A comment on the T.R.A.I. Consultation Paper on “Monopoly/Market dominance in Cable TV services” Part – I

The Telecom Regualatory Authority of India on 3rd June, 2013 released Consultation Paper No.: 5/2013 titled “Monopoly/Market dominance in Cable TV services”. The paper was in response to a reference received on 12th December, 2012 from the Ministry of Information and Broadcasting seeking TRAI’s recommendations under Section 11(1)(a) of T.R.A.I. Act.

With this post I aim to proffer answers to the questions raised by the Regulator and aim to provide suggestions as requested by them.

1. Do you agree that there is a need to address the issue of monopoly/market dominance in cable TV distribution? In case the answer is in the negative, please elaborate with justification as to how the ill effects of monopoly/market dominance can be addressed?

Absolutely yes. Ironically, it is T.R.A.I. itself which has caused the problem of dominance in the first place. Earlier, before the implementation of Digital Access Service (D.A.S.), i.e., what is commonly referred to as the “Set Top Box”, Cable TV could either be analogue or non-addressable viz. the cable TV signal is not digital. In the case of non-addressable platforms, Local Cable Operators (L.C.O.’s) had the option of downlinking Free to Air (F.T.A.) channels directly from broadcasters without the help from Multi System Operators (M.S.O.’s). Pay channels were ofcourse obtained by LCO’s through M.S.O.’s as these are transmitted by broadcasters in encrypted form as required. However, after the amendment of the Cable T.V. Act, 1995 in November 2011, it became obligatory for each cable operator to transmit or re-transmit programs of any channel in encrypted form through a digital addressable system. Consequently, only M.S.O.’s can receive signals from the broadcasters as per the Cable TV Networks Rules, 1994 as amended on 28th April 2012. Therefore, as per the paper,

“The MSO maintains a Subscriber Management System (SMS) where details about each customer and his/her channel preferences are stored. All the channels are now decrypted at the customer end through a set top box (STB) programmed by the MSO as per details in the Subscriber Management System. Therefore, in the DAS environment, MSOs play a key role in distribution of both FTA and pay channels.”

Which brings us to the condition which must be imposed to the above affirmative, that this dominance is predominantly at the State level. There does not appear to be a national dominance as most MSO’s operate on a regional basis. Therefore, the relevant market while examining such a question of dominance must be taken to be a respective state. I had highlighted this point in an earlier post while discussing similar issues before the C.C.I.

Also, since at present D.A.S. has still not been fully implemented across the entire country, it may be difficult to determine the true level of dominance of M.S.O.’s in each state. Till that time, the T.R.A.I. may consider our suggestion on the substitutive ability of the services as enumerated in the earlier post.

2.Do you agree that the state should be the relevant market for measuring market power in the cable TV sector? If the answer is in the negative, please suggest what should be the relevant market for measuring market power? Please elaborate your response with justifications.

Yes. The reasoning for which has already been elaborated above.

3. To curb market dominance and monopolistic trends, should restrictions in the relevant cable TV market be:

(i) Based on area of operation?
(ii) Based on market share?
(iii) Any other?
Please elaborate your response with justifications.

At the outset, I feel ex-ante restrictions are not the best method of tackling dominance in the sector as not only could they hurt competition compliance but experience shows it is often difficult to predict or theorize the effects or consequences of such regulations and this generally results in a huge spate of litigation. However, if such regulations are to be implemented, then they should NOT be based on the market share of an M.S.O. since it would be a herculean task to ensure competitiveness through regulations in each separate state (since the market share would be based on each specific state.) Moreover, market shares are subject to changes through regular competitiveness and acquisitions. Lastly, it is a well accepted principle of competition law, and which the T.R.A.I. should also follow, that dominance itself is not considered an offence but an abuse of that dominance is considered an infringement of competition law. Rather, it would be better to draft certain general rules on abuse of dominance in the Cable TV sector which may be enforced on an ex-post facto basis.

To be Contd.

Good Intentions Do Not Imply Good Actions

It has been recently reported that the Central Electricity Regulatory Commission (CERC) has issued draft regulations intended to prevent abuse of market power and regulate the conduct of companies harming or potentially harming competition in the sector.

As per the news article:

“The proposals allow it to issue directions in the event of anti-competitive agreements, abuse of dominant position or anti-competitive combinations entered into by any entity, licensee, deemed licensee and licence-exempt ones.”

While am sure that the intentions of the CERC are good and their initiative may be applauded in terms of pro-activity, it doesn’t exactly help in settling the jurisdictional conflicts between the CCI and various other sectoral regulators, many of whom have been lobbying to prevent loss of turf. In fact, a bare perusal of the draft shows that the CERC is merely empowering itself with the powers already enumerated for the CCI under the Competition Act. It grants itself the power to investigate anti-competitive agreements, abuses of dominant positions and even combinations related to the power sector !! The only rider is under the proviso to Regulation 8(1) and Regulation 8(2) of the draft which are as follows respectively:

“…Provided that a complaint under sub-regulation (a) or a reference under subregulation (b) shall be accompanied by an affidavit stating that the Competition Commission of India is not inquiring into the matter referred to in the said complaint or the said reference.”

“If during the course of the said inquiry or any subsequent proceedings, it comes to the notice of the Central Commission that the matter under its consideration is also being inquired into by the Competition Commission of India, the Central Commission may refer the matter to the Competition Commission of India as provided in regulation 12 or may seek the opinion of the Competition Commission of India as provided in Regulation 13.”

Click on the following links for the regulations. (Public Notice/ Explanatory Memorandum/ Draft)

Jurisdiction ?? Of course we have jurisdiction ?!?! – Part 2 ( A Post Script to Part – 1)

I realised after re-reading my previous post that I failed to answer certain questions which I may be asked by readers. :

1. Why have I not commented on the currently sub – judice matter before the Delhi High Court challenging the jurisdiction of the CCI in favour of the PNGRB ??

2. Why have I not commented on the conflict of powers and jurisdictions between the CCI and COMPAT, especially after the Judgement of the Supreme Court in CCI v. SAIL ??

To answer these questions. :

1. Others far more learned than me, including Vinod Dhall, have already commented on the issue (See http://www.livemint.com/articles/2011/01/23232944/Competition-watchdog-faces-fre.html) and so I have decided to reserve my opinions on the matter till the conclusion of the suit.)

2. The previous post specifically focused on the conflict of jurisdictions faced by the CCI/COMPAT against other subject specific jurisdiction of other regulatory bodies and Tribunals. I shall be commenting on the possible fallouts of the judgement on a separate post in due course.

Hope this suffices. Please feel free to post any other questions in the comments.

Jurisdiction ?? Of course we have jurisdiction ?!?! – Part 1

A common question that has often perplexed lawyers and jurists alike is how to resolve the conflict of jurisdiction that has arisen and which is more than likely to arise in the future between the Competition Commission of India and various other subject specific Tribunals in India. The origin of the issue is very simple to analyse: you cannot under any circumstances have exclusively specific subject jurisdiction for Tribunals. It has been tried around the world and has always failed. What is more difficult is its resolution.

Abroad, regulators rarely encounter this problem, for the simple reason that they don’t allow themselves to !! They prefer not to raise their hackles at every other regulator who may occasionally (and usually accidentally) let his dog run into their backyard. Coordination is the key to an effective implementation of laws and foreign Regulators generally seem to display a remarkably high level of maturity between themselves to resolve disputes related to conflict of jurisdiction. ( A classic example can be that of the FTC and FCC of United States).

Sadly, immaturity and inflated ego’s are two very prominent features of the Indian Bars and the executive, and so consequently, it extends to all Regulators, whether independent of governmental regulation or not, so it is doubtful considering the present state of affairs, whether they can arise a non adjudicatory resolution to the dispute.

The reason this post part has been titled as Part – 1 is because I intend to in the long run derive the correct legal jurisdiction solution between the CCI/COMPAT and all other tribunals and regulators over time as i get time for a detailed analysis and research. in this post, I shall focus only on the inherent conflict of jurisdiction between the TRAI/TDSAT and the CCI/COMPAT.

The issue was raised before me first during an internal moot problem prepared by a senior alumni of my Law School. I confess, I failed to find and answer to the question (specifically, what gave the TDSAT the right to pass a notice on the COMPAT, and whether they have and overriding jurisdiction over the COMPAT ??), and at that time all I could do was to pathetically avoid the question through dodging tactics and beating around the bush. (Surprisingly, the judges were impressed with it, I personally was disgusted with myself with what i considered as inadequate research). I later met the drafter of the problem and asked him for an answer to the question. He claimed that the TDSAT had a higher jurisdiction, and though I understood and accepted his logic, I admit, I was not convinced. I can now proudly claim that I have finally found the answer to the question (albeit, maybe a bit too late) and I can say with full conviction that the COMPAT has a higher authority. In fact, one will realise that there can arise no opportunity for a conflict of jurisdiction.

Section 14 of the TRAI Act, 1997 states in its proviso as follows:

“….Provided that nothing in 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 jurisdiction of the Monopolies and Restrictive Trade Commission established under sub-section (1) of section 5 of the Monopolies and Restrictive Trade Practices Act, 1969….”

At the same time, Section 8 of the general clauses act also states:

“Where this Act, or any (Central Act) or regulation made after the commencement of this Act, repeals and re-enacts, with or without notification, any provision of a former enactment, then references in any other enactment or in any instrument to the provision so repealed shall, unless a different intention appears, be construed as references to the provision so re-enacted.”

Reading both these provisions together, one can derive a clear interpretation that since the Competition Act, 2002 repeals the Monopolies and Restrictive Trade Practices Act, 1969, a direct interpretation that arises is that the TDSAT is exempted from handling matters that the CCI and COMPAT would be competent to handle under their jurisdictions (viz. anti – competitive agreements, abuses of dominant position, combinations). accordingly, it may, under section 21 of the Competition Act, make references to the CCI regarding any matter related to telecommunications or broadcasting involving anti – trust issues.

Personally, I feel that though such clauses do clarify such vexatious questions inflicted upon various regulatory authorities and tribunals, what in fact statutes should also do is encourage harmony and coordination between the these regulatory authorities. I am happy to note that the competition Act does try to do so through section 62 which clearly states that the application of laws is not barred and that the provisions of the act are in addition to, and not in derogation of the provisions of any other law for the time being in force.