Getting rid of free loaders from its network will enable Jio to refine its network strength. (Photo: BloombergQuint)

Jio’s Cartel Charge: Did Supreme Court Limit CCI’s Jurisdiction?

The Supreme Court rejected Competition Commission of India’s plea to probe Reliance Jio Infocomm Ltd.’s allegation of cartelisation against its older rivals.

But the top court didn’t completely bar the antitrust regulator, calling its intervention premature. The CCI can come in only after the sector regulator, in this case the Telecom Regulatory Authority of India, finds anti-competitive behaviour, it ruled.

What’s The Case About?

Reliance Jio had approached the CCI alleging that Bharti Airtel Ltd., and Idea Cellular Ltd. and Vodafone India—which have now merged—were acting in concert to create hurdles for its entry into the sector by denying its requests for requisite number of points of interconnect or a gateway between two networks for completing calls.

The CCI, in its April 2017 order, found a prima facie case against the companies and asked its director general to conduct an investigation. The three operators approached the Bombay High Court, which in September 2017 granted them relief. As far as the contracts are regulated by the TRAI Act are concerned, in the first instance, it’s the authority under that law—in this case TRAI—which has to decide these questions, the high court ruled.

Supreme Court’s Balancing Act

The commission challenged it in the Supreme Court, which tried to balance the roles of the two regulators. “This specific and important role assigned to the CCI cannot be completely wished away and the ‘comity’ between the sectoral regulator (TRAI) and the market regulator (the CCI) is to be maintained,” the top court said in its judgment.

How does the top court plan to achieve this balance? “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,” the Supreme Court said. If TRAI’s findings lead to the prima facie conclusion that the incumbent dominant operators indulged in anti-competitive practices, the CCI can be allowed to investigate the matter, the top court said.

It’s a very important judgment as it addresses the often-raised points of contention between the jurisdiction of the sector regulator and the CCI, according to Dhanendra Kumar, former chairman of the CCI. “Similar ratio should be applied in other cases too.”

If there is a similar situation involving the sector regulator in another industry and the points of dispute that are squarely and specifically under the regulations of that regulator and they are seized of the matter and examining it, then CCI should withhold their inquiry.
Dhanendra Kumar, Former Chairman, CCI

If any violations of the Competition Act surface after the enquiry, the CCI can take up its investigation, Kumar said. It doesn’t mean that the CCI has been barred from looking at the issues of telecom or other sectors, he said.

One has to look at the Supreme Court judgment carefully, to the extent it lays down when the CCI should withhold and when step in and begin its investigations if needed.
Dhanendra Kumar, Former Chairman, CCI

Amitabh Kumar, partner at J Sagar Associates, disagreed. “I think that this would be specific to the telecom sector because of the kind of dispute that arose,” he said. “The sectoral regulator can have many kinds of disputes. But here the dispute was because of interconnect, a technical aspect.”

“I don’t think it is something which will have a general application and will not apply to all cases where there is a sector regulator. Unless there are similar facts and where the sector regulator is better placed to find out something on the technical aspects of the dispute then this judgement will apply.”
Amitabh Kumar, Partner, Sagar Associates