India: Prima Facie Troubles In Finding CCI's Jurisdiction

Chandramauli Dwivedi[1]

  1. Recently, the Supreme Court of India significantly streamlined the CCI's powers to order an investigation in cases involving sectoral issues pending adjudication by sectoral regulators. While for the regulator itself, this may have been a considerable blow to its outreach in cases involving competition and sectoral issues simultaneously, the Supreme Court's judgement in CCI v. Airtel[2] does two noteworthy things: it remedies a loophole in the legislation which has caused several challenges to CCI's jurisdiction and brings to fore potential problems in the mechanism of passing a prima facie order. This article attempts to set out a narrative on the impact of the decision on CCI's powers, the mechanism of implementation laid down and the lack of clarity which prevails in understanding prima facie orders. The article also explores the greater fallacy in the prima facie mechanism in the Act and the troubles it spells.

A Maverick decision

  1. The Supreme Court's decision stems from appeals filed by the CCI and Reliance JIO against a decision of the Bombay High Court, which had quashed CCI's investigation into an alleged telecom cartel.[3] JIO had gone to the CCI alleging collective denial by Airtel, Vodafone and Idea of the Points of Interconnection (PoIs), i.e. the hardware required to make calls on other telecom networks. JIO's grief was that this resulted in massive call failures on its network. The association of telecom operators, Cellular Operators Association of India was also alleged to be involved in aiding a cartel which was intent on foreclosing JIO's entry.
  1. The Bombay High Court in its decision in Vodafone v. CCI[4] found that the conditions of issuing PoIs were governed by the licence agreements and rules / regulations issued by the Department of Telecommunications and the Telecom Regulatory Authority of India (TRAI). As the clauses in these agreements between JIO and the incumbent service providers were pendente lite, the CCI had exceeded its jurisdiction in passing a prima facie order to investigate. The High Court held that when the position under the law and regulations governing a particular market were in dispute, an investigation could not have been ordered.
  1. The Supreme Court broadly agreed with the High Court's dictum that the telecom sector was governed by the TRAI Act and related regulations etc. and laid down a mechanism – wherein questions of interpretation of 'terms' between parties (i.e. their contract clauses, unified license, interconnection agreements, quality of service regulations, parties' rights and obligations) were to be settled by the Authorities/Telecom Disputes Settlement and Appellate Tribunal (TDSAT) under the TRAI Act and not by the CCI under the Competition Act, 2002. Without delving too much into the principle, the Supreme Court acknowledged that Competition Act and TRAI Act were independent statutes and the statutory authorities under the respective Acts were to discharge their power and jurisdiction in the light of the objectives for which they are established, a principle which had been fleshed out in detail in the High Court's decision.
  1. However, the High Court's decision was not protective of the powers prescribed under the provisions of the Competition Act and merely held that CCI was incapable in dealing and deciding the issues which arose out of the TRAI Act. Thus, issues related to contract agreements, terms and clauses were to be settled by TRAI, in the first instance and unless these issues were decided, no proceedings could be initiated by or before CCI. The High Court loosely held that the authority (i.e. TRAI) under the TRAI Act was to determine rights and obligations under licenses, post which CCI could avail jurisdiction and go into the question of anti-competitive practices.
  1. On a slightly different note, the Supreme Court takes a protective approach towards CCI's powers, as being distinct and specific. The judgement notes that questions such as whether an agreement had appreciable adverse effect on competition (AAEC) within India or whether an agreement between competitors amounted to cartelisation fall under the exclusive domain of CCI, and not sectoral bodies like TRAI. While the incumbent operators had contended that the jurisdiction of the CCI stood totally ousted, the Supreme Court has not accepted such a characterisation. It identifies CCI as the experienced body in conducting competition analysis and capable of opting for structural remedies aiding in inducing new entry and promoting competition. The judgement holds that the specific 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) must be maintained. While this reiteration of CCI's jurisdictional scope may seem repetitive, however, in the backdrop of the various jurisdictional challenges which have been faced by the CCI, it is entirely appropriate in setting at rest all controversy.

The Mechanism: Incomplete or appropriate?

  1. Most significantly, the Supreme Court lays down a mechanism to check conflicts between overlapping jurisdictions of a sectoral regulator and the CCI. The Court holds that since the matter pertains to the telecom sector, balance would be maintained if TRAI dealt with and decided on the jurisdictional aspects, in the first instance. It is held that once findings are returned by the TRAI 'which lead to the prima facie conclusion that the IDOs have indulged in anti-competitive practices, the CCI could 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.'
  1. It becomes abundantly clear that the sectoral regulator should first make an assessment of the 'jurisdictional aspects', i.e. the factual matrix of the interpretation of 'terms' between parties and subsequently apply its own prioritised jurisdiction. Reliance has been placed by the Supreme Court on Corona Ltd.[5] to establish that 'fact or facts upon which the jurisdiction of a court, a tribunal or an authority depends can be said to be a "jurisdictional fact". If the jurisdictional fact exists, a court, tribunal or authority has jurisdiction to decide other issues. If such fact does not exist, a court, tribunal or authority cannot act.' The Apex Court also relies on Halsbury's Laws to hold that 'the existence of a jurisdictional fact is a sine qua non or condition precedent to the assumption of jurisdiction by a court or tribunal.'
  1. However, it may be said that the decision errs in so far as it leaves to TRAI, to make a prima facie finding of anti-competitive practices. The balanced approached referred to is accurate in delaying CCI's jurisdiction to a later stage, however is erroneous in making CCI's findings dependent on the findings of TRAI with respect to competition issues. The idea of CCI acting upon a finding on issues of cartelisation / abuse of dominance by a sectoral regulator does not seem to made on a firm footing and its effectiveness will only be tested, one case at a time.
  1. While finding that the High Court's decision was not appropriate in giving a finding on merits, the Supreme Court concurred on the mechanism, i.e. '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'. In the judgement, the meaning of 'attaining finality' has eventually been limited to findings made by TRAI[6]. However, in its discussion, the Supreme Court opines[7] '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.' (Emphasis supplied)
  1. It remains to be argued that a determination by TRAI on jurisdictional aspects does not amount to issues attaining finality. Under the TRAI Act[8], parties can appeal a direction, decision or order made by TRAI to the TDSAT. Not just this, an order of TDSAT can also be appealed[9] to the Supreme Court. A plain reading suggests that the TDSAT is empowered to adjudicate disputes involving licensing conditions, between service providers or those with consumers. Therefore, at what stage does adjudication under the TRAI Act attain finality remains a looming question. In a hypothetical situation, if TRAI was to give a positive finding of cartelisation and CCI were to form a prima facie view in that regard, would the CCI have to scrap its investigation if the TDSAT overturned TRAI's finding?
  1. Despite academic questions, it is foreseeable that the Supreme Court's judgement shall put to rest most controversies revolving around CCI's jurisdiction in fairly straightforward cases. While several such controversies are pending litigation before other courts, several have been adjudicated awkwardly. A few sectoral regulators with whom CCI's jurisdiction has conflicted are the Petroleum and Natural Gas Regulatory Board, Delhi Electricity Regulatory Commission, Institute of Chartered Accountants of India. Substantial contemplation has been spelt out[10] on the subject which has been acknowledged as a contemporary issue[11].

Position of Courts / non-sectoral adjudicatory bodies, in general

  1. A more pertinent question is whether the CCI must await the determination by a High Court / any other adjudicatory body which may not qualify as a sectoral regulator, but performs the function of adjudicating on specific rights, such as IP rights.
  1. For instance, in Ericsson v. CCI[12], Micromax and Intex had alleged that Ericsson was charging unfair and discriminatory royalty rates for certain standard essential patents, it held in the GSM technology used in phones and that these were contrary to FRAND terms. Aggrieved by the investigation, Ericsson approached the High Court and contested that issues were pending adjudication before the High Court in a civil suit and in revocation proceedings before the Intellectual Property Appellate Board (IPAB), thus, CCI had no jurisdiction as matters were sub-judice and investigation could lead to conflicting results. A single judge bench suggested a harmonious construction between the provisions of the Patents Act and the Competition Act and found that the nature of remedies provided under the two acts were entirely different. While parties were given liberty to approach the patent controller as well as the CCI simultaneously, it was held that in case of an irreconcilable inconsistency between the two legislations, the Patents Act being the more specific legislation would have an overriding effect. The decision is currently under challenge. During the appeal, the High Court is likely to take a cue from the decision in Airtel. After all, the adjudication by the High Court in its civil suit / the IPAB in its revocation proceedings is essential for the 'jurisdictional fact' of patent issues to be decided.
  1. Supreme Court's dictum in Airtel would have a significant bearing on investigations before the CCI, in which one party alleges frivolity of proceedings before another adjudicatory body.  In Biocon / Roche, Biocon alleged amongst other things that Roche had indulged in filing frivolous complaints to authorities to restrict the entry of Biocon's bio-similar of Roche's drug 'Trastuzumab'. These included complaints to the Drug Controller regarding a lack of clinical trials; notices insinuating that reliance shouldn't be placed by Biocon on packaging material published by Roche; letters to the pricing authority to not include bio-similars / generics in calculating the ceiling price; filing a civil suit claiming misrepresentation of Roche's drug by Biocon and seeking an injunction. Roche contested that CCI did not have jurisdiction as the civil suit was pending before the High Court, however, CCI found that reliefs available before itself and the High Court were distinct and not mutually exclusive. CCI held that the civil suit couldn't have been baseless, as it involved complicated issues and was heavily contested at both ends.
  1. A similar situation currently subsists in the case of JCB / Bull Machines, where Bull alleged that JCB had abused its dominance by filing a civil suit before the High Court, which was allegedly frivolous. The civil suit concerned infringement and validity of design rights. JCB challenged CCI's prima facie order in a writ before the High Court contesting that issues before the CCI, High Court and the Controller of Designs and Copyright were identical. Thus, an adjudication by the CCI would lead to subsuming jurisdiction of two other adjudicatory bodies which have to first necessarily make findings on IP rights, prior to CCI commencing investigation.  Here again, the High Court may find Airtel to be seminal in acknowledging CCI's limitations.
  1. Other cases involving issues of allotment of flats (DDA[13]) and practices of real estate developers (DLF[14]), where the CCI may have an overlap with the consumer redressal forum may also benefit and be expedited by the Supreme Court's decision. For all such cases, the adjudicating authority will have to make out the presence of jurisdictional facts.
  1. In fact, the CCI itself has recently shown deference to the mechanism laid down in Airtel. In National Stock Exchange[15], it was alleged that the co-location services provided by NSE, which provided access to information about traded prices of shares ahead of other traders, was availed to certain members preferentially and unfairly and this distorted competition. SEBI was also investigating the case and an interim investigation revealed violation of fairness norms. Acknowledging that the case was under SEBI's scanner since 2015, CCI noted that SEBI too was looking at issues of preferential / discriminatory co-location services and did not find it apposite for itself to be delving into an investigation. The jurisdictional fact seems to be that parties are governed by rules of SEBI, which is also undertaking an investigation on similar issues.

Justiciability of a Prima facie order – Can of worms

  1. On a different note, the Apex Court's decision throws light on the complexities involved in deciding whether an order under Section 26(1) is truly prima facie or not. The incumbent operators alleged that Section 26(1) order fails the 'prima facie test', is quasi-judicial instead of being administrative – as CCI had directed an investigation after collecting detailed information from the parties and by holding conferences, calling material details, documents, affidavits post which it recorded its opinion. Due to these reasons and on the fact that the Section 26(1) order would have had adverse consequences, the High Court had concluded that it was quasi-judicial.
  1. CCI contended that the High Court's exercise of writ jurisdiction was wrong because as per CCI v. SAIL[16], such jurisdiction was narrow and could be exercised in exceptional cases. The Supreme Court in SAIL said that a prima facie order is a direction simpliciter to cause an investigation into the matter. It is in the nature of an administrative direction by CCI to its own wings departmentally and does not effectively determine any right or obligation of the parties to the lis. The reasoning used is that a closure of a case by an order under Section 26(2) determines the rights of parties and has a lasting effect, thus, a right to appeal accrues.
  1. Refusing to refer SAIL to a larger bench, the Court notes[17] in Airtel that the CCI need not record detailed reasons in a prima facie opinion but should express its mind in no uncertain terms, with reference to the information furnished. However, orders under Section 26(2) should be 'well reasoned', analysing and deciding all contentions raised. Under Section 26(1), there is no adjudicatory or determinative process involved and a requirement for recording minimum reasons exists. While the Supreme Court looks at the nature of the order to decide the maintainability of the writ (challenging jurisdiction), a qualitative question for consideration arises – what is the threshold for 'recording minimum reasons' / 'well reasoned'. To form a prima facie opinion, in a profoundly complicated litigation involving an IP suit / sectoral regulations and allied rules, the CCI would have to review substantial material, hear arguments at length, and set out a narrative of reasons before directing an investigation.
  1. Incidentally, in obiter, the Court notes in SAIL that 'these principles are not only applicable to administrative or executive actions but apply with equal force to judicial pronouncements. A judgement without reasons would cause prejudice to the person against whom it is pronounced, as that litigant would not know the rationale behind rejection of its claim, and therefore not providing reasons would impede the ability to challenge the judgment in an appeal. The order of an administrative authority may not provide reasons like a judgment, but the order must be supported by the reasons of rationality. The distinction between passing of an order by an administrative or quasi-judicial authority has practically extinguished and both are required to pass reasoned orders.'[18] While it can be argued that a party facing a Section 26(1) order shall never get the chance to appeal against it under the Act, the reasons laid down will form the basis in case the party seeks a recall of the order or attempts to challenge it before the High Court in a writ. While the court has blurred the lines between an administrative order and a quasi-judicial order in providing reasons, a Section 26(1) order has not been made appealable only to keep the flood gates of litigation shut.
  1. It seems to be an uphill task for the CCI, which will have to pass prima facie orders, after conducting the exercise of finding its own 'jurisdictional facts' and checking overlaps with sectoral regulators. This would definitely involve fact finding, review of material, pleadings and hearings – post which a reasoned order would have to be passed. Where CCI would be deciding on its own jurisdiction such as in the SEBI case, the rights of the parties would be incidentally adjudicated upon. On a separate note, in cases where the Informant makes allegations under several counts of abuse, and CCI finds a prima facie case to investigate for a particular form of abuse alone, the order should ideally become partially quasi-judicial and remain partially administrative. While meagre considerations may arise in the future, the decision in Airtel has truly settled the dust for the day. 

[1] Chandramauli Dwivedi is an associate placed with the competition law practice group of L&L Partners Law Offices. He can be reached at cdwivedi@luthra.com. Views expressed are his own.

[2] Competition Commission of India v. Bharti Airtel Ltd. & Ors.; judgement dated 05 December 2018, in C.A. No. 11843 to 11852 of 2018.

[3] For more details, please see Turf Wars And The Hanging Fate Of Competition Commission Of India

[4] Vodafone India Limited vs. The Competition Commission of India, 2017 SCC OnLine Bom 8524

[5] Carona Ltd vs M/S Parvathy Swaminathan & Sons, AIR 1967 SC 295.

[6] Para 99, supra note 4.

[7] Para 84, supra note 4.

[8] Section 14A of TRAI Act.

[9] Section 18 of TRAI Act.

[11] For more details, please see Interface Between Competition Commission Of India And Sectoral Regulators by Dr. Geeta Gouri.

[12] Telefonaktiebolaget LM Ericsson  (PUBL) v. Competition Commission of India, W.P. (C) 464/2014 & 1006/2014 was decided on 30.03.2016and is pending in appeal in L.P.A. 550/2016.

[13] Delhi Development Authority v. Competition Commission of India, W.P.(C) 6892/2014 and Case No. 06 of 2013.

[14] DLF Ltd. v. Competition Commission of India & Ors., Civil Appeal No. 6328 of 2014.

[15] Advocate Jitesh Maheshwari v. National Stock Exchange of India Ltd., Case No. 47 of 2018.

[16] Competition Commission of India v. Steel Authority of India Ltd.; (2010) 10 SCC 744.

[17] Para 94, Supra Note 16.

[18] Para 71, Supra Note 16.

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