Dear Reader, 

It is with pleasure that we present the 15th edition of Spotlight to you.  

This edition discusses a frequently occuring phenomenon of jurisdicttional truf-war between the Competition Commission of India and sector regulators, and also presents some ways to deal with this recurring issue. 

We look forward to hearing your thoughts and suggestions.

Recurring Jurisdictional Turf-war between CCI and Sector Regulators -  Towards Solution

The Recurring Problem
Sector regulators questioning the Competition Commission of India (CCI) jurisdiction to claim their fiefdom over that sector is not new. In a most recent episode, the Securities and Exchange Board of India (SEBI) asked the CCI to refrain from pursuing a matter involving allegations of collusion and predatory pricing against certain credit rating agencies (CRAs). The CCI, however, rightly rejected SEBI’s claim and continued to dispose of the matter, saying it is “well within its powers to investigate anti-trust practices”.

In 2019, Brickwork Ratings India Pvt. Ltd., a CRA, filed information with the CCI against the four leading CRAs (viz., CRISIL Ltd. India Ratings and Research Pvt. Ltd. CARE Ratings Ltd. and ICRA Ltd.; together Opposition Parties or OPs). The Informant alleged that OPs were colluding in bidding (anti-competitive agreements) to public sector utilities and were quoting a very low price (predatory pricing) to block smaller CRAs from winning these contracts.[1]

When CCI sent the matter to SEBI for their comments, the latter stated that the Code of Conduct prescribed under the SEBI (CRA) Regulations, 1999 imposes an unequivocal obligation on the CRAs to conduct their business with high standards of integrity, dignity and fairness and not to indulge in any unfair competition. Thus, the allegations levelled attract the provisions of the 1999 Regulations, for which SEBI is the regulatory authority to examine the allegations and take appropriate action.

Therefore, as per SEBI, the present information may not be entertained by the Commission. The OPs also raised similar objections – that CCI has no jurisdiction as the subject matter – regulation of CRAs – is strictly within the domain of SEBI.

However, when SEBI did not state in its comments whether it has initiated or is initiating any inquiry on such allegations, CCI decided to proceed in the matter. CCI also relied upon a 2019 judgement of the Supreme Court. The SC in Competition Commission of India v. Bharti Airtel Limited and Others had opined that mere presence of a sectoral regulator does not oust the jurisdiction of the CCI.

Therefore, the CCI proceeded to deal with the matter. However, since no prima facie case could be established with regard to the allegations of cartel or predatory pricing, the matter was closed.  

The case, however, has again raised the jurisdictional turf-wars between CCI and sectoral regulators, which have repeatedly been happening at some intervals. If some credible solution is not found, such turf-wars may increase in the future given that many new regulations are in the pipeline. Such jurisdictional conflicts and uncertainties increase investment risks and onerous, costly delays.

Recently, delivering a keynote speech during a CCI conference, NK Singh, Chairman, 15th Finance Commission, deliberated at length on the jurisdictional conflict between CCI and the sectoral regulators. Such conflict could arise due to legislative ambiguity or jurisdictional overlap, or both. Interpretational bias could aggravate such conflicts. The market players and legal arbitrators may also generate such conflicts. The tangled understanding of framers of the legislation is evident in multiple legislations.[2]

Solutions to Avoid Jurisdictional Turf-war
In 2011, CUTS International came out with a detailed report,[1] commissioned by the Ministry of Corporate Affairs, on the overlap-conflicts between sectoral regulators and competition authorities.

According to the study, both competition agencies and sector regulators have a common goal of promoting economic growth through pro-competitive regulation. But despite sharing a common goal, the sector regulators and competition authorities have different legislative mandates and hence their perspectives regarding competition matters may be different.

Since technical regulation is generally a structural issue and competition enforcement qualifies more as a behavioural issue, sector regulators are primarily responsible for structural and ex-ante issues, while the competition authority looks into the behavioural and ex-post issues.

Though there is a legislative mandate for the CCI to consult any sector regulator, the root problem for the continuing turf war is mainly because such consultations are not mandatory and binding. The changes brought via amendments to the Competition Act in 2007 – giving suo motu powers to CCI to initiate such consultations – the glaring loophole continues to remain because opinions received from consultations under Sections 21 and 21A of the Act are not binding.

The said CUTS study recommends that to avoid jurisdictional conflicts between sector regulators and CCI, both (set of) laws – competition law and sector regulation laws – should provide for “mandatory” consultation between the two bodies regarding the issues coming under either’s jurisdiction. This recommendation was also made by the Planning Commission’s policy document of December 2007 and the draft National Competition Policy, 2011.[2] Such a provision will ensure the responsibility of every regulator to keep in loop other regulators exercising overlapping domain over the same issue.

The European Union member states have also resolved the overlap issues by providing mandatory consultation between the competition authority and sector regulators under both the competition law and sector regulatory laws.[3]
Unfortunately, the draft Competition (Amendment) Bill, 2020, published last year for general comments, had not rectified the lacunae of mandatory consultation. CUTS had made submission to the Ministry of Corportate Affairs in this regard with the hope that the same will be incorporated before the Bill is being introduced in the Parliament.[4]

Besides, the CCI and the sectoral regulators need to cooperate and establish a forum for regular exchange of ideas. The mechanism adopted via an Ordinance (2010) to resolve a jurisdictional conflict between SEBI and Insurance Regulatory and Development Authority (IRDA) over Unit-linked Insurance Plans (ULIPs) could be a helpful guide in this regard.[5]

Another good example could be the Financial Stability Forum chaired by the Finance Minister to coordinate all financial regulators, including RBI and SEBI.

The Forum of Indian Regulators (FOIR),[6] established in 2000, maybe developed into a formal forum where coordination between various regulators could be institutionalised. Its membership may be expanded by including all the sector regulators in India.

In addition to the above, coordination can also increase by adopting certain good practices such as:

  •  right to participate/observe proceedings before the other;
  • use of experts from each other for facilitating inquiry/investigations;
  • exchange of personnel on deputation or internship basis;
  • participation in each other’s training programmes, workshops, seminars, etc.;
  • and conducting regular training programmes by CCI for representatives of the sector regulators so that they are in a better position to appreciate various competition issues.[7]