Regulators can be categorized into two main groups: sector regulators, whose focus is on specific industries, and the other is competition authorities, who are tasked with enforcing national competition laws across all sectors of the economy. This division implies a potential overlap of responsibilities and the requirement for coordinated mechanisms to ensure the proper alignment of authority between sector regulators and competition authorities.
Sectoral Regulators
Sectoral regulators are regulatory entities that have the responsibility of overseeing specific sectors within the economy. In India, various sectors are subject to regulation by sectoral regulators, which are entrusted with asks such as setting tariff rates, ensuring product and process quality, issuing licenses, and addressing sector-specific concerns.
Noteworthy sectoral regulators in India include the Reserve Bank of India (RBI), which regulates the banking sector, the Securities and Exchange Board of India (SEBI), which oversees the securities market, the Insurance Regulatory and Development Authority of India (IRDAI), responsible for regulating the insurance sector, the Telecom Regulatory Authority of India (TRAI), in charge of the telecommunications sector, and the Central Electricity Regulatory Commission (CERC), which regulates the power sector.
Competition Commission of India
The Competition Commission of India (CCI) is a regulatory body established under the Competition Act. It comprises a Chairperson and 6 Members appointed by the Central Government. The CCI is entrusted with the task of eliminating practices that negatively impact competition, fostering and sustaining competition, safeguarding consumer interests, and ensuring the freedom of trade for all participants in India.
The CCI’s vision is centered around cultivating a competitive culture that inspires businesses to be fair, innovative, and competitive while enhancing consumer welfare and supporting economic growth.
To fulfill its objectives, the CCI possesses a range of functions and powers. Its functions include eradicating anti-competitive practices, promoting and maintaining competition in markets, protecting consumer interests, providing opinions on competition issues referred by statutory authorities, undertaking competition advocacy, raising public awareness, and delivering training on competition matters.
The CCI also wields several powers, such as investigating agreements made by enterprises to detect abuses of dominant power, initiating inquiries based on reports or its own motion, imposing fines and directing organizations to change their anti-competitive or anti-consumer practices, entering into memoranda or arrangements with foreign agencies subject to prior approval from the Central Government, and holding memberships and observer statuses in international organizations such as the International Competition Network (ICN), BRICS, United Nations Conference on Trade and Development (UNCTAD), and Competition Committee of the Organization for Economic Co-operation and Development (OECD).
Conflict between Sectoral Regulators and CCI
The Competition Commission of India (CCI) and sectoral regulators in India encounter potential conflicts of jurisdiction arising from legislative ambiguity, overlapping jurisdictions, or legislative omissions. The presence of multiple sectoral regulators increases the likelihood of disputes between the CCI and these regulatory bodies.
The CCI’s responsibilities encompass sectors that are already governed by specialized sectoral regulators, for example, the telecom sector. In the power sector, both the CCI and sectoral regulators like the Central Electricity Regulatory Commission (CERC) and State Electricity Regulatory Commissions (SERC) oversee competition-related activities.
The Competition Act includes provisions that can give rise to conflicts of jurisdiction between the CCI and sectoral regulators. Indian courts have granted exclusive authority over competition matters to sectoral regulators, creating challenges in excluding the role of the CCI. Consequently, finding an optimal solution within the Indian context becomes essential to address the issues related to sectoral regulation, competition law, and overlapping jurisdictions.
In summary, conflicts of jurisdiction between the CCI and sectoral regulators in India may arise due to legislative ambiguities, overlapping jurisdictions, or omissions. While the CCI regulates conduct in sectors where specialized sectoral regulators already exist, finding a suitable resolution within the Indian context becomes crucial to tackle the challenges associated with sectoral regulation, competition law, and overlapping jurisdictions.
Provisions within the statute attempting to solve the conflict
These conflicts between regulatory bodies may persist, but the legislature has incorporated certain provisions in the laws to promote harmonious functioning among regulators.
Section 21 of the Competition Act of 2002 allows sectoral regulators to refer decisions related to the competition to the Competition Commission of India (CCI). However, it remains unclear to what extent the CCI can influence the regulators in the absence of such referrals. Furthermore, the binding nature of the advice provided by the CCI to sectoral regulators lacks clarity under the law.
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The power of sector-specific authorities in determining entry conditions for firms within their respective sectors directly impacts competition. This situation creates a potential area of conflict between the two regulatory bodies.
Other countries’ way of dealing with this conflict
To address such uncertainties, valuable insights can be derived from the practices adopted by other countries. For instance, in Australia, competition authorities typically oversee utility sectors, and regular meetings between the competition authority and provincial regulators are held to enhance coordination.
In South Africa, the Competition Commission takes on the responsibility of negotiating agreements with other regulatory bodies to ensure effective coordination and harmonization of jurisdiction in competition matters within the relevant industry, thereby maintaining consistency with the principles outlined in the Competition Act.
Proposed Solution
Although sections 21 and 21A of the Competition Act allow for cross-referencing on competition matters between the Competition Commission of India (CCI) and sectoral regulators, these provisions have not been utilized to address conflicts effectively.
Sectoral regulators primarily employ ex-ante regulation, while the CCI adopts an ex-post regulatory approach. Conflicts can arise between the CCI and sectoral regulators, emphasizing the importance of promoting coordination between them. Each entity has distinct roles to fulfill, necessitating the avoidance of role overlap.
In cases where overlap may occur, the most appropriate approach is to encourage coordination between the CCI and sectoral regulators. Granting exclusive authority to regulate competition matters to either the competition authority or sectoral regulators would not be equitable, as sectoral regulators possess specialized technical expertise in their respective sectors, while the competition authority may lack the necessary proficiency to handle complex competition issues.
Therefore, cooperation between the two entities is crucial and can be achieved through the following measures:
- Establishing formal cooperation protocols that determine jurisdictional boundaries, information-sharing mechanisms, and the process of seeking advice.
- Establishing a unified appellate authority to handle appeals against orders issued by both the CCI and sectoral regulators, similar to the model implemented in the UK where the Competition Appellate Tribunal hears appeals against orders from all sectoral regulators.
- Facilitating the CCI’s participation in public discussions on regulatory proposals, allowing the competition authority to provide input and insights.
By implementing these measures, effective coordination and cooperation between the CCI and sectoral regulators can be fostered, leading to a more streamlined and harmonious regulatory framework.
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Authored by Khushi Desai, a 5th year Student at O.P. Jindal Global University.