- Recent debate on turf wars between the competition regulator and sector-specific regulators in India has risen due to a letter by the the chairman of the Competition Commission of India (CCI), D.K. Sikri, to his counterpart at the Telecom Regulatory Authority of India (Trai), R.S. Sharma.
Arguments made by Sikri
- Sikri in his letter argued that the CCI is better placed to look into matters related to predatory pricing than Trai.
- This letter comes against the backdrop of a consultation paper floated by Trai in February, where the telecom sector regulator sought to deal with predatory pricing issues in the telecom sector.
- Hitherto, the understanding was that ex-ante competition matters fell in the domain of Trai, and ex-post matters such as predatory pricing were the turf of the CCI.
What is the fuss all about?
- Predatory pricing is a strategy where the dominant market player prices its products or services below costs to undercut its rival.
- It is easy to see that with its unmatched resources, the dominant player can sustain losses in the short run, only to recoup the same in the long run when the suffers.
- It is of great importance that only a dominant position holder can be punished for engaging in predation.
- In turn, dominant position is determined based on market share.
- A firm is considered to be a dominant position holder if the market share is significantly high (generally above 50% in the European Union), barriers to entry are also high, and there is no countervailing buyer power.
Ensuring Fair competition
- The limited mandate of Trai is also to promote competition.
- Trai also tries to ensure fair competition through means other than acting against predatory pricing.
- The way CCI works and acts against predatory pricing in the present scheme of legislative mandate is bound to leave an enforcement gap through which cases like Reliance Jio can leak.
- These are the gaps that Trai can try fixing ex-ante to ensure fair competition.
- Trai could either limit the duration of promotional offers, which include below cost pricing, or it could increase the interconnect usage charges (IUC) from the current 14 paise per second to a point where below cost pricing becomes unmaintainable.
- Trai realizes that with promotional offers, the present scheme of promotional offers may result in unfair and anti-competitive measures.
- In the same consultation paper, Trai has sought stakeholders’ views on defining relevant market. It is true that the telecom regulator also requires delineating relevant market.
Competition law framework
- While the telecom regulators resort to the competition law framework to delineate relevant market.
- It is possible that the telecom body and competition body reach different results.
- It can because of different perceptions of substitutability between products or services that are the subject matter of enquiry.