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Competition Law and Judicial Review: Has Bombay High Court Ousted CCI's Jurisdiction in Telecom Cases?

November 21, 2019

[Soham Goswami is an Editor at IRCCL.]

 

The Bombay High Court has quashed a Competition Commission of India (CCI) investigation against Star India Limited (Star) and Sony Network Pictures India Private Limited (Sony) (collectively, OPs) for anti-competitive conduct against Noida Software Technology Park Limited (NSTPL /Informant). By judgement dated 16 October 2019, Kureshi and Kathawalla JJ have quashed the Section 26(1) order (Impugned Order). 

 

NSTPL is distinct from other operators as it owns a Head-end In The Sky (HITS) license, which enables it to transmit content to local cable operators (LCOs) by satellite (in contrast, Multi-System Operators (MSOs) transmit via cable, but may directly transmit to consumers under extant regulations). A HITS licence, therefore, provides technological benefits but restricts an operator from dealing with consumers directly, requiring reliance on television broadcasters. NSTPL moved the CCI against Star, Sony and the India Broadcasting Foundation (IBF) alleging that Star and Sony had, as broadcasters, interpreted the provisions of the Telecom and Regulatory Authority of India’s (TRAI) Interconnection Regulations 2004 to impose onerous and commercially unviable payment conditions on NSTPL, as well as colluding with other broadcasters under the guise of the IBF on price determination.[1]

 

This conduct was separately challenged before the Telecom Dispute Settlements and Appellate Tribunal (TDSAT) in two petitions. The first petition found Star, Taj and other broadcasters guilty of forcing NSTPL to enter into interconnection agreements which bore no resemblance to market rates and further by discriminating between HITS operators (NSTPL) and other MSOs (the distinction under clause 3.6 of the Interconnection Regulations 2004 relates to addressable systems such as DTH and non-addressable systems and not HITS operators and MSOs, contrary to what the broadcasters submitted) and therefore, HITS operators were to be treated on a similar footing with MSOs for commercial terms in interconnect agreements. The first petition addresses the questions raised before the CCI to an extent; the second petition, dealing solely with the disconnect notices served upon NSTPL by Star and Sony, has not been finally determined yet.

 

The Star court bases its decision on the Supreme Court’s decision in CCI v Bharti Airtel (Bharti Airtel)[2]. It also proceeds to identify Bharti Airtel as a decision applicable to disputes in personam. The Bharti Airtel court expanded on what constitute jurisdictional facts in paragraph 90 of that decision, i.e. the CCI’s jurisdiction could be invoked only when the TRAI or TDSAT made a prima facie finding of anti-competitive conduct.[3] The Star court holds that the TDSAT decision in the present case (discussed above) was a decision in rem (despite it having conclusively determined that the alleged conduct was illegal and between the parties in the CCI proceedings) and therefore not a jurisdictional finding for the CCI to take cognizance.

 

The Bharti Airtel court did not envisage the distinction between in rem and in personam disputes with respect to jurisdictional facts. As is evident from the language of this decision, the telecom regulator need only make a prima facie finding of the potentially anti-competitive conduct for the CCI to take cognizance. Further, Sikri J’s reliance on Carona Limited v Parvathy Swaminathan and Sons[4] to illustrate what constitute jurisdictional facts, along with the identification of jurisdictional facts in paragraph 56 in Bharti Airtel, clearly shows that the test is to have a simple ruling on the presence of these issues by the regulator, and not to have these issues determined finally. Thus far, no further; the TDSAT ruling from 7 December 2015 (the first TDSAT petition) did make these findings, and these findings were final.[5]

 

The Star court overlooks the fact that the nature of proceedings before the TRAI/TDSAT, as before the CCI and other regulators, are inherently in rem, with a diluted locus standi requirement and opportunities available for stakeholders to address matters of interest. It is, therefore, necessary to keep the threshold to trigger the CCI’s jurisdiction at the lowest level possible, as the Bharti Airtel court envisaged.

 

Another issue the Star court overlooks is that the review of an administrative order of the nature of a Section 26(1) order under the Competition Act 2002 (to direct the Director General to investigate on establishment of a prima facie case) is impermissible under the Article 226 jurisdiction of the High Courts. This was the ruling of the Supreme Court in CCI v SAIL and endorsed in the closing paragraphs of Bharti Airtel. Interestingly, the Star court states that it will not review the order, but instead proceeds to do so![6] The court further states that the CCI must outline their reasons for believing that grounds for investigating the OP for a Section 3(4) allegations exist in the Section 26(1) order. In fact, the process before the CCI is that such finding is based on evidence procured by the Director General’s office (in pursuance to the Section 26(1) order) and conclusive rulings on the presence or absence of anti-competitive conduct are only made in a Section 27 order (which is a final decision from the CCI).

 

The CCI may, on a review of the Director General’s report and the parties’ arguments, find that the anti-competitive conduct did not constitute an appreciable adverse effect on competition. This reinforces the importance of refraining from review of an administrative order that should ideally have no bearings on the rights of a party; to do so is to reduce the discretion of the regulator and impede its functioning. The CCI often faces challenges to its jurisdiction, to the extent that it often writes off its ability to adjudicate a matter. This is not good news in a country that is, at present, experiencing severe economic issues with innovation and with individual industries.

 

 

Epilogue. In 1994, a three-judge bench of the Supreme Court had enumerated a rule of restraint while reviewing decisions by tribunals, limiting judicial review to the reasonableness of those decisions. This particular decision, Tata Cellular v Union of India, dealt with the discretion of the Department of Telecommunications in tendering with private companies; in doing so, the court restates overarching principles in dealing with judicial review of tribunal decisions, especially economic and commercial ones. Established precedent in Indian law already advises a hands-off approach when engaging in judicial review of a tribunal’s decision, and this has already been addressed by the Delhi High Court in the context of the CCI.[7] The courts would do well to apply this principle consistently.

 

[1]Case 39 of 2017. Allegations were made under sections 3(3) (horizontal agreements), 3(4) (vertical agreements) and 4(2) (discriminatory terms). The CCI dismissed the allegation under section 3(3), while ordering an investigation for the remaining allegations.

[2] CCI v Bharti Airtel (2019) 2 SCC 521.

[3]The language used in Bharti Airtel mentions a prima facie determination by the telecom regulator. See paragraph 91.

[4](2007) 8 SCC 559. Relied on in Bharti Airtel, paragraph 96.

[5]Challenges to the 1st TDSAT decision were dismissed by the Delhi High Court and the Supreme Court.

[6]Star, paragraph 21.

[7]Shashikant v Central Bureau of Investigation and Others (2007) 1 SCC 630, also see Google Inc. v Competition Commission of India (2015) SCC Online Del 8992.

 

 

 

 

 

 

 

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