Competition Commission of India vs Bharti Airtel Limited and Others

Competition Act, 2002: Competition Commission of India (CCI) – Duties and functions – The CCI is entrusted with duties, powers and functions to deal with three kinds of anti-competitive practices – These are: (a) where agreements are entered into by certain persons with a view to cause an appreciable adverse effect on competition; (b) where any enterprise or group of enterprises, which enjoys dominant position, abuses the said dominant position; and (c) regulating the combination of enterprises by means of mergers or amalgamations to ensure that such mergers or amalgamations do not become anti-competitive or abuse the dominant position which they can attain – The purpose of CCI is to eliminate such practices which are having adverse effect on the competition, to promote and sustain competition and to protect the interest of the consumers and ensure freedom of trade, carried on by the other participants, in India – For the purpose of conducting an inquiry, the CCI is empowered to call any person for rendering assistance and/or produce the records/material for arriving at even the prima facie opinion.

Competition Act, 2002: s.26(1) – Writ petition against order under s.26(1) of 2002 Act – Maintainability of – RJIL filed information under the Act alleging anti-competitive agreement/cartel having been formed by three major telecom operators (IDOs) along with COAI – CCI exercised its right under s.26 and held that prima facie case existed and an investigation was warranted into the matter and directed Director General to cause investigation in the case – In writ petition, High Court was called upon to decide as to whether the jurisdiction of the CCI was entirely excluded or to what extent the CCI could exercise its jurisdiction in these cases when the matter could be dealt with any another regulator, namely, the TRAI – Held: When such jurisdictional issues arose, the writ petition would clearly be maintainable – Constitution of India – Art.226 – Judicial review. Competition Act, 2002: s.26(1) – Whether the High Court could give its findings on merits – Held: Once the order under s.26(1) of the 2002 Act is held to be administrative in nature and that it was merely a prima facie opinion directing the Director General to carry the investigation, the High Court was not competent to adjudge the validity of such an order on merits – The observations of the High Court giving findings on merits, therefore, were not appropriate – At the same time, since the order of the High Court is upheld on the aspect that the CCI could exercise jurisdiction only after proceedings under the TRAI Act had concluded/attained finality, the ultimate direction given by the High Court quashing the order passed by the CCI is not liable to be interfered with as such an exercise carried out by the CCI was premature.

Telecom Regulatory Authority of India Act, 1997: Salient features of the Act, discussed.

Disposing of the appeals, the Court

HELD : 1.1 The Competition Act, 2002 deals with three kinds of practices which are treated as anti-competitive and are prohibited. These are: (a) where agreements are entered into by certain persons with a view to cause an appreciable adverse effect on competition; (b) where any enterprise or group of enterprises, which enjoys dominant position, abuses the said dominant position; and (c) regulating the combination of enterprises by means of mergers or amalgamations to ensure that such mergers or amalgamations do not become anticompetitive or abuse the dominant position which they can attain. The CCI is entrusted with duties, powers and functions to deal with three kinds of anti-competitive practices. The purpose is to eliminate such practices which are having adverse effect on the competition, to promote and sustain competition and to protect the interest of the consumers and ensure freedom of trade, carried on by the other participants, in India. For the purpose of conducting such an inquiry, the CCI is empowered to call any person for rendering assistance and/or produce the records/material for arriving at even the prima facie opinion. [Paras 67, 68][551-B-C; 558-A-C]

Excel Crop Care Limited v. Competition Commission of India and Another (2017) 8 SCC 47 : [2017] 5 SCR

901 – relied on

1.2 While inquiring into any alleged contravention and determining whether any agreement has an appreciable adverse effect on competition, factors which are to be taken into consideration are mentioned in sub-section (3) of Section 19. These include creation of barriers to new entrants in the market, driving existing competitors out of the market and foreclosure of competition by hindering entry into the market. All these activities have connection with the ‘market’. The word ‘market’ has reference to ‘relevant market’. As per sub-section (5) of Section 19, such relevant market can be relevant geographic market or relevant product market. The instant case relates to telecommunication market. [Para 69][558-C-E]

2.1 The telecom market is regulated by the statutory regime contained in the TRAI Act. Under the said Act, TRAI is established as a regulator which exercises control/supervision and also provides guidance to the telecom/mobile market. This statutory body is required to function as per the provisions of the TRAI Act as well as the Rules and Regulations framed thereunder. Additionally, the telecom companies are also governed by licence agreements entered into between the Central Government and such service providers, for providing telephone/telecommunication services to the customers/subscribers. [Para 71][559-C-D]

2.2 Some of the features which govern the

telecommunication industry are: (a) To protect the interest of the service providers and consumers of the telecom sector and to permit and ensure technical compatibility and effective interrelationship between different service providers and for ensuring compliance of licence conditions by all the service providers, TRAI was constituted under the Telecom Regulatory Authority of India Act, 1997. TRAI is a recommendatory/advisory and regulatory body discharging the functions envisaged under subsection (1) of Section 11 of the said Act. TRAI, inter alia, is charged with ensuring fair competition amongst service providers, including fixing the terms and conditions of entire activity between the service providers and laying down the standards of Quality of Service (QoS) to be provided by each service provider. In exercise of its functions, TRAI has issued detailed Regulations for telecom services, including fixation and revision of tariffs (Tariff Order), fixation of Inter-connect Usage Charges (IUC), prescription of quality of service standards, etc.

(b) The Telecom Service Providers, which include the respondents as well as RJIL, provide telecommunication access service and are PAN India Telecom Service Providers. They are governed by the Cellular Mobile Telephone Service (CMTS)/Unified Access Service Licence (UASL) issued by the Telecommunications Department, Government of India under section 4 of the Telegraph Act. (c) The Central Government has the exclusive privilege of establishing, maintaining and working telegraphs under the Telegraph Act and the Central Government is authorised to grant licence on such terms and conditions and in consideration of such payment as it thinks fit to any person to establish, maintain or work as telegraph within any part of the country. By virtue of Section 4 of the Telegraph Act, a service provider is duty bound to enter into a licence agreement with the former for unified licence, with authorisation for provision of services, as per the terms and conditions prescribed in the Schedule. As a condition of the said licence, the licensee agrees and unequivocally undertakes to fully comply with the terms and conditions stipulated in the licence agreement without any deviation or reservation of any kind. The licence is governed by the provisions of the Telegraph Act, the Indian Wireless Telegraphy Act, 1933, the TRAI Act and the Information Technology Act, 2000, as modified or regulated from time to time. [Para 73][565-G-H; 566-A-G]

2.3 The interconnection agreement, inter alia, provides for the following clauses: (a) to meet all reasonable demand for the transmission and reception of messages between the interconnect systems; (b) to establish and maintain such one or more POIs as are reasonably required and are of sufficient capacity and in sufficient numbers to enable transmission and reception of the messages by means of applicable systems; and (c) to connect A and keep connected to the applicable systems. By virtue of the licence, the licensee is obligated to ensure quality of service as prescribed by the licensor or TRAI and failure on their part to adhere to the quality of service stipulated by TRAI would make the licensor liable to be treated for breach of the terms and conditions of the licence. In order to render effective services, it is mandatory for the licensee to interconnect/provide POIs to all eligible telecom service providers to ensure that calls are completed to all destinations and interconnection agreement is entered into between the different service providers which mandates each of the party to the agreement to provide to the C other interconnection traffic carriage and all the technical and operational quality service and time lines, i.e. the equivalent to that which the party provides to itself. [Para 74][567-A-C, F-H; 568-A-B]

3.1 With the advent of globalisation/liberalisation leading D to free market economy, regulators in respect of each sector have assumed great significance and importance. It becomes their bounden duty to ensure that such a regulator fulfils the objectives enshrined in the Act under which a particular regulator is created. Insofar as the telecom sector is concerned, the TRAI Act itself mentions the objective which it seeks to achieve. It not only E exercises control/supervision over the telecom service providers/licensees, TRAI is also supposed to provide guidance to the telecom/mobile market. ‘Introduction’ to the TRAI Act itself mentions that due to tremendous growth in the services it was considered essential to regulate the telecommunication services F by a regulatory body which should be fully empowered to control the services, in the best interest of the country as well as the service providers. TRAI is, thus, constituted for orderly and healthy growth of telecommunication infrastructure apart from protection of consumer interest. It is assigned the duty to achieve the universal service which should be of world standard quality G on the one hand and also to ensure that it is provided to the customers at a reasonable price, on the other hand. In the process, purpose is to make arrangements for protection and promotion of consumer interest and ensure fair competition. [Paras 78, 79][570-B-D; 571-E]

Modern Dental College and Research Centre and Others v. State of Madhya Pradesh and Others (2016) 7 SCC

353 – followed

3.2 Specific functions which are assigned to TRAI, amongst other, include ensuring technical compatibility and effective interrelationship between different service providers; ensuring compliance of licence conditions by all service providers; and settlement of disputes between service providers. In the instant case, dispute raised by RJIL specifically touches upon these aspects as the grievance raised is that the IDOs have not given POIs as per the licence conditions resulting into non-compliance and have failed to ensure inter se technical compatibility thereby. Not only RJIL raised this dispute, it even specifically approached TRAI for settlement of this dispute which arose between various service providers, namely, RJIL on the one hand and the IDOs on the other, wherein COAI is also roped in. [Paras 79, 80][571-F-H; 572-A]

3.3 As the TRAI is constituted as an expert regulatory body which specifically governs the telecom sector, the said aspects of the disputes are to be decided by the TRAI in the first instance. These are jurisdictional aspects. Unless the TRAI finds fault with the IDOs on the said aspects, the matter cannot be taken further even if it is assumed that the CCI has the jurisdiction to deal with the complaints/information filed before it. RJIL has approached the DoT in relation to its alleged grievance of augmentation of POIs which in turn had informed RJIL that the matter related to inter-connectivity between service providers is within the purview of TRAI. RJIL thereafter approached TRAI; TRAI intervened and issued show-cause notice and post issuance of show-cause notice and directions, TRAI issued recommendations on the issue of inter-connection and provisioning of POIs to RJIL. The sectoral authorities are, therefore, seized of the matter. TRAI, being a specialised sectoral regulator and also armed with sufficient power to ensure fair, nondiscriminatory and competitive market in the telecom sector, is better suited to decide the said issues. After all, RJIL’s grievance is that inter-connectivity is not provided by the IDOs in terms of the licenses granted to them. TRAI Act and Regulations framed thereunder make detailed provisions dealing with intense obligations of the service providers for providing POIS. These provisions also deal as to when, how and in what manner POIs are to be provisioned. They also stipulate the charges to be realised for POIs that are to be provided to another service provider. Even the consequences for breach of such obligations are mentioned. [Para 83][573-F-H; 574-A-C]

4. The High Court was right in concluding that till the jurisdictional issues were straightened and answered by the TRAI which would bring on record findings on the said aspects, the CCI is ill-equipped to proceed in the matter. Having regard to the said nature of jurisdiction conferred upon an expert regulator pertaining to this specific sector, the High Court is right in concluding that the concepts of “subscriber”, “test period”, “reasonable demand”, “test phase and commercial phase rights and obligations”, “reciprocal obligations of service providers” or “breaches of any contract and/or practice”, arising out of TRAI Act and the policy so declared, are the matters within the jurisdiction of the Authority/TDSAT under the TRAI Act only. Only when the jurisdictional facts in the instant matter are determined by the TRAI against the IDOs, the next question would be whether it was a result of any concerted agreement between the IDOs and COAI supported the IDOs in that endeavour. It would be at that stage the CCI can go into the question as to whether violation of the provisions of TRAI Act amounts to ‘abuse of dominance’ or ‘anti-competitive agreements’. [Para 84][574-D-F]

5. Whether TRAI has the exclusive jurisdiction to deal with matters involving anti-competitive practices to the exclusion of CCI altogether because of the reason that the matter pertains to telecom sector?

5.1 The CCI is to determine whether the conduct of the parties was unilateral or it was a collective action based on an agreement. Agreement between the parties, if it was there, is pivotal to the issue. Such an exercise has to be necessarily undertaken by the CCI. The Competition Act is also a special statute which deals with anti-competition. If the activity undertaken by some persons is anti-competitive and offends Section 3 of the Competition Act, the consequences thereof are provided in the Competition Act. Section 27 empowers the CCI to pass certain kinds of orders, stipulated in the said provision, after inquiry into the agreements for abuse of dominant position. Moreover, it is within the exclusive domain of the CCI to find out as to whether a particular agreement will have appreciable adverse effect on competition within the relevant market in India. For this purpose, CCI is to take into consideration the provisions contained in the Competition Act, including Section 29 thereof. Sections 45 and 46 also authorise the CCI to impose penalties in certain situations. Obviously, all these functions not only come within the domain of the CCI, TRAI is not at all equipped to deal with the same. Even if TRAI also returns a finding that a particular activity was anti-competitive, its powers would be limited to the action that can be taken under the TRAI Act alone. It is only the CCI which is empowered to deal with the same anti-competitive act from the lens of the Competition Act. If such activities offend the provisions of the Competition Act as well, the consequences under that Act would also follow. Therefore, contention of the IDOs that the jurisdiction of the CCI stands totally ousted cannot be accepted. Insofar as the nuanced exercise from the stand point of Competition Act is concerned, the CCI is the experienced body in conducting competition analysis. Further, the CCI is more likely to opt for structural remedies which would lead the sector to evolve a point where sufficient new entry is induced thereby promoting genuine competition. This specific and important role assigned to the CCI cannot be completely wished away and the ‘comity’ between the sectoral regulator (i.e. TRAI) and the market regulator (i.e. the CCI) is to be maintained. [Paras 89, 90][576-C-G; 578-B-F]

Haridas Exports v. All India Float Glass Manufacturers’ Assn. & Ors. (2002) 6 SCC 600 : [2002] 1 Suppl. SCR

229 – relied on

5.2 The primacy has to be given to the respective objectives of the two regulators under the two Acts. At the same time, since the matter pertains to the telecom sector which is specifically regulated by the TRAI Act, balance is maintained by permitting TRAI in the first instance to deal with and decide the jurisdictional aspects which can be more competently handled by it. Once that exercise is done and there are findings returned by the TRAI which lead to the prima facie conclusion that the IDOs have indulged in anti-competitive practices, the CCI can be activated to investigate the matter going by the criteria laid down in the relevant provisions of the Competition Act and take it to its logical conclusion. The CCI could not have dealt with this matter at this stage itself without availing the inquiry by TRAI. Also, insofar as the telecom sector is concerned, jurisdiction of the CCI under the Competition Act is not totally ousted. [Paras 91, 92][578-G-H; 579-A-B]

6. Whether the writ petitions filed before the High Court of Bombay were maintainable?

In the case of Steel Authority of India Limited, nature of the order passed by the CCI under Section 26(1) of the Competition Act was gone into. The Court, in no uncertain terms, held that such an order would be an administrative order and not a quasijudicial order. The case set up by the respondents was that the CCI did not have the jurisdiction to entertain any such request or information which was furnished by RJIL and two others. The question, thus, pertained to the jurisdiction of the CCI to deal with such a matter and in the process the High Court was called upon to decide as to whether the jurisdiction of the CCI is entirely excluded or to what extent the CCI can exercise its jurisdiction in these cases when the matter could be dealt with by another regulator, namely, the TRAI. When such jurisdictional issues arise, the writ petition would clearly be maintainable. Thus, although the view of the High Court that the impugned order was quasi-judicial order is not accepted, the High Court was competent to deal with and decide the issues raised in exercise of its power under Article 226 of the Constitution. The writ petitions were, therefore, maintainable. [Paras 94, 96, 97][580-C-D; 582-B-C; 583-F]

7. Whether the High Court could give its findings on merits?

Once it is held that the order under Section 26(1) of the Competition Act is administrative in nature and further that it was merely a prima facie opinion directing the Director General to carry the investigation, the High Court was not competent to adjudge the validity of such an order on merits. At the same time, since it is held that the order of the High Court on the aspect that the CCI could exercise jurisdiction only after proceedings under the TRAI Act had concluded/attained finality, i.e. only after the TRAI returns its findings on the jurisdictional, the ultimate direction given by the High Court quashing the order passed by the CCI is not liable to be interfered with as such an exercise carried out by the CCI was premature. [Paras 98, 99][583-G-H; 584-A-B]

Barium Chemicals Ltd. and Another v. Company Law Board and Others AIR 1967 SC 295 : [1966] SCR 311 – relied on

State (NCT of Delhi) v. Sanjay (2014) 9 SCC 772 : [2014] 9 SCR 1063 ; Solidaire India Ltd. v. Fairgrowth Financial Services Ltd. & Ors. (2001) 3 SCC 71 : [2001]

1 SCR 932 ; Union of India and Another v. Association of Unified Telecom Service Providers of India and Others (2011) 10 SCC 543 : [2011] 14 SCR 657 ; Competition Commission of India v. Steel Authority of India Limited and Another (2010) 10 SCC 744 : [2010]

11 SCR 112 ; Competition Commission of India v. Coordination Committee of Artistes and Technicians of West Bengal Film and Television & Ors. (2017) 5 SCC

17 : [2017] 5 SCR 1 ; Begum Sabiha Sultan v. Nawab Mohd. Mansur Ali Khan & Ors. (2007) 4 SCC 343 : [2007] 5 SCR 36 ; State of Punjab v. Labour Court, Jullundur & Ors. (1980) 1 SCC 4 : [1980] 1 SCR

953 ; Ashoka Marketing Ltd. & Anr. v. Punjab National Bank & Ors. (1990) 4 SCC 406 : [1990] 3 SCR 649 ; Bhavnagar University v. Palitana Sugar Mill (P) Ltd. & Ors. (2003) 2 SCC 111 : [2010] 11 SCR 112 ; Competition Commission of India v. Steel Authority of India Ltd. & Anr. (2010) 10 SCC 744 : [2007] 10 SCR

656 ; Carona Ltd. v. Parvathy Swaminathan & Sons (2007) 8 SCC 559 : [2007] 10 SCR 656 – referred to Deutsche Telekom v. European Commission Case

C-280/08 P, Judgment dated 14.10.2010 ; FTC v. Supreme Court Trial Lawyers Association 493 US 411 (1990) ; Credit Suisse v. Billing et al 551 US 264 (2007) – referred to