TDSAT dismisses Trai's predatory pricing rule, analysts suggest it's too late

Telecom tribunal TDSAT on Thursday set aside sector regulator Trai's rule on predatory pricing for lack of transparency in the guidelines over determining market share and rates of services.

The move comes as a major relief to Bharti Airtel, Vodafone and Idea Cellular (Now Vodafone-Idea Ltd) which had in March challenged the amendment made by Trai in the Telecommunication Tariff order.

"The impugned tariff amendment order is set aside in so far as it changes the concept of SMP (significant market player), non-predation and the related provisions," TDSAT Bench comprising Justice SK Singh and member AK Bhargava said in an order dated December 13, 2018.

Telecom Disputes Settlement and Appellate Tribunal(TDSAT) ordered Trai to rework the predatory pricing rule within six months.

TDSAT further held that segmented offers and discounts offered in ordinary course of business to existing customers without any discrimination within the targeted segment do not amount to a tariff plan and therefore "need no reporting in manner prescribed for regular tariff plans".

Moreover, instead of reporting of all such discounted offers not falling within the cap of 25 tariff plans, Trai may call for details of any segmented offer about which it may receive specific complaints.

In February 2018, Trai said it will impose financial disincentive of up to Rs 50 lakh per circle on operators if their service rates are found to be predatory in nature.

The amendment was issued after old telecom operators Airtel, Vodafone and Idea alleged that Reliance Jio is offering services at predatory rates.

Trai's rule considered a tariff predatory if in a "relevant market" a telecom operator with over 30 per cent market share offers services at a price which is below the average "variable cost", with a view to reduce competition or eliminate the competitors.

Trai will arrive at "variable cost" after deducting fixed cost and share of fixed overheads borne by the company from total cost incurred by it for running business during the period under review.

The regulator has also said that telcos will have to provide services to all subscribers availing the same tariff plan in a non-discriminatory manner.

"Since we have found that there was lack of required transparency in arriving at the concept of SMP, non-predation and average variable cost, it is not necessary to discuss other issues raised by the appellants and noted earlier," the order said.

It said that since concept of predation under the competition laws requires consideration of many issues based on enquiry report and evidence, it would not be proper to adopt a definition which provides "artificial protection to a telecom service provider who may have the capability and intent to destabilise the sector through predatory pricing before it attains the defined status of SMP."

TDSAT order said that powers and jurisdiction of a statutory authority like the Competition Commission should not be blocked or abridged by issuing order or directions like those impugned which do not have the flavour of a subordinate legislation such as regulations.

Telecom operators industry body COAI had indicated that the regulation favoured a particular industry player and that the order has distorted the market, placing all other operators at a "serious disadvantage". Both Trai and Reliance Jio had rejected the allegation.