A CRITICALANALYSIS OF THE NOTION OF PUBLIC INTEREST IN THE COMPETITION ACT, 2002 IN THE LIGHT OF BSNL V/S. AIRTEL 3G
– Mr. Girish Muduli1
The Scope of this paper has been limited to know Public Good in India in accordance with The Competition Law 2002. The Objective of the paper is to understand the working of ‘The Competition Law 2002’, in the light of BSNL v. AIRTEL 3G.The Enactment of Competition Act 2002 is a response to the growing complexity in human affairs in general and trade business in particular. In the case of BSNL v. AIRTEL 3G, the CCI have decided in the favor of Airtel 3G on the basis of Section 26 (1) and 26 (2) of the Act because by looking into the Public Good perspective of the case as there was no proof of Cartelization.
The phrase “keeping in view the economic development of the country” which is to be found in the first line of the Preamble of the Competition Act, 2002, tells us that economic development of the country is among the other goals, precisely what the legislators had in mind. Section 19(3) provides for different factors that the Competition Commission must take into account while determining whether an agreement has an appreciable adverse effect on competition under Section 3 of the Act.
Section 19(3)(f) mandates taking into account the promotion of economic development while deciding if the agreement is anti-competitive or not and thus it is a saving clause for such agreements which even though might have an appreciable adverse effect on competition must be tolerated for economic development of the country. Thus, the residual effect of such an agreement on the society and its economic development is just as important as its appreciable adverse effect on competition. Correspondingly Section 19(4) provides for factors that the Commission must take into account while determining whether an enterprise enjoys a dominant position or not under Section 4 of the Act.
Section 19(4)(l) also lays down an exception in terms of contribution of the enterprise to economic development ofthe country and implies that the Commission maytolerate a dominant firm in the broader economic interest of the country2. So, in the case of BSNL v. AIRTEL 3G3 on the basis of Section 19(1)(a) and Section 19(4), we could say that there does not exist a prima facie case for causing an investigation to be made by the Director General under Section 26(1) of the Act. It is a fit case for closure under Section 26(2) of the Act and the same is hereby closed.
PUBLIC INTEREST IN THE COMPETITION ACT, 2002:
In the wake of economic liberalization and widespread economic reforms introduced in 1991, and in its attempt to move from a ‘command and control’ regime to a regime based on free market principles, India decided to replace its then existing competition law – the Monopolies and Restrictive Trade Practices Act 1969, which was primarily designed to restrict the growth of monopolies in the market – with a modern competition law based upon established competition law principles. As the first step towards this transformation, the CompetitionAct 2002 was enacted and received presidential assent on January 13, 2003. The Competition Act seeks to achieve the following objectives: –
• to prevent practices that have an adverse effect on competition;
• to promote and sustain competition in the markets;
• to protect the interests of consumers; and
• to ensure freedom of trade carried on by other participants in markets in India.
These objectives are sought to be achieved by the Competition Commission of India, which was established by the central Government with effect from October 14 2003. Accordingly, the commission is mandated to prohibit anti-competitive agreements and abuse of dominant positions by enterprises and to regulate combinations (i.e., mergers, amalgamations or acquisitions) through a process of inquiry and investigation4. Effective competition regime provides necessary conditions for maximizing the interests of the consumers or in a broad sense, the public interests.Protection of consumer interests runs through the CompetitionAct.
The Preamble of the Act and subsequent provisions like Sec 18, 19 etc. expressly provide for protection of consumer interests. Sec. 2(f) defines ‘consumer’ which, is much wider than the definition given under the Consumer Protection Act, 1986. Further, under the chapter on Duties, Powers and Functions of Commission, it is provided that the Commission shall, while determining the “relevant geographic market” and “relevant product market”, must have due regard to consumer preferences5 and choices.
The National Competition Policy, 2011 also stated that the fundamental role of competition policy is to guarantee consumer welfare by encouraging optimal allocation of resources and granting economic agents’ appropriate incentives to promote productive efficiency, quality and innovation6. The inefficiency and inadequacy of the MRTPAct led to the formulation of the CompetitionAct, and the establishment ofthe Competition Commission of India to enforce its provisions. The Competition Commission of India is expected to serve consumers better as far as its redressal or remedy is concerned.
Among other things that the CompetitionAct allows an individualconsumer or their associations to present their grievances for redressal, before this forum. However, cost considerations and other factors may deter individual consumers or local consumer groups to approach the CCI. The need for regional benches of the Commission is again felt in this context7. Although abuse of dominance by an undertaking/enterprise/firm or certain conducts by dominant firms or firms having monopoly or market power is generally prohibited under competition law, but certain exemptions or exclusions have been provided under the CompetitionAct 20028.
Correspondingly Section 19(4) provides for factors that the Commission must take into account while determining whether an enterprise enjoys a dominant position or not under Section 4 of theAct. Section 19(4)(l) again lays down an exception in terms of contribution ofthe enterprise to economic development of the country and implies that the Commission may tolerate a dominant firm in the broader economic interest of the country.9
THE DECISION OF COMPETETION COMMISSION IN BSNL V. BHARTI AIRTEL 3G LTD.
Section 3 of the Competition Act, 2002- Prohibition of agreements- Anti-competitive agreements- Informant was a 100 per cent Government owned enterprise, with object of providing telecom services, while opposite parties were private telecom services provider in India- Informant filed information alleging cartelization among Opposing Parties (OPs) Airtel, Vodafone and Idea, in 3G spectrum auction held in 2010. Informant alleged that OPs had bid selectively and entered into illegalroaming arrangements amongst themselves to secure roaming rights over areas for which they had bid10.
Whether OPs got 3G spectrum in 33 services areas out of total 22 circles, but if OPs had formed a cartel, total number of licenses would have been 22 and not 33- Held yes- Whether informant failed to furnish any data to show data opposite parties formed a cartel amongst themselves although they competed with each other in bidding process in several circles- It was held, yes- whether for violation of terms and condition of licenses granted to party remedy would be with TDSA and not before commission- It was held, yes- whether thus, there did not exist a prime facie case for causing investigation to be made by DG and, therefore case was to be closed.
THE TELECOM REGULATORY AUTHORITY OF INDIA ACT (TRAI), 1997
Section 2(k) ofthe TRAI defines ‘telecommunications service’, as: “Telecommunication service’ means service of any descriptions (including electronic mail, voice mail, data services, audio text services, video text services, radio paging and cellular mobile telephones services) which is made available to users by means of any transmission or receptions of signs, signals, writing, images and sounds or intelligence by nature, by wire, radio, visual or other electro-magnetic means but shall not include broadcasting services11.
THE FUNCTION OF TRAI-ALIGNING WITH THE COMPETITION COMMISSION:
Section 11 (1) of the Act sets out the functions of the TRAI. Clauses (h) and (i) of that subsection onlyprovide TRAI shallfacilitate competition and promote efficiencyin the operation of telecommunication services as to facilitate growth in such service and protect the interest of consumer of telecommunication services.
Under clause (n) it will also settle disputes between service providers. The types of disputes that may be settled by TRAI under Section 14 (2) between providers of telecommunication services or between any of the service providers and a group of consumers are limited to: –
• Technical compatibility and intercommunications between service providers.
• Revenue sharing agreements between different service providers and
• Quality of telecom service and interest of consumers.
THE DECISION OF TDSAT IN BSNL V. BHARTI AIRTEL 3G LTD.
In a major relief to incumbent telecomoperators BhartiAirtel,Vodafone India and Idea Cellular, the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) overturned a ban imposed in 2011 on intra-circle roaming (ICR) pacts among operators, which allows them to offer 3Gservices even in circles where they do not have 2,100-MHz spectrum.The move is expected to give the much-needed push to the expansion of 3G services, which have been languishing due to an uncertainty among consumers on whether operators can offer seamless services across the country12.
TDSAT also quashed the cumulative penalty of Rs 1,200 crore imposed by the department of telecommunications (DoT) on the three incumbent operators, which together offer services to about 30 million of the country’s 40 million 3G subscribers. DoT officials said it would not be possible to challenge the decision in the Supreme Court, as it was the apex court that had earlier referred the case to TDSAT13.
The three operators can now offer pan-Indian 3G services to their customers across all circles, despite having the requisite 2,100-MHz spectrum in only a few. BhartiAirtelhas 3G spectrum in 13 of the 22 telecom circles, while Vodafone has it in nine and Idea Cellular in 11.An earlier order had disallowed the companies from acquiring new subscribers in the circles where they did not possess 3G spectrum, causing a 30 per cent reduction in their data revenues, according to industry estimates. A senior Vodafone India executive, who did not want to speak on record, said: “We have lost a lot of revenue because of the ban. Our 3G customers want seamless services and this (TDSAT decision) will give 3G a big fillip.14”
The TDSAT decision will also provide customers more choice and increase competition in the sector. “The decision benefits customers, who will have more choices. Now, operators can freely invest in network coverage, as ICR pacts will allow them to offer better services even without adequate spectrum in all circles,” said Cellular Operators Association of India (COAI) Director-General Rajan Mathews.Experts also agree that it will give a boost to 3G services. Hemant Joshi, partner, Deloitte Haskins & Sells, says the TDSAT decision will allow optimum utilisation of spectrum and help in further proliferation of 3G services across the country.
“Operators can concentrate on their 3G service rollouts and marketing. This will also benefit the subscribers, as they are not required to change the operator to avail 3G services. This is in line with the in-principle approval given earlier,” Joshi adds.
Earlier, the ban on ICR for 3G was seen by many as a proxy war in the 4G services space between the incumbent operators and the new entrant Reliance Jio Info-com. The ban gave Reliance Jio a clear edge over rivals, as it was the only Pan-India player with the more efficient 2,300-MHz spectrum in all circles. Rival Bharti Airtel had 4G spectrum in only 13 circles (after buying Qualcomm), while Vodafone and Idea had none. So, without an ICR regime, the three incumbent telcos would have had serious problems in competing with Reliance Jio.But that was in 2011. With technological and spectrum policy changes, the current policy of technological neutrality has changed the scenario. Under the new regime, spectrum is no longer pegged to one service and operators can use their airwaves to offer whichever service they want – 2G, 3G or 4G.As a result, though Vodafone India does not have 2,300-MHz (earlier tied to 4G), it can offer 4G services with the 900- or 1,800-MHz spectrum it has across the country. This means, it does not even need to sign ICR pacts for 2,300-MHz airwaves and can take on Reliance Jio by offering 4G services using its 1,800-MHz spectrum15.
Mathews agrees: “With spectrum now becoming technology-neutral, operators can offer any service with spectrum of any band. But, if need arises, the operators now have the option of getting into ICR pacts for services.” Mathews, however, says 2,100-MHz still is the most effective band for 3G, because of the huge infrastructure and device ecosystem available globally. And, the TDSAT decision will give a big push to the service.
“The question that needs to be asked is, who will compensate the operators for their revenue loss on account of not being able to offer services to new customers.” DoT had taken Bharti Airtel, Vodafone India and Idea Cellular to court for allegedly violating their licence conditions by offering 3G services, through ICR pacts, in circles where they did not have permits. The department had slapped a penalty of Rs 350 crore on BhartiAirtel, of Rs 550 crore on Vodafone and a Rs 300-crore one on Idea Cellular for providing 3G services outside their licensed telecom zones.These three had signed ICR pacts for sharing 3G spectrum and offering services across one another’s circle.
The Government could approach SC seeking to overrule the TDSAT order. That appeared likely as Telecom Minister Kapil Sibbal said the Government still maintained that the license agreements clearlyforbid network sharing. While the lobbygroup of GSM companies welcome the ruling, none of the operators individually spoke on the matter. “We are very gratified with the ruling,” said Rajan Mathews, SG of the GSM group. According to him, before entering into the agreements, the companies had asked was legal”and Dot had replied inthe affirmative”.If the rival companies can sell services in areas where they don’t have airwaves, it would allow them to avoid having to buy spectrum and set up infrastructure at a time when demand for data services is growing exponentially16.
The telecomtribunaloverturned a ban on telecomcompanies sharing highspeed,third-generation (3G) networks in a ruling that came as a big relief for service providers that don’t have their own spectrum and eases the capital pressure on the industry,already having to contend with the high price of frequencies.The Telecom Disputes Settlement and Appellate Tribunal also quashed. 1,200 Crore of penalties slapped on BhartiAirtel,Vodafone India and Idea Cellular by the telecom department,which had accused the nation’s top three operators’ companies of violating licensing rules by entering into 3G network-sharing agreements. This Agreements was 1st challenge in CCI where CCI said that there does not exist any fact which can be taken a prima facie case for causing an investigation to be made by the director General under Section 26 (1) of the Act.
It is a fit case for closure under Section 26 (2) of the Act and therefore this case is closed. Section 19 gives statutorily powers to the Commission to make inquiry into contravention of Sections 3 and 4 and as also in subsequent sub-sections, the factors to be taken into consideration in determining the issues involved in any inquiry for contravention of section 3 and 4. Since the fact of BSNL v. Airtel 3G was not contradictory to the Competition Act 2002 and this sharing of 3G signal is for the Consumer Profit or Public interest therefore this case was decided correctly and it have become one of the landmark case for protection of Consumers in accordance to Competition Law Jurisprudence.