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| Web column | Regulatory turf wars |
| Krishnava Dutt / New Delhi Apr 22, 2010, 15:22 IST |
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 The jurisdictional war over Ulips between Sebi and Irda is not the first conflict between regulators and certainly not the last that we will be witnessing. With the establishment of the Competition Commission of India (CCI) under the Competition Act, 2002 and with enough teeth being given to it to cover all sectors of the economy and impose paralysing penalties, conflicts between the CCI and sector regulators are set to become a common feature in the days to come.
The overarching reach of the Act is further emphasised by section 60 thereof which states that the provisions of the Act will have effect notwithstanding anything inconsistent contained in any other law. However, section 62 states that the provisions shall be in addition to and not in derogation of the provisions of any other law.
On one hand CCI has the mandate to regulate competition issues across sectors and on the other hand, various industries in India are subject to specific regulatory control. Some of the sector regulators include the CERC/SERCs, PNGRB, Sebi, RBI, Trai, Irda and Airports Economic Regulatory Authority, all established under their respective statutes. Most sector regulators have been given the express mandate to regulate competition in their spheres. Even if such power has not been given expressly, it can be implied from the extensive powers given to some regulators. Though turf wars among sector regulators are not new in this country, the entry of the CCI adds a whole new dimension to this battle.
Already there are tensions between the RBI and the CCI over the issue of merger control among banks. While CCI seeks to control mergers across sectors including banking, RBI is unwilling to share its turf with the CCI. In the electricity sector, CCI is probing into allegations of abuse of dominance by power distribution companies in Delhi. It has been reported that CCI has issued notices to distribution companies alleging that they have been installing faulty meters and overcharging their customers. The CCI intends to commence investigations into allegations by the MCX Stock Exchange that NSE has been abusing its dominant position by waiving transaction fee on currency derivatives. The CCI, therefore, has been very proactive across sectors and sooner or later conflicts between the CCI and sector regulators are bound to emerge.
The legislature has tried to resolve the conflict by introducing provisions which allow cross referral of issues between the CCI and other regulators. A harmonious co-existence among the regulators is therefore envisaged. Significantly, the opinions of the CCI and the statutory authority are not binding on the other.
This discussion becomes even more interesting if one examines the other regulatory legislations. The Electricity Act, 2003 provides that the appropriate commission may issue such directions as it considers appropriate to a licensee or a generating company if it enters into any agreement or abuses its dominant position or enters into a combination which is likely to cause or causes and adverse effect on competition in electricity industry. The Electricity Act also contains provisions similar to sections 60 and 62 of the Competition Act. We, therefore, have two legislations with a non-obstante clause, both covering the same area. Applying principles of statutory interpretation, it may be argued that the non-obstante clause in the subsequent enactment i.e. the Electricity Act, 2003 should prevail over the previous enactment i.e. the Competition Act. Another principle of statutory interpretation is to determine the ‘general’ and ‘special’ legislation, as a ‘special’ legislation will prevail over a ‘general’ legislation. The Supreme Court has, however, held that the above tests are merely illustrative and by no means should they be considered as exhaustive. It is for the court, when it is called upon to resolve such conflict, to harmoniously interpret the provisions of both the competing statutes and give effect to one over the other. Though enactments such as the PNGRB Act, Irda Act and Trai Act do not contain such non-obstante provisions, there is still scope for confusion as far as jurisdictional issues are concerned. Interestingly, the Trai Act and the AERA Act make an exception for matters which are under the purview of the MRTP Commission and the Competition Act respectively.
The current framework, therefore, does not provide an adequate solution to the impending problem. The real purpose of preventing anti-competitive practices will be lost if the regulators who have been given the power to prevent such practices enter into a turf war among themselves. One possible way of addressing the problem is to clearly delineate the regulatory functions and assign the functions among regulators. This has been suggested by Unctad (2006) as a possible method for resolving conflicting mandates. For example technical regulatory tasks can be assigned to the sector regulators while pure competition issues can be left to the CCI. In theory this seems like an ideal solution, but in practice trying to define and dissect functions will have its own set of problems.
Giving exclusive jurisdiction to either regulator is a possible solution, but highly inefficient. Though competition authorities have the expertise in the subject, the sector regulators have sector specific technical competence necessary, which competition authorities may lack, to determine a particular case. At the same time, sector regulators may not have the adequate training to deal with pure competition law issues. Therefore, an efficient way of resolving the conflict is to ensure that while deciding on a case involving a particular sector, apart from competition authorities, technical experts from that sectors be also mandatorily involved. The composition of the CCI, being itself considered as an expert body, may be such that it includes sector regulators as well. Alternatively, the CCI may look at entering into separate agreements with other regulators to clearly enunciate the procedure to be followed in a case involving that particular sector and in respect of which both the regulators are entitled to exercise jurisdiction.
India may learn a few tricks from the UK where Competition Act, 1998 gives concurrent powers to the Office of Fair Trading (OFT) and sector regulators for communications matters, gas, electricity, water and sewerage, railway and air traffic services in enforcing anti-competitive agreements and abuse of dominance provisions. UK has enacted the Competition Act (Concurrency) Regulations, 2004 which contains provisions for the co-ordination of the performance by the OFT and the regulators of their concurrent functions. The OFT and the regulators are required to consult with each other before acting on a case where it appears that they may have concurrent jurisdiction. If no agreement can be reached, then matter is referred to the Secretary of State. Double jeopardy is prevented because simultaneous exercise of jurisdiction by more than one authority in relation to a case is prohibited. Interestingly, an appeal from both the OFT and the sector regulators lies to the competition appellate tribunal.
It is clear that unless the government takes a proactive measure, jurisdictional conflicts are bound to surface and perhaps, as in the conflict between the SEBI and IRDA in the Ulips issue, it will be left to the courts to finally resolve the conflicts as and when they will arise in future.
The author is Managing Partner, Argus Partners, Advocates. Views expressed are personal.
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