[By Aastha Singh & Kumari Bhargavi]
The authors are students of Symbiosis Law School, Pune.
INTRODUCTION
Independent economic or sectoral regulators such as the Telecom Regulatory Authority of India (TRAI), the Securities and Exchange Board of India (SEBI), and the Reserve Bank of India (RBI) were established to oversee specific critical industries in India after economic reforms ushered in a more competitive market structure and a critical departure from government monopolies. The Competition Commission of India (CCI) is another example of the same. However, it now faces the additional difficulty, brought about by the ever-changing intricacies of an internationalized economy, of negotiating the “turf wars” that occur when the authority of many sectoral regulators overlaps. India’s ever-changing economic landscape, should be examined using a behavioural economics framework, to understand why do “turf wars” happen and further to highlight the necessity for a unified approach to governance.
The lens of behavioural economics to answer an antitrust issue is an innovative and emerging one in nature. The use of behavioural economics to the analysis of interactions between sectoral regulators and possible cognitive biases of antitrust authorities has been under-explored, in contrast to its more conventional focus on consumer preferences and welfare implications. This gap presents a unique opportunity to examine how behavioural insights could address conflicts and coordination by shedding light on a probable solution.
This article contends to explore how biases, favouritism in practice, and institutional inertia influence the decision-making process in regulatory conflicts. It advocates for a cohesive regulatory strategy and proposes solutions to harmonize the functions of sectoral regulators and the CCI to better manage competition-related issues in India’s dynamic economic environment, by making use of psychological and organisational factors i.e. behavioural economics that cause the regulatory conflicts.
TURF WARS AND THE REGULATORY OVERLAPS
In India, sectoral laws like the Telecom Regulatory Authority of India Act, the Petroleum and Natural Gas Regulatory Board Act, and the Electricity Act mandate regulators to promote competition but they tend to blur lines between ex-ante regulation and ex-post competition evaluation. This overlap leads to legislative or jurisdictional disputes with the CCI. While the principle of “leges posteriores priores contrarias abrogant” suggests that newer, sector-specific statutes should override older competition laws, the Competition Act’s Section 60 provides for a “non-obstante” clause, giving it precedence, however as per Section 62, the Competition Act and other statues should be harmoniously construed. The CCI has asserted its jurisdiction over all economic aspects, even in cases where sectoral laws might seem to take precedence. Subsequently, Section 21, and Section 21A of the Act, which include an arrangement for discussions between the CCI and other sectoral regulators, aim to partially resolve this issue. Consultations under these provisions are not, however, required or legally obligatory.
One of the primary goals of both the competition agencies and other sectoral regulators is economic regulation which is inclusive of controlling market monopoly and protection consumer interests, however jurisdictional conflicts become problematic in the first place because, when two bodies spend time, effort, and resources on the same disagreement, the biggest impact is duplication. Second, CCI penalties can be far higher than regulator penalties, making it unclear for potential investors. Existing gamers can benefit from lack of clarity by forum shopping. Thus, CCI and sector-specific regulator jurisdiction must be clarified.
The turf war pertaining to jurisdictional issues was first observed in the case of Star India v. Sea T.V. Network, wherein the apex court held that despite the fact that the case concerns “monopoly and restrictive trade” the MRTP Commission (now CCI) does not have jurisdiction that violates the TRAI Act. In the case of CCI v. Bharti Airtel Ltd., the Supreme Court resolved the long-running competition for dominance between the cross-regulator, CCI, and the sector-specific regulator, TRAI. The court said that the CCI is not a sector-based organisation; rather, its jurisdiction extends beyond sectoral boundaries to encompass all industries. However, a different stance taken by the Delhi High Court held in Telefonaktiebolaget LM Ericsson v. CCI that the Competition Act is an addition to all other Acts and does not supersede them. The Delhi High Court did not uphold the Ericsson ruling in Monsanto Holdings Pvt. Ltd. v. CCI, holding that the CCI has jurisdiction over cases involving the infringement of patent rights. Therefore, the CCI will evaluate how the rights are exercised or behaved, not the content of those rights, which is the purview of the expert body.
BEHAVIOURAL ECONOMICS AND THE REGULATORY DECISION-MAKING PROCESS
Behavioural Economics is a branch of economics that underpins neoclassical economics with insights from psychology, and in turn, contributes to behavioural sciences by its economics perspective and the abundant experimental practice it has developed. It explores how cognitive biases emerging from heuristics—mental and emotional shortcuts to form opinions, often influence regulatory decision-making, especially in scenarios where sectoral regulators have repeated interactions with incumbent players. This repeated engagement can lead to the development of implicit preferences or institutional inertia, which may manifest as decisions that disproportionately favour established entities. Such biases can hinder the objectives of fostering competition and innovation, thereby conflicting with the broader mandate of competition authorities like the CCI.
In the telecom sector, a potential example, TRAI could uphold incumbents’ high prices as essential for financial stability, despite data indicating that these practices impede competition, demonstrating confirmation bias in regulatory conflicts. But CCI, which is supposed to make sure the market is fair, could see the same tariffs as anti-competitive measures used to keep new competitors out. As seen in cases like, this disagreement arises because different regulators are looking for evidence that backs up their own agendas. Reliance Jio and the Incumbent Operators, highlights the need for greater coordination between sector-specific and competition regulators.
Favouritism in Practice:
Decisions made by TRAI have often been seen as biased in favour of long-standing telecom companies, which has led to criticism of the agency. Regulating mechanisms are frequently skewed in favour of these incumbents because of their vast networks and established relationships. Disparate license terms, preferential spectrum allocation, or impediments to new entrants’ ability to compete successfully are all possible results of such favouritism.
Conversely, the CCI’s mission is to foster cross-sectoral competition. Its lawsuits against monopolistic companies in a variety of sectors, including telecommunications, in the infamous CCI V. Bharti Airtel case show that it frequently challenges methods that maintain market concentration or unfair benefits. Competition authorities aim for market dynamism and equity, but sectoral regulators may prioritize stability and the status quo. This underlying tension is highlighted by these divergent approaches.
To comprehend these prejudices, a framework is offered by behavioural economics. For reasons such as regulatory capture and status quo bias, regulators may unwittingly side with established businesses. Both status quo bias and regulatory capture occur when regulators, as a result of their intimate relationship with the entities they oversee and the frequency of their interactions, start to identify more closely with those entities than with the public interest. This makes regulators reluctant to disturb existing institutions.
Turf Protection
In the telecom industry disagreement between TRAI and CCI, especially in cases like CCI v. Airtel, an example of turf defense by sectoral regulators may be seen. In its role as sectoral regulator, TRAI has frequently resisted competitive examination under CCI by stressing its exclusive jurisdiction over telecom operations. As an example, TRAI seemingly wants to defend its “territory” by continuing to regulate matters like pricing and interconnection agreements, thanks to its long history of cooperation with incumbent telecom providers.
Protectionist behaviour may be the result of status quo bias, which is the propensity to oppose changes that challenge long-standing practices or reduce the power of regulators. Anchoring bias, when TRAI bases its choices on historical regulatory frameworks or its role in sector-specific stability, may also contribute, overlooking CCI’s market competition difficulties. Inefficient bias-driven turf protection prolongs confrontations and undermines regulatory monitoring. For example , in the case of Consumer Online Foundation v. Tata Sky Ltd, even though TRAI is the special regulator, the CCI ruled that it has exclusive authority over market competition when a jurisdictional challenger emerged. This case might be referred to as CCI protecting its turf, by placing emphasis on its jurisdiction.
The authors believe that certain biases vis-a-vis behavioural economics have manifested themselves into the crux of the regulatory turf wars between sectoral regulators. On the surface, the objectives and purposes of regulators differ, and as a result, the way that legislation views a given issue also differs, as does the method that the regulator takes. The only way to solve this war is through the means of institutionalized coordination mechanism that would serve as a bridge to resolve jurisdictional conflicts between sectoral regulators and the CCI through structured deliberation, clear procedural frameworks, and mandatory consultation mandates, to ensure that ex-ante and ex-post regulatory concerns are harmonized.
CONCLUSION
The existing turf wars between CCI and sectoral regulators underlines the systemic inefficiencies in governance and accountability inclusive of cognitive bias and favouritism in the regulatory decision-making, as well as lack of a coordination mechanism between the sectoral regulators and competition agencies, which needs to be addressed by the policy makers. In fact, in 2011, CUTS International, commissioned by the Ministry of Corporate Affairs, published an extensive report recommending the inclusion of mandatory consultation provisions in both competition laws and sectoral regulatory frameworks to address issues falling within either of body’s domain.
Proving how limited rationality affects competition law is the main goal of the author. Evidence suggests that a factual approach is the natural progression of competition law. Instead of focusing on how markets should be, the focus is on how they actually are. The authors argue that adopting the European Union (EU) model, which mandates such consultations, is the most effective solution. This approach not only mitigates jurisdictional conflicts but also curtails the ego-driven assertions of authority by sectoral regulators, often masked as specialized expertise. Furthermore, the authors suggests that behavioural training programmes should be organized for regulators to identify and overcomes biases in decision making. It by addressing both the institutional and behavioural economic aspects, India can attain a harmonious regulatory ecosystem to ensure fair competition and consumer welfare.