI Act and the policy so declared, are the matters within the jurisdiction of TDSAT under the TRAI Act. Only when the jurisdictional facts in the present matter were determined by the TRAI against the respondents, the next question would arise as to whether it was a result of any concerted agreement between the respondents. It would be at that stage the CCI can go into the question as to whether violation of the provisions of TRAI Act amounts to ‘abuse of dominance’ or ‘anti-competitive agreements’.

(b) Whether TRAI has the exclusive jurisdiction to deal with matters involving anti-competitive practices to the exclusion of CCI altogether?

The function that is assigned to CCI is distinct from the function of TRAI. It is within the exhaustive domain of CCI to find out as to whether a particular agreement will have an appreciable adverse effect on competition within the relevant market in India. Such functions not only come within the domain of CCI, but TRAI is not at all equipped to deal with the same.

The Court, thus, did not agree with the appellants that CCI could have dealt with this matter without availing the inquiry by TRAI. It also did not agree with the respondents that insofar as the telecom sector is concerned, the jurisdiction of the CCI under the Competition Act is totally ousted.

In incidental issues, the Court decided that the petitions field by other companies before the Bombay High court were maintainable. When such jurisdictional issues arise, the writ petition would clearly be maintainable. In view of the above discussion, the Court dismissed the appeal while upholding the decision of the High Court. [CCI v. Bharti Airtel Ltd., 2018 SCC OnLine SC 2678, decided on 05-12-2018]

Amendments to existing lawsLegislation Updates

The Telecom Regulatory Authority of India has amended the Telecommunication Interconnection Regulations, 2018 (1 of 2018).

Salient features of the amendments are :-

  • In regulation 6 of the Telecommunication Interconnection Regulations, 2018 (1 of 2018) (hereinafter referred to as the principal regulations), after sub-regulation (3) the following proviso shall be inserted, namely:-

“Provided that the port charges and infrastructure charges, for all ports provided before the 1st February, 2018, shall continue to be payable as per the terms and conditions which were applicable to them before the 1st February, 2018.”

  • For regulation 8 of the principal regulations, the following regulation shall be substituted, namely:-

“Request for augmentation of POIs –

(1) Every service provider shall provide to the interconnecting service provider, at interval of every six months, its forecast of busy hour outgoing traffic, for the succeeding six months, at each POI and the first such forecast shall be provided within sixty days of the commencement of the Telecommunication Interconnection (Amendment) Regulations, 2018 and thereafter on the 1st April and 1st October every year.

(2) A service provider may request the other service provider for additional ports at a POI, if the projected utilisation of the capacity of such POI, calculated in the manner as contained in schedule II to these regulations, at the end of sixty days from the date of placing the request, is likely to be more than eighty-five percent and such projected utilization of the capacity of POI shall be determined on the basis of the daily traffic for the preceding sixty days at the POI during busy hour:

Provided that the service provider shall request for such number of additional ports which is likely to bring the utilization of the capacity of such POI, at the end of sixty days from the date of making request, to less than seventy-five percent.”

  1. In regulation 9 of the principal regulations, in sub-regulation (1), for the words “five working days”, the words “seven working days” shall be substituted;
  2. In regulation 9 of the principal regulations, in sub-regulation (2), for the words “three working days”, the words “five working days” shall be substituted;
  3. In regulation 9 of the principal regulations, in sub-regulation (3), for the words “five working days”, wherever occurring, the words “ten working days” shall be substituted;
  4. In regulation 9 of the principal regulations, in sub-regulation (4), for the words “three working days”, the words “ten working days” shall be substituted;
  5. In regulation 9 of the principal regulations, in sub-regulation (5), for the words “five working days”, the words “ten working days” shall be substituted;
  • After schedule I to the principal regulations, schedule II has been inserted.
Cyril Amarchand MangaldasExperts Corner


The Indian telecom sector has witnessed continual activity in the recent years, with the entry of new players such as Reliance Jio, consolidation between existing players such as Vodafone and Idea Cellular and the exit of incumbent players such as Telenor and Tata Teleservices. This constant transformation has intensified the battle between industry players to garner market shares and attract consumers. In addition to competing in the marketplace, telecom operators have also been fighting legal battles on competition issues such as cartelisation and predatory pricing as well as on telecom issues such as interconnection. Given that the issues at the core of these matters relate to both competition and telecom laws, a turf war has arisen between the Telecom Regulatory Authority of India (TRAI) and the Competition Commission of India (CCI) re jurisdiction.

Notably, CCI had, through a letter to TRAI last year, highlighted its competence to look into matters relating to predatory pricing. The letter was a result of a consultation paper issued by TRAI in February 2017 on anti-competitive concerns in tariffs by Telecom Service Providers (TSPs).[1] In his letter, the CCI Chairperson stipulated that “issues and questions for consultation relating to delineation of relevant market, assessment of dominance and predatory pricing” are “issues of determination for the Commission”.[2]

Responding to CCI, TRAI stressed that it had the experience and capability to examine all matters, including competitive issues, falling within the purview of tariffs.[3] In line with its assertion, pursuant to the Telecommunication Tariff (Sixty-third Amendment) Order, 2018 (the Amendment Order)[4], TRAI has recently amended the Telecommunication Tariff Order, 1999 (the Tariff Order), to regulate tariffs offered by TSPs on the basis of competition law principles. Through the amendment, TRAI has introduced concepts of “significant market power” and “predatory pricing” in the Tariff Order.

According to TRAI, such regulatory powers are set out under the Telecom Regulatory Authority of India Act, 1997 (the TRAI Act), which requires it to take “measures to facilitate competition and promote efficiency in the operation of telecommunication services so as to facilitate growth in such services”. To further this mandate of facilitating competition, TRAI in its Amendment Order has provided guidance on non-predation, through the insertion of the following definitions:

(a) “Non-predation” has been defined as not indulging in predatory pricing by a service provider having significant market power;

(b) “Significant market power” has been defined as a TSP holding a market share of at least 30% in the relevant market, which is to be determined on the basis of either subscriber base or gross revenue. The Amendment Order simultaneously recognises that the concept of ‘SMP’ flows from the concept of ‘dominance’ under competition laws;

(c) “Predatory pricing” has been defined as the provision of a telecommunication service in the relevant market at a price which is below the average variable cost, with a view to reduce competition or eliminate the competitors in the relevant market—Interestingly, the Amendment Order also refers to the definition of “predatory pricing” under the Competition Act, 2002 (the Competition Act) to emphasise that intent is the key;

(d) “Relevant market” has been defined as the market which may be determined by TRAI with reference to the relevant product market for distinct telecommunication services (such as Wireline Access Service, National Long Distance Service, International Long Distance Service) and the relevant geographical market;

(e) “Relevant product market” has been defined as the market in respect of a distinct telecommunication service for which the licensor grants licence to the TSP;

(f) “Relevant geographic market” has been defined as a market comprising the respective licence service area for which the licensor grants licence to the TSPs to provide distinct telecommunication services.

In addition to requiring the TSPs to conduct a self-check of tariffs at the time of reporting it to TRAI in order to ensure that there is no predation, the Amendment Order also confers suo motu powers on TRAI to examine tariffs to determine the occurrence of any predatory pricing, thus extending its jurisdiction to ex-post abusive conduct. In case of predation, a penalty not exceeding INR 50 lakhs per tariff plan for each service area can be imposed by TRAI.

Post the introduction of the Amendment Order however, officials of TRAI have clarified that dominant operators may match tariffs offered by a new entrant, and such actions would not be seen as predatory.[5]

On the other hand, the Competition Act established a sector agnostic regulator to prevent practices having adverse effect on competition and to promote and sustain competition in markets. The Competition Act sets out specific prerogatives of CCI to prohibit anti-competitive agreements and abuse of dominance. The abusive practices identified include predatory pricing. However, affording due consideration to the market dynamics, the Competition Act requires CCI to holistically examine such conduct. The in-depth examination required by CCI includes the delineation of the relevant market on the basis of factors such as end-use, pricing, consumer preferences, regulatory barriers, transport costs, etc.[6] Subsequently, CCI is required to make a determination of dominance giving due regard not only to the market share of the enterprise, but also to its size and resources, economic power, entry barriers, countervailing buyer power, market structure, etc.[7] Similar to clarifications from TRAI officials, the Competition Act also provides for a carve-out against predatory pricing if such pricing has been adopted to “meet the competition”.

However, contrary to the bright-line test of 30% under the Amendment Order, CCI’s decisional practice repeatedly cautions against adopting a blanket market share test for detection of dominance. As noted by CCI’s Chairperson in the letter to TRAI, market interactions should ideally be assessed on a case-by-case basis without any presumptions based on a formulaic framework.[8] CCI’s holistic approach is evidenced by its recent orders in the telecom sector, where it has approved mergers of key telecom players, despite the significant aggregate market shares, after having weighed in factors such as buyer power, increased switching, absence of switching costs, presence of other players, dynamic nature of the market, etc.[9]

The difference in the regulatory frameworks gives a preview of the contrasting approach to be adopted by the regulators for the same contravention and the conflicting regulatory views that the industry is likely to witness in the coming months. Moreover, while contrasting views may make compliance by TSPs difficult, similar findings may also lead to double jeopardy.

The regulatory conflict has already surfaced before courts, with the Bombay High Court finding that the Competition Act itself is not sufficient to decide and deal with the issues arising out of the provisions of TRAI Act and the contract conditions, under the relevant regulations.[10] The appeal to the Bombay High Court had been filed against a prima facie order of the CCI finding that TSPs, such as Airtel and Vodafone, had cartelised to deny adequate point of interconnections to Reliance Jio to thwart its entry into the telecom market. The decision of the High Court has now been appealed to the Supreme Court.

While the way forward is unknown, this fight for regulatory supremacy can only end with the CCI and TRAI joining forces to coordinate and consult with each other in matters that involve questions of competition and telecom laws. This will also be in line with the intent of the legislators who foresaw this situation and included a provision[11] under the Competition Act for a reference of matters inter se CCI and other statutory regulators.

 

Anshuman Sakle is a Partner with the Competition Law Practice at Cyril Amarchand Mangaldas and can be contacted at anshuman.sakle@cyrilshroff.com.  Arunima Chandra is a Senior Associate with the Competition Law Practice at Cyril Amarchand Mangaldas and can be contacted at arunima.chandra@cyrilshroff.com.

[1] Available at http://www.trai.gov.in/sites/default/files/Consultation_paper_03_17_feb_17_0.pdf.

[2]Available at https://www.thehindubusinessline.com/info-tech/turf-war-rages-between-cci-and-trai-over-telecom-tariffs/article9791247.ece.

[3]Available at http://www.financialexpress.com/industry/trai-tells-cci-it-has-power-to-settle-competitive-telecom-tariff-issues/798026/.

[4] Available at http://trai.gov.in/sites/default/files/TTO_Amendment_Eng_16022018.pdf.

[5]Available at http://www.livemint.com/Industry/O00tAdsmeBgcObcQSE42uO/Telecom-firms-free-to-match-Reliance-Jios-cheap-tariffs-ru.html.

[6] Sections 19(6) and (7) of the Competition Act.

[7] Section 19(4) of the Competition Act.

[8]Available at http://www.livemint.com/Industry/uzSqE22Uk4Lgt1jX8PjCOJ/CCI-to-Trai-Consult-us-on-predatory-pricing-issues.html.

[9]Vodafone/Idea, Combination Registration No. C-2017/04/502; Bharti Airtel Ltd./Tata Teleservices Ltd., Combination Registration No. C-2017/10/531.

[10] Vodafone India Ltd. v. Competition Commission of India, 2017 SCC OnLine Bom 8524.

[11] Sections 21 and 21-A of the Competition Act.

Hot Off The PressNews

Telecom Commission has approved almost all the TRAI’s Recommendation on In-flight Connectivity in its meeting on 01-05-2018. With this, the airlines and the TSPs can offer voice and data services in India Airspace once an aircraft reaches an altitude of 3000 metres. It is expected that it will take 3 to 4 months to operationalise the service. In line with earlier decision of Committee of Secretaries, In-Flight voice and data services shall be provided through Indian Satellites or through satellites approved by Department of Space for communication purposes, with gateways in India. A separate category of licensee called In-Flight Connectivity Provider shall be created with a token license fee of Re. 1. Such facility of voice and data connectivity shall also be extended to ships and other moving vehicles (Earth Stations in Motion).

[Press Release no. 1530998, dt. 02-05-2018]

Ministry of Communications

Case BriefsHigh Courts

Delhi High Court– Dismissing the writ petition filed by the petitioner challenging the orders of Telecom Disputes Settlement & Appellate Tribunal’s (TDSAT) on the ground that the procedure adopted by the TDSAT in making the orders and the jurisdiction exercised in issuing the directions contained therein is beyond the powers of TDSAT under the Telecom Regulatory Authority of India (TRAI) Act, 1997, the bench of R.S Endlaw J., held the petition to be not maintainable. The Court observed that jurisdiction cannot be exercised by this Court under Article 226 of the Constitution owing to the availability of alternative remedy of appeal under Section 18 of the TRAI Act

The petitioner had filed the petition as it was asked by the TDSAT to disclose the agreements it had entered into with Multi System Operator (MSO). The matter was listed before the TDSAT on 12 January. This Court while reserving its judgment in the present case, in an earlier hearing had directed the tribunal to defer the hearing scheduled on 12.01.2016 to a date after three weeks. Gopal Jain, Senior Counsel appearing for the petitioner contended that TDSAT has in the impugned orders stepped out from its adjudicatory role into regulatory function which under the TRAI Act is of the TRAI and not of the TDSAT. Per contra the counsel for respondent 4 on being asked the stand of TRAI contended that TDSAT in the impugned orders has interpreted the Regulations and TRAI did not find any fault with the impugned orders. Considering the contentions of both the parties, the Court was only concerned with the maintainability issue.

The Court relied on Dinkar Kumar v. Union of India 2014 SCC OnLine Del 2288 and Commissioner of Income Tax v. Chhabil Dass Agarwal (2014) 1 SCC 603 wherein it was held that the High Court will not entertain a petition under Article 226 on the exceptional grounds of violation of principles of natural justice or the order being wholly without jurisdiction or the vires of the Statute being under challenge, if an effective alternative remedy is available to the aggrieved person or the Statute under which the action complained of has been taken itself contains a mechanism for redressal of grievance. Thus, owing to the alternative remedy this petition was dismissed. [Star India Private Ltd. v.  Noida Software Technology Park Ltd,  2016 SCC Online Del 6690,  decided on 22.01.2016]