Analysis of the Draft Indian Ports Bill 2020: [Another] Regulatory Overlap in the Brewing?
[Moksh and Arjun are fourth-year students at Symbiosis Law School, Noida.]
Recently, the Ministry of Ports, Shipping and Waterways (MPSW) circulated the Draft Indian Ports Bill 2020 (IPB). The objective of the IPB is to ensure growth and development of the port sector in the country.
Under the IPB, MPSW has proposed the establishment of a Maritime Port Regulatory Authority (MPRA). The functions of the MPRA, which form a part of the current discussion, can be discerned from Sections 8 and 9 of the said draft. Clauses (ii) and (iii) of Section 8(1)(b) impose an obligation on the MPRA to assess the competitiveness of the existing ports/facilities and determine measures to facilitate competition in the operation of ports, respectively.
Since these functions also fall under the domain of the Competition Commission of India (CCI), we attempt to analyze the relevant provisions of the IPB which might lead to, what seems to be, a prima facie regulatory overlap between the MPRA and the CCI.
Analysis of the provisions of the draft bill
In addition to clauses (ii) and (iii) of Section 8(1)(b) of the IPB which are discussed above, the MPRA, under Section 8(1)(c)(xvii), is vested with the power to review draft concession agreements and advice State Maritime Board(s) on whether any provisions of the agreement may amount to an anti-competitive practice or abuse of dominant position.
Moreover, the powers of the MPRA, under Section 9 of the draft, to receive and take cognizance of complaints alleging anti-competitive behaviour are eerily similar to those of the CCI under Chapter IV of the Competition Act 2002 (CA); however, the proviso to Section 9 limits this power of the MPRA to the port sector. A logical inference of this is that we could see companies, which are in the maritime business, forum shopping between the CCI and the MPRA.
A further perusal of Section 9 also highlights the fact that the MPRA could conduct an ex-ante and ex-post analysis of mergers in the ports industry. Again, these provisions are similar to the CCI’s merger control regime, which involves the CCI conducting an ex-ante analysis of a combination between two entities if and when they trigger the prescribed thresholds under the CA. We resort to the use of the word “could” as, in contrast to the rights and obligations of the CCI under Sections 5 and 6 of the CA wherein the CCI shall and has to study a combination, if and when it triggers the prescribed limits, the MPRA can only study a combination if and when a reference regarding the same is made to it by the Central Government, State Government(s), or State Maritime Board(s). There are no threshold limits in the IPB.
CCI’s regulatory tussles in the past
The overlap between the functions of the CCI and MPRA would not be the first time that the CCI has been at an impasse with another similar sectoral regulator. The CCI has been at crossroads with the Petroleum and Natural Gas Board (PNGRB) and the Telecom Regulatory Authority of India (TRAI).
The PNGRB is empowered under Section 11(a) of the PNGRB Act 2006 to ‘foster fair trade and competition between the entities’. In a still-pending matter between the Indian Oil Corporation Limited (IOCL) and the CCI, the Delhi High Court had, in 2013, issued a stay on the CCI’s investigation into allegations of cartelization in the market for the supply of aviation fuel against the IOCL and other related companies, albeit without any explanation(s).
However, this has not prevented the CCI to adjudicate several other matters in the petroleum and natural gas industry. In the case of XYZ and IOCL Limited and Others. (Case Number 5 of 2018), wherein the IOCL and other related companies had contended that the matter at hand, as it related to petroleum and natural gas industry, would fall under the jurisdiction of the PNGRB, the CCI had opined that it has the jurisdiction to adjudicate the dispute. The CCI made it clear that its powers are wider than those vested with PNGRB, and that any decision by the PNGRB would be in personam, as opposed to the CCI’s decision which would be in rem (¶¶34-37).
As can be gleaned from this order, the test that the CCI has so propounded to resolve the matters relating to sectoral overlaps would involve 1) whether the CCI exercises comparatively more expansive powers than the concerned statutory authority and 2) how the decision, in general, would affect the public and the concerned parties.
However, on 5 December 2018, in the case of CCI v. Bharti Airtel Limited and Others (Bharti Airtel), the Supreme Court upheld the Bombay High Court’s order to quash the investigation proceedings initiated by the CCI against certain telecom companies. The court held that the CCI had usurped the jurisdiction of the TRAI. It stated that the CCI could only investigate if TRAI had observed and concluded that the concerned parties had indulged in anti-competitive behaviour per the CA (¶92).
We find it worthwhile to mention that the above-mentioned provisions of the IPB, which pertain to the regulation of combinations, do not find mention in the TRAI Act 1997. However, Bharti Airtel evinces that the apex court favours sectoral regulator(s) over the CCI, in the presence of lex specialis, and this has led the universal powers of the CCI to be side-lined and usurped. The apex court, albeit opining that the CCI is well-equipped to deal with any competition law related matters, held that the telecom sector matters will be, in the first instance, dealt with in the context of the TRAI Act 1997 by the TRAI (¶¶87-91). Though different from the TRAI Act 1997, this is what the IPB intends and aims to bring forth. The IPB, being a sector-specific law, will be given preference over the CA, and the regulatory body that the IPB proposes to set up, MPRA, will prima facie oust the jurisdiction of the CCI.
Observations and concluding remarks
The IPB would have made perfect sense if the CCI had not had the power/authority to regulate and ensure fair competition in the maritime and ports business. However, this is not the case. It was only recently that the CCI had approved the combination of Adani Ports and Krishnapatnam Port Company. Both entities are in the business of providing port services, and under Section 9 of the IPB, their combination would also have been subject to the analysis of the MPRA. This mechanism will lead to the same transaction possibly being analyzed for anti-competitiveness twice, which would end up in resources being used inefficiently.
Moreover, as the recent available annual report of the CCI indicates, it had received INR 15,156 lakhs as grants-in-aid from the Central Government for FY 2018-2019. In the era of cash crunch, which is not likely to go away anytime soon, the move of the government to set up an authority with similar regulatory powers does not sit well with the idea of not wasting the taxpayer’s money.
Though there are no preparatory discussions for the draft available as of now for us to prognosticate the purpose and objective of setting up the MPRA, we can reasonably foresee that this draft, if turned into law without any substantial changes (which is highly likely), would create problems of regulatory overlap. Interestingly, the MPRA, per Section 8(c)(xiv), can enter into memorandums of understandings with other statutory authorities. Through this concurrence model, the CCI and the MPRA can possibly reduce and even eliminate any and all regulatory tussles between them. Though the concurrence model of these sorts is something novel for our country, it has been followed by the United Kingdom for quite a while. However, it is worthwhile to note that the regulatory setup in the UK involves regulatory bodies working closely with each other. In contrast, there is a historically hierarchical institutional culture in India, a notion which was reinforced by the Supreme Court in Airtel (¶¶78-79, 99). Thus, the success of the concurrence model in India seems doubtful. Another point to note is that in the UK, there exists a common appellate tribunal to adjudicate upon competition-related matters arising from different sectoral regulators; however, the IPB proposes to set up a new appellate body to decide on appeal matters in the port industry including issues of competition, something which the National Company Law Appellate Tribunal decides upon in India.
We also find imperative to mention is that a statutory authority can, per Section 21 of the CA, refer their matter to the CCI on the condition that the matter at hand involves breaches of the provisions of the CA. Mandating reference to be made to the CCI by sectoral regulators of matters involving competition law still seems to be the best course of action for ensuring regulatory harmony and better governance.
We expect and hope that the comments made by the stakeholders to the MPSW concerning the IPB would have addressed this issue and that the ministry will diligently look into resolving this conundrum.