necessary and sufficient(nas) testsector regulatory bodies- ensure level playing field, fixing...

NECESSARY AND SUFFICIENT(NAS) TEST: for Healthy Inter-Regulatory Relationship

AOD Case in Electricity Sector Need to show Jurisdiction to CCI More than200 orders of MERC Examined Threw Up Fascinating Surprises Leading case Wardha Power Company Examined and Absolved What if ….. Led to NAS hypothesis

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If it was a case of murder Section 302 IPC- jurisdiction with courts Suppose CCI took it up on a complaint Imports provisions of IPC , Evaluates & Reaches a conclusion of-not guilty But can not punish with life term/death?No So can’t be a shop for acquittals only

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BEFORE:

State controlled ‘prices & production quotas’

directly. Examples sugar,cement, heavy

industries etc.etc.

AFTER:

AFTER:

AFTER: Sector Regulatory

Bodies- ensure level playing field, fixing

tariffs, ground rules ..

Sector Regulatory Bodies- ensure level playing field, fixing

t iff

State of Economy and Regulators

Developed

Developing

Under-developed

Economy

Under-developed- Minimal number of market regulators-except ‘most essential’ sectors like Banking, Pharmaceutical and Telecom (?), most sectors are unregulated

Developing- With growth of various segments of economy , Sectoral regulators start blooming in new sectors to ensure fair competition ex ante- laying down regulations, granting license, ensuring compliance

Developed- Sectoral regulators fade away- giving space to ex post market regulators

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Regulator Established

1. Reserve Bank of India(RBI)

1.04.1935

2. Central Drug Standardization and Control Organization(CDSCO)

1940

3. Institute of Chartered Accountants of India(ICAI)

1.05.1949

4. Institution of Cost Accountant of India(ICSI)

28.05.1959

5. Institute of Company Secretaries of India(ICSI)

4.10.1968

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Regulator

Established

6. National Bank for Agriculture and Rural Development(NABARD)

12.07.1982

7. Atomic Energy Regulation Board(AERB) 1983

8. Advertising Standards Council Of India(ASCI) 1985

9. Inland Waterways Authority of India(IWAI) 27.10.1986

10. Bureau of Indian Standards(BIS) 23.12.1986

11. National Housing Bank(NHB) 1987

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Growth of Regulators in India-III

Regulator Established 1. Securities and Exchange Board of India(SEBI) 12.04.1992

2. Telecom Regulatory Authority of India(TRAI) 20.02.1997

3. Central Electricity Regulation Commission(CERC) 24.07.1998

4. Insurance Regulatory and Development Authority(IRDA)

1999

5. Pension Fund Regulatory and Development Authority(PFRDA)

10.10.2003

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Growth of Regulators in India-IV

Sectoral Regulator

Date of Establishment

6. Warehousing Development and Regulatory Board(WDRA)

2007

7. Airports Economic Regulatory Authority(AERA)

12.05.2009

8. Food Safety and Standards Authority of India(FSSAI)

2011

9. Insolvency and Bankruptcy Board of India(IBBI)

2016

Jurisdictional Conflict among Sector Regulators Statutory Overlaps Regulatory Jurisdictional Overstep Turf Wars

Competition Regulator’s Presence

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Regulatory Conflict Instances

SEBI & IRDA Insurance Cos’ ULIPs

CERC & FMC Future Trading in Electricity

PFRDA & IRDA Pension Plans by Insurance Cos

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Conciliatory Tone: Conflicting Tone:

s. 175, Electricity Act- Provisions of this Act are in addition to and not in derogation of any other law for the time being in force.

s. 174. Electricity Act- [ subject to…the provision of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force...]

s.62, Competition Act- The provisions of this Act shall be in addition to, and not in derogation of, the provisions of any other law for the time being in force.

s.60, Competition Law- The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force.

s. 28, IRDA Act- The provisions of this Act shall be in addition to, and not in derogation of, the provisions of any other law for the time being in force.

(No such corresponding provision)

The legislative scheme of regulatory bodies, seen as

a whole , need room for conflict resolution.

Reasons for Conflictsfor Conflict Resolution

Diverse forums have attempted to resolve interregulatory conflict. Some of them are-

Executive Intervention: One time remedy; open to judicial challenge; no certainty of resolution.

Judicial Intervention: One time remedy; time consuming

Inter- Regulatory Consultation;

Statutory Avenues: Not binding. Ex- s. 21, 21A Competition Act.

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Quick Implementation (Ex. a single govt. notification) No continuous-case to case- executive and judicial

intervention Substantial test –self resolution – leaving Govt. alone to

decide jurisdiction-nipping most cases in the bud Principled method for resolving disputes

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The Right Regulator

Necessary

Statutory Mandate

Sufficient Powers to deal with violations

Essentials of NAS

Test

Rightful Regulator

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Not Right Regulator

Necessary Mandate

Sufficient Powers for Violations

Essentials of NAS

Test

Not Rightful

Regulator

Provisions and Powers to- 1. Examine; 2. Investigate; 3. Adjudicate; and 4. Deal, if guilty 1,2,3 - Necessary 4 - Sufficient

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Allegations of abuse of dominant position before Electricity Regulatory Commission.

The Commission adopted the following process-

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Step 1 • Examined relevant market

Step 2 • Assessment of dominant position

Step 3 • Assessed abuse thereof

Applying NAS Test, MERC had no jurisdiction as- 1. No power to investigate. 2. No power to take punitive measures (appropriate

remedy).

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Both FTC and the Department of Justice (DOJ) Antitrust Division concurrently enforce the federal antitrust laws.

their authorities overlap, but in practice the two agencies complement each other.

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DOJ Antitrust Division

Federal Trade

Commission

Before opening an investigation, the agencies consult with one another to avoid duplicating efforts.

In Apple antitrust case, after meetings b/w FTC & DoJ it was decided, DOJ will carry investigation.

Over time, both agencies have developed expertise in industries. Ex. –FTC devotes most of its resources to, healthcare, pharmaceuticals, food, energy, computer tech, internet service.

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Shipping Board under the Act had the power to- Disapprove, modify or cancel discriminatory/ unfair agreements. Determine question of combination Determine unfair trade practice. S 15-disapprove,modify,canceagreement S14-determine question on any combination , agreement , or understanding or

unfair trade practice S22-Complaint to Board Held, Anti-trust law impliedly excluded. Test adopted similar to NAS test.

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The Right Regulator

Necessary

Statutory Mandate

Sufficient Powers to deal with violations

Essentials of NAS

Test

Rightful Regulator

No doubt, NYSE had powers in curbing abuses by self-regulation but scheme not enough to deal with completely;

Therefore, act of depriving the petitioner of direct wire connection without notice and hearing – violative of section 1 of Sherman Act

‘Implied Immunity’ /’Clear Repugnancy’ / NAS Held, Anti-trust law NOT excluded

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Not Right Regulator

Necessary Mandate

Sufficient Powers for Violations

Essentials of NAS

Test

Not Rightful

Regulator

U.S. Supreme Court applied ‘clear repugnancy test’- Both conditions of NAS satisfied

Thus , in examining anti-competitive conduct, sectoral Act impliedly precluded antitrust laws as it was ,by itself, adequate.

Opined, serious conflict b/w antitrust and regulatory regimes.

Clear and adequate authority with SEC to regulate- Hence, antitrust laws excluded. 29

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Not Right Regulator

Necessary Mandate

Sufficient Powers for Violations

Essentials of NAS

Test

Not Rightful

Regulator

Interstate Commerce Act (IC Act),1887 - powers to ICC against damage caused by unreasonable rate

Jurisdiction to the ICC Court held that section 7 of the Antitrust Act would give

shipper preference over other trade competitors- thus disturbing equillibrium

Clear case of repugnancy b/w antitrust laws and IC Act ICC- had NAS Powers

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The Right Regulator

Necessary

Statutory Mandate

Sufficient Powers to deal with violations

Essentials of NAS

Test

Rightful Regulator

Civil suit-arising out of agreement approved by Federal Communications Commission (FCC) under s. 310(b) Communications Act, 1934.

FCC argued that it had the power to adjudicate antitrust issues.

Court ,after analyzing the legislative history of Communications Act, 1934 and section 313 held, FCC did not have power to decide antitrust issues .

Hence, FCC did not have either ‘necessary provision’ or ‘sufficient power’.

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Not Right Regulator

Necessary Mandate

Sufficient Powers for Violations

Essentials of NAS

Test

Not Rightful

Regulator

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