Case: COMPETITION COMMISSION OF INDIA Vs. BHARTI AIRTEL LTD


Decision reasoning: 0[ds]A. Jurisdiction of the CCIIn the wake of globalisation andkeeping in view the economic development of the country,responding to opening of its economy and resorting to liberalisation, need was felt to enact a law that ensures fair competition in India by prohibiting trade practices which cause an appreciableadverse effect onwithin markets in India and for establishment of an expert body in the form of Competition Commission of India, which would discharge the duty of curbing negative aspects of competition, the Competition Act, 2002 has been enacted by the Parliament.It is for the aforesaid reason that the CCI is entrusted with duties, powers and functions to deal with three kinds ofpractices mentioned above. The purpose is to eliminate such practices which are havingadverse effect onthe competition, to promote and sustain competition andto protect the interest of theconsumers 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. The regulations also empower the CCI to hold conferences with the concerned persons/parties, including their advocates/authorised persons.It is also relevant to mention at this stage that while inquiring into any alleged contravention and determining whether any agreement has an appreciableadverse effect onfactors which are to be taken into consideration are mentioned in(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 subsection (5) of Section 19, such relevant market can be relevant geographic market or relevant product market. In the present case, we are concerned with the relevant product market, viz. telecommunication market.(7) of Section 19 enumerates the factors which are to be kept in mind while determining the relevant product market.Market definition is a tool to identify and define the boundaries of competition between firms. It serves to establish the framework within which the competition policy is applied by the Commission. The main purpose of market definition is to identify in a systematic way the competitive constraints that the undertakings involved face. The objective of defining a market in both its product and geographic dimension is to identify those actual competitors of the undertakings involved that are capable of constraining those undertakings behaviour and of preventing them from behaving independently of effective competitive pressure. Therefore, the purpose of defining the ‘relevant market? is to assess with identifying in a systematic way the competitive constraints that undertakings face when operating in a market. This is the case in particular for determining if undertakings are competitors or potential competitors and when assessing the anticompetitive effects of conduct in a market. The concept of relevant market implies that there could be an effective competition between the products which form part of it and this presupposes that there is a sufficient degree of interchangeability between all the products forming part of the same market insofar as specific use of such product is concerned. In essence, it is the notion of ‘power over the market? which is the key to analyse many competitive issues.It is an admitted position that in the instant case we are dealing with the telecom market, which is the relevant market. An interesting feature is that this telecom market is also 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.In order to ensure that there is smooth interconnectivity and a consumer who is the subscriber of mobile phone of one service provider, say for e.g. Vodafone, and wants to make call to a mobile phone of his friend which is provided by another service provider, say Idea Cellular, the unified licenses put an obligation on all these licensees to interconnect with each other on the POI. This is so mentioned in Clause 27.4 of Part I of the Schedule to the unified licence. Such interconnectivity of POI is subject to compliance of regulation/directions issued by TRAI. 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 and keep connected to the applicable systems. Some of the other clauses of the interconnection agreement are as follows:A minimum four weeks? written notice has to be given by either party for augmentation of interconnect links.n shall be completed within 90 days of receipt of requisite charges specified in the Schedule.r party shall provide a forecast in writing, in advance for its requirements of port capacity for ?Telephony Traffic? for the next six months to enable the other party to dimension the required capacity in its network.The interconnection tests for reach and every interface will be carried out by mutual arrangement between signatories of the agreement.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 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. The interconnection agreement separately entered into different service providers is based on the format prescribed in the Telecommunication Interconnection (Reference Interconnect Offer) Regulations, 2002.From the aforesaid analysis of the scheme contained in the TRAI Act, it becomes clear that the functioning of the telecom companies which are granted licence under Section 4 of the Telegraph Act is regulated by the provisions contained in the TRAI Act. TRAI is a regulator which regulates the telecom industry, which is a statutory body created under the TRAI Act.Thus, with the advent of globalisation/liberalisation leading 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 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 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 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. It is because of this reason that the powers and functions which are assigned to TRAI are highlighted in the Statement of Objects and Reasons. Specific functions which are assigned to TRAI, amongst other, including 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 noncompliance and have failed to ensure inter se technical compatibility thereby. Not only RJIL has raised this dispute, it has even specifically approached TRAI for settlement of this dispute which has arisen between various service providers, namely, RJIL on the one hand and the IDOs on the other, wherein COAI is also roped in. TRAI is seized of this particular dispute.We are of the opinion that as the TRAI is constituted as an expert regulatory body which specifically governs the telecom sector, the aforesaid 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 aforesaid aspects, the matter cannot be taken further even if we proceed on the assumption that the CCI has the jurisdiction to deal with the complaints/information filed before it. It needs to be reiterated that RJIL has approached the DoT in relation to its alleged grievance of augmentation of POIs which in turn had informed RJIL vide letter dated September 06, 2016 that the matter related tobetween service providers is within the purview of TRAI. RJIL thereafter approached TRAI; TRAI intervened and issuednotice dated September 27, 2016; and post issuance ofnotice and directions, TRAI issued recommendations dated October 21, 2016 on the issue ofand 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,and competitive market in the telecom sector, is better suited to decide the aforesaid issues. After all, RJIL?s grievance is that interconnectivity 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.We, therefore, are of the opinion that the High Court is right in concluding that till the jurisdictional issues are straightened and answered by the TRAI which would bring on record findings on the aforesaid aspects, the CCI isto proceed in the matter. Having regard to the aforesaid 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 present matter as mentioned in this judgment particularly in paras 56 and 82 above are determined by the TRAI against the IDOs, the next question would arise as to 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? oragreements?. That also follows from the reading of Sections 21 and 21A of the Competition Act, as argued by the respondents.The issue can be examined from another angle as well. If the CCI is allowed to intervene at this juncture, it will have to necessarily undertake an exercise of returning the findings on the aforesaid issues/aspects which are mentioned in paragraph 82 above. Not only TRAI is better equipped as a sectoral regulator to deal with these jurisdictional aspects, there may be a possibility that the two authorities, namely, TRAI on the one hand and the CCI on the other, arrive at a conflicting views. Such a situation needs to be avoided. This analysis also leads to the same conclusion, namely, in the first instance it is the TRAI which should decide these jurisdictional issues, which come within the domain of the TRAI Act as they not only arise out of the telecom licenses granted to the service providers, the service providers are governed by the TRAI Act and are supposed to follow various regulations and directions issued by the TRAI itself.The CCI is specifically entrusted with duties and functions, and in the process empower as well, to deal with the aforesaid three kinds ofpractices. The purpose is to eliminate such practices which are havingadverse effect onthe competition, to promote and sustain competition andto protect the interest of theconsumers and ensure freedom of trade, carried on by other participants, in India. To this extent, the function that is assigned to the CCI is distinct from the function of TRAI under the TRAI Act. Learned counsel for the appellants are right in their submission that the CCI is supposed to find out as to whether the IDOs were acting in concert and colluding, thereby forming a cartel, with the intention to block or hinder entry of RJIL in the market in violation of Section 3(3)(b) of the Competition Act. Also, whether there was anagreement between the IDOs, using the platform of COAI. The CCI, therefore, 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. In Haridas Exports, this Court held that where statutes operate in different fields and have different purposes, it cannot be said that there is an implied repeal of one by the other. The Competition Act is also a special statute which deals withIt is also to be borne in mind that if the activity undertaken by some persons isand 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. The following kinds of orders can be passed by the CCI under this provision:"27. Orders by Commission after inquiry into agreements or abuse of dominant position.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 or any of the following orders, namely:—(a) direct any enterprise or association of enterprises or person or association of persons, as the case may be, involved in such agreement, or abuse of dominant position, to discontinue and not tosuch agreement or discontinue such abuse of dominant position, as the case may be;(b) impose such penalty, as it may deem fit which shall be not more than ten per cent of the average of the turnover for the last three preceding financial years, upon each of such person or enterprises which are parties to such agreements or abuse:Provided that in case any agreement referred to in section 3 has been entered into by a cartel, the Commission may impose upon each producer, seller, distributor, trader or service provider included in that cartel, a penalty of up to three times of its profit for each year of the continuance of such agreement or ten percent. of its turnover for each year of the continuance of such agreement, whichever is higher.d) direct that the agreements shall stand modified to the extent and in the manner as may be specified in the order by the Commission;(e) direct the enterprises concerned to abide by such other orders as the Commission may pass and comply with the directions, including payment of costs, if any;g) pass such other [order or issue such directions] as it may deem fit.Provided that while passing orders under this section, if the Commission comes to a finding, that an enterprise in contravention to section 3 or section 4 of the Act is a member of a group as defined in clause (b) of the Explanation to section 5 of the Act, and other members of such a group are also responsible for, or have contributed to, such a contravention, then it may pass orders, under this section, against such members of the group.Moreover, it is within the exclusive domain of the CCI to find out as to whether a particular agreement will have appreciableadverse effect onwithin 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 the aforesaid 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 wasits 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 sameact 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.The conclusion of the aforesaid discussion is to give primacy to the respective objections 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 inpractices, 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. This balanced approach in construing the two Acts would take care of Section 60 of the Competition Act as well.We, thus, do not agree with the appellants that CCI could have dealt with this matter at this stage itself without availing the inquiry by TRAI. We also do not agree with the respondents that insofar as the telecom sector is concerned, jurisdiction of the CCI under the Competition Act is totally ousted. In nutshell, that leads to the conclusion that the view taken by the High Court is perfectly justified. Even the argument of the learned ASG is that the exercise of jurisdiction by the CCI to investigate an alleged cartel does not impinge upon TRAI?s jurisdiction to regulate the industry in any way. It was submitted that the promotion of competition and prevention of competitive behaviour may not be high on the change of sectoral regulator which makes it prone to ‘regulatory capture? and, therefore, the CCI is competent to exercise its jurisdiction from the stand point of the Competition Act. However, having taken note of the skillful exercise which the TRAI is supposed to carry out, such a commentTRAI may not be appropriate. No doubt, as commented by the Planning Commission in its report of February, 2007, a sectoral regulator, may not have an overall view of the economy as a whole, which the CCI is able to fathom. Therefore, our analysis does not bar the jurisdiction of CCI altogether but only pushes it to a later stage, after the TRAI has undertaken necessary exercise in the first place, which it is more suitable to carry out.B. Whether the writ petitions filed before the High Court of Bombay were maintainable?Here comes the scope of judicial interference under Article 226 of the Constitution. As per the RJIL as well as CCI, the High Court could not have entertained the writ petition against an order passed under Section 26(1) of the Competition Act which was a pure administrative order and was only a prima facie view expressed therein, and did not result in serious adverse consequences. It was submitted that the finding of the High Court that such an order wasorder is not only erroneous but it is contrary to the law laid down in the case of Steel Authority of India Limited. The respondents, on the other hand, have submitted that the judgment in the above case had no application in the instant case as it did not deal with the sector that is regulated by a statutory authority. Moreover, such an order wasin nature and cannot be treated as an administrative order since it was passed by the CCI after collecting the detailed information from the parties and by holding the conferences, calling material details, documents, affidavits and by recording the opinion. It was submitted that judicial review against such an order is permissible and it was open to the respondents to point out that the complete material, as submitted by the respondents, was not taken into consideration which resulted in an erroneous order, which had adverse civil consequences inasmuch as the respondents were subjected to further investigation by the Director General.There is no reason to take a contrary view. Therefore, we are not inclined to refer the matter to a larger Bench for reconsideration.It was, however, argued that since the case of Steel Authority of India Limited was not dealing with the telecom sector, which is regulated by the statutory regulator, namely, TRAI under the TRAI Act, that judgment would not be applicable. Merely because the present case deals with the telecom sector would not change the nature of the order that is passed by the CCI under Section 26(1) of the Competition Act. However, it raises another dimension. Even if the order is administrative in nature, the question raised before the High Court in the writ petitions filed by the respondents touched upon the very jurisdiction of the CCI. As is evident, 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.Thus, even when we do not agree with the approach of the High Court in labeling the impugned order asorder and assuming jurisdiction to entertain the writ petitions on that basis, for our own and different reasons, we find that 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.Whether the High Court could give its findings on merits?Once we hold 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 would not be competent to adjudge the validity of such an order on merits. The observations of the High Court giving findings on merits, therefore, may not be appropriate.At the same time, since we are upholding 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 aspects which are mentioned above by us, 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.