Supreme Court clarifies the jurisdiction of Competition Commission of India (CCI) and Telecom Regulatory Authority of India (TRAI) in telecom sector disputes (05 December 2018)

Case Background

The case involves a dispute between Reliance Jio Infocomm Limited (RJIL) and three major telecom operators: Bharti Airtel Limited, Vodafone India Limited, and Idea Cellular Limited (referred to as the “IDOs”). RJIL alleged that these IDOs formed an anti-competitive agreement or cartel to hinder RJIL’s entry into the telecom market. This dispute arose after RJIL launched its services and experienced significant call failures, which it attributed to the IDOs’ failure to provide adequate Points of Interconnection (POIs). POIs are crucial for enabling calls between subscribers of different networks.

RJIL filed a complaint with the Competition Commission of India (CCI), alleging that the IDOs were delaying or denying the provisioning of POIs, thereby violating competition laws. The CCI, after a preliminary hearing, found a prima facie case and ordered an investigation. This order was challenged by the IDOs and the Cellular Operators Association of India (COAI) in the Bombay High Court, which ruled in their favor, stating that the CCI lacked jurisdiction. The High Court held that the Telecom Regulatory Authority of India (TRAI) had exclusive jurisdiction over such matters.

Timeline

Legal Framework

The Supreme Court considered the following key legal provisions:

• Section 3 of the Competition Act, 2002: This section prohibits anti-competitive agreements, including those that limit or control the provision of services. Specifically, Section 3(3)(b) states that “Any agreement entered into between enterprises or associations of enterprises or persons or associations of persons or between any person and enterprise or practice carried on, or decision taken by, any association of enterprises or association of persons, including cartels, engaged in identical or similar trade of goods or provision of services, which limits or controls production, supply, markets, technical development, investment or provision of services; shall be presumed to have an appreciable adverse effect on competition.”
• Section 19 of the Competition Act, 2002: This section empowers the CCI to inquire into alleged contraventions of Section 3 and Section 4. Section 19(1) states that “The Commission may inquire into any alleged contravention of the provisions contained in sub-section (1) of section 3 or sub-section (1) of section 4 either on its own motion or on (a) receipt of any information, in such manner and accompanied by such fee as may be determined by regulations, from any person, consumer or their association or trade association; or (b) a reference made to it by the Central Government or a State Government or a statutory authority.”
• Section 26(1) of the Competition Act, 2002: This section outlines the procedure for inquiry, stating that “On receipt of a reference from the Central Government or a State Government or a statutory authority or on its own knowledge or information received under section 19, if the Commission is of the opinion that there exists a prima facie case, it shall direct the Director General to cause an investigation to be made into the matter.”
• Section 11 of the Telecom Regulatory Authority of India Act, 1997: This section outlines the functions of TRAI, including making recommendations on measures to facilitate competition and promote efficiency in telecom services. It also mandates TRAI to ensure compliance with license terms and conditions and to regulate inter-connectivity between service providers. Section 11(1)(a)(iv) states that the functions of the Authority shall be to make recommendations on “measures to facilitate competition and promote efficiency in the operation of telecommunication services so as to facilitate growth in such services”.
• Section 14 of the Telecom Regulatory Authority of India Act, 1997: This section establishes the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) to adjudicate disputes between licensors and licensees and between service providers.

Arguments

Appellants (CCI and RJIL):

• The CCI argued that its jurisdiction was distinct from TRAI’s, focusing on anti-competitive agreements and cartels, while TRAI regulates telecom services.
• The CCI contended that the IDOs were acting in concert to block RJIL’s market entry, violating Section 3(3)(b) of the Competition Act.
• The CCI emphasized that the issue was not merely about the adequacy of POIs but whether the IDOs’ conduct was a result of a collusive agreement.
• The CCI argued that the High Court erred in treating the Section 26(1) order as quasi-judicial and in giving findings on merits, thereby exceeding its writ jurisdiction.
• RJIL argued that COAI was acting as a platform for the IDOs to collude against RJIL, violating competition laws.
• RJIL contended that the IDOs were not acting independently but were part of a concerted effort to hinder RJIL’s market entry, which is an anti-competitive practice.

Respondents (IDOs and COAI):

• The IDOs argued that the TRAI Act is a special law that ousts the CCI’s jurisdiction in the telecom sector, and that TRAI had exclusive jurisdiction.
• The IDOs contended that the dispute was about the interpretation of interconnection agreements, which falls under TRAI’s purview.
• The IDOs argued that CCI’s order under Section 26(1) was not a mere administrative direction but had serious adverse consequences and was therefore amenable to judicial review.
• The IDOs argued that they had provided sufficient POIs, and the CCI failed to consider this material.
• The IDOs submitted that the issues raised by RJIL were essentially contractual disputes masquerading as competition issues.
• COAI argued that it was merely representing the interests of the industry and not acting as a cartel.

Issues Framed by the Supreme Court

The Supreme Court addressed the following key issues:

1. Whether the Competition Commission of India (CCI) has jurisdiction to investigate alleged anti-competitive practices in the telecom sector, or is this the exclusive domain of the Telecom Regulatory Authority of India (TRAI)?
2. Whether the High Court was justified in entertaining the writ petitions against the order passed by the CCI under Section 26(1) of the Competition Act?
3. Whether the High Court could give its findings on merits of the case?

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Judgment

How each authority was viewed by the Court:

• Haridas Exports v. All India Float Glass Manufacturers’ Assn. & Ors. [(2002) 6 SCC 600]:* This case was followed to support the view that the Competition Act and other statutes can operate in different fields without implied repeal.
• State (NCT of Delhi) v. Sanjay [(2014) 9 SCC 772]:* This case was cited to emphasize that the absence of a non-obstante clause in the TRAI Act means it does not override other laws.
• Solidaire India Ltd. v. Fairgrowth Financial Services Ltd. & Ors. [(2001) 3 SCC 71]:* This case was followed to support the argument that between two special statutes, the later one prevails.
• Union of India and Another v. Association of Unified Telecom Service Providers of India and Others [(2011) 10 SCC 543]:* This case was cited to highlight that TRAI’s role in facilitating competition is recommendatory, not regulatory.
• Deutsche Telekom v. European Commission [Case C-280/08 P]:* This case was followed to show that competition law applies unless legislation eliminates competition.
• Telefonica SA v. European Commission [T-336/07]:* This case was followed to support the view that a competition authority can intervene in a regulated market.
• Competition Commission of India v. Steel Authority of India Limited and Another [(2010) 10 SCC 744]:* This case was followed to define the nature of the order under Section 26(1) as administrative.
• FTC v. Supreme Court Trial Lawyers Association [493 US 411 (1990)]:* This case was followed to demonstrate that trade associations can be held liable for anti-competitive conduct.
• Competition Commission of India v. Coordination Committee of Artistes and Technicians of West Bengal Film and Television & Ors. [(2017) 5 SCC 17]:* This case was followed to show how trade associations can be used for anti-competitive purposes.
• Begum Sabiha Sultan v. Nawab Mohd. Mansur Ali Khan & Ors. [(2007) 4 SCC 343]:* This case was followed to emphasize that the substance of a suit is determined by the averments in the plaint.
• State of Punjab v. Labour Court, Jullundur & Ors. [(1980) 1 SCC 4]:* This case was followed to support the argument that a special law prevails over a general law.
• Ashoka Marketing Ltd. & Anr. v. Punjab National Bank & Ors. [(1990) 4 SCC 406]:* This case was followed to show that in a conflict between two special laws, the purpose of the laws is considered.
• Credit Suisse v. Billing et al [551 US 264 (2007)]:* This case was followed to caution against over-intervention in regulated sectors.
• Bhavnagar University v. Palitana Sugar Mill (P) Ltd. & Ors. [(2003) 2 SCC 111]:* This case was followed to support the principle that when the law prescribes a particular procedure, other modes of action are prohibited.
• Carona Ltd. v. Parvathy Swaminathan & Sons [(2007) 8 SCC 559]:* This case was followed to define jurisdictional facts and their importance for the exercise of jurisdiction.
• Modern Dental College and Research Centre and Others v. State of Madhya Pradesh and Others [(2016) 7 SCC 353]:* This case was followed to emphasize the importance of regulatory bodies in a liberal economy.
• Barium Chemicals Ltd. and Another v. Company Law Board and Others [AIR 1967 SC 295]:* This case was followed to support the view that writ petitions are maintainable when jurisdictional issues are raised.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the need to maintain a balance between the roles of the sectoral regulator (TRAI) and the market regulator (CCI). The Court emphasized the importance of TRAI’s expertise in resolving telecom-specific issues before CCI could intervene on competition aspects. The Court also considered the potential for conflicting decisions if both authorities acted simultaneously. The need for a balanced approach to ensure both sector-specific regulation and market competition was a key factor.

Logical Reasoning

Issue 1: Jurisdiction of CCI vs. TRAI

Issue 2: Maintainability of Writ Petitions

Issue 3: Findings on Merits

Final Order

The Supreme Court upheld the Bombay High Court’s decision to quash the CCI’s order under Section 26(1) of the Competition Act, but on different grounds. The Supreme Court held that the High Court was right in entertaining the writ petition, but it erred in giving findings on the merits of the case. The Supreme Court clarified that the CCI can investigate anti-competitive practices in the telecom sector but only after TRAI has determined certain jurisdictional facts. The Court directed that the matter should be remitted back to the CCI with the direction that it should await the findings of TRAI on the issue of interconnection before proceeding further. The Court also held that the CCI should not proceed with its investigation until the TRAI gives its findings.

Key Takeaways

The Supreme Court’s judgment provides crucial clarity on the jurisdictional boundaries between the CCI and TRAI. Here are the key takeaways:

• Concurrent Jurisdiction: The CCI and TRAI have concurrent, but not overlapping, jurisdiction in the telecom sector. TRAI has the primary role in determining sectoral facts, while the CCI addresses anti-competitive practices.
• Jurisdictional Facts: Before initiating an investigation, the CCI must await TRAI’s findings on jurisdictional facts related to the telecom sector, such as interconnection agreements and license conditions.
• No Ouster of Jurisdiction: The TRAI Act does not completely oust the jurisdiction of the CCI. The Competition Act remains applicable to the telecom sector, but its application is contingent on TRAI’s findings.
• Administrative Orders: While CCI’s Section 26(1) order is administrative, it is subject to judicial review if jurisdictional issues are raised.
• Balanced Approach: The judgment emphasizes the need for a balanced approach between sectoral regulation and market competition, ensuring that both TRAI and CCI play their respective roles effectively.