CCI AND SECTORAL REGULATORS

– Kritika Dobhal [i]

The relevance of this topic stems from the fact that the tussle of jurisdiction between CCI and sectoral regulators is as old as CCI itself and the issue has come up time and again in various cases.

1. SECTORAL REGULATORS EXPLAINED

Sectoral regulators are sector specific regulators with their mandate to regulate the grant of license and tariff rates or license fees, quality of product and process, with respect to the environment in the particular sector.

The need for sector specific sectors was basically felt after liberalization. Before that, almost all sectors were dominated by either Government or Government owned entities. Also, most of the factors that determine competition, such as price, entry, etc., were controlled. Since public sector units were believed to act in public interest, no need for regulators was felt therein.

2. CONFLICT OF JURISDICTION BETWEEN CCI AND SECTORAL REGULATORS

There is a scope for conflict of jurisdiction between the Competition Commission of India (“CCI”) and sectoral regulators. This is because of Sections 18, 21, 21A, 60 and 62 of the Competition Act, 2002 (“the Act”). While Section 18[ii] and the Preamble[iii] of the Act entrusts CCI with a duty to sustain competition in the economy and Section 60 [iv]accords the Act primacy in case of conflict between the provisions of the Act and some other legislation, Section 62[v], however, provides that the Act will be read in conjugation and not in derogation of other statutes. A reading of these sections hints that CCI is the authority with primary jurisdiction to maintain competition in the economy. Also, there is Section 21[vi] which provides that the statutory authority may refer a matter which is before it, to the CCI, if such a need arises. Earlier, a matter could only be referred to CCI under Section 21 if a party requested, but after the amendment to the Act, a matter can sou motu be referred to CCI. Section 21 A[vii], on the other hand, gives the power to the CCI to refer a matter to the statutory authority.

Sector laws which were enacted before the CCI bestowed the responsibility upon the regulator to instill competition and protect the interest of the players, an objective with which CCI was later established. Even after enactment of the CCI, there have been few sector laws which bestow some competition functions upon the sectoral regulator. So, when on one hand, the Act gives primacy to the CCI in the matters of regulating competition in the market, on the other, the sector laws have given power to the authorities to regulate competition in the market, and this leads to overlap in jurisdiction.

Following are some regulators which have the potential of having a conflict of jurisdiction with the CCI due to the mandate provided in the statutory law:

  • The Securities and Exchange Board in India (“SEBI”)- Sections 11(e) and (h) of Securities and Exchange Board India Act, 1992 mandate SEBI to prohibit fraudulent and unfair trade practice and regulate the substantial acquisition of shares and takeover of companies in the sector. Also, there is Section 3 j(ii) SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, which outlines the procedure which SEBI expects the listed firms to expect. SEBI, thus, scrutinizes such mergers, and there is an overlap of jurisdiction.
  • Insurance Regulatory and Development Authority (“IRDA”)- IRDA (Schemes of Amalgamation and Transfer of General Insurance Business) Regulations, 2011, gives IRDA the authority to regulate combinations in the insurance sector, which is again overlapping of jurisdiction.
  • Telecom regulatory Authority of India (“TRAI”)- Under Section 11(1)(h) of TRAI Act, 1997, TRAI has powers to facilitate efficiency in providing telecommunication services so as to facilitate growth in such services. Its objective, inter-alia, is to promote a level playing field and promote fair competition. This is also the objective of CCI and hence, a potential of overlap of jurisdiction.
  • Central Electricity Regulatory Commission (“CERC”)- Section 60 of electricity Act, 2003 gives CERC the power to give appropriate directions to the licensee if it is abusing its dominant power or enters into a combination which has a potential to cause adverse effect on the electricity industry. This is basically what the CCI is there for. Initially the scope for conflict was limited as there were few players which were mostly public sector enterprises, but with Electricity Act, 2003, private investment in electricity industry is opened, which increases the chances of anti-competitive tactics by players.
  • Petroleum and Natural Gas Regulatory Board (“PNGRB”)- Section 11 of PNGRB Act, 2006, mentions that one of the functions of the Board is to protect the interest of the consumers by fostering trade and competition among the entities.

3. CCI’S TAKE ON CONFLICT OF JURISDICTION

In   M/s HT Media Ltd. v. M/s Super Cassettes Industries Ltd[viii], the contention raised by the opposite party, i.e., M/s Super Cassettes, inter-alia, was whether the CCI has jurisdiction to hear the matter. According to the opposite party, the appropriate authority to hear the matter is the Copyright Board and that the arena of licensing is within the jurisdiction of the Board, the Board being the sectoral regulator in this case. The CCI acknowledged the fact that determining license fee and its reasonableness is within the jurisdiction of the Copyright Board and CCI refused to indulge in that. However, the Commission did deal with the issues which were falling within the ambit of Section 3 of the Act (which had nothing to do  with the Copyright Board). CCI, in this case, did not delve into the matter of the unreasonableness of license fee. This is because, CCI being a newer body, it tries to refrain from encroaching upon the jurisdiction of sectoral regulators.

Under Section 27, the CCI has the power to give orders in case it finds that there has been any contravention of Section 3 or 4. Under Clause (d)[ix]– the CCI has the power to direct that the agreement will stand modified to the extent and in the manner specified by CCI’s order. But the CCI has never used this power to be a price fixer. Even in cases of affordable medicine and health care, CCI has never fixed price ceiling. This is because there is a government regulatory agency [National Pharmaceutical Pricing Agency (“NPPA”)] to look into it. For example, as per para 19 of the Drug Price Control Order, 2013, (DPCO) the Government may, in case of extra-ordinary circumstances and in the public interest, fix the ceiling price, or retail price of any drug, whether scheduled or non-scheduled or a new drug for such period, as it may deem fit. It also has powers to revise (either increase or decrease) the ceiling price or retail price of the drug which is already fixed and notified, irrespective of the annual wholesale price index for that year (based on which companies are automatically permitted under DPCO to revise the prices annually). NPPA is the Govt. regulatory agency which has its mandate to control prices of pharmaceutical drugs in India.

There has also been an amendment in the Act in 2007 which tried to reduce the possibility of conflict between CCI and the regulators. Section 21 was amended and Section 21A was added whereby earlier a matter before a regulator could only be transferred to the CCI at the request of the party, now the CCI has the power to take up the matter suo motu. Also, under the amendment, if a regulator disagrees with the CCI, it has to record reasons for doing the same. What is envisaged under these amendments is that if a regulator feels that it is infringing the jurisdiction of the CCI, it can refer the matter to CCI for its opinion.

Though the CCI generally refrains from encroaching upon the jurisdiction of regulators, there have been attempts by the regulators to oust the jurisdiction of CCI. The biggest example of this is Reserve Bank of India (“RBI”). Section 44A of the Banking regulation Act, 1949  outlines the procedure for amalgmation of banking companies and also provides that the bank mergers have to be sanctioned by RBI. Also, a Section of the Banking Laws Amendment Bill explicitly ousts the jurisdiction of CCI when it came to Bank mergers. The possible reasons for such action could be that Banking Sector is quite different from other sectors in the sense that it is a very crucial for the function of the economy and that the RBI has more expertise and competence to deal with bank mergers. Also, having two authorities to deal with the single matter will cause unnecessary delay, and would be against the spirit of RBI. In response to such attack by RBI, the Chairman of CCI, Mr Ashok Chawla commented “Why is it being perceived that what the competition regulator does can as well be done by the sectoral regulators- not so-the legal architecture doesn’t provide for that. And if did provide for that, the legislature in its wisdom would not have enacted the Competition Act.”[x]

Another potential conflict of jurisdiction was shown in the oil and gas sector. It was when Reliance Industries filed a  complaint with CCI against Indian Oil Corp. Ltd., Bharat Petroleum Corp Ltd. and Hindustan petroleum Corp Ltd alleging that they’ve formed a cartel to supply turbine fuel to Air India. The companies filed an application before the Delhi High Court that the CCI was not the appropriate authority to hear the matter, and that PNGRB has the jurisdiction. The Delhi High Court acted on the application and stayed CCI from investigating into the matter and deleted it from being a party.[xi]

There was an overlap in jurisdiction in the electricity sector also. When CCI found out the BSES Rajdhani, BSES Yamuna Power and North Delhi power Station were abusing its dominant status when they distributed faulty meters which showed 2.5% higher than the true reading. The CCI probe was not taken well by the Delhi Electricity Regulatory Commission and it believed that the matter lied in their jurisdiction and the powers were vested under the Electricity Act, 2003.[xii]

4. CONCLUSION

There are varying approaches taken worldwide to the issue of overlap in jurisdiction between competition authorities and sectoral regulators such as exclusive jurisdiction, cooperative jurisdiction or concurrent jurisdiction. By demanding a particular sector not be included within the ambit of the competition authority’s jurisdiction, what the regulators are demanding basically is an exclusive jurisdiction whereby the statute confers powers upon one authority to deal with a particular matter. That is a set-up which is very less likely to work in India set-up (or any country for that matter) because both the authorities are very crucial for the sound functioning of any sector. For example, the UK has adopted concurrent jurisdiction whereby both completion authority and sectoral regulators work simultaneously in a particular sector. In the UK, the Office of Fair Trading (OFT) and the sectoral regulators harness their particular expertise to ensure the smooth functioning in the sector. The regulators are, in this scenario, free to decide whether to follow the Competition Act or to enforce the sector specific statutes. Then there is the cooperative approach whereby both the authorities have to cooperate in dealing with cases of common interest, but the Competition Authority has the final say regarding the competition issues.

In the author’s opinion, what’ll work best for the Indian scenario is the cooperative approach because it’ll give CCI the final say in cases of anti- competitive activities, although it is a farfetched dream to expect the sectoral regulators to put their sword down and sign a Memorandum of Understanding for working in cooperation with CCI for regulating competition matters.

[i] 2nd year student, B.A. LL.B. (Hons.), National Law University, Jodhpur (Rajasthan).

[ii] Section 18 of the Act reads “Subject to the provisions of this Act, it shall be the duty of the Commission to eliminate practices having 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: Provided that the Commission may, for the purpose of discharging its duties or performing its functions under this Act, enter into any memorandum or arrangement with the prior approval of the Central Government, with any agency of any foreign country.”

[iii] The Preamble of the Act reads “An Act to provide, keeping in view of the economic development of the country, for the establishment of a Commission to prevent practices having adverse effect on competition, to promote and sustain competition in markets, to protect the interests of consumers and to ensure freedom of trade carried on by other participants in

markets, in India, and for matters connected therewith or incidental thereto.”

[iv]  Section 60 of the Act reads “The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force.”

[v]   Section 62 of the Act reads “The provisions of this Act shall be in addition to, and not in derogation of, the provisions of any other law for the time being in force.”

[vi]  Section 21 of the Act reads “. (1) Where in the course of a proceeding before any statutory authority an issue is raised by any party that any decision which such statutory authority has taken or proposes to take is or    would be, contrary to any of the provisions of this Act, then such statutory authority may make a reference in respect of such issue to the Commission:

 [Provided that any statutory authority, may, suo motu, make such a reference to the Commission.]

 [(2) On receipt of a reference under sub-section (1), the Commission shall give its opinion, within sixty days of receipt of such reference, to such statutory authority which shall consider the opinion of the Commission and thereafter, give its findings recording reasons therefor on the issuesreferred to in the said opinion.]”

[vii]  Section 21-A of the Act reads “(1) Where in the course of a proceeding before the Commission an issue is raised by any party that any decision which, the Commission has taken during such proceeding or proposes to take, is or would be contrary to any provision of this Act whose implementation is entrusted to a statutory authority, then the Commission may make a reference in respect of such issue to the statutory authority: Provided that the Commission, may, suomotu, make such a reference to the statutory authority.

(2) On receipt of a reference under sub-section (1), the statutory authority shall give its opinion, within sixty days of receipt of such reference, to the Commission which shall consider the opinion of the statutory authority, and thereafter give its findings recording reasons there for on the issues referred to in the said opinion.]”

[viii] CCI case no. 40/2011.

[ix]  Section 27 (d) of the Act reads “Where after inquiry the Commission finds that any agreement referred to in section 3 or action of an enterprise in a dominant position, is in contravention of section 3 or section 4, as the case may be, it may pass all orany of the following orders, namely:- direct that the agreements shall stand modified to the extent and in the manner as may be specified in the order by the Commission”

[x]Available at:  http://www.moneycontrol.com/news/trends/management-trends/-1407525.html

[xi]Available at: http://www.livemint.com/Home-Page/aCmjQr8BRwb0W4OQj2TUUK/Competition-watchdog-faces-fresh-challenge-to-jurisdiction.html

[xii] CCI case no. 45/2005.

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