This article is written by Jisha Garg, from the Rajiv Gandhi National University of Law, Punjab. This is an exhaustive article dealing with the conflict of CCI with other sectoral regulators. This article focuses on the overlapping of the regulators’ jurisdiction with the Competition Commission and also suggests some possible approaches to resolve the conflicts between the two authorities. The author also presents his views about the most suitable approach at the end of the article.
Table of Contents
Introduction
India opened up its economy in 1991 by adopting the Liberalisation, Privatisation and Globalisation (LPG) policy in 1991. This led to a shift from a government-controlled closed economy to a market controlled economy. This shift was initiated due to its presumption of ensuring efficiency through optimum utilisation of resources. The change from a closed to an open economy demanded structural adjustments due to which market reforms became quintessential to make a move, a successful one. Various pre-1991 laws such as Monopolies and Restrictive Trade Practices Act, 1969 were rendered futile and failed in adapting to the changing economic environment in the country. To review and evaluate this Act, a high-level committee was formed under the chairmanship of Shri S.V.S. Raghavan. The committee recommended the formation of a new law on competition which would align with the international developments.
It was due to this reason that the Competition Act was enacted in 2002, which promoted a shift from restrictive and unfair trade practices and thwarting monopoly to the promotion of competition in the market. However, the implementation of the Act was stalled because the constitutional validity of some of its provisions was challenged before the court. After the adoption of the LPG policy, various sector-specific regulators were introduced. These included the Securities and Exchange Board of India, 1992, Competition Commission of India, Telecom Regulatory Authority of India, etc. Due to the rise of these specific regulators, there are jurisdictional conflicts with the Competition Commission of India. The present article delves into such disputes and explains the court’s stance on such differences.
Competition Commission of India and sectoral regulators
Competition Commission of India is a corporate body formed under the Competition Act, 2002. The head office of the commission changes from time to time, depending on the discretion of the government. The regional offices of the commission are scattered across the country. The commission consists of a Chairperson with a minimum limit of two members and a maximum limit of 6 members. The tenure of the members is five years, and the Central Government appoints them. Some of the objectives of the commission are:
- Mitigating the adverse impact of competition on the market.
- Introducing health measures for sustenance and promotion of competition.
- Protecting consumer’s interests by promoting fair trade practises in the market.
- Creating awareness in public and promoting competition.
Sectoral regulators are sector-specific regulators which were introduced to regulate tariff rates, quality of product and process, the grant of license and license fees, following the conditions in the particular sector. Sectoral regulators were formed after the liberalisation policy. Before that, most sectors were dominated by the government, and therefore the formation of regulatory bodies was considered futile since the government was supposed to act in the public interest. Most instruments of competition, including demand-supply, were controlled by the government. However, with the involvement of the private sector in the competition, the sector saw the emergence of sectoral regulators.
Conflict of jurisdiction between CCI and sectoral regulators
Sections 18, 21, 21A, 60 and 62 of the Competition Act have the scope of creating a conflict of jurisdiction between Competition Commission of India and other sectoral regulators. Before the enactment of the Competition Act, various sectoral regulators have delegated the duty of protecting the interests of the players in the market. The Competition Act was formulated with a similar purpose. More sectoral regulators were introduced to conduct competition functions. So it is evident that although the Act bestows the power to regulate competition in the market on the Competition Commission, the sector laws present similar responsibility to several other authorities. This becomes one of the reasons for a conflict of jurisdiction between them. Some of the regulators who have the potential of having a conflict of jurisdiction are mentioned below:
- The Securities and Exchange Board in India (SEBI): Various provisions of the SEBI Act, 1992 direct it to prohibit unfair and fraudulent trade practises. It also regulates the acquisitions of shares and mergers. Thus, there is a clear overlap of jurisdiction since the Competition Commission has also been bestowed with similar responsibilities.
- Insurance Regulatory and Development Authority (IRDA): IRDA Regulations, 2016, authorises IRDA to regulate combinations in the insurance sector. This is again an overlap of jurisdiction with the Competition Commission of India.
- Telecom Regulatory Authority of India (TRAI): Section 11(1)(h) of TRAI Act, 1997 empowers TRAI to facilitate efficiency in providing telecommunications services to promote fair competition and establish a level playing field. This is also one of the objectives of the CCI and hence, potential for overlap in jurisdiction.
Case studies of overlap conflicts
Market dominance
The electricity sector is probably more problematic in this regard. Section 60 of the Electricity Act confers powers over market dominance issues with the sector regulator; the practice has often been inconsistent with the law as well as varied from case to case.
For example, in Suomoto vs North Delhi Power Ltd. & Bases & Ors. case CCI issued notices after it found three power distributors; BSES Rajdhani Power, BSES Yamuna Power and North Delhi Power Ltd (NDPL) guilty of abusing their dominant positions. However, the Delhi Electricity Regulatory Commission objected to CCI’s intervention claiming that such matters to be exclusively under their domain pursuant to the powers vested in them by the Electricity Act, 2003.
However, a contrarian position was taken by the DERC in Neeraj Malhotra, Advocate vs. North Delhi Power Ltd. & Ors., the Discoms alleged before the CCI that only the Delhi Electricity Regulatory Commission under the EC Act had jurisdiction to deal with the issues relating to anti-competitive behaviour of electricity distribution companies. In this case, the DERC categorically stated in its communication to the CCI that although all matters pertaining to electricity tariff have to be decided as per the provisions of the EC Act and the DERC Regulations, allegations of anti-competitive behaviour, including abuse of dominant position by the DISCOMS fell within the jurisdiction of the CCI.
Merger control
In the banking sector, RBI has often contended that the banking sector must be excluded from the ambit of the competition commission, especially in the matters of mergers and acquisitions. This is because it is believed that the central bank has the required expertise and competence to deal with such matters. They have been demanding an exemption from the Parliament regarding the same.
However, it has been argued that if exemptions are provided in the banking sector, then other sectors would also demand exemptions which will lead to deterioration of the Commission’s powers. It has also been said that although the primary role of approving mergers and acquisitions be vested in the hands of the RBI, such decisions are taken by both the authorities co-jointly.
CCI’s take on it
In order to reduce the possibility of a conflict of jurisdiction between the CCI and other regulators, the Competition Act was amended in 2007. It amended Section 21 and added Section 21A through which CCI has been bestowed with the power to take the case’s suo moto cognizance as opposed to the earlier provision wherein the decision to direct the query was based on the discretion of the party. In case the regulator feels that CCI is encroaching upon its jurisdiction, it has to state the reasons for the same and can ask for CCI’s opinion.
There have been several attempts by regulators to encroach upon CCI’s jurisdiction. The biggest example of this is the Reserve Bank of India. Section 44 of the Banking Regulations Act, 1949 provides for the provisions of merging banking companies and also authorises the RBI to approve various mergers. This provision encroaches upon the jurisdiction of CCI.
Reliance Industries filed a complaint against several oil and gas companies with the Competition Commission. The companies, in turn, approached the court saying that the Commission is not the competent authority to hear the matter and the matter is outside its jurisdiction. The court stayed the hearing before the Competition Commission.
The take of courts in a conflict of jurisdiction
Courts, from time to time, have taken various stances to resolve the disputes relating to jurisdiction. In the Competition Commission of India v. Bharti Airtel case, the Supreme Court has ruled on the specific responsibilities of TRAI and the Competition Commission. The CCI has itself contended that although there are various sectoral regulators in existence, the power to investigate the cases relating to anti-competition conduct solely rests with the Competition Commission.
There have been instances in the past wherein there was an overlap in the use of various enactments, especially where both the statutes had a ‘non-obstante clause’ in it. Courts have used a number of principles while resolving such disputes- the newer laws prevailing over the older ones, specific legislations prevailing over general ones etc. Specific exemptions have been crafted by various courts and tribunals while resolving jurisdictional disputes between the competition authorities and specific regulators.
The United Kingdom follows a concurrency model wherein both the authorities appreciate competency and follow a consultative process to decide the case of a jurisdictional dispute. South Africa follows a comparable framework established on the lines of a concurrency model. Australian system gives primacy to specific rules over general competition rules. There are yet other jurisdictions in which particular sectors are excluded from competition authorities. There are some other systems which are silent on the issue of overlaps between the two authorities.
The way forward
The Financial Sector Legislative Reforms Committee Report highlighted the complications because of the multiplicity of regulators. Several regulators’ jurisdictions cover aspects of the same transaction, whereas they are entirely silent on other issues. Every financial regulator penalises the company in question, whereas the consumer protection is overlooked, and no compensation is provided to them for the damages suffered by them. The FSLRC report highlights two objectives, formation of one integrated financial regulator and protection and compensation to the aggrieved consumers. There are two possible approaches to address the issue of jurisdictional dispute.
The first possible way forward could be to follow a concurrency model as followed by countries like the UK and Australia. However, there are serious doubts about the potential success of such a model in India. The power battles and the hierarchical institution culture prevalent in the country would prevent various government authorities from coordinating and cooperating.
The most suitable scenario for India seems to be the formation of a single authority for the selective enforcement of competition law. Competition authorities have the necessary expertise to interpret anti-competition conduct. A single authority would also ensure uniformity in the application of rules governing the competition sector. A legislative amendment is imperative to make CCI the sole authority to regulate competition in the market with sectoral regulators devising economic, technical and access regulation. However, given primacy to a single authority does not mean the complete elimination of the sectoral regulators. It means the Competition Commission can utilise the specialised knowledge and advice of the various regulators for bringing in the necessary legislative amendments and by helping it in the enforcement process.
Conclusion
There are a number of approaches followed worldwide to resolve the dispute of overlapping jurisdiction including concurrent jurisdiction, exclusive jurisdiction and cooperative jurisdiction. However, different approaches are suited to different countries. Exclusive jurisdiction means that the sectoral regulators are demanding the power to deal with a particular matter. The regulators are given the freedom to follow the competition law or refuse to follow it. This kind of approach is unsuitable in the Indian context because such an approach would undermine the Competition Commission’s powers and defeat the purpose for which it was formed. The second approach being the concurrent approach is likely to fail due to the power struggles in the Indian set up as has already been mentioned above.
According to the author, although the ideal approach would be the cooperative approach, the most pragmatic seems to be the one in which a single centralised authority is given primacy with the utilisation of specialised knowledge and advice from the sectoral regulators. The approach will not only benefit the Competition Commission but will also meet the demands of the sectoral regulators.
References
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