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Competition Law and Telecom Sector

The Competition law is a law that promotes or seeks to maintain market competition by regulating anti-competitive conduct by various enterprises and companies. In India, Competition Act 2002 was implemented to prevent practices from having an adverse effect on competition and to promote and sustain competition in the markets.

The Monopolies and Restrictive Trade Practices act,1969 is currently not in force as it was repealed and replaced by The Competition Act,2002 and The MRTP Commission was replaced by the Competition Commission of India.

Abuse of Dominance
Abuse of Dominance refers to a situation where affirm or group of firms that have a dominant role in the market intend to eliminate a competitor or a competing firm or dissuade a new firm from entering the market. The dominant enterprise or group exercise certain practices that Section 4 of the Competition Act prohibits. Some of them are Imposition on predatory prices, denying market access, limiting the supply of goods and services, use of dominant position in one market to enter into another market.

Cartelization
Cartel includes an association of producers, sellers, distributors, traders, or service providers who, by agreement amongst themselves, limit, control, or attempt to control the production, distribution, sale or price of, or, trade in goods or provision of services.

Cartels are agreements between enterprises (including a person, a government department, and association of persons/enterprises) not to compete on price, product (including goods and services), or customers. The Act gives a detailed definition of an enterprise in section 2 (h). The objective of a cartel is to raise prices above competitive levels, resulting in injury to consumers and the economy. For the consumers, cartelization results in higher prices, poor quality, and less or no choice for goods or/and services.

Telecom Sector
The telecom sector in India has witnessed the intense change over the last decade. The Arrival of Reliance Jio in the telecom market in 2016 and the Vodafone-Idea merger in 2018 reinforce the steep competition in this sector. In this context, I shall refer to two judicial decisions delivered in recent years where the telecom market players have initiated complaints against each other for predatory pricing and cartelization.

Bharti Airtel V. Reliance Jio
In this case, a complaint was filed by Bharti Airtel against Reliance Jio. Bharti Airtel alleges three basic contentions as follows:

  1. Reliance Industries were using their financial strength to enter into the telecom market through Reliance Jio, alleging the abuse of Dominant Position by Reliance Industries, in contravention to section 4(2)(e) of the Competition Act, 2002.
  2. Further, the free services provided by Reliance Jio were in contravention to section 4(2)(a)(ii) of the Competition Act, 2002 and amounted to predatory pricing.
  3. Lastly, alleging an anti-competitive agreement between Reliance Industries and Reliance Jio in contravention of Section 3 (1) of the Act, 2002 whereby Reliance Jio had unfettered access to the funds and resources of Reliance Industries to cause an appreciable adverse effect on competition in the telecom industry.


The services granted by Reliance Jio right after its entry into the telecom market included a ‘Jio Welcome Offer' under which data, voice, video, and a full bouquet of applications were granted free of cost to the purchasers which attracted the consumers and gave an impact on their mind to switch to Reliance Jio and to not use any other network as it was pocket friendly to the consumer.

The Competition Commission of India started the proceeding with a preliminary conference with both the parties and then further went on to examine each allegation to the facts as provided by Bharti Airtel and Reliance Jio. The Competition Commission has limitedly interpreted the term ‘relevant market' in the context of the present matter. The Commission has sufficed the wireless telecom services to be the relevant geographical market and focused on the dominance of Reliance Jio in its individuality.

The Competition Commission of India went on to note that, according to market data, Reliance Jio does not have a market share of more than 7% in each of the 22 telecom circles in India, and the market consists of several players (such as Vodafone, Idea, Tata, MTNL, etc.) who have similar financial and technical capabilities. There existed sufficient choice in the market and the consumers were not in any way dependent on a single service provider. In light of this, the CCI held that Reliance Jio cannot be said in the dominant position in the relevant market. As it was not in the dominant position, there does not arise any case of abuse of the dominant position through predatory pricing in the relevant market.

Competition Commission of India V. Bharti Airtel
In this case, a complaint was filed by Reliance Jio under Section 19(1) of the Competition Act,2002 against Bharti Airtel, Vodafone, and Idea, contending that these three telecom operators had formed a cartel and were indulging in anti-competitive practices. Further, Reliance Jio filed an application before the Telecom Regulatory Authority of India (TRAI) to monitor the conduct of IDOs and COAI.

CCI's order (directing investigation under Section 26(1) of the Act) on the above application was challenged before the Bombay High Court which held that the CCI had no jurisdiction in the matters of telecom sector as in the instant case, the matter was also referred to TRAI which is technically well equipped to deal with the said issue. Aggrieved by the impugned order of the High Court, CCI and Reliance Jio challenged it before the Supreme Court by way of a special leave petition.

The Apex Court dismissed the appeals filed by the CCI & Reliance Jio and upheld the decision of the Bombay High Court has deftly resolved the long-debated scuffle for predominance between the overarching fair market watchdog, the CCI, and the sector-specific regulators, the Telecom Regulatory Authority of India by deferring scrutiny into any possible coordination or collusion between the existing telecom players through the platform of COAI or otherwise by CCI.

Further, the Court whilst upholding its previous judgment in the SAIL case on the nature of the CCI prima facie order under Section 26(1) of the Act, for the first time, made a demarcation between examination of competition issues by the CCI in a sector having a statutory regulator and a sector without one. The Court adduced the need for use of Section 21A of the Act, which makes it obligatory for the CCI to procure the opinion of the sector regulator on sector-specific issues first. This way, the Court eventually showed a middle way to sort out the long-debated jurisdictional conflict issue between the CCI and sector regulators. By invoking the doctrine of harmonious construction, the court has maintained an equilibrium by giving TRAI the authority to determine the rights and obligations of the parties first, and then if it apprehends the existence of anti-competitive act, evokes the jurisdiction of CCI.

Conclusion
As competition in the Indian telecom sector continues to rise steeply, the market players are bound to raise similar disputes against each other in the future. Also, as the Competition Act, 2002 is a penal statute that allows imposition of significant penalties, raising a complaint about a violation of this statute turns out as an attractive option for the rival market players.

The absence of clear dividing lines between promoting competition and checking anti-competitive practices leads to conflicts as we have seen in the above cases. The legislatures while enacting the framework under the Competition Act, 2002 and Telecom Regulatory Authority of India Act, 1997 failed to establish the power and role of competition commission and sectoral regulatory. Both these bodies have to formulate boundaries for themselves and ensure that they manage to create a pro-consumer business-friendly model for the telecom sector.

References:

  1. Section 19: Inquiry into certain agreements and dominant position of enterprise.' Competition of India Act,2002
  2. Bharti Airtel v. Reliance Jio,2017 (PDF). cci.gov.in
  3. CCI v. Bharti Airtel Ltd. And Ors.; (2019) 2 SCC 521. main.sci.gov.in

Written By: Prathit Sareen: 2nd Year, JIMS Engineering, Management and Technical Campus School of Law, Guru Gobind Singh Indraprastha University
E-mail: [email protected]

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