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COMPETITION LAW IN INDIAN TELECOM SECTOR: CONFLICT?

Technical Report · November 2022

DOI: 10.13140/RG.2.2.30605.61924

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 TELECOMMUNICATION LAW
CIA III

COMPETITION LAW IN INDIAN TELECOM SECTOR:

CONFLICT ?

NOVEMBER, 2022.

SUBMITTED TO: MS SHIVANI

SUBMITTED BY: MANEESH MAHINVITH

REG NO: 19113107

SCHOOL OF LAW

CHRIST (Deemed to be University), Pune Lavasa Campus -

'The Hub of Analytics'
 INDEX

S.NO TOPIC Pg.NO

1 ABSTRACT 2

2 INTRODUCTION 3

3 PURPOSE OF COMPETITION LAW 4

4 OVERLAP PROBLEMS 5

5 RJIL CASE 5

6 SOLUTIONS 6

7 CONCLUSION 7

1
ABSTRACT

The second-largest telecom market in the world is in India. The field of competition law has
expanded greatly since the 1990s. Geographically speaking and in terms of the breadth of
economic activities, competition law has expanded tremendously. The goal of the introduction of
competition law is to advance the market's competitive culture and procedures. The first person
to adopt competition law was Joseph Stieglitz. When the idea of competition law first emerged in
the 18th century, it was known as restraint of trade, the law of monopolies, combination acts, and
restrictive trade practices. The Sherman Act, the first antitrust law, was passed in 1890 and
marked the beginning of competition law in economies. Nearly 90% of nations now have
competition legislation. The argument over the relative merits of the industry and competition
legislation is not a recent one. Such a case is highlighted in the Indian context by allegations
Reliance Jio made against incumbent telecom providers Airtel, Vodafone, and Idea before the
Telecom Regulatory Authority of India and the Competition Commission of India. This case is
analyzed largely from a legal perspective, and it is contended that competition law involvement
is only necessary in "gap" circumstances, or those in which the regulatory framework is unable
to take consumer welfare into consideration. When the regulatory body and the competition
agency come to differing conclusions, the matter may be settled by a third party, whose judgment
is binding on both the regulatory body and the competition agency. By policing anti-competitive
behavior by various organizations and companies, the Competition Law fosters or attempts to
sustain market competition. The Competition Act of 2002 was put into effect in India to stop
actions from harming competition and to encourage and sustain competition in the markets.
Due to its repeal and replacement by the Competition Act of 2002 and the replacement of the
MRTP Commission by the Competition Commission of India, the Monopolies and Restrictive
Trade Practices Act of 1969 is no longer in effect.

2
INTRODUCTION

Telecommunications and other network businesses are frequently subject to both sector-specific
regulation and competition legislation. Since sector-specific regulation applies ex ante and
competition law only applies ex post, it is frequently believed that there is no conflict between
the two. This overly simplified promise, however, is of limited practical use because there are
some situations when regulation and competition must be applied simultaneously. In fact, there
have been many occasions throughout the world where the jurisdictions have had difficulty
accurately defining the borders of their regulatory and competitive regimes. This problem has
also been raised in the Indian context by the developments in the country's telecommunications
industry over the past nearly year. Under Section 19(1)(a) of the Competition Act, 2002
(henceforth, the act), Reliance Jio Infocomm Limited (RJIL) filed a case with the Competition
Commission of India (CCI) in December 2016 against Cellular Operators Association of India
(COAI), Vodafone India, Vodafone Mobile Services Limited (VMSL), Vodafone Group
(Vodafone PLC), Bharti Airtel Limited (Airtel), Bharti Hexacom Limited (Bharti HexaThe
telecommunication service providers' trade association is the COAI. The primary claim made by
RJIL, the new entrant in the Indian telecommunications market, is that the incumbents conspired
to deny the point of interconnections (PoIs), which are required for providing telecommunication
services. Additionally, it was alleged that the incumbents primarily provided one way (from the
incumbent's to RJIL) to deliberately downgrade RJIL's services.As a result, the newcomer
accused the incumbents of forming a cartel to prevent the newcomer from entering the market
and devaluing their offerings.After considering the claim, the CCI decided that the facts appeared
to be sufficient to warrant an investigation under Section 26(1) of the Act.However, prior to
filing its complaint with the CCI in July 2016, RJIL had complained to the telecom sector
regulator, the Telecom Regulatory Authority of India (TRAI), that the three incumbents had
failed to provide the required number of PoIs.According to License Agreements and the
Standards of Quality of Service [QoS] of Basic Telephone Service [Wireline] and Cellular
Mobile Telephone Service Regulations, 2009, the act of not providing a sufficient number of
PoIs was found to be in violation of various regulations by the TRAI. The TRAI made a
recommendation on 21 October 2016 to the Department of Telecommunication (DoT) that a
penalty of `50 crore each be imposed against Airtel, Vodafone, and Idea, for each of the licensed
areas.

This paper tries to explore the issue primarily from a legal point of view and argues that, given
the circumstances of the case, the issue belongs to TRAI. In cases where sector-specific
regulation and competition law are in conflict, the article offers a solution and discusses the
scope and interface of regulation and competition. It also presents the analysis of the facts
primarily from a legal perspective and incorporates economic and institutional perspectives.

3
PURPOSE OF COMPETITION LAW

The efficient operation of the market is the goal of both regulation and competition.However,
regulation has a broader scope than competition law.Different kinds of market failures can be
fixed by regulation, as can ensuring the safety and quality of goods and services, protecting the
interests of consumers, and advancing special public interests like redistribution.In examination,
the order of contest regulation is to preclude the adverse consequences on buyer government
assistance emerging from the market force of enterprises. Subsequently, the restricted cross-over
among guideline and contest regulation is to actually look at market
disappointments because of the activity of market power.Consequently, even the antitrust and
regulatory tools may differ.Sometimes, price caps imposed by regulation directly benefit
consumers.On the other hand, antitrust tries to safeguard and advance shopper government
assistance by working with and safeguarding contest among market players .The connection
between guidelines furthermore, rivalry regulation can be gathered in the accompanying ways:

Cases of type 1: Competition law and regulation rarely clash with one another.Their roles appear
clearly defined beyond these cases.For instance, sector regulations are in place to control
pollution and guarantee universal service.Competition agencies are ineffective in these instances.

Cases of type 2: These are the situations in which, for example, structural changes or regulation
has made it easier to enter the market.One such model is local loop unbundling (LLU). In such
cases ex risk utilization of guideline works with rivalry on the lookout.After that, competition
law is left in charge of these markets to ensure ongoing competition ex post.

Cases of type 3: These are the situations in which a problem may lie at the crossroads of
competition law and regulation.One of these issues is the focus of this article, and it lies at the
crossroads of competition law and sector-specific regulation.

4
OVERLAP PROBLEMS

The simultaneous application of competition law and regulation can lead to a number of
issues.The first is the possibility of conflicting decisions under these two regimes.For instance,
based on the same facts, the regulatory body allows market players to take action, which the
antitrust regulator may later find to be in violation of competition law, or vice versa.Besides the
fact that this present circumstance sabotages the power of the two systems, it likewise leads to
legitimate vulnerability.Additionally, forum shopping is skewed by the availability of two
competing solutions.It likewise stays a likelihood that an endeavor is prosecuted at both the
gatherings.This excessive enforcement is bound to chill the market in such a situation.Over
Enforcement is even more concerning when viewed in the context of India's telecom industry,
which is in deep debt.Operators in the telecom sector currently face a debt of 7.8 lakh crore and a
number of policy obstacles that have a negative impact on the sector's overall financial health.

RJIL CASE

For this situation, a grumbling was documented by Bharti Airtel against Dependence Jio.Bharti
Airtel makes the following three fundamental claims:

i) Alleging that Reliance Industries had abused its dominant position in violation of section
4(2)(e) of the Competition Act, 2002, Reliance Industries used their financial power to enter the
telecom market through Reliance Jio.

ii) In addition, Reliance Jio's free services violated section 4(2)(a)(ii) of the Competition Act of
2002 and constituted predatory pricing.

iii) Lastly, claiming that Reliance Jio and Reliance Industries entered into an anti-competitive
agreement in violation of Section 3 (1) of the Act of 2002. As a result, Reliance Jio had
unrestricted access to Reliance Industries' funds and resources, which significantly harmed
competition in the telecom sector.

Following its entry into the telecom market, Reliance Jio offered a "Jio Welcome Offer" that
provided customers with free data, voice, video, and a slew of other applications. This attracted
customers and convinced them to switch to Reliance Jio and stop using any other network

5
because it was more cost-effective.After holding a preliminary conference with both parties, the
Competition Commission of India proceeded to investigate each claim based on the evidence
provided by Bharti Airtel and Reliance Jio.In the present case, the Competition Commission has
limitedly interpreted the term "relevant market."The Commission has done the trick the remote
telecom administrations to be the applicable geological market and zeroed in on the
predominance of Dependence Jio in its distinction.The Competition Commission of India added
that market data indicate that Reliance Jio does not have a market share of more than 7% in each
of India's 22 telecom circles, and that the market is dominated by a number of players (including
Vodafone, Idea, Tata, MTNL, and others).who are equipped with similar technical and financial
capabilities.The market offered a sufficient variety, and customers were in no way reliant on a
single service provider.Considering this, the CCI held that Dependence Jio can't be said in the
predominant situation in the significant market.In light of the fact that it was not in the dominant
position, there is no evidence of predatory pricing in the relevant market.

THE SOLUTION

The CCI's intervention transforms the competition assessment into a moral examination of
market behavior in the absence of any legal, institutional, or technical justifications for its
application. One of the goals of US antitrust law was moral condemnation, which cannot be
denied. However, it must also be true that moral condemnation and fairness in antitrust law are
not independent of the idea of consumer welfare and efficiency, which could already be
explained by the RJIL case's regulatory framework.

Putting the regulators in charge is a matter of practical wisdom and professional collegiality,
especially when the subject matter is technical. Additionally, a regulator is closer to the market
than competition authorities, which is a matter of practical understanding. Regulators are a part
of the market players' day-to-day interactions. In turn, regulators are more familiar with
businesses than competition regulators, who keep their distance from market participants. In the
event of an ongoing case, competition authorities only deal with specific market players and are
unaware of the sector's overall status.

When a case invokes simultaneous jurisdiction, a few others have proposed mandating
consultation between the competition agency and the sectoral regulator (Mehta and Mehta,
2017).If everyone agrees, either the regulator or the competition agency can take up the case
during such consultations. For instance, in a protocol, the Independent Postal and
Telecommunications Authority (OPTA) and the Netherlands Competition Authority (NMA)
included arrangements for their collaboration. These arrangements save resources, discourage
forum shopping, and facilitate joint efforts .However, a mandatory consultation cannot guarantee

6
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an even distribution of powers. Institutions are frequently influenced by personality, and since
there is no clear division of responsibilities, much depends on how well a competition agency
and sector-specific regulator get along with one another. In the event that mandatory consultation
fails, the matter would always be brought before the courts. Therefore, it is preferable to allow
the regulator to take charge and wait for its decision whenever concurrency arises. Competition
authorities should intervene if the decision disregards consumer welfare.

There may be events when a regulator values public interest objectives more than competition
principles, or favors static efficiency over dynamic efficiency, whereas the competition agency
favors the latter over the former.19 These are the cases when there is no “gap” but conflicting
decisions arising out of faith in different ideologies. As, in general, there is no hierarchy between
regulatory and competition statutes, such cases can result in litigation before courts. These cases
can be resolved under the aegis of a third body—for example a high-power committee—whose
decision is binding on both the agencies.

CONCLUSION

Over-enforcement is a possibility when competition law and regulation are applied

simultaneously. Over-enforcing laws is bad not only for the market but also for consumers and
the economy in the long run. When it comes to resolving market failures brought on by the
exercise of market power, some people believe that competition is superior to regulation.
However, this topic is not covered in the paper. It rather endeavors to appoint right jobs to an
explicit guideline and contest regulation at whatever point they are mutually pertinent.
Competition law and regulation, in this article's view, are complementary rather than
antagonistic.

The RJIL case in India, in which both TRAI and CCI have claimed concurrent jurisdiction, was
the subject of the paper. The article argued that the CCI should only intervene when regulatory
intervention cannot account for consumer welfare after examining the issue primarily from a
legal perspective. A sectoral regulator is in a better position to make a decision, particularly
when the issue is technical .When it is necessary to make decisions faster in order to rectify
market failures, a regulatory remedy is more appropriate because it is also more swift. The article
suggests that matters involving the intersection of regulation and competition law should be
prioritized by sectoral regulators. When a sectoral regulator and a competition agency come to
different conclusions, a third body can make a decision that affects both the regulator and the
competition agency.