CCI Investigations and Bharti Airtel: Interpretations Galore

[Shreyas Sinha and Krishanu Paul are second-year B.A., LL.B. (Hons.) students at the National Law School of India University (NLSIU), Bengaluru]

On 14 February 2020, a single judge of the Karnataka High Court stayed an order of the Competition Commission of India (‘CCI’) that had directed an investigation by the Director-General under section 26(1) of the Competition Act, 2002 (‘the Act’), into alleged anti-competitive activities by e-commerce giants Amazon and Flipkart. The High Court cited, amongst other things, a concurrent investigation by the Central Government under the Foreign Exchange Management Act, 1999 (‘FEMA 1999’) as one of the reasons for its order.  On 11 June 2021, more than a year after the investigation had been stalled, the Karnataka High Court vacated its stay. Appeals by Amazon and Flipkart against this vacation failed twice – before a division-bench of the High Court and before the Supreme Court of India.

On 24 March 2021, the CCI directed another investigation by the Director-General, this time against WhatsApp and Facebook, over WhatsApp’s proposed privacy policy and its alleged inconsistency with section 4(2)(a)(i) of the Act. The order was challenged by WhatsApp and Facebook before a single judge of the Delhi High Court. One of the principal contentions raised by the petitioners was that the CCI could not exercise its suo moto investigatory powers in this case since WhatsApp’s privacy policy and issues surrounding it were pending adjudication, on various grounds, before the Supreme Court, thereby excluding the CCI’s jurisdiction. This contention – and all other arguments – was, however, rejected by the Court. Appeals before a division-bench and a vacation-bench of the High Court proved unfruitful.

The Issues

Why did the two High Courts, in the first instance, reach different conclusions and what role did a concurrent investigation or adjudication by another authority have to play in their reasonings? That is what we seek to analyse in this post. We contend that the two High Courts’ approaches rest on differing interpretations of the CCI’s jurisdiction vis-à-vis the Supreme Court’s decision in Competition Commission of India v. Bharti Airtel Ltd. We argue that the Delhi High Court’s interpretation is the correct understanding of the CCI’s jurisdiction vis-à-vis other authorities (e.g., sectoral regulators and courts) and that courts should not grant injunctions against CCI investigations due to concurrent investigatory or adjudicatory processes. We proceed by – first, analysing the CCI’s investigatory powers vis-à-vis sectoral regulators; second, arguing that the principle of res sub judice should not apply to CCI investigations; and third, concluding with normative observations.

CCI Investigations, Bharti Airtel, and Sectoral Regulators

In both Amazon Seller Services Private Ltd. v. Competition Commission of India and WhatsApp LLC v. Competition Commission of India, the petitioners argued, inter alia, that the CCI’s investigatory jurisdiction would be excluded when a different authority is conducting a concurrent investigatory or adjudicatory process on the same issue. This argument stems, in our view, from a fundamental misconstruction of the Supreme Court’s judgement in Bharti Airtel. In the context of sectoral regulators (such as Central Government agencies dealing with a matter under FEMA 1999), we argue that the CCI’s investigatory jurisdiction is not excluded.

In Bharti Airtel, the Supreme Court had to settle a jurisdictional issue between the CCI and the Telecom Regulatory Authority of India (‘TRAI’). The principal issue was whether the alleged denial of ‘Points of Interconnection’ and Mobile Number Portability to Reliance Jio Infocom Ltd. (‘RJIL’) by Incumbent Dominant Operators (‘IDOs’) like Vodafone and Airtel constituted a violation of TRAI’s regulations and amounted to cartelisation under competition law. Both TRAI and the CCI had initiated concurrent investigations into the matter. The Supreme Court injuncted the CCI from proceeding on the matter until TRAI had made a determination as to the violation of telecom regulations.

It is easy to see how one could, on a prima facie view of the case, (erroneously) conclude that the Supreme Court’s judgement lays down a general rule against concurrent investigations by the CCI when a sectoral regulator is seized of the issue. We contend that this viewpoint is not tenable when one considers the context-specific nature of Bharti Airtel. The issues in the case, as the Supreme Court itself acknowledged, necessarily involved a determination by TRAI before the CCI could proceed with its investigation because these issues were directly governed by TRAI-framed regulations. It was only reasonable, as the Supreme Court noted, to allow TRAI to make its determination as to the alleged infringement of its regulations first because:

“…If CCI is allowed to intervene at this juncture, it will have to necessarily undertake an exercise of returning the findings on the aforesaid issues/aspects…TRAI is better equipped as a sectoral regulator to deal with these jurisdictional aspects…in the first instance, it is TRAI which should decide these jurisdictional issues, which come within the domain of the TRAI Act.” (paragraph 105).

Furthermore, the Supreme Court did not oust the investigatory jurisdiction of the CCI in toto (paragraphs 108 to 120). The CCI was permitted to undertake an investigation into alleged cartelisation once TRAI had made its decision in the matter. Indeed, as the Delhi High Court reasoned in Monsanto Holdings Pvt. Ltd. v. Competition Commission of India, when this perspective is considered, it becomes clear that the decision in Bharti Airtel is an exceptional one and cannot be construed as laying down a general rule against CCI investigations when the issue is being concurrently investigated or adjudicated upon by a sectoral regulator. Concurrent investigations by the CCI and other regulatory authorities ought to be harmonised, wherever possible, as competition law aspects are distinct from other issues even though the larger matter under investigation may be the same [Telefonaktiebolaget LM Ericsson (PUBL) v. Competition Commission of India].

Res Sub Judice and Section 26 Investigations

Our second argument is that the principle of res sub judice should not be applied to CCI investigations and that these investigations should not be stayed because the matter in question is pending before an adjudicatory body like a constitutional court (i.e., Supreme Court and the High Courts) or a specialised tribunal. A res sub judice argument was raised by WhatsApp before the Delhi High Court in the privacy policy case. WhatsApp contended that, because the legality of the privacy policy in question was sub judice before the Supreme Court, the CCI ought to have no investigatory jurisdiction. However, this was rejected. While the High Court did reach the correct outcome, it did not sufficiently clarify why the principle would not apply. That is what we intend to do now.

Questions of res sub judice are fundamentally related to section 26(1) of the Act and how it has been interpreted over the years. Directions by the CCI to initiate Director-General investigations are administrative orders and do not relate to its quasi-judicial functions under section 36 of the Act, a proposition that was laid down by the Supreme Court in Competition Commission of India v. Steel Authority of India Ltd. and re-iterated, to take one instance, by the Delhi High Court in Google Inc. v. Competition Commission of India. Therefore, a direction to initiate a Director-General investigation does not constitute an additional judicial proceeding, thereby rendering res sub judice wholly inapplicable as the principle is exclusively concerned with judicial or quasi-judicial proceedings and not administrative ones. While the Delhi High Court did engage with the essentially administrative nature of an order under section 26(1) of the Act, it did not engage with this deeper reasoning around res sub judice, resulting in a lack of clarity on the issue.

All this, it must be noted, is not to argue that an order under section 26(1) cannot be challenged before a court at all. Indeed, section 26(1) orders can be judicially reviewed if they do not contain a modicum of reasoning that prima facie justifies a direction to the Director-General for investigation. But, that is a wholly different scenario from arguing that a section 26(1) order should be stayed just because the larger matter in question is pending adjudication on various grounds.

Conclusion

Court-mandated injunctions on CCI investigations often have a debilitating impact on the quality of the investigation and the general competition law enforcement in the country. The most obvious problem is delay. Consider, for example, the more than one-year gap between the Karnataka High Court’s stay on the CCI investigation into Amazon and Flipkart and the High Court’s vacation of the same. Furthermore, these injunctions also kick-start multiple rounds of litigation in appellate courts, increasing administrative expenses for the CCI, a public authority funded through taxes.

In this post, we have attempted to highlight two grounds on which courts have granted or been asked to grant stays against CCI investigations and demonstrated why this is legally untenable. While courts today are less inclined to order stays on CCI proceedings, problematic instances, such as the different approaches of the Karnataka and Delhi High Courts, do crop up from time to time. Interestingly enough, all of this can be traced back to the Supreme Court’s verdict in Bharti Airtel. While the decision itself is legally sound, it cannot be denied that it has been the subject of a fair bit of confusion. Therefore, it is necessary that the Supreme Court clarify it and lay down authoritative guidance for High Courts (and itself) as to how CCI investigations under section 26(1) are to be approached. In all probability, the WhatsApp-CCI dispute will soon end up before the Supreme Court, presenting a rare opportunity to clarify these important questions of competition law. Only time will tell if the Court will seize it.

Shreyas Sinha & Krishanu Paul

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