2024 (11) TMI 945 - CCI - Companies Law

Jurisdiction of the Competition Commission of India (CCI) in the matter - Contravention of the provisions of Section 4(2)(a)(ii) and 4(2)(c) of the Act by National Internet Exchange of India - it is submitted that the Informant has erroneously delineated the relevant market as the same is misconceived, baseless and incomplete - concealment of previous litigation by the Informant - erroneous delineation of the relevant market - whether there is any issue involved in the present matter which may oust the jurisdiction of the Commission or may merit invocation of Section 21A in the present proceedings? HELD THAT - The Commission observes that the obligation to comply with the provisions of the Act and maintain fair competition in the market is independent of the obligation to comply with the provisions of TRAI Act/Regulations, and violation of one need not ipso facto result in violation of the other. The Commission is, inter alia, entrusted with the duty of eliminating practices having an adverse effect on competition, to promote and sustain competition in markets, to protect the consumers and to ensure freedom of trade carried on by other participants in the market. As a sectoral regulator, the TRAI may formulate and enforce obligations through appropriate code of conduct for the entities operating in the telecom sector, keeping in view its sector-specific objectives. However, compliance with the TRAI regulatory framework remains independent of the possibility of any practice of an entity operating in the telecom sector falling afoul of the provisions of the Act. The OP s submission that the entity s existence stems from sectoral regulator s recommendations and thus, it is within the domain of TRAI and not Commission s, does not hold water. It will be erroneous to interpret the judgment of the Hon ble Supreme Court in Bharti Airtel case 2018 (12) TMI 1683 - SUPREME COURT to mean that in every case of overlap of jurisdiction with a sectoral regulator, the Commission will have to withhold taking action and await examination by the sectoral regulator. This would render the object and purpose of the Competition Act, 2002, nugatory. The law laid down by Hon ble Supreme Court in the Bharti Airtel case was specific to the peculiar facts of that case. A universal application of the law laid down on those particular facts cannot be inferred and implied in all cases where the Commission is exercising its jurisdiction in sectors which are also regulated by a sectoral regulator. It is clear that the allegations involved in the present matter are determinable within the legal mandate given to the Commission. Thus, the Commission does not find any merit in the preliminary objection regarding lack of jurisdiction in the matter. Further, seeking opinion of any statutory authority such as TRAI under the provisions of Section 21A of the Act is the prerogative of the Commission and may be exercised in appropriate cases, as deemed fit by the Commission. The Commission notes that the Informant has alleged contravention of provisions of Section 4 of the Act. In this regard, the Commission notes that the Informant has delineated (in Information) relevant market as provision of internet exchange services for peering between content providers, CDNs and ISPs in towns/cities in India in which CDNs/content providers are not present/do not have their data centres - considering the homogeneous nature of services throughout India provided by the parties in the matter, the Commission deems it appropriate to delineate relevant market as provision of internet exchange services in India . Based on the data provided by the OP, it appears that in terms of volume of traffic and number of connected networks, the Informant has significant presence vis- -vis OP in abovementioned six cities. The Commission also notes that despite the OP being the oldest IX provider and the much later entry of the Informant in the market, the Informant has been able to increase its relative presence in the relevant market which suggests that the relevant market remains contestable - Thus, from the data available on record and the facts and circumstances present in the matter, the Commission is of the view that dominance of the OP is not getting established. Accordingly, the Commission is not inclined to delve further into the matter. The Commission is of the view that the OP does not appear to be dominant in the aforesaid delineated relevant market and consequently, there is no competition concern arising in the present matter. Therefore, the matter is directed to be closed forthwith under Section 26(2) of the Act. The Secretary is directed to communicate the decision of the Commission to the parties, accordingly.

Summary

Issues Involved:

1. Jurisdiction of the Competition Commission of India (CCI) in the matter.
2. Delineation of the relevant market.
3. Dominance of the Opposite Party (OP) in the relevant market.
4. Allegations of predatory pricing by the OP.
5. Allegations of denial of market access by the OP.

Detailed Analysis:

1. Jurisdiction of the Competition Commission of India (CCI):

The OP raised a preliminary objection regarding the jurisdiction of the CCI, arguing that the matter falls under the purview of the Telecom Regulatory Authority of India (TRAI) due to the regulatory framework governing telecom activities. The OP cited a pending writ petition in the Delhi High Court challenging a DoT order, which requires the Informant to obtain a license under the Indian Telegraph Act, 1885. The OP contended that the CCI should await the outcome of the TRAI proceedings before exercising jurisdiction.

The Commission, however, clarified that its jurisdiction is not ousted by the existence of a sectoral regulator like TRAI. The CCI's mandate to eliminate anti-competitive practices and promote fair competition is distinct from the regulatory functions of TRAI. The Commission referred to the Supreme Court's judgment in the Bharti Airtel case, which upheld the CCI's jurisdiction to investigate anti-competitive practices independently of sectoral regulations. Therefore, the CCI found no merit in the OP's jurisdictional objection.

2. Delineation of the Relevant Market:

The Informant delineated the relevant market as "internet exchange services for peering between content providers, CDNs, and ISPs in towns/cities in India where CDNs/content providers are not present." The OP proposed a broader market definition, including various internet infrastructure services across India.

The Commission considered the submissions and concluded that the relevant market should be defined as "provision of internet exchange services in India." This definition reflects the homogeneous nature of services provided by both parties across the country.

3. Dominance of the Opposite Party (OP):

The Informant alleged that the OP holds a dominant position in the relevant market, citing its extensive network and financial resources. The OP, however, argued that it is not dominant and that the Informant has a significant market presence.

The Commission examined market data, including traffic volume, number of IX points, and connected networks. It found that the Informant has a substantial presence in key cities and that the market remains contestable with multiple players, including AMS-IX and DE-CIX. The Commission concluded that the OP does not hold a dominant position, as it cannot unilaterally affect market conditions to its advantage.

4. Allegations of Predatory Pricing:

The Informant accused the OP of engaging in predatory pricing by offering internet exchange services below cost, leading to a denial of market access. The OP countered that its pricing strategy was temporary and aimed at market penetration in Hyderabad, with no intent to eliminate competition.

The Commission noted that predatory pricing requires evidence of dominance, intent to oust competitors, and the ability to recoup losses. Given the lack of dominance, the Commission found no basis for the predatory pricing allegation. The OP's pricing strategy, as part of its mandate to promote internet penetration, did not constitute an anti-competitive practice.

5. Allegations of Denial of Market Access:

The Informant claimed that the OP's pricing practices resulted in a denial of market access, as evidenced by lost customers. The OP argued that the market remains competitive, with multiple players and no entry barriers.

The Commission observed that the Informant has a significant market presence and that the market is open to competition. The allegations of market access denial were not substantiated by evidence of anti-competitive conduct by the OP. Therefore, the Commission found no competition concern in this regard.

Conclusion:

The Commission concluded that the OP is not dominant in the relevant market and that there is no evidence of anti-competitive conduct. Consequently, the matter was closed under Section 26(2) of the Competition Act, 2002. The Commission granted confidentiality to certain documents submitted by the Informant for three years, subject to the provisions of Section 57 of the Act.