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November 27, 2014

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CCI And Sector-Specific Regulators


- Suhail A. Nathani, [ ]
- Gauri Chhabra, [ ]

Suhail A. Nathani & Gauri Chhabra

The Article Explores The Existing Interface Between The Competition Commission Of India And Other Regulators While Proposing Greater Cooperation Between Both Sides To Ensure Less Conflict And Multiplicity Of Proceedings

India's Liberalisation and Privatisation witnessed creation of sector-specific regulators to cater to the needs of the sectors with its domain expertise and technical regulations, by providing a level playing field and ensuring competition in the market. With the coming into force of the Competition Act, 2002 ("Act") (replacing the erstwhile Monopolies and Restrictive Trade Practices Act, 1956), which established the Competition Commission of India ("CCI"), the principal competition enforcement agency in India, a power tussle was created between the CCI and the other sector-specific regulators. Whilst the sector-specific regulators and competition authorities share a similar set of objectives, i.e. to ensure competition in the market, they are entrusted with different functions, perspectives and areas of supervision.

The interface between competition law and sector-specific regulations has been a source of endless debate and controversy. Lack of legislative clarity, precedence over time, sector-specific expertise, are some of the factors that have led to uncertainties, ambiguities in the application of law, forum-shopping, and differing remedies for the same cause of action. Accordingly, there is a need for the CCI and sector-specific regulators to co-operate with each other, to bridge the gaps and establish a framework for them to operate mutually.

Mandate of the CCI under the Act


The CCI is under duty to eliminate practices having an adverse effect on competition, promote and sustain competition, protect the interests of consumers and ensure freedom of trade carried on by other participants, in markets in India.2 The Act stipulates co-operation between the CCI and the statutory authority by way of Section 21 and 21A. Section 21 stipulates that the statutory authority may refer an issue to the CCI, if there exists any conflict between the Act and the sector-specific regulations. In such a case, while the CCI is bound to deliver its opinion within a stipulated period of 60 days, it is not necessary for the statutory authority to abide by such opinion.3 Similarly, the CCI may make a non-binding reference to the statutory authority in case there is any conflict between the provisions of the Act and statutory regulations.4

While the CCI in the past has sought advice from sector-specific regulators in various instances5 and has also provided its expertise to other regulators6, given that cross-referencing is not compulsory and the CCI and the statutory authority are not bound by the findings of each other7, concerns have been raised in relation to effectiveness of these provisions.8

In relation to applicability of the provisions of the Act, Section 60 of the Act provides supremacy to the provisions of the Act in case of any inconsistency. The provisions of the Act shall have an overriding effect on any other law in force.9 Further, under Section 62 of the Act, the provisions of the Act shall be in addition to, and not in derogation of, the provisions of any other law for the time being in force. As such, the Act stipulates harmonious construction of the provisions with other regulations.10

Therefore, the Act vests ultimate responsibility on the CCI to adjudicate upon competition-related issues, across all sectors.11 However, similar powers have been bestowed on a number of independent regulators such as the Telecom Regulatory Authority of India ("TRAI"), the Central Electricity Regulatory Commission ("CERC"), the Insurance Regulatory Development Authority ("IRDA"),the Petroleum and Natural Gas Regulatory Board ("PNGRB"), to regulate and promote competition in the relevant sector. As such, there exists overlapping jurisdiction between the CCI and sector-specific regulators, which has been challenged many times before the courts of law. It is interesting to see how such overlapping jurisdiction has been dealt with in the past by the court of law.

Interface between competition law and sector-specific regulators


CCI's objective is to promote and sustain competition in the market in order to protect the interest of the consumer. Co-operation between the CCI and sector regulators will ensure that the activities of the regulators are well coordinated, thereby minimising conflict and duplicity of proceedings.

The Act empowers the CCI to enforce provisions relating to anti-competitive agreements12, abuse of dominance13 and combinations14. While exercising its powers, the jurisdiction of the CCI has been challenged in various instances, wherein the CCI has emphasized its exclusive jurisdiction over competition related matters. In one of the earlier cases filed with the CCI in Consumer Online Foundation v. Tata Sky Ltd. & Other Parties,15 the jurisdiction of the CCI was challenged by Dish TV operators on the basis that TRAI had exclusive jurisdiction over issues arising in the telecommunication industry. The CCI, clarifying its stand in unequivocal terms, held that competition-related matters shall squarely fall within the purview of the Act. Subsequently, in Shri Neeraj Malhotra, Advocate vs. North Delhi Power Ltd. & Ors,16 which alleged anti-competitive behaviour of the electricity distribution companies, the Discoms alleged exclusive jurisdiction of the DERC on issues relating to anti-competitive behaviour of electricity distribution companies. However, the DERC, in the said case, categorically stated in its communication to the CCI that although all matters pertaining to electricity tariff have to be decided under the provisions of the Electricity Act and DERC Regulations, allegations of anti-competitive behaviour, including abuse of dominant position by the Discoms fell within the jurisdiction of the CCI, thus upholding the jurisdiction of the CCI on competition-related issues.

Recently, the CCI in M/s HT Media Limited v. M/s Super Cassettes Industries Limited,17 while deciding on its jurisdiction, held that the powers of the CCI and the Copyright Board are different and the Copyright Board cannot serve as an effective instrument for promotion of competition.18 The CCI while recognising the role and importance of sector-specific regulators, held that the CCI being the market regulator, had jurisdiction to look at all issues affecting competition in the market.19

Although competition law is sector-agnostic and is applicable across sectors, the CCI has not garnered supremacy in all the proceedings. The High Court in certain cases has stayed the proceedings before the CCI. For instance, the proceedings before the CCI against public sector undertakings in the oil sector alleging cartelisation in the supply of aviation turbine fuel to Air India, was stayed by the Delhi High Court,20 since the PNGRB had already passed an order in relation to restrictive and unfair trade and marketing practices and cartelisation in respect of marketing and sale of petroleum and petroleum products by public sector undertakings.21

In another instance, Ericsson had initiated legal action against Micromax for enforcing its intellectual property rights before the Delhi High Court.22 Micromax, during the pendency of the proceedings before the Delhi High Court, filed a complaint before the CCI, accusing Ericsson of abusing its dominant position by imposing exorbitant royalty rates for standard essential patents and not licensing it on fair, reasonable and non-discriminatory terms. The CCI passed a prima facie order directing investigation.23 Ericsson filed a separate writ petition before the Delhi High Court challenging the CCI's jurisdiction, since the Patent Act itself provides adequate mechanism to balance the rights of the patentee and other stakeholders. At the interim stage, the Delhi High Court directed Ericsson to provide information to the Director General of investigation ("DG"), however, restricted the ability of the CCI to pass any final order.24

Recently, on a complaint filed by Bull Machines Private Limited against JC Bamford Excavators Limited ("JCB") before the CCI for abusing its dominant position by misusing judicial processes in order to exclude competition and deny market access to new candidates,25 the Delhi High Court questioning the jurisdiction of the CCI, restrained the CCI from passing the final order.26 Interestingly, the DG during its investigation conducted its first ever drawn raid on the offices of JCB for non-co-operation during the course of the investigation. Against the conduct of the DG, the Delhi High Court completely stayed the proceedings before the CCI against JCB "given the manner in which the action has been taken by the respondent (CCI)".27

Way Forward


The overlap between the CCI and sector-specific regulators has given rise to conflicts and confusion, leading to multiplicity of proceedings, resulting in conflicting views. The jurisprudence, as it stands today, appears that the CCI and the sector-specific regulators operate in their individual capacities.

In order to ensure effective coherence, it is important for the regulatory authorities to co-operate with each other.28 Both the CCI and the sector-specific regulators have their areas of expertise and both cannot replace each other. The sector-specific regulators have socio-economic benefits as their objective, while the CCI's objective is to promote and sustain competition in the market in order to protect the interest of the consumer. Co-operation between the CCI and the sector regulators will ensure that the activities of the regulators are well coordinated, thereby minimising conflict and duplicity of proceedings.

 

Footnote:
1 Suhail A. Nathani (suhailnathani@elp-in.com) is a Partner and Gauri Chhabra (gaurichhabra@elp-in.com) is a Senior Associate in the Competition Law Practice Group at ELP. 2 Section 18 of the Act. 3 Section 21. 4 Section 21A. 5 In Shri Neeraj Malhotra, Advocate vs. North Delhi Power Ltd. & Ors (Case No. 6/2009), the CCI sought an opinion of the Delhi Electricity Regulatory Commission ("DERC"); the CCI took an opinion of Airports Economic Regulatory Authority and PNGRB on certain issues arising in the Mumbai International Airport Private Limited/Indian Oil Corporation Limited/Bharat Petroleum Corporation Limited/Hindustan Petroleum Corporation Limited/Mumbai Aviation Fuel Farm Facility Limited, Combination Registration No. C-2014/04/164, available at: http://www.cci.gov.in/May2011/OrderOfCommission/CombinationOrders/C-2014-04-164.pdf [last accessed on 15 October 2014]. 6 Opinion was sought by Maharashtra Electricity Regulatory Commission under proviso to Section 21(1) of the Act, from the CCI in relation to competition law issues arising in Case No. 13 of 2010, dated 14 March 2011, available at: http://www.mercindia.org.in/Order%2058%2042/Competition_Commission.pdf [last accessed on 15 October 2014]. 7 The Madras High Court in Vikash Trading Company v Designated Authority (2013) 1 MLJ 907, observed that "[T]he contentions raised on behalf of the petitioners that the Designated Authority ought to have referred the matter to the Competition Commission, under Section 21 of the Competition Act, 2002, cannot be accepted. It is noted that Section 62 of the Competition Act, 2002, makes it clear that the provisions of the said Act shall be in addition to and not in derogation of any other provision or any other law for the time being in force. As such, it cannot be said that it would be mandatory on the part of the Designated Authority to refer the matter to the Competition Commission, under Section 21 of the said Act, especially, in view of the fact that specific time limits have been prescribed for the Designated Authority to perform its functions, as per the provisions of Rule 16 of Anti-Dumping Rules." 8 The Central Government by way of the Competition Amendment Bill, 2012, is proposing to amend Section 21 and 21A of the Act to mandate the statutory authorities to refer "competition" related matters to the CCI and vice versa. The Bill further proposes to amend Section 27 of the Act, according to which the CCI shall give due regard to the opinion given by the statutory authority at the time of passing of the order. Available at: https://theindiancompetitionlaw.files.wordpress.com/2013/02/the-competition-a-bill-2012.pdf [last accessed on 15 October 2014]. 9 Section 60. 10 In the proceedings before the Delhi High Court in Union of India v. Competition Commission of India W.P.(C) 993/2012 & C.M. Nos. 2178-79/2012, dated 23 February 2012, it was held that the provisions of the Act are in addition to other laws in force, which is similar to Section 3 of the Consumer Protection Act, 1986, wherein the Supreme Court of India held that the 1986 Act provides for an additional remedy. Consequently, the High Court rejected the argument that the proceedings before the CCI are not maintainable in view of the arbitration clause. Available at: http://delhicourts.nic.in/FEB12/UOI%20VS%20COMPETITION%20COMMISSION%20OF%20INDIA.pdf [last accessed on 15 October 2014]. 11 The Government of India, by way of a notification dated 8 January 2013, has exempted a banking company in respect of which the Central Government has issued a notification under Section 45 of the Banking Regulation Act, 1949, from the application of Sections 5 and 6 of the Act for a period of 5 years from such date of the notification. Available at: http://www.cci.gov.in/images/media/notifications/S.O.%2093%20(E)_08012013.pdf [last accessed on 15 October 2014]. 12 Section 3 of the Act. 13 Section 4 of the Act. 14 Sections 5 and 6 of the Act. 15 Case No. 2/2009, available at: http://www.cci.gov.in/menu/MainOrderConsumer250411.pdf [last accessed on 15 October 2015]. 16 Case No. 6/2009 17 Case No. 40/2011. 18 ibid, paragraph 130 on page 53. 19 Supra note. 12, paragraph 131, pages 53-54. 20 W.P. (C) 8211/2010, available at http://delhihighcourt.nic.in/dhcqrydisp_o.asp?pn=214538&yr=2010 [last accessed on 15 October 2015]. 21 Reliance Industries Limited & Ors. v. Indian Oil Corporation Ltd. & Ors., Complaint No. 4 of 2008, order dated 12 July 2012, available at http://www.pngrb.gov.in/newsite/pdf/orders/order02july.pdf [last accessed on 15 October 2014]. 22 CS(OS) 442/2013, available at http://delhihighcourt.nic.in/dhcqrydisp_o.asp?pn=57850&yr=2013 [last accessed on 15 October 2014]. 23 Case No. 50/2013, available at http://www.cci.gov.in/May2011/OrderOfCommission/261/502013.pdf [last accessed on 15 October 2014]. 24 W.P.(C) 1006/2014, Telefonaktiebolaget LM Ericsson v. Competition Commission of India & Anr., available at http://delhihighcourt.nic.in/dhcqrydisp_o.asp?pn=33798&yr=2014 [last accessed on 15 October 2014]. 25 Case No. 105 of 2013, available at http://www.cci.gov.in/May2011/OrderOfCommission/261/1052013.pdf [last accessed on 15 October 2014]. 26 Rituparna Datta, Livelaw, Delhi HC Restrains CCI from Passing Final Orders in Enquiry Against JCB, published on 7 April 2014, www.livelaw.in, available at: http://www.livelaw.in/delhi-hc-retrains-cci-passing-final-orders-enquiry-jcb/ [last accessed on 15 October 2014]. 27 Deepak Patel, Business Standard, Delhi HC Stays CCI Probe Against JCB, published on 27 September 2014, available at: http://www.business-standard.com/article/companies/delhi-hc-stays-cci-probe-against-jcb-114092700899_1.html [last accessed on 15 October 2014]. 28 The draft National Competition Policy Statement issued by the committee constituted by the Ministry of Corporate Affairs in 2011 while mentioning the requirements of a framework for an interface between a competition regulator and a sector-specific regulator, refers to the XI-Plan which states that the "[T]he interface between the Competition Commission vis-à-vis sectoral regulators is critical. The basic premise to be recognised is that sectoral regulators have domain expertise in their relevant sectors. The Competition Commission, established under the Competition Act, 2002 on the other hand, has been constituted with a broad mandate to deal with competition for which certain very specific parameters are laid down under the Act. A formal mechanism for coordination between the Competition Commission and the sectoral regulators is, therefore, of key importance. Coordination between sectoral regulators and Competition Commission should be made mandatory through suitable provisions in the Competition Act, 2002 and sectoral laws." Available at: http://www.mca.gov.in/Ministry/pdf/Draft_National_Competition_Policy.pdf [last accessed on 15 October 2014].

 

Disclaimer - The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or corporate body. No person should act on such information without appropriate professional advice after a thorough examination of the facts and circumstances of a particular situation. There can be no assurance that the judicial / quasi judicial authorities may not take a position contrary to the views mentioned herein.

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