CCI v. Sector Regulators: Navigating Jurisdictional Ambiguities for Effective Resolution

Abstract

The Competition Commission of India (CCI) functions as a watchdog of the market safeguarding competition and consumer welfare. Several other sector-specific regulators like SEBI and TRAI also have their presence. In performing their functions, their jurisdiction often overlaps. This jurisdictional conflict raises several problems like forum-shopping, legal uncertainty, and over-enforcement. The article examines the causes of such conflicts and suggests some measures to eliminate them.

Introduction

In March 2024, the CCI issued a show-cause notice to Muthoot Finance highlighting concerns over jurisdictional overlap between the CCI and the Securities and Exchange Board of India (SEBI).[1] Muthoot filed complaints with CCI and SEBI over debenture trustees’ anti-competitive activities, but did not reveal its SEBI complaint to the CCI.

The case demonstrates a jurisdictional clash between the CCI’s role in resolving competition problems and SEBI’s monitoring of debenture trustees.

The convergence of competition law and sector regulations produces several problems. Forum shopping is a primary concern, where parties choose the court from those courts having jurisdiction, for a more favourable outcome. Such activities may disrupt judicial processes and undermine their authority and efficiency. Legal uncertainty emerges when a sector regulator’s approval is later challenged by CCI, forming concerns about CCI’s ability to overturn such actions. This can result in inconsistent decisions, as demonstrated by varying rulings from the CCI on similar appeals. Over-enforcement is another problem, where a firm may face penalties from both regulatory and competition bodies, which can adversely affect the firm and the economy. In a sector like telecom, where companies recorded 4.17 lakh crores of debt in 2021-22, over-enforcement is likely to have a chilling effect on the market and economy. Keeping in mind these considerations, there is a need to address and resolve such conflicts.

Causes of the Conflict

Multiple reasons can be cited for jurisdictional conflicts between the regulators and the CCI. Conflict may be caused due to legislative framework, regulatory design, or judicial precedents. Legislative provisions such as ‘non-obstante clause’ and ‘exclusion of jurisdiction of civil court’ often create multiple difficulties. Differing court interpretations have led to legal ambiguity, as judicial interpretation of legislation plays a key role of triggering these disputes.

(I) Ambiguous Legislative Provisions

Ambiguities have also arisen from provisions of the Competition Act itself, with Section 60 granting it overriding effect over other laws, while Section 62 states that the Act is supplementary and not in derogation of other laws. An overriding effect has also been accorded to the Electricity Act.[2] Specific statutes like PNGRB Act and Patents Act also aim to promote competition, and have their own provisions addressing anti-competitive behavior. For instance, S. 11 of PNGRB Act[3] provisions for fostering competition and fair trade, borrowing ‘restrictive trade practices’ concept from the old MRTP Act. The Patents Act has provisions to avoid certain restrictive conditions.[4] Excessive use of non-obstante clause, mandate of sector regulators to hear competition issues and lack of guidelines to address conflicts exacerbate the situation.

(II) Judicial Decisions

The writ courts had to step in very often to settle jurisdictional disputes between regulators and the CCI. The courts have attempted to fill the lacunae created by the legislature. Even after multiple attempts, the controversy on the CCI’s jurisdiction is unceasing, partly because there is no distinct pattern in judicial decisions. The ratio of these decisions also differs. Apparently, the judiciary has been successful in settling the dispute of the CCI with a few regulators, but no general rule or guideline has been provided.

The CCI vs. Bharti Airtel[5] is at the forefront of these decisions. In July 2016, Reliance Jio Infocomm Limited (RJIL) complained to the Telecom Regulatory Authority of India (TRAI) about the denial of sufficient Points of Interconnection (PoIs) by incumbent telecom operators Airtel, Vodafone, and Idea. TRAI recommended that Department of Telecommunications (DoT) impose penalties on these operators. Subsequently, RJIL filed a case with CCI in December 2016, alleging violations of the Competition Act, 2002. The incumbents challenged this action in the Bombay High Court, which agreed to quash the investigation, reasoning that TRAI needed to clarify the terms of interconnection agreements and parties’ obligations first. Supreme Court upheld this decision, stating that TRAI should initially address jurisdictional issues. Only after TRAI’s findings indicate potential anti-competitive practices, should the CCI get involved.

Bharti Airtel decision could have set the ground rule, but for the Monsanto Holdings[6] case which disagreed with its rationale. The dispute centered on Monsanto’s royalty fees for its BT-II cotton seed technology, which was patented under the Patents Act, 1970. CCI found that Monsanto’s pricing practices potentially breached sections 3(4) and 4(2)(a)(i) of the Competition Act by imposing unfairly high prices and restrictive conditions on its patented technology. Consequently, CCI directed an investigation into the matter under Section 26(1) of the Act. Monsanto challenged the CCI order before the Delhi High Court, arguing that CCI lacked jurisdiction because the issues were related to patent rights under the Patents Act. Monsanto also argued that the Bharti Airtel decision[7] overturned the previous Micromax/Ericsson case[8]. However, the High Court upheld the Ericsson ruling, stating that CCI’s jurisdiction over patent rights is not excluded unless there is a direct conflict with the Patents Act. Court clarified that the Bharti Airtel decision does not establish a general rule that complaints must first be addressed by statutory regulators before the CCI can act.

In Amir Khan Productions Private v. Union of India[9], the Bombay High Court affirmed that CCI has the authority to determine its jurisdiction depending on the case. The petitioner argued that CCI lacked jurisdiction over film-related matters due to exhaustive provisions of the Copyright Act, 1957. A similar argument was made in the Monsanto Holdings case[10] regarding the Patents Act’s provisions on compulsory licensing and restrictive agreements but despite existence of detailed provisions in other statutes, courts have upheld CCI’s jurisdiction.

While it may seem that courts tend to protect CCI’s jurisdiction, decisions to the contrary have also been made.[11] There are inconsistencies in court decisions regarding the CCI’s jurisdiction prowess, with some cases granting it discretion, while others restrict its authority. The CCI itself has shown irregularity in its approach. For example, it acted against DLF following a complaint by apartment allottees but dismissed similar complaints in other cases, deeming them outside its purview, In Subhash Yadav v. Force Motor Ltd. [12], CCI referred the matter to another statute, while in Shri Anand Prakash Agarwal v. Dakshin Haryana Bijli Vitran[13], it dismissed a complaint about fuel surcharge adjustments, directing it to the State Electricity Regulatory Commission. Such discrepancies highlight the judiciary’s limitations in interpreting laws, as lawmaking remains the legislature’s domain.

Towards Collegiality

The need to resolve jurisdictional issues arises when there is coextensive application of regulations and competition law. While the purpose and modus operandi of sector regulators and the Commission may be different at times, but the ultimate purpose that they serve is consumer welfare. Bearing that in mind, some suggestions are being made.

The first and most obvious solution to this conflict is cooperation. Co-operation would dis-incentivize forum-shopping for market players. The expertise of a sector-specific regulator would help with better analysis of cases, sharing of information between the CCI and sector regulators could fastrack CCI investigations. Co-operation can be achieved in various ways, legally and institutionally. One way to ensure co-operation is to incorporate the idea in the statute. Sections 21 and 21A of the Competition Act address inter-regulatory consultation between statutory authorities but current non-binding consultation provisions are ineffective. While recent amendments aim to integrate other laws, they fall short of fully addressing the coordination challenges.[14] In various jurisdictions, competition authorities have signed MoUs with sectoral regulators to outline frameworks for cooperation, though adherence to these agreements is not guaranteed. For example, the Competition Commission of South Africa has MoUs with 14 sector-specific regulators,[15] and in 2021, Egypt’s competition authority and NTRA established a joint committee to enhance market competition. [16] Similarly, Iceland’s ICA and PTA have a long-standing MoU to improve efficiency and legal clarity. MoUs offer several advantages, such as providing detailed cooperation methods, being crafted by experienced authorities, and clarifying mandates where legislative provisions are insufficient. [17]

Creating working groups can improve collaboration by designating clear points of contact and enhancing communication between competition authorities and sector regulators. In India, we do have Forum of Indian Regulators (FOIR). However, FOIR’s ability to resolve jurisdictional issues is limited, highlighting the need for stronger coordination between the CCI and other regulators.

In the absence of a defined hierarchy between sector regulators and CCI, establishing a higher authority with binding decisions for both could reduce litigation, prevent forum shopping, and lighten the burden of courts. In the UK, the Competition Appeal Tribunal handles appeals related to competition and economic regulatory matters across various sectors, including telecommunications and healthcare.[18]

Conclusion

In India, the CCI stands out as enforcer of competition across all sectors, unlike sector-specific regulators. This broad mandate often leads to jurisdictional conflicts with other regulators, resulting in litigation that can delay or hinder cases. The unclear roles and ineffective legal framework contribute to these conflicts, requiring intervention from writ courts. Internationally, such issues are managed through agreements and collaborative efforts between regulators. Consistent cooperation between CCI and sector regulators is critical for efficient competition regulation.

[1] Pavan Burugula, ‘CCI sends show-cause notice to Muthoot Finance for ‘regulatory shopping’ Moneycontrol (New Delhi, 4 April 2024).

[2] , The Electricity Act, 2003 (36 of 2003), s.174

[3] The Petroleum and Natural Gas Regulatory Board Act, 2006 (19 of 2006).

[4] , The Patents Act, 1970 s.140

[5] The CCI v. Bharti Airtel (2019) 2 SCC 521.

[6] Monsanto Holdings (P) Ltd v. CCI, 2020 SCC OnLine Del 598.

[7] The CCI v. Bharti Airtel (2019) 2 SCC 521.

[8] Ericsson v. Competition Commission of India, WP(C) 464/2014, DHC.

[9] Amir Khan Productions Private v. Union of India, 2010 SCC OnLine Bom 1226.

[10] Monsanto Holdings (P) Ltd. vs CCI, 2020 SCC OnLine Del 598.

[11] See, ICAI vs Competition Commission of India, 2023 SCC OnLine Del 3422.

[12] CCI Case No 32 of 2012.

[13] CCI Case No 01 of 2016.

[14] The Competition (Amendment) Act, 2023 (9 of 2023).

[15] Directorate For Financial And Enterprise Affairs Competition Committee OECD, ‘Independent Sector Regulators – Note by South Africa’ (DAF/COMP/WP2/WD(2019)22).

[16] National Telecom Regulatory, ‘Authority NTRA and ECA Sign a Memorandum of Understanding to Enhance Free Competition Practices in Egypt’s Telecom Market’ (National Telecom Regukatory Authority of Egypt, 2021) <https://www.tra.gov.eg/en/ntra-and-eca-sign-a-memorandum-of-understanding-to-enhance-free-competition-practices-in-egypts-telecom-market-2/> accessed 17 August 2023.

[17] OECD, ‘Roundtable on Changes in Institutional Design of Competition Authorities – Note by Iceland’ (DAF/COMP/WD(2014)94).

[18] Competition Appeal Tribunal, ‘About the Tribunal | Competition Appeal Tribunal’ (Catribunal.org.uk, 2015) <https://www.catribunal.org.uk/about> accessed 27 August 2023.