Abstract

This article seeks to analyze the effect of Reliance Jio Infocom Ltd. (“Jio”) on the development of Indian Competition law. It traverses through a series of competition law disputes regarding the said company, analyses each of them separately while coming to the outcome that Jio is at the advent of the evolution of jurisprudence related to sectoral conflict/ turf war involving the Competition Commission of India (CCI).

Introduction

India, being the world’s second largest telecom market, started grabbing eyeballs in the backdrop of the ongoing tussle between telecom giants to capture the market for both voice calls and data services. Ever since Reliance Jio Infocom Ltd. (“Jio”) entered the said market, it had stirred the industry in ways that was not to be reckoned with a few months prior to its entry. In the pursuit of establishing a foothold in the telecom market, it introduced unlimited free calling or zero paise calling and internet through its promo packs Welcome Offer (Sep ’16 to Dec ’16) and Happy New Year offer (Post Jan ’17). It will not be wrong to say and admit here that Jio introduced 3G/4G internet services to a lot of users in the nation. It in many sense, radicalized the telecom industry. The new schemes it introduced caused disquiet and stir amongst the competitors in the market with respect to the hold on their customers. This unfolded a series of dramatic events, which to the author’s mind are as eventful as Jio’s entry.

The CCI Debacle

Interestingly, the Competition Commission of India (“CCI”) was seized of the Jio case in two parts. Whilst India’s biggest telecom network - Bharti Airtel (“Airtel”) - filed an information with the Commission alleging abuse of dominance by Jio, two other informants charged the said company under similar provision, even though on different grounds. Jio moved the CCI alleging cartelisation against it by the incumbent telecom operators and the Cellular Operators Association of India (COAI) against it. Airtel challenged the zero pricing scheme of Jio under Section 4[2][a][ii] and 4[2][e] of the Competition Act, 2002 (“Act”), and Jio on the other hand contended that merely making investment into a telecom start-up cannot be construed as leverage of dominant position. Dismissing Airtel’s complaint, the CCI held that the company failed to provide any plausible explanation as to how Jio’s free services were an outcome of unilateral conduct of Reliance Industries- the parent company of Jio. It further spelled that Jio, with its paltry (6.4%) market share, could not be termed as dominant in the market so as to operate independently of the market forces to affect its consumers or competitors.

The author is of the opinion that the CCI erred in determining a broad relevant market for telecom services across India, without distinction in the kind of services offered. Considering that Jio’s customers constituted less than 7 per cent of the total subscriber base at a pan-India level - that too essentially operated only on 4G band - the CCI should have considered only the provision of services across the said band, wherein Jio had a substantial presence. The CCI further erred in not taking note of the fact that even after Telecom Regulatory Authority of India’s (TRAI) order to stop zero pricing after December 2016, Jio continued the practice till March 2017. Moreover, Jio violated the basic requirement of not providing tariff which is lower than the Interconnect User Charges (IUC) as decided by TRAI Regulations. Even if one accepts the assertion that a new entrant can initiate lucrative offers to gain market, the stage at which the CCI intervened was at a time when Jio would hardly qualify as a ‘new entrant’. It had already got hold of about one-third of the country’s broadband subscriber base, and about 85 per cent of the market in terms of mobile data traffic.

Interestingly, Jio alleged cartelisation by other telecom networks like Idea, Vodafone and Airtel (collectively, the IDOs) by restricting access to Point of Interconnection (POI) to thwart the market. It also alleged that the said companies denied mobile number portability requests to customers willing to switch to Jio, and the COAI was facilitating the same. The CCI after finding prima facie violation in the said case directed the Director-General (DG) to probe into the allegations vide a 3:2 order. This order was assailed by the IDOs in the Bombay High Court; the author stresses the implication of it later in the article.

Igniting the Turf War with TRAI

Jio’s practices set off a high-decibel regulatory turf war between the fair market watchdog and the TRAI, which was triggered by a letter from the former to the latter. The CCI in its letter reiterated the fact that assessment of market dominance and predatory pricing fell under its ambit. It came at a time when TRAI was in the process of coming out with policies on tariffs, including aspects related to abuse of market dominance or predatory pricing. Incidentally, TRAI, in February 2018, floated a consultation paper to discuss whether tariff offers made by telecom companies are transparent enough and if the current definition, such as ‘non- discrimination’, is adequate. The letter pointed out that "…telecom regulator's move to create an analytical framework on predatory pricing, which rests upon definitions, concepts of the Competition Act and decisional practices of international anti- trust jurisdictions may blur the lines between the two bodies and lead to confusion…"

It is rather cogent to think that CCI was correct in its assertion since it is the sole expert body having statutory mandate to sustain and promote competition in markets across all sectors in India. CCI has the necessary experience and economic skills to better understand the complex legal and economic arguments which both sides are likely to bring out, and is better poised to apply them to take a correct stand. Noteworthy here is the fact that the Act prescribes voluntary consultation between CCI and the sector regulator but the opinion of neither is binding. Interestingly, such sectoral conflict has always been controversial and therefore, the Ministry of Corporate Affairs' high powered Committee on National Competition Policy and Allied Matters had recommended in 2011 that the Competition Act be amended to inter alia provide for mandatory consultation between the CCI and sector regulator on overlapping issues. The said policy is yet to see the light of the day. In the opinion of the author, the CCI with its experience and mandate is better able to judge cases pertaining to competition. TRAI being a regulatory body should look into the technical aspects as it is simply not mandated or equipped to deal with issues of competition law.

Twists of the Bombay High Court

The Bombay High Court in its recent judgment further fueled the turf war by setting aside the CCI order directing a probe against IDOs on complaints of “cartelisation” made by Reliance Jio. The significance of this judgment is enormous for CCI as it results in restricting the scope of exercise of its investigative powers. The judgment is controversial in many aspects and warrants a relook. The said ruling holds that an order under Section 26(1) determines the rights of the parties by putting an end to proceedings, and therefore can still be termed adjudicatory. This is in contradiction to the position taken by the Apex court in CCI v SAIL which established Section 26(1) to be merely an administrative direction given internally. The judgment rakes a controversy by failing to take note of the fact that all ingredients that it had considered to term the order adjudicatory, are already covered in Section 26(1). It seems that the Bombay HC has deliberately made such a classification of administrative orders to term CCI probe to be invalid.

Supreme Court Settles

The Supreme Court dismissed an appeal by the CCI assailing the verdict of the Bombay High Court discussed above. The Apex Court was in agreement with the Bombay High Court in terms of the sectoral powers and resolutions of disputes therewith. While settling scores for jurisdiction of the CCI to probe into the allegations of cartelisation by IDOs and COAI, it held that involvement of technical issues pertained to the telecom industry, therefore TRAI is better suited to resolve the conflict. It however held that the CCI is the relevant body with the appropriate jurisdiction to adjudicate upon matters related to competition.

Conclusion

In summary, the Jio effect in competition law could be the beginning of evolving jurisprudence and taking action on issues which were earlier avoided by the CCI. It is for the first time that such strong reaction has been given to a new entrant in the market. It is unprecedented to an extent where the Commission has recognized its jurisdiction in sectoral conflicts, and has made a representation to another regulatory body (TRAI). The Supreme Court’s decision is in many ways a disruptor and has gone a long way in settling sectoral issues between regulators.