Introduction:
When two distinct regulatory bodies establish authority over the same issue, it creates legal uncertainty and compliance issues for business entities. This issue has been presented in the Torrent Power Limited (TPL) case, where the Joint Electricity Regulatory Commission (JERC) and the Competition Commission of India (CCI) were at odds on the issue of jurisdiction. The acquisition of 51% stake by TPL in the Dadra and Nagar Haveli and Daman and Diu Power Distribution Corporation Limited raises crucial question of whether CCI’s jurisdiction prevails over that of a subject-specific regulatory body.Torrent Power contended that theElectricity Act, 2003 (Electricity Act) which allows ERCs to deal with anti-competitive behaviour in the electricity industry, would take precedence. The CCI, however, took the stance that competition law has an overarching application to many industries and, therefore, would provide fair competition beyond sector-specific regulations.
Through the means of this article, the authors will critically analyse the conundrum around overlapping legislative frameworks and argue for the exclusive jurisdiction of CCI in anti-competitive cases. Finally, the authors will suggest a harmonious approach to promote and sustain competition by drawing parallels from foreign regulatory frameworks.
Torrent Power Limited Case: Setting the Boundaries of Regulatory Power
The CCI has initiated proceedings against Torrent Power Limited under Section 43A of theCompetition Act, 2002(Competition Act), alleging that the organization (acquirer) failed to give notice of its acquisition as mandated by law. In response, TPL replied by invoking Section 60 of the Electricity Act, 2003, alleging that issues relating to competition in the case of electricity are within the regulatory jurisdiction of JERC. Further, the acquisition was regulated under electricity law and did not require approval under the CCI. The CCI, however, rejected such arguments, arguing that the competition law has an independent existence vis-à-vis sectoral legislations, to ensure market fairness across all sectors. Moreover, TPL’s reliance on the Second Ericsson ruling was found to be misplaced, wherein the Delhi High Court determined that sector-specific legislation would ipso facto supersede the competition act. The CCI reiterated that sector-specific laws and competition law must complement each other rather than being contradictory.
Finally, despite holding Torrent Power in default of compulsory notification, the CCI did not impose a penalty because of the regulatory ambiguity and strict bid timelines, requiring payment within 30 days of the Letter of Intent (LOI) to undertake the transaction. Failure to do so would result in the disqualification of TPL as a successful bidder and the forfeiture of a ₹30 crore bid security. This short timeline made it practically difficult to notify the transaction and await CCI approval.. This ruling establishes a robust precedent in defining the scope of the regulatory jurisdiction and highlights the imperative need for legislative reforms to avoid future jurisdictional disputes.
Critical Analysis:
Context
The Electricity Act aims to enable open access to transmission networks, regulate various stages of power distribution, and encourage fair competition. At the national level, the Central Electricity Regulatory Commission (CERC) is responsible for regulating electricity generation, transmission, and distribution throughout the country, while SERCs perform the same functions at the state level. Section 60 of the Electricity Act empowers CERC/SERC to regulate competition within the electricity sector to prevent anti-competitive practices and protect the interests of consumers, suppliers and industry participants. Sections 173 and 174 of the Electricity Act include a non-obstante clause, granting the Electricity Act an overriding effect over other laws where applicable.
However , Section 60 of the Competition Act also provides a non-obstante clause, which asserts the supremacy of competition legislation in matters of competition regulation and enforcement. While Electricity Act regulates activities undertaken in electricity industry, the jurisdiction of the Competition Act spans the entire economy, including sector-specific regulators like telecommunications and electricity. As both Acts aim to promote fair competition, jurisdictional overlaps are bound to happen.
CCI’s Jurisdiction in Sector-Specific Cases:
TPLprimarily relied on the principle of “generalia specialibus non derogant.” It states that where a general and special law relate to the same subject without the scope of reconciliation, the special law will prevail. If both of them are special laws, the one enacted later will supersede. Subsequently, it placed reliance on the Second Ericsson Case which determined that since both statutes are “special,” the later-enacted amendment to Chapter XVI of the Patents Act, 1970 (introducing ex-ante patent licensing regulations) would prevail over the Competition Act. However, this judgement is flawed for three reasons. Firstly, both the Competition Act and Patent Act serve distinct regulatory purposes: the former is a general ex-post framework to regulate anti-competitive practices across sectors, while the latter’s Chapter XVI is a sector-specific ex-ante regime that prevents patent abuse through licensing. These laws are complementaryrather than conflicting, as they operate at different stages. Secondly, the Court overlooked the ex-ante vs. ex-post distinction where sectoral regulators set preventive rules, while competition authorities address post-facto market distortions. Thirdly, the “later-in-time” rule applies only if the conflict between the two equally special laws cannot be reconciled. Further, TPL’s reliance on the Competition Appellate Tribunal (COMPAT) order in Anand Prakash Agarwal v. Dakshin Haryana Bijli Vitran Nigam Limited could not be substantiated as CCI clarified that tariff pricing is a regulatory matter under the exclusive domain of SERCs. The order does not, in any manner, diminish or exclude the jurisdiction of the CCI to adjudicate matters related to anti-competitive conduct within the electricity sector
Need for an exclusive jurisdiction of CCI
The Competition Act is a specialized statute designed to regulate and adjudicate matters pertaining to anti-competitive conduct in the market. Section 26 outlines detailed procedures for anti-competitive assessments and Section 27 bestows wide powers upon CCI to investigate into allegations of abuse of dominance and unfair combinations as per sections 4 and 6 of competition Act, and functions as a complete legal code in itself. However, this should not mean the total exclusion of ERCs as they must retain primacy over technical/sectoral aspects. Meanwhile, any allegations of anti-competitive practices may be exclusively examined by the CCI. Competition authorities will ensure consistent application of rules across all sectors.
While the Competition Act provides a clear regulatory framework for identifying combinations, assessing their competitive impact, and applying corrective measures, the Electricity Act lacks such detailed provisions, making it less equipped to handle competition-related concerns that could be taken in case a combination or acquisition adversely affects the market. This legislative shortcoming was clearly demonstrated in the Torrent Power Limited Case. Further, budgetary and manpower constraints faced by ERCs could raise concerns regarding efficiency and expeditious adjudication process. As, Supreme Court in CCI v. SAIL emphasized that the purpose and underlying principles of the Competition Act aim at the swift and effective resolution of anti-competition matters.
Refining the Legislative Framework: Inspirations from Global Practises
The jurisdictional overlapping between ERCs and CCI would result in duplication of efforts, potential threat of forum shopping, and inefficient use of resources. This issue calls for legislative reform to provide clarity and clear demarcation of roles and responsibilities of both the authorities. One option could be to grant exclusive jurisdiction over both sector-specific regulations and competition enforcement to the CCI, similar to the approach followed in Australia. This approach would reduce the overlapping of jurisdictions and consolidate sectoral expertise and competition regulation, providing for a united forum. However, this approach is criticized as competition authorities will be overburdened with the increased caseload and delayed investigations. Also, it is imperative to acknowledge the substantial contribution that sectoral regulators’ expertise and knowledge can provide to a robust competition framework.
Another pragmatic alternative would be, giving concurrent jurisdiction to both the authorities, followed by the UK. This would leverage the expertise of sectoral regulators, enabling competition authorities to address anti-competitive issues more efficiently. However, it is insufficient due to permissible forum shopping. Further, this model would not be favourable for India, since power struggles among different government bodies prevent cooperation, and lead to the wastage of resources.
The most plausible option would be concurrent jurisdiction, coupled with a mandatory consultative and collaborative mechanism, ensuring coordination between the entities. Formal and informal consultations have the potential to prevent jurisdictional overlaps, reduce forum shopping, and promote legal certainty. These practices will involve the establishment of a unified forum and personnel exchange, enabling CCI to participate in ERC proceedings. Countries like the European Union and South Africa mandate competition authorities and sectoral authorities to enter into a Memorandum of Understanding to rationalize the jurisdictional overlaps and establish clear functional demarcations. Under this model, ERCs would retain ex-ante authority dealing with structural and regulatory issues like fixing electricity tariffs, third-party access, and entry-exit conditions. Meanwhile, the CCI will possess ex-post authority, supported by sufficient resources and manpower, to address anti-competition issues and ensure fair market practices.
Sections 21 and 21A of the Competition Act provide for a consultative mechanism between CCI and other bodies. However, the presence of the word ‘may’ make the provision of consultation discretionary on the part of the CCI, which fails to serve the purpose of harmonizing jurisdictional overlaps. Legislative amendments should be made to these sections to replace ‘may’ with ‘shall,’ making the consultation process mandatory to ensure consistent inter-agency cooperation. Courts could also start interpretating the provisions as mandatory in nature rather than being directory. This would ensure that both acts are harmoniously constructed without rendering any law redundant.
Conclusion:
The Torrent Power case reflects the regulatory conflicts resulting from overlapping jurisdictions of ERCs and CCI. While sectoral regulation is controlled by the Electricity Act, industrial fairness across sectors is ensured by the Competition Act. The CCI’s decision in the Torrent Power case underscores the urgent need to prevent regulatory uncertainty and compliance issues. The use of compulsory consultative mechanisms between ERCs and competition authorities can enhance enforcement coordination, prevent forum shopping, and ensure effective governance of competition. Lastly, legislative clarity is essential for a balance between sectoral regulation and competition law enforcement, thereby ensuring a competitive and transparent market environment.
This blog is written by Yarabham Akshit Reddy, Yashashvi Sharma, 3rd year BA.LLB students at Hidayatullah National Law University
