COMPETITION COMMISSION OF INDIA

PROJECT ON SECTOR REGULATORS AND COMPETITION LAW

SUBMITTED BY:SEEMA SHARMA Student, LLM 2nd year, GGSIPU, University, Dwarka, New Delhi

SUBMITTED TO:Sh. SHIV RAM BAIRWA Joint Director (Law)

The Competition Commission of India, New Delhi

Disclaimer

This project report has been prepared by the author as an intern under the Internship Program of the Competition Commission of India for academic purposes only. The views expressed in the report are personal to the intern and do not necessarily reflect the views of the Commission or its Honble Members/Chairperson in any manner. This report is the intellectual property of the Competition Commission of India and the same or any part thereof may not be used in any manner, whatsoever, without express permission of the Competition Commission of India.

SEEMA SHARMA

Acknowledgements

This dissertation is an effort made by me with the astute guidance of my mentor, Sh. SHIV RAM BAIRWA. His valuable inputs and constant encouragement has inspired me to carry out this research fruitfully. He gave me his valuable time to discuss the facets of this topic and guided me towards an enlightening and holistic research. I also put on record my gratitude towards the library staff, which has provided me help and access to all the resourceful material for my research. It has been an honour to work under the guidance of experts at the prime regulator of competition in India.

SEEMA SHARMA

LIST OF ABBREVAITION
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. OFGEM OFWAT OFCOM ORR CAA OFREG OFT OUR FTC CCS IDA RBI DOT DOA FRB EC Office of Gas and electricity Office of Water Services Office of Communication Office of Rail Regulation Civil Aviation Authority Office for the Regulation of Electricity and Gas Office of Fair Trading Office of Utilities Regulation Fair of Trading Commission Competition Commission of Singapore Info Communication Development Authority of Singapore Reserve Bank Of India Department of Telecommunication Department of Antitrust Federal Reserve Bank European Commission

EXECUTIVE SUMMARY

This research study aims to explore regulatory conflicts in India and project countries and assesses the approaches taken at various stages to address them. This also tried to compared conflict of jurisdiction between sector regulation and Competition in Indian as well world experience. The objective of the study is to draw on the experiences of different countries to tailor an effective cooperative regime for India. Countries world over have adopted approaches to address regulatory overlap conflicts to fit with their varied realities. India needs to do the same in terms of tailoring the best approach that suits its needs while taking helpful lessons from global best practices studied in this paper. In all countries studied in this research paper, overlap conflicts arose after liberalization and opening up of the economy. Lack of clarity in the respective roles of two regulatory bodies was the main source of such conflicts. Along with this, the absence of mandatory cooperation amongst most reinforced the cooperative frameworks to minimise conflicts of this nature.

TABLE OF CONTENT
DISCLAIMER ACKNOWLEGMENT LIST OF ABBREVAITION EXECUTIVE SUMMARY CHAPTER-1 Introduction 1.1 Inception of Sector Regulator 1.2 Inception of Competition Law CHAPTER-2 Conflict between Sector Regulators and Competition Law 2.1 Type of Regulation and Competition Law 2.2 Sectors Regulators in India A. Petroleum and Natural Gas Regulatory Board Act, 2006 B. The Electricity Act, 2003 C. Telecom Regulatory Authority of India Act, 1997 D. Insurance Regulation and Development Authority Act, 1999 E. RBI Act, 1934 F. Securities Exchange Board of India Act,
6

1-6

7-20

2.3 International Experience Namibia European Union USA Australia

CHAPTER 3

Relationships between Sector Regulator and Competition Law 3.1 Complimentarily Relationship 3.2 Conflicting Relationship

21-23

CHAPTER-4

Resolution of Conflict 4.1 4.2 Resolving or managing the problem International Experience a. Concurrent Jurisdiction b. Cooperation Jurisdiction 4.3 Indian Experience a. Clarifying Jurisdiction Roles b. Designing Mandatory Cooperative Framework CONCLUSION & SUGGESTION BIBLIOGRAPHY

24-35

36 37

CHAPTER-1 INTRODUCTION Competition authorities and sector regulators share a common objective which is to improve economic performance through competition by preventing market failures and associated economic inefficiencies. The two, however, differ in their core competencies. Competition authorities are mandated and therefore well-equipped with the skills necessary for delineating relevant markets, assessing likelihood of harm to competition, entry conditions and market power. Sector regulators on the other hand, are specifically mandated to ensure reasonable tariffs, third party access, service standards etc, and to promote competition in the regulated sector, particularly addressing entry barriers and access issues. Having extensive and ongoing knowledge of technical aspects of products and services, sector regulators are likely to be better suited for technical regulation than competition authorities 1. Despite a common goal, friction may arise as a result of differences in the prioritization of objectives and the methods used by sector regulators and the competition authority. One of the main causes of such conflict is legislative ambiguity and the lack of clarity about powers vested in the competition authorities as well as sector regulatory bodies. Furthermore, in case of an overlapping jurisdictional conflict, which regulator has the overriding jurisdiction is also not clear from the relevant enactments. In many cases, sector regulators were brought in before competition regime was ushered in, hence the earlier view the latter as an encroachment in their turfs in so far as the sectors they are mandated to regulate. Policy-makers world over are facing the issue of whether some or all activities of some of the traditionally monopolistic sectors can be subjected to economy-wide competition rules rather than sector-specific regulation and how to manage the interface between competition and sector regulation. The issue has been discussed and debated in international fora in recent years. Many recent studies by the Organization for Economic Cooperation and Development (OECD), United Nations Conference on Trade and Development (UNCTAD) and others have attempted to analyses such conflicts and suggested ways to resolve them. A growing number of countries since the 1990s have undertaken major reforms aimed at the breaking down of monopoly structures in infrastructure and financial markets. These reforms have particularly
1

Harmonizing Regulatory Conflicts- CUTS International

focused on the liberalisation, privatisation and deregulation of telecommunications, electricity, natural gas, transportation, and financial service industries and the introduction of an economy-wide competition regime aimed at curtailing anticompetitive practices and abuse of market power. The reforms have brought in private players at multiple levels and issues of regulatory overlap need more attention than ever. 1.1 The Objective of Competition and Sector Regulatory Laws 2

Competition law

Sector Regulators

1.

Promote efficiency.

1. These prevent inefficient use of resources and protect consumer.

2. Encourage competition in market.

2. Technical Expertise necessary to determine standard, access, ensures maintain safety and

3. Ensures abundant availability of goods and service of acceptable quality at affordable price. 4. Offer wider choice to consumer

determine tariffs, price fixing and regulation.

TABLE NO.1 Areas of conflicts The most common industries where competition law interacts with sector or industry specific laws are in the network industries involving access to network facilities sometimes considered as essential facilities or interconnection, monopoly pricing, anticompetitive agreements and merger control 3.

Source OECD(1999)

The overlap problem and jurisdictional disputes typically arise in the following areas: Licensing Conditions: the number of licenses and the conditions of the licenses will have an effect on the intensity of competition; Dominance: market definition and assessment of dominance by the sector regulator in establishing which operator should offer interconnection services on one hand and by the competition authority in establishing abuse of market power by an operator; Monopoly Pricing: some competition regimes include rules, which restrict excessive or unjust prices. Such rules could also conflict with industry specific pricing rules established under utility sector or industry specific regulation. Restrictive Business Practices: where we have one vertically integrated monopoly firm then there are no competitors, hence there is no one with which to enter into agreements or to behave in a manner that would restrict or lessen competition in the market for relevant services. Merger Control: restriction on mergers between utilities and other firms, or restrictions on reintegration, are often provided for under industry or sector specific regulatory laws. In the new unbundled environment of infrastructure firms, common ownership for example of generation firms with transmission or generation with distribution firms is normally restricted under sector specific regulation. The liberalization of the Indian economy in 1991 brought with it the need for some changes in the general regulatory environment. Before the opening up of the economy, economic activity was mainly dominated by the government and government-owned companies. In addition, most of the factors that determine the level of competition in the economy, such as entry, price, scale, Location, etc., were controlled. Telecommunication services were under the control of Government firms. Oil exploration, drilling, refining and marketing were a government monopoly, while the same pattern of government dominance was also apparent in other sectors Such as banking and electricity. This situation did not call for independent regulators as government was generally believed to be acting in the interest of the public.

Warrick Smith and David Gray, Regulatory institution for Utilities and Competition, International experience unpublished, world bank paper, p-27(1988) Market

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1.1 INCEPTION OF SECTOR REGULATOR The pattern changed greatly, following a new wave characterized by liberalization, privatization and globalization from the early 1990s, which saw a changing picture in the manner in which economic activity was conducted. The Reserve Bank of India (RBI) was established on April 01, 1935, in line with the provisions of the Reserve Bank of India Act, 1934, its Board for Financial Supervision (BFS), responsible for overseeing the supervisory role of the Bank, was only constituted as a committee of the Central Board of Directors in November 1994 (RBI, not dated), in response to anticipated and actual private participation in line with the liberalization drive. In the electricity sector, the need for a regulator was only felt during the post-liberalization era, when it was felt the coexistence of divergent private and government interests in the electricity sector warranted the creation of an autonomous and independent regulator which was at arms length from the government. 4 This saw the Central and state electricity regulatory commissions being set up. In some cases, the regulatory authorities were established well after the players had already begun operating under the liberalized environment. For example, the telecommunications regulator, the Telecom Regulatory Authority of India (TRAI), was set up in 1997 at a time when mobile services were already about two years in existence. For instance, in Monnet Sugar Limited v. Union of India, (MANU/UP/0823/2005) the Allahabad High Court dealt with Industrial (Development and Regulation) Act, 1951 which prior to the process of liberalization was the epitome of license and permit controls. Indeed, economic reforms has led government to reinvent itself through doing less rowing and more steering. For instance, when government though it fit that the department of telecom cannot be regulator as well player in the telecom sector it replaced the department of telecom with the Telecom Regulatory Authority of India. In case of Reliance Airport Developers Pvt. Ltd. v. Airports Authority of India, [2006 (11) SCALE 208; MANU/SC/4912/2006], the Supreme Court of India endorsed the public private partnership approach to development.

CUTS(2007)

11

Unlike the socialist hue that pervaded governance till 1991, India increasingly relies upon market rivalry for allocation as well as distribution of resources 5. Also there is a realization that the textbook model of perfect competition does not exist in reality. One of the intervention strategies to address the market imperfections that may induce welfare-reducing monopolies is that of competition law and policy. While new regulatory bodies were being set up to tackle various issues emanating from actual and anticipated private player behaviour and other structural issues, the same concerns were also being felt about the competition arena. Prior to the early 1990s liberalization period, India had an operational competition law in the form of the Monopolies and Restrictive Trade Practices (MRTP) Act, 1969.

2.2 INCEPTION OF COMPETITION LAW The new paradigm of economic reforms took effect in the early 1990s, the MRTP Act was found to be hardly adequate as a tool and a law to regulate the market and ensure the promotion of competition. This saw a lengthy process towards competition reforms, eventually resulting in the extant Competition Act, 2002 (as amended). This saw the creation of two competition bodies, the Competition Commission of India (CCI) and the Competition Appellate Tribunal (CAT), to administer the competition law in India. GENESIS OF OVERLAPPING JURIDICTION The objective of putting in place a modern competition law, together with its implementing agencies to co-exist with the regulatory bodies, was on the observed differences in objectives between the two set of regulators. However, these institutions were established at different time periods and there are bound to be overlaps in their objectives. Some sector regulators were also given the responsibility to instill competition in the areas they were regulating, an objective which was later given to the competition authority, when eventually established. Some sector laws which were enacted after the Competition Act, 2002, also bestow sector regulators some competition functions and these include the Airports Economic Regulatory Authority (AERA)

The latest step in reliance upon market is freeing up of exploration of oil and gas sector for private players. See for instance, Raghuvir Srinivasan, Well of paradoxes, The Hindu Business Line, http://www.blonnet.com/bl10/stories/2004012800732300.htm.

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Act, 2008; Petroleum and Natural Gas Regulatory Board (PNGRB) Act, 2006and Electricity Act, 2003. As a result, a scenario where agencies with overlapping jurisdictions were co-existing was created. .

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CHAPTER-2 CONFLICTS BETWEEN SECTOR REGULATORS AND COMPETITION LAW Section 18 of the Competition Act, 2002 states that:It shall be the duty of the Competition Commission of India to eliminate practices having adverse effect on competition, promote and sustain competition, protect the interests of consumers and ensure freedom of trade carried on by other participants, in markets in India. Undoubtedly, this mandate is extraordinarily wide. It is also agnostic about sector specific regulators. A similar language has been used in the preamble of the Act and is also covered in S. 18. 6 Specific provisions contained within the legislation demonstrate the probable tension. Section 60 of the Competition Act, 2002 is the usual non obstante provision asserting the supremacy of competition legislation within the domain of competition enforcement 7.However, Section 62 8 of the Competition Act, 2002 encouragingly declares that competition legislation ought to work along with other enactments. Both sections 60 and 62, ironically, are couched in mandatory language. If sections 18, 60 and 62 were not sufficient to cause enough mystery, section 21 of the Competition Act, 2002, suggests that in any proceedings before a statutory authority, if such a need arises, the statutory authority 9 may make a reference to competition authority. Incidentally, upon reference, the opinion of the competition authority 10 is not binding upon the statutory authority 11. The competition authority is bound to deliver its opinion to the statutory authority within a stipulated time period of two months.

The preamble of Competition Act, 2002 read An Act to provide keeping in view of the economic development, for establishment of commission to prevent practices having adverse effect on competition, to prevent practices having adverse effect on competition in market, to protect the interest of consumer to ensure freedom of trade carried by other participants. 7 Sec.60 of Competition Act, 2002 The provision of this Act shall affect notwithstanding anything inconsistent therewith contained in any other law for time being in force. 8 Sec.62 OF Competition Act, 2002 reads: The provision of the Act shall be in addition to, not in derogation of the provision of any other law for time being in force. 9 Sec.2(w) read: define Statutory authority any authority, board, corporation, council, institute, university or by other body corporate, established by or under any central, state or provincial Act for the purposes of regulating production or supply of goods or provision of any services or market therefore or any matter connected therewith or incidental thereto. 10 Sec.21(1) States:- where in the course of proceeding before any statutory authority and issue to raised by any party that any decision which such authority has taken or pr4oposes to take is or would be contrary to any of the provision of this Act/ then such statutory authority may make a reference in respect of such issue to the commission. 11 Sec.21(2) On receipt of reference under sub section(1), the commission shall, after hearing the parties to the proceeding, give its opinion to such statutory authority which shall thereafter pass such order on the issue referred to in that subsection on it deem fit.

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The essence of the interface between competition authority and sector specific regulators in India lies on the four limbs of sections 18, 21, 60 and 62 of the Competition Act, 2002. Competition authority could have potential interface with the jurisdiction of sector-specific regulators viz. Telecom Regulatory Authority of India (TRAI), Central Electricity Regulatory Commission (CERC), and Petroleum and Natural Gas Regulatory Board (PNGRB). The Competition authority unites the power of private enforcement with the claim of damages and hence can ensure healthy consumer welfare. 2.1 TYPE REGULATION AND COMPETITION Competition law seeks to promote efficient allocation and utilization of resources, which are usually scarce in developing countries. A good competition law lowers the entry barriers in the market and makes the environment conducive to promoting entrepreneurship. Regulations, on the other hand, are public constraints on market behaviour or structure. They usually refer to a diverse set of instruments by which governments set requirements on businesses and citizens. Regulations can be categorized as under: (i) Economic Regulations Those which intervene in market decisions such as pricing, competition and entry/exit. (ii) Technical Regulations: Those which regulates the technical aspects which are distinct and unique to the sector (iii) Social regulations Those which protect public interest such as health, safety, environment. (iv) Administrative regulations Administrative formalities through which government collects information and intervenes in individual economic decisions. The objective of a sector regulator is to provide good quality service at affordable rates, but the promotion of competition and prevention of anticompetitive behaviour may not be high on its agenda or the laws governing the regulator may be silent on this aspect. It is not uncommon for sector regulators to be more closely aligned with the interest of the firms being regulated, which is also known as regulatory capture.Besides, a sector regulator may not have an overall view of the economy as a whole and may tend to apply yardsticks which are different from the ones used by the other sector regulators. In other words, there is a possibility of the lack of consistency across sector.

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The following table no.2 summarizes the difference in their approach.

Sector specific Regulator

Competition Authority

Tells businesses what to do and how to price products

Tells businesses what not to do

Focuses

upon

specific

Focuses upon the entire economy and functioning of the market.

sectors of the economy.

Ex

ante

addresses before

Ex post addresses behavioral issues after problem arises.

behavioral

issues

problem arises.

Focus

upon

orderly

Focus upon consumer welfare and unfair transfer of wealth from consumers to firms with market power.

development of a sector that would presumably trickle down in a sector ensuring consumer welfare.

Sectoral

regulators

are

Competition legislation is usually more appropriate for affecting conduct competition. and maintaining

usually more appropriate for access and price issues such as changing the structure of the market, reducing barriers to entry and opening up the market competition. to effective

16

Therefore, it is evident that the role of sector specific regulators is overlapping but quite distinct. Unlike the sector specific regulators, competition authority takes a holistic view of the economy and addresses behavioral issues after the problem arises. The competition authority also addresses the unfair transfer of wealth that may take place between the consumers and firms wielding market power. The conflicts between CCI and the sector regulators could be caused by: 1. Legislative ambiguity or jurisdictional overlap or legislative omission. 2. Interpretational bias involved could further aggravate the conflicts.

3. Conflicts between two may be generated by the market players and legal arbitrators for obvious reasons. Conflicts are bound to hurt consumers and the uncertainties that go with them can increase risk of investment. 4. The tangled understanding of framers of the legislation is evident both in recent legislations as well as past ones.

2.2 MANDATE OF COMPETITION IN VARIOUS SECTOR REGULATION Various sector specific regulations also appear to provide the regulators constituted there under with the power to decide on or regulate the aspect of maintaining or promoting competition in the relevant sector.

A. PETROLEUM AND NATURAL GAS REGULATORY BOARD ACT, 2006

In spite of the Competition Act, 2002 already on statute book, one of the objectives behind the Petroleum and Natural Gas Regulatory Board Act, drafted as recently as March, 2006 is to promote competitive markets 12 and protect the interest of consumers by fostering fair trade and competition amongst the entities. 13

See, the preamble to the Petroleum and Natural Gas Regulatory Board Act, 2006 that states that it an Act to provide for the establishment of Petroleum and Natural Gas Regulatory Board to regulate the refining, processing, storage, transportation, distribution, marketing and sale of petroleum, petroleum products and natural gas excluding production of crude oil and natural gas so as to protect the interests of consumers and entities engaged in specified activities relating to petroleum, petroleum products and natural gas and to ensure uninterrupted and adequate supply of petroleum, petroleum products and natural gas in all parts of the country and to promote competitive markets and for matters connected therewith or incidental thereto. 13 Section 11 (a) of the Petroleum and Natural Gas Regulatory Board Act, 2006 states that the Board shall protect the interest of consumers by fostering fair trade and competition amongst the entities.

12

17

The Petroleum and Natural Gas Regulatory Board (PNGRB) is mandated to be mindful of competition while dealing with access to common carriers or contract carrier 14 as well as distribution networks. Specifically, if PNGRB is interested in declaring existing pipeline or distribution network 15 as a common carrier, it still needs to be guided by the principles of competition 16. Subject to an entitys right of first use, the entitys excess capacity is to be distributed by PNGRB in accordance with fair competition 17. Further, while determining transportation tariffs, PNGRB is expected to keep considerations of competition and efficiency at the back of its mind. Interestingly, the PNGRB Act borrows the concept of restrictive trade practice from the Monopolies and Restrictive Trade Practices Act, 1969. After four years of drafting the competition legislation, the framers of legislation appear to have either forgotten about the earlier legislation or developed cold feet about the need for modern competition legislation. In order to deter the infringers of the enactment, a la other regulatory enactments, contravention of the directions given by the Petroleum and Natural Gas Regulatory Board attracts civil penalty 18. A complaint based upon the phoenix entitled restrictive trade practice ensures that penalty is enhanced by five times. However, unlike the electricity regulator; the PNGRB Act does have any overriding, non obstante provision.
Section 11(e)(i) states that the Board shall regulate, by regulations, access to common carrier or contract carrier so as to ensure fair trade and competition amongst entities and for that purpose specify pipeline access code. 15 Section 11 (e) (iii) of the PNGRB Act states that the Board shall regulate, by regulations, access to city or local natural gas distribution network so as to ensure fair trade and competition amongst entities as per pipeline access code. 16 Section 20(5) of the PNGRB Act states that for the purposes of this section, the Board shall be guided by the objectives of promoting competition among entities, avoiding infructuous investment, maintaining or increasing supplies or for securing equitable distribution or ensuring adequate availability of petroleum, petroleum products and natural gas throughout the country and follow such principles as the Board may, by regulations, determine in carrying out its functions under this section. 17 Section 21(1) of the PNGRB Act states: The entity laying, building, operating or expanding a pipeline for transportation of petroleum products or laying, building, operating or expanding a city or local natural gas distribution network shall have right of first use for its own requirement and the remaining capacity shall be used amongst entities as the Board may, after issuing a declaration under section 20, determine having regard to the needs of fair competition in marketing and availability of petroleum and petroleum products throughout the country.
18
14

Proviso to section 28 states that in the case of a complaint on restrictive trade practice, the amount of civil penalty may extend to five times the unfair gains made by the entity or ten crores rupees, whichever is higher.

Section 28 of the PNGRB Act states: In case any complaint is filed before the Board by any person or of the Board is satisfied that any person has contravened a direction issued by the Board under this Act to provide access to, or to adhere to the transportation rate in respect of a common carrier, or to display maximum retail price at retail outlets, or violates the terms and conditions subject to which registration or authorization has been granted under section 15 or section 19 or the retail service obligations or marketing service obligations, or does not furnish information, document, return of report required by the Board, it may, after giving such person an opportunity of being heard in the matter, by order in writing, direct that, without prejudice to any other penalty to which he may be liable under this Act, such person shall pay, by way of civil penalty an amount which shall not exceed one crores rupees for each contravention and in case of a continuing failure with additional penalty which may extend to ten lakhs rupees for every day during which the failure continues after contravention of the first such direction.

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B. THE ELECTRICITY ACT, 2003

The Electricity Act, 2003 is redolent of the conundrum caused by overlapping jurisdictions of regulatory authorities in India. The Electricity Act was passed on May 26, 2003, which is a good four and a half months after the Competition Act, 2002 was passed on January 13, 2003, but still, one of the objectives behind the Electricity Act is that of promotion of competition 19. Indeed, the framers of the legislation also conferred power upon the regulator to deal with anti-competitive agreements, abuse of dominant position and mergers related to impediment to competition in electricity20. This is similar to the language used in section 3 and 4 of the Competition Act, 2002 which pertain to anti-competitive agreements, abuse of dominant position and regulation of combinations. In Shri Neeraj Malhotra, Advocate vs. North Delhi Power Ltd. & Ors. [Case No. 6/2009], in which the anti-competitive behavior of the electricity distribution companies was alleged, there was clear confusion regarding the jurisdictional authority in competition related issued. The Discoms alleged before the CCI that only the Delhi Electricity Regulatory Commission (DERC) under the Electricity Act, 2003 had jurisdiction to deal with the issues relating to anti-competitive behavior of electricity distribution companies. However, this regulator appears to be in favor of leaving the competition related issues exclusively in the hands of the competition authority and retaining the responsibility of deciding on the technical issues with themselves. The DERC, in the said case categorically stated in its communication to the CCI that although all matters pertaining to electricity tariff have to be decided as per the provisions of the Electricity Act and DERC Regulations, allegations of anti-competitive behviour, including abuse of dominant position by the Discoms fall within the jurisdiction of the CCI.
The regulator, while fixing tariff levels, is to be guided by the principle of competition and efficiency. In order to promote competition, it is open to the regulator to issue directions to the licensees engaged in transmitting, distribution or trading in electricity. The regulator has also been entrusted with the task of advising the

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The preamble of the Electricity Act, 2003 states that it is an Act to consolidate the laws relating to generation, transmission, distribution, trading and use of electricity and generally for taking measures conducive to development of electricity industry, promoting competition therein, protecting interest of consumers and supply of electricity to all areas, rationalization of electricity tariff, ensuring transparent policies regarding subsidies, promotion of efficient and environmentally benign policies, constitution of Central Electricity Authority, Regulatory Commissions and establishment of Appellate Tribunal and for matters connected therewith or incidental thereto.

Section 60 of the Electricity Act, 2003 states: The Appropriate Commission may issue such directions as it considers appropriate to a licensee or a generating company if such licensee or generating company enters into any agreement or abuses its dominant position or enters into a combination which is likely to cause or causes an adverse effect on competition in electricity industry

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government in competition within electricity sector. The regulator has been mandated to be guided by the

lodestar of competition while evolving scheme for reorganization of provincial electricity boards that were under financial distress. In addition, section 60 21 of the Electricity Act can gives rise to conflicts with CCI if not properly managed. The electricity regulator, too, has been armored with the non obstante
powers that stipulate that the electricity legislation trumps other enactments. Like competition authority, the electricity regulator also finds itself constrained by a duty to act in aid of other regulators.

C. TELECOM REGULATORY AUTHRORITY OF INDIA ACT, 1997 The telecom regulator is perhaps another interesting instance. It was established, inter alia, in order to ensure orderly development of telecom sector 22. Accordingly, one of the critical functions of the telecom regulator is to facilitate competition and promote efficiency 23. Nevertheless, the appellate authority established to adjudicate telecom disputes excludes competition matters, albeit those arising under the old, MRTP Act 24. Unlike the insurance regulator, the telecom regulator, does not have a generic, but a limited duty to aid other authorities existing in the telecom sector 25 and does not possess any overarching powers over other regulators. In the case of Consumer Online Foundation v. Tata Sky Ltd. & Other Parties [Case 2/2009], Dish TV submitted that the CCI could not claim jurisdiction over this matter as Telecom Regulatory Authority of
21

Section 60 of the Electricity Act, 2003 states: The Appropriate Commission may issue such directions as it considers appropriate to a licensee or a generating company if such licensee or generating company enters into any agreement or abuses its dominant position or enters into a combination which is likely to cause or causes an adverse effect on competition in electricity industry 22 The preamble of the Telecom Regulatory Authority of India Act, 1997 states that it is an Act to provide for the establishment of Telecom Regulatory Authority of India and the Telecom Disputes Settlement and Appellate Tribunal to regulate the telecommunications services, adjudicate disputes, dispose of appeals and to protect the interests of service providers and consumers of the telecom sector, to promote and ensure orderly growth of the telecom sector and for matters connected therewith or incidental thereto. 23 Section 11 of the Telecom Regulatory Authority of India Act, 1997 states: (1) Notwithstanding anything contained in the Indian Telegraph Act, 1885, the functions of the Authority shall be to (a) make recommendations, either suo motu or on a request from the licensor, on the following matters, namely:(iv) measures to facilitate competition and promote efficiency in the operation of telecommunications services so as to facilitate growth in such services (viii) Efficient management of available spectrum. 24 Proviso (A) to section 14(a) of the TRAI Act, 1997 states: Provided that nothing under this clause shall apply in respect of matters relating to (A) the monopolistic trade practice, restrictive trade practice and unfair trade practice which are subject to the jurisdiction of the Monopolies and Restrictive Trade Practices Commission established under sub-section (1) of section 5 of the Monopolies and Restrictive Trade Practices Act, 1969 25 Section 38 of the TRAI Act, 1997 states: The provisions of this Act shall be in addition to the provisions of the Indian Telegraph Act, 1885 and the Indian Wireless Telegraphy Act, 1933 and, in particular, nothing in this Act shall affect any jurisdiction, powers and functions required to be exercised or performed by the Telegraph Authority in relation to any area falling within the jurisdiction of such Authority.

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India (TRAI) and Telecom Disputes Settlement and Appellate Tribunal (TDSAT) were already vested with the jurisdiction and responsibility to govern and regulate the telecommunication industry covering telecom, broadcasting and cable TV services.. CCI held that any matter that raises competition concerns would fall within the purview of the Competition Act, 2002 enabling CCI to exercise its jurisdiction.

D.

INSURANCE REGULATION AND DEVELOPMENT AUTHORITY ACT, 1999

IRDA was established in 1999 under the Insurance Regulation and Development Authority Act, 1999. The regulator was established to regulate, promote and ensure the proper growth and development of the insurance and re-insurance sector. As provided for under section 14(2) of the IRDA Act, duties of IRDA do not have much overlaps with those of CCI, although it is important that the regulator be conscious of competition provisions in pursuing some of its functions. For example, when the regulator modifies, suspends or cancels registration for an entity, it is important that the effect on competition be factored into the decision. In addition, when the regulator devises methods for promoting efficiency in the conduct of insurance business as well as when adjudicating disputes between insurers, it is also important to ensure that such decisions are not competition distorting. IRDAs recently produced regulations on amalgamations and transfer of business also has the potential to overlap with CCIs mandate to regulate combinations. Under the IRDA (Scheme of Amalgamation and Transfer of General Insurance Business) Regulations, 2011, IRDA now has the authority to regulate combinations in the insurance sector, which would also have to pass through the scrutiny of CCI.

E. RBI ACT, 1934 The RBI, which started operating on April 01, 1935, in line with the RBI Act of 1934, has a myriad of objectives. These include ensuring monetary stability; operating the currency and credit system of the country; foreign exchange and reserves management, government debt management, financial regulation and supervision and acting as banker to the banks and to the government (RBI, not dated). In that regard, its legislation bestows upon it powers to design and implement the policy framework for banking and

21

non-banking financial institutions, which generally serve to provide people access to the banking system, protect depositors interest and maintain the overall health of the financial system 26. Recently, In Bank Case pre payment penalty case 27 CCI notices to banks asking them to explain the imposition of penalty on borrowers for pre payment of home loan. CCI s notices is based on premise the pre payment penalty acts as a barrier by preventing customers to shift their loans from one bank to another which offer better interest rates. Pre- payment penalties have been in existence for a long time. However, its impact on the Banking sector was never detected or analyzed by RBI, primarily because RBI officials haves not been trained to do so. In fact just after CCIs intervention a senior RBI official gave following statement to medial We will direct banks to do away with the pre payment penalty in case of loan disbursed in Future. It is clear that a regulatory loophole existed which need to be filled by CCI. F. SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 SEBI was established in terms of the Securities and Exchange Board of India Act, 1992, to promote the development of the securities market as well as protecting the interests of the investors in the sector. In addition to its enabling Act, SEBI also operates under other legislations, which include the Securities Contracts (Regulation) Amendment Act, 2007, the Depositories Act, 1996 - No. 22 of 1996 and the Securities Contract (Regulations) Act 1956. An appellate body, the Securities Appellate Tribunal, was also established in terms of Section 15K of the SEBI, Act. Among the functions of SEBI, as outlined under Section 11(2) (e) 28 and (h) 29 of the Securities and Exchange Board of India Act, 1992, are the functions with a possible overlap with the Competition authority. The Sections mandate SEBI to prohibit fraudulent and unfair trade practices relating to securities markets and regulate substantial acquisition of shares and takeover of companies in the sector. In that regard SEBI came up with the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (the Takeover Code). This outlines procedures which SEBI expects stock exchange-listed firms to observe when merging. These mergers thus pass through the scrutiny of the SEBI, which also brings in a possible overlap with CCI.

RBI controls entry and merger of banks, expansion of branches and ATMs, besides controlling policy on banking service charges, and, therefore, there is a distinct possibility of overlap with CCI. 27 Decided on 23.5.2011(relating to charging of foreclosure charges on prepayment of mortgage loan) 28 Sec.11(2)(e) Prohibiting fraudulent and unfair trade practices relating to securities market. 29 Sec.11(2)(h) Regulating substantial acquisition of share and takeover of companies

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In NSE-MCX 30, CCI in this case imposed penalty of Rs 55.5 crores upon NSE for it abuse of Dominant position in the Stock exchange market by indulging into the practice of predatory pricing and also abusing its dominant position to protecting other relevant market. 3.3 INTERNATIONAL EXPERIENCE NAMIBIA Competition regulation in Namibia is governed by the Namibian Competition Act, (Act No. 2 of 2003). The Act establishes the Namibia Competition Commission (NaCC) which has jurisdiction to deal with all matter related to anti competitive activies. Financial sector The Central Reserve Bank of Namibia, also referred to as the Bank of Namibia (BoN) is vested with the power to supervise and regulate banking financial institutions through the BoN Act, (Act No. 15 of 1997) and the Banking Institutions Act (BIA), Act No. 2 of 1998. Section 54 of the Banking Institutions Act states that: (1) A banking institution shall not, without the prior written approval of the Bank (a) Enter into a merger or consolidation; (b) Transfer, or otherwise dispose of, the whole or part of its property, whether situated in or Outside Namibia, other than in the ordinary course of business;

Telecom sector The Communications Regulatory Authority of Namibia (CRAN) is the body responsible for regulating the communication sector which includes telecommunications services and networks, broadcasting, postal services and the use and allocation of radio spectrum. The authority was established by an Act of Parliament; the Communications Act, (Act No. 8 of 2009). Amongst its many functions, it is tasked with the responsibility of establishing the general framework for the opening of the telecommunication sector in Namibia to competition, to provide for the regulation and control of communications activities by an independent regulatory authority. Section 2 of the Communications Act states that the objectives of the Act are:

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National stock exchange Vs Multi stock exchange decided on 25.5 2011

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(a) To establish the general framework governing the opening of competition of the telecommunication sector in Namibia to competition; (b) To provide for the regulation and control of communications activities by an independent Regulatory authority; (k) To ensure competition and consumer protection in the telecommunications sector

Namibia ports authority Namport was established in terms of the Namibian Ports Authority Act, 31 and is responsible for operating and managing the countrys ports, namely; the Port of Luderitz and the Port of Walvis Bay. The authority is tasked with the duties of managing the port facilities inorder to cater for current trade needs and develop the ports for future demands as well as contribute to the competitiveness of the SADC region's trade through the efficient, reliable and cost-effective supply of port services. Both CRAN and the BoN have clear overlaps with the Commission in terms of competition issues. The Namport and the NAMFISA Acts do not specify any clear competition mandate for the two institutions. Even in that case, situations can arise which create overlaps between the agencies functions and make it difficult for them to carry out their respective mandates. EUROPEAN UNION European Commission is responsible for enforcing EC competition law. Article4, chapter II of the Regulation1/2003 provides for the power of the commission for the purpose of applying Article 81 and 82 of the treaty establishing the European Community. Where the Commission, acting on a complaint or in its own initiatives, find that there is an infringement of Article or of Article of the treaty, it may by decision require the undertaking and association of undertaking concern to bring such infringement to an end. United Kingdom sectoral Regulators such as (a) Ofgem-in the energy markets; (b) Ofwat-in the water industry;
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Act no. of 1994 Amit Kapur, Partner, Competition Law & Policy, JSA, New Delhi e-mail: amit@jsalaw.com

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(c) Ofcom-in the communications sector; (d) ORR-for railway services; (e) CAA-in relation to air traffic services; and (f) OFREG-for gas and electricity in Northern Ireland, have played a pivotal role in promoting or facilitating competition within their sectors, which has been achieved in a complementary manner to the Competition regulator/principal Authority, within their sectors. As in case of Electricity Act where Sections 60 and 66 give ample powers to the Electricity regulatory Commission to deal with Anti-competitive behavior of the licenses, these regulators have all the powers of the OFT to apply and enforce the Act to deal with anti-competitive agreements or abuse of market dominance relating to relevant activities in their designated sector. The OFT alone, however, has powers to issue guidance on penalties and to make and amend the Procedural Rules. The Competition Act, 1998 (Concurrency) Regulations 2000 have been made for the purpose of coordinating the exercise of the concurrent powers and the procedures to be followed. In USA 33,

U.S. antitrust laws are enforced by both

1. FTC's Bureau of Competition and 2. Antitrust Division of the Department of Justice.

The Sherman Act is the nations oldest antitrust law. Passed in 1890, it makes it illegal for competitors to make agreements with each other that would limit competition. So, for example, they cant agree to set a price for a productthatd be price fixing. The Clayton Act was passed in 1914. With the Sherman Act in place, and trusts being broken up, business practices in America were changing. But some companies discovered merging as a way to control prices and production (instead of forming trusts, competitors united into a single company. The Clayton Act helps protect American consumers by stopping mergers or acquisitions that are likely to stifle competition.

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Mansoor Ali Shoket, Partner, Competition Law & Policy, JSA, New Delhi e-mail:mansoor@jsalaw.com

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With the Federal Trade Commission (FTC) Act (1914), Congress created a new federal agency to watch out for unfair business practicesand gave the Federal Trade Commission the authority to investigate and stop unfair methods of competition and deceptive practices. Today, the Federal Trade Commissions (FTCs) Bureau of Competition and the Department of ustices Antitrust Division enforce these three core federal antitrust laws. The department of Justice and Federal Trade Commission often advice industry-specific regulators, on matters that may affect competition. The US antitrust agencies, like any private person may file comments offering their competition expertise in regulatory proceedings before independent agencies. In Australia 34 Australia has a general competition law, the Trade Practices Act 1974 (TP Act) that applies across all industries and is administered by a single competition authority, the Australian Competition and Consumer Commission (ACCC). The Australian Competition Tribunal is an appellate body able to review certain adjudication decisions made by the ACCC. The ACCC and the National Competition Council (NCC) also perform several important economic regulatory functions. For example, the ACCC has various responsibilities in relation to the terms and conditions of access to certain essential infrastructure facilities such as telecommunications, gas and electricity and in monitoring prices in industries where competition is weak. It also has a quality of service monitoring role in respect of airports. These responsibilities reflect a government view that there are advantages in placing these economic regulatory functions with the general competition agency. Australian Competition Authority has a number of key economic regulatory functions. With the division of labour between various regulators, there is potential for some degree of overlap of functions between the Australian Competition Authority which administers competition regulation across all the sectors of economy and those technical and economic regulators that operate within specific industries or within certain States across a number of industries. For this reason, a number of steps have been taken to minimize uncertainty regarding the jurisdiction of particular regulators and avoid confusion for consumers and the business community.

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Ishita project Report on Interface between Sector Regulator and Competition Law

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Similar options can be looked into taking into consideration the international experience as to how the interaction between sector and competition regulators is managed through different institutional approaches. The sector regulators must play a lead role in a complementary manner and should not abdicate their duties and leave the competition issues to be dealt with competition authority particularly in the high technical sectors. Both sector regulators and the competition regulators have to mutually respect each other and must have all options of communication open in true spirit of co-operation and they must complement each other to effectively deal with issues and help in building a robust and open economy.

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CHAPTER -3 RELATIONSHIP BETWEEN SECTOR REGULATORS AND COMPETITION LAW Regulation is a very general word covering many different types of public constraints on market behavior or structures. The enforcement of competition law vary from sector to sector there are some sector where sector regulation prevent competition law from being enforced and on the other hand there some sector wher competition law is enforced under sector regulator. The goals of sector regulations differ considerably from sector to sector 35:1. In telecommunication, electricity, gas, and rail transport, one goal of sector regulation is usually to open these sectors to competition. In other sectors, such as professional services, health services or environmental waste services, the goal of regulation is often to limit competition because of some perceived market failure. 2. Some sectors the goal of the sector regulation is, at least in principle, not to promote or to restrain competition but rather to pursue some other social goal. For example protect consumer from fraud. There are different types of relationship exit between sector regulator and Competition law. They are:3.1 COMPLEMENTARY RELATIONSHIP The competition law cannot fully deliver all its benefits and there is a need to monitor the behavior of the incumbent operator. There is a need to define and control the access price to the facility to allow market entry. Furthermore, it is sometimes argued that monitoring the timing of entry in the industry is also an important factor to ensure that entrants do not fail during the first years following their entry. Thus it is argued that there is a specific need to monitor the sector. This type of regulation is generally not inconsistent with competition law. The enforcement of competition law may help ensure that the incumbent does not abuse its market power by engaging in anticompetitive strategies (such as predatory pricing or cross subsidization) when providing the services open to competition.
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The Canada illustrates the potential

REPORT TO THE THIRD ICN ANNUAL CONFERENCE

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complementarity between sector regulations in sectors newly opened to competition and general competition law by stating: The purpose of Canadian competition law is to maintain and encourage competition in Canada in order to promote the efficiency and adaptability of the Canadian economy and achieve other objectives. Sector regulation in Canada often complements this goal. This has particularly been the case in network industries such as telecommunications and energy where regulation of access to monopoly or near monopoly essential facilities has been instrumental in promoting open and effective competition in related markets. In certain sectors there has been a high degree of cooperation between sector regulators and Canadian competition authorities in detecting and preventing competition abuse 1. Another example of complementarily relationship is: Hughes Echostar Merger case in the United States. The proposed merger between Hughes and Echostar in the US in 2001 concerned the concentration of the two most significant nationwide direct broadcast satellite (DBS) companies offering multichannel video programming distribution (MVPD) services (also known as Pay TV) in the United States. It required approval from the Federal Communications Commission (FCC) for the transfer of licenses for DBS service and was subject to review by the Antitrust Division of the Department of Justice (DOJ). The DOJ and FCC had informal meetings about the transaction, concerns arising from the merger, and the timing of the investigations. Although the two agencies employ different standards, both agencies identified similar concerns with the proposed merger, and each attempted to complete its review process as quickly as possible.

2. In most countries, competition law applies to the insurance sector, the nature of the business of insurance is such that in certain cases, co-operation between competing insurance companies can yield efficiency benefits. Examples are cooperation for the purposes of sharing information on the magnitude of risks, and cooperation for the sharing of large risks. These practices, to the extent that they promote competition and are beneficial to insurance policyholders and insured.

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CONFLICTING RELATIONSHIP Regulated Conduct Defence (RCD):- In this Activities that are regulated are not directly subject to the Competition Act due to the Regulated Conduct Defence under Canadian competition law. The RCD protects conduct which would otherwise be subject to the Competition Act, if the conduct is specifically authorized by valid provincial or federal legislation. RCD is an interpretive tool developed by the courts to resolve apparent conflicts between two different laws. The Bureaus approach to the RCD is to determine where the Competition Act and a statutory regulatory regime are in conflict. The RCD applies, and the Competition Act becomes inoperative where there is clear operational conflict between the regulatory regime and the Competition Act, such that obedience to the regime means contravention of the Act. An example of such situation can seen in 1999 when the Fleet Financial/Bank Boston merger was examined, the DoJ and the FRB staffs reached different conclusions on the remedy needed to address competitive concerns and that the FRB did not require divestitures in a limited number of markets favored by the DoJ.

Self regulation: - There are cases in which the goal of regulation is to limit (or even eliminate) competition, possibly because of a perceived market failure. In France, lawyers, architects, public notaries, doctors and surveyors have legally binding selfregulations enforced by their respective professional associations. These self regulations limit competition by restricting entry, freedom of establishment, advertising and, in certain cases, price competition. The official justification for these restrictions on competition is usually that consumers would be unable to exercise their choice because of lack of information, all the more so that consulting such professionals is usually not an often repeated experience, and therefore consumers need to be protected against unfair practices. These type of relationship are seen in the European Union, Mexico, Norway, Sweden, the
United Kingdom and the United States.

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CHAPTER 4 RESOLUTION OF CONFLICT

4.1 Resolving or Managing the Problem International experience shows that the interaction between sector and competition regulators can be managed through institutional approaches. Primacy can be given either to sectoral regulatory law or to competition law. Another approach could be a concurrent one, where both competition law and industry or sector regulation law possess equal jurisdiction, through consultative approach. Within the three institutional models (sector regulation, competition law, concurrent) there are five approaches in practice governing the regulatory interface: 1. There is no economic regulation in one or more sectors; instead the competition agency applies general competition rules to accomplish some or the entire objective commonly associated with economic regulation. In the initial case New Zealand used the competition agency as the Utility Regulator. General Legislation, i.e. the Competition Act states that practices which lesson competition or abuse of dominant position is prohibited. New Zealand has no separate sector legislation.

2. Sector or industry regulators are given primacy to deal with competition issues in the regulated industry. They are the principal enforcers of competition laws, if any, applying to their sectors.

3. The economy wide competition law enforced through the competition authorities takes primacy over industry or sector regulatory law. Competition agencies are also the principal economic regulators.

4. Sector or industry regulators and competition authorities are given concurrent jurisdiction to enforce competition rules in the regulated sectors.

5.

A general mandate driven division of labour, i.e. competition laws are exclusively applied by the

competition agencies and regulation exclusively by technical and economic regulators.

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4.2 International Experience A look at international experiences would reveal that countries have adopted different strategies to try and deal with the issue of overlaps between competition authorities and sector regulators. Some have opted for an exclusive jurisdiction approach, where the legislative provisions make it clear that either the competition authority or the sector regulator has jurisdiction and not both. However, the overlaps between the regulated issues might pose some challenges in the implementation of such an exclusive jurisdiction framework. Merger regulation by the competition authority, for example, may warrant structural remedies, thereby encroaching on the functions of sector regulators. The standards imposed by sector regulators may also result in exclusive licensing and marketing, which holders can easily abuse, which a competition authority may see some reason in challenging. It can also be established that some countries have opted for a concurrent jurisdiction approach, having noted problems brought about by an exclusive jurisdiction approach. Concurrent jurisdiction would give both competition authorities and sector regulators mandates, with the success of such an approach being hinged on the establishment of a working framework between the two regulators to harness their respective expertise. Co-operation and coordination would be called for, which can range from informal cooperation to formalised working arrangements between the two authorities. Other countries have also opted for a cooperation approach, where the sector regulator and the competition authority have to cooperate in dealing with cases of common interest, though the competition authority would still have the final say on competition issues. There are countries with competition laws giving an exclusive jurisdiction approach, which has left some grey areas, as conflicts often arise. However, there are a few countries that can be used as examples on concurrent jurisdiction approach and cooperation approach. 1. Concurrent Jurisdiction The UK The Competition Act, 1998, gives the Office of Fair Trading (OFT) and the sector regulators concurrent powers to enforce the Chapter I and Chapter II prohibitions of the Act (dealing with anti-competitive

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agreements and the abuse of dominance respectively). Among those regulators which were bestowed the power to enforce the Competition Act in their sectors include the following: 1. OFGEM Office of Gas and Electricity Markets; 2. OFWAT Office of Water Services; 3. OFCOM Office of Communications (Telecommunications and Broadcasting); 4. ORR Office of Rail Regulation; 5. CAA Civil Aviation Authority; and 6. OFREG Office for the Regulation of Electricity and Gas (Northern Ireland). This thus implies that the regulators are free to decide whether to use the Competition Act powers against anticompetitive behaviour or to enforce the sector specific provisions. Necessary provisions were also put under the Competition Act to accommodate concurrent powers of sector regulators. Under Sections 54 and Schedule 10 of the Act, the necessary tools for the competition authority to engage the sector regulators are provided. In addition, the Competition Act (Concurrency) Regulation 2004 gives guidelines on how concurrency can be determined. Among the issues covered by the guidelines are the following: 1. The sector regulators and OFT are both classified as competent persons to handle competition issues. 2. The sector regulators and OFT have to decide which is more competent to handle a matter once it arises, using procedure that is outlined under the regulation. 3. OFT and the regulators are obliged to circulate information which would be used for the purposes of determining which of them is more competent to handle the case.

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4. The procedure that has to be followed if agreements are not being reached among the parties is also provided for 36. In the event of a dispute on jurisdiction, the matter will be referred to the Secretary of State for arbitration. The Netherlands A concurrent system was also adopted in the Netherlands, in the form of a Cooperation Protocol between the Netherlands Competition Authority (NMa) and the Commission of the Independent Post and Telecommunications Authority (OPTA). The protocol contained a series of agreements on the nature of cooperation between OPTA and the NMa in exercising their powers to strengthen their enforcement effectiveness. It was intended to structure this cooperation and to facilitate OPTA and the NMa to pursue the following functions 37: 1. Coordinate the exercise of concurrent powers when taking decisions, in order to prevent forum shopping; 2. Apply the same interpretations of terms used in the law on competition, post and telecommunications; 3. Establish consistent policy rules for cases arising; and 4. Provide each other with information on the abuse of dominant positions and the regulatory control of mergers and on the regulation of the post and telecommunications sectors, which may be of importance to each others operations. The protocol was also a result of the provisions in the respective laws, which provided for such cooperation. Article 18.3, Clause 4 of the Telecommunications Act, 1998, and Article 15, Clause 2 of the Post Act, require for an agreement to be reached between OPTA and the NMa on the handling of matters of mutual interest. Article 24 of the Independent Post and Telecommunications Authority Act

See the Competition Act 1998 (Concurrency) Regulations 2004. See the Agreements between the Commission of the Independent Post and Telecommunications Authority (OPTA) and the Director General of the Netherlands Competition Authority (the NMa) on the method of cooperation in matters of mutual interest.
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and Article 91 of the Competition Act, which request the authority of OPTA and the NMa to exchange information, were also motivational in this framework. South Africa South Africa can be regarded as a country which has embraced both the concurrent jurisdiction approach as well as the cooperation approach. Section 82 of the Competition Act, 1998, outlines the basis upon which the Competition Commission can seek cooperation with sector regulators. In addition to that, Section 3 (3) of the Act provides that, in sectors subject to the jurisdiction of another regulator, the Competition Act, together with the other legislation, must be construed as establishing concurrent jurisdiction in regulating conducts. The sector regulator is given room to exercise primary authority to establish conditions within the industry that it regulates, while the Competition Commission is also given primary authority to review mergers and to detect and investigate alleged prohibited practices within that sector. The Section also provides for an agreement between the Competition Commission and the sector regulator to be reached, spelling out the administrative manner in which the concurrent jurisdiction would be managed. In pursuit of this, the Competition Commission has signed some memoranda of understanding with some sector regulators including those in the energy, postal services and communications sectors. NAMIBIA Section 67 of the Namibian Competition Act deals with issues of concurrent jurisdiction and relationships with other regulatory authorities. It states that: (1) If a regulatory authority, in terms of any public regulation, has jurisdiction of any conduct regulated in terms of Chapter 3 or 4 within a particular sector, the commission and that authority (a) Must negotiate an agreement to co-ordinate and harmonise the exercise of jurisdiction over competition matters within the relevant industry or sector and to ensure the consistent application of the principles of this Act; and (b) In respect of a particular matter within their jurisdictions, may exercise jurisdiction by way of such an agreement. It further states that: (2) In addition to the matters contemplated in paragraph (a) of subsection (1), an agreement in terms of that subsection must 35

(a) Identify and establish procedures for the management of areas of concurrent jurisdiction; (b) Promote co-operation between the regulatory authority and the Commission; and (c) Provide for the exchange of information and the protection of confidential information. The experience with Telecommunications: CCSA vs. Telkom SA Ltd The case between the Competition Commission of South Africa and Telkom South Africa Ltd provides a perfect example of cases of concurrent jurisdiction between competition authorities and sector regulators. The case dealt with the concurrent jurisdiction of the Competition Commission and the Independent Communications Association of South Africa (ICASA). The Commission investigated a complaint against Telkom for an alleged contravention of the Competition Act. Telkom was of the opinion that neither the Commission nor the Tribunal had either the power or the competence to adjudicate the conduct of Telkom. Telkom, which was established by the Post Office Act, Act 44 of 1958, had the exclusive power to conduct the telecommunications service. Telkom was however obliged under the Post Office Act to lease the facilities to a person providing a telecommunication service. Should Telkom refuse to grant such a lease, ICASA was entitled and tasked with the adjudication of the dispute. There were four complaints lodged against Telkom with the Commission and all related to the failure by Telkom to grant a licence of its facilities to the prospective licensees. The issue of Jurisdiction was raised when Telkom sought to rely on the defence that the four complaints laid against Telkom related to conduct which it was by the Telecommunications Act or alternatively by ICASA. Section 3 of the Competition Act provides that the Act shall apply to all economic activity within, or having an effect within, the Republic. Originally a regulatory body such as ICASA would have had jurisdiction, since section 3(1) (d) which has now been repealed provided that the Act did not apply to acts which were subject to or authorised by pubic regulation. The acts of Telkom were authorised by the Telecommunications Act, however this section has been repealed and the Act has jurisdiction granted to it by Section 3 of the Competition Act. The Supreme Court of Appeal affirmed that the Competition Act applies to all economic activity within or having effect within South Africa and that ICASA cannot and does not have exclusive jurisdiction with regard to Telkom and went further to hold that the Competition authorities are the appropriate authorities to deal with the complaint.

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2. Cooperation Approach Jamaica The cooperation approach for Jamaica can be inferred from the regulation of competition issues in the telecommunications sector. The Office of Utilities Regulation (OUR) is the sector regulator, responsible for the implementation of the Telecommunications Act, 2000, while the Fair Trading Commission (FTC) is the competition authority, drawing its mandate from the Fair Competition Act, 1993. The Telecommunications Act gives OUR an overlapping jurisdiction with the FTC with respect to some competition issues in the sector, as promoting fair and open competition is among its key objectives. However, OUR is obliged to refer and consult with the FTC before making decisions on issues such as defining dominance in the voice telephony market and before prescribing corrective measures. The consultation can be through written submissions, formal meetings between the two organisations (at the level of staff and sometimes management) or through joint working groups.

Singapore The basis for cooperation between the Competition Commission of Singapore (CCS) and sector regulators on competition matters is outlined under Section 87 of the Competition Act, 2004, of Singapore. The Section provides that CCS may enter into cooperation agreements with any regulatory authority for the purposes of facilitating co-operation between the Commission and the regulatory authority in the performance of their respective functions in so far as they relate to issues of competition between undertakings. The identified rationale was to avoid duplication of activities by the Commission and the regulatory authority in pursuing their mandate, particularly in the determination of the effects on competition of any act done or proposed to be done, so as to ensure consistency between decisions and steps taken by the Commission and the regulatory authority. In 2005, the Info-communications Development Authority of Singapore (IDA), the telecommunications regulator in Singapore, came up with its Code of Practice for Competition in the Provision of Telecommunications Services in Singapore. The Code outlines cooperation guidelines on how IDA will
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handle a range of competition matters, including issues of dominance and its abuse which also fall under the mandate of CCS. Under its Guidelines on the Major Provisions, CCS undertakes that, on crosssector competition cases, it would work out with the relevant sector regulator on which regulator is best placed to handle the case in accordance with the legal powers given to each regulator to prevent double jeopardy and minimize regulatory burden in dealing with the case. INDIA In India this type of approach is provided under Competition Act,2002 are:Sec.21 Reference by Statutory: - 1. Where in the course of a proceeding before any statutory authority an issue is raised by any party that any decision which such statutory authority has taken or proposes to take, is or would be, contrary to any of the provision of this Act, then such statuary authority may make a reference in respect of such issue to the commission. Sec.21A Reference by Commission: - Where in the course of a proceeding before the commission an issue is raised by an party that any decision which the commission has taken during such proceeding or proposes to take, is or would contrary to any provision of this Act whose implementation is entrusted to a statutory authority, then the commission may make a reference in respect of such issue to the statutory authority. Sec.49 Competition Advocacy: - The Central Government may in Formulating a policy in competition or any matter and State Government may in formulating a policy on competition make a reference to the commission for it opinion on possible effect of such policy on competition and on receipt of such a reference gives its opinion to the Central Government and State Government. 4.3 INDIAN PERSPECTIVE- A LESSON FOR INDIA As seen in international experience, countries over world have adopted approaches to address regulatory overlap conflicts to fit their varied realities. India needs to do the same in terms of tailoring the best approach that suits its needs while taking helpful lessons from global best practices in this area. Two such approaches are briefly discussed below.
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1. Clarifying Jurisdictional Roles Competition agencies are best suited to examine behavioural issues while sectoral regulators are better equipped for structural matters. Therefore, giving primacy to one over the other as some jurisdictions have done is not sound judgment. All sector regulators have the duty to promote competition in their respective sectors as drafted in their preamble. However, this is not to be interpreted in a manner that they are also required to check anticompetitive practices in their sector and preclude the CCI from performing its legitimate duties. This was argued recently in the clash between PNGRB and CCI. The CCI has been set up with a specific mandate and is best suited to look into matters concerning competition such as mergers, abuse of dominance etc. that are detrimental to economic democracy and consumer interests. Furthermore, the preamble and section 18 of the Competition Act entrusts the CCI with the duty of sustaining competition in whole economy of India. Notwithstanding this reasoning, regulators such as RBI and Department of Telecommunications (DoT, which oversees mergers in the telecom sector as against the regulator: TRAI) have been pushing for exemptions from the CCI over mergers in their domain. Furthermore, a discrepancy is clearly visible in some of the statutes that have been drafted with a clear legislative intent to vest consumer related issues within the jurisdiction of the Consumer Protection Act but do not have the same treatment to the Competition Act or its predecessor MRTP Act. For example, the Electricity Act, while giving overriding powers to the Consumer Protection Act in matters of conflicts between the two statutes under Section 173, has kept core competition issues of market dominance which also serves to protect consumer welfare, within the ambit of the sector regulator under Section 60 of the Electricity Act. We have already seen how the statutory application has varied in interpretation. On the other hand, a good statutory application of this principle can be witnessed in the Airport Economic Regulatory Authority (AERA) Act which has not discriminated between the Consumer Protection Act and the Competition Act in granting exemptions from the purview of the jurisdiction of the AERA Act. Drawing inspiration from countries such as South Africa and Brazil, India needs to make attempts at attacking the roots of the overlap conflict problem by addressing the existing legislative ambiguities.

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2. Designing a Mandatory Cooperative Framework The importance of coordination between the competition authorities and sectoral regulators has been highlighted by a Working Group on Competition Policy established by the Planning Commission of the Government of India in 2006 and its recommendations were inserted in the Policy Document on the Five Year Plan: Inclusive Growth under Chapter 11: Consumer Protection and Competition Policy. This was adopted by the National Development Council in December, 2007. Para: 11.33 recommends: The interface between the Competition Commission vis--vis sectoral regulators is critical. The basic premise to be recognized is that sectoral regulators have domain expertise in their relevant sectors. The Competition Commission, established under the Competition Act, 2002 on the other hand, has been constituted with a broad mandate to deal with competition for which certain very specific parameters are laid down under the Act. A formal mechanism for coordination between the Competition Commission and the sectoral regulators is, therefore, of key importance. Coordination between sectoral regulators and Competition Commission should be made mandatory through suitable provisions in the Competition Act, 2002 and sectoral laws. Emerging from the discussions held in this paper, a concurrent framework is probably the most desirable approach for India to follow. Such a framework should however provide for mandatory mutual consultations on overlapping issues. Currently India follows a cooperative regime between the two regulators although this is not mandatory in law. Sections 21 and 21A and sec.49 of the Competition Act have provided for such cooperation that has been made mutual after an amendment to the Act in 2007. However this is not sufficient as the outcomes of such consultations are not binding. The Ministry of Corporate Affairs recently set up a committee last year to draft a National Competition Policy for India and allied matters. 38 Accordingly, in the proposal for amendments in the Competition Act, 2002 the word may in Section 21 of the Act which reads in part: any statutory authority may make a reference to the CCI is to be substituted with the word shall thus making such consultation mandatory. However, the proposed amendments to the Act and the Policy are yet to be adopted..

There are three broad options available for dividing the task: (a) The sector regulator supplants the competition authority, (b) the competition authority replaces the sector regulator, and

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www.mca.gov.in/Ministry/pdf/Revised_Draft_National_Competition_Policy_2011_17nov2011.pdf

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(c) The competition authority and sector regulator coexist. After considering the pros and cons of options (a) and (b), this section posits that, though sector regulators may coexist with the competition authority in India, the Commission ought to trump sector-specific regulators.

A. Sector Regulators Supplant the Competition Commission The notion that a sector-specific regulator ought to take primacy over a competition authority appears very attractive at first blush. The sector specific regulator is closest to the sector and would naturally be a repository of pertinent information available within that sector. In other words, it would be more in tune with the needs of the businesses within its sector. However, when the institutional setup grants a sector-specific regulator jurisdiction over both sector regulation and competition matters arising within the sector, conflicts may arise between the objective of protecting competition and other goals such as, for instance, the orderly development of a specific market. Additionally, sector regulators may shy away from enforcing competition law in order to reduce the potential for any conflict with regulated entities.

B. The Competition Commission Replaces Sector Regulators Another option is to make the Commission responsible for both sector specific regulation as well as overarching competition enforcement. This approach is advantageous, as it reduces the multiplicity of regulators and accumulates sector expertise. Indeed, Australia has used this approach to create an economy-wide economic regulator that integrates technical and competition regulation. However, experts have expressed their concern that this scheme may lead to a complex bureaucratic structure. There is also a lingering danger that the regulator may prefer using direct regulatory power over indirect competition enforcement powers. C. Co-existence of the Competition Commission and Sector Regulators Institution-building is a complex, time-consuming exercise. At a pragmatic level, sector-specific regulators are here to stay, as it would be practically impossible to abolish the authorities that have already come into existence. Further, the experiences of other countries are not of much assistance. There is wide diversity in the models available. Australia, on one hand, privileges its competition authority, while the UK, on the other hand, grants

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explicit concurrent powers to sector regulators. Empirically, there is no final, definitive conclusion on which regulatory body should befavored. Indeed, even in the UK, despite concurrent competition powers exercised by sector regulators, no infringement decisions had been made until September 2005. The optimal, sui generis model must be rooted in the legal context. To be sure, both sector-specific regulators and competition authorities have unique core competencies to offer. Nevertheless, there are pragmatic, descriptive, and normative reasons why the Commission ought to trump sector regulators in India. Descriptively, the compelling justification for the primacy of the Commission is that, unlike legislation governing sector specific regulators, competition legislation grants a private right of action and provides for damages. The twin rubrics of private enforcement and damages ensure a qualitatively higher standard of consumer welfare that is unavailable under the legislative framework of any sectorspecific regulator. Normatively, since enforcement of competition law is a sophisticated, Specialized field, leaving it in the hands of the Commission would reduce transaction costs and enhance efficiency.

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CONCLUSION & SUGGESTION

There is a requirement is to create a system to ensure cooperation between CCI and other sector regulators. Both CCI and sector regulator have their areas of expertise and both cannot replace each other. It may also be noted that the objectives of CCI and sector regulators are complementary. While sectoral regulators have socio economic benefits as their objective, CCIs objectives are to promote and sustain competition in the market in order to protect the interest of the consumer.

Cooperation will make sure that the activities of the regulators is well coordinated, thereby ensuring best use of their respective resources. It may also happen that conflicts may arise due to different prioritization of their respective goals by the CCI and sector regulators. Even the different method used for the resolution of the same problem may cause conflict.

Conflict can be sorted out through consultation. It is for this reason that Competition Act provides for consultation between CCI and other statutory authorities i.e. sector regulators here, by way of reference. Government may also consider creating regulators forum (as has been done in some other countries for example Australia) which would allow CCI and sector Authorities to work in close cooperation and coordinate their action. This would also allow the regulators to achieve policy coherence while simultaneously getting sensitized to competition law.

It cannot be denied that there is a requirement of competition in all the industries in order to improve on their efficiencies and benefit the consumer. Temporary exceptions for certain sectors may be acceptable because certain sector in India may not be ready to face open competition. Therefore, a formal

mechanism for coordination between CCI and the sectoral regulators is of key importance.

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BIBLIOGRAPHY

1. Harmonizing Regulatory Conflicts- CUTS International Report 2. Warrick Smith and David Gray, Regulatory institution for Utilities and Competition, International experience 3. Raghuvir Srinivasan, Well of paradoxes, 4. Amit Kapur, Partner, Competition Law & Policy, JSA, New Delhi e-mail: amit@jsalaw.com 5. Mansoor Ali Shoket, Partner, Competition Law & Policy, JSA, New Delhi email:mansoor@jsalaw.com 6. Ishita project Report on Interface between Sector Regulator and Competition Law 7. REPORT TO THE THIRD ICN ANNUAL CONFERENCE 8. www.mca.gov.in/Ministry/pdf/Revised_Draft_National_Competition_Policy_2011_17nov2011. 9. Damien Geradin and Gregory Sidak in European and American Approaches to Antitrust Remedies and theInstitutional Design of Regulation in Telecommunications 10. www.business-standard.com/india/news/cci-ambit-to-shrink-after-banking-law/472830/ 11. www.cuts-ccier.org/ArticlesJan10-CCI_has_a_role_to_play_in_bank_mergers.htm 12. Concurrency Regulations, 2004 a http://www.legislation.gov.uk/uksi/2004/1077/contents/made 13. William J. Baumol On the Proper Cost Test for Natural Monopoly in the Multi Product Industry, American Economic Review 14. DTI Report, Concurrent Competition Powers in Sectorial Regulation, URN06/1244, May 2006 15. David Boies (1997) Public Control of Business, Little Brown

BARE ACTS 1. Petroleum and Natural Gas Regulatory Board Act, 2006 2. The Electricity Act, 2003 3. Airport Authority of India Act, 4. Telecom Regulatory Authority of India Act, 1997 5. Insurance Regulation and Development Authority Act, 1999 6. Securities Exchange Board of India Act, 1992 7. The Competition Act,2002
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