Telecom tribunal sets aside TRAI’s predatory pricing rule 

Telecom tribunal sets aside TRAI’s predatory pricing rule 

News:

The Telecom Disputes Settlement and Appellate Tribunal (TDSAT) has rejected Telecom Regulatory Authority of India’s (TRAI) rule on Predatory Pricing.

Important facts:

What is Predatory Pricing?

Predatory Pricing is the practice of a firm selling a product at very low price with the intention of driving competitors out of the market, or create barriers to entry into the market for potential new competitors.

TRAI’s Rule on Predatory Pricing

1. TRAI prohibited incumbent operators from providing discounts which are not part of tariff package to their high-APRU (average revenue per user) subscribers.
2. It considered a tariff predatory if in a “relevant market” a telecom operator with over 30% market share (Significant Market Player) offers services at a price which is below the average variable cost, with a view to reduce or eliminate competitors. However, the rules allowed newer operators to offer such tariffs till they reached the threshold mark.

Telecom Disputes Settlement and Appellate Tribunal (TDSAT) judgement:

1. Rejection of definition of “significant market player” (SMP):

• According to the tribunal, the definition is flawed as TRAI retained subscriber base and gross revenue, but ignored capacity and traffic share while determining SMPs.
• It further stated that the definition gave artificial protection to a telco, who may have the capacity and intent to destabilise the sector through predatory pricing before it attains the defined status of SMP.

1. Rejection of definition of Predatory Pricing:

• The Tribunal stated that the powers of TRAI are limited to examining whether a tariff is predatory or not.
• It has no jurisdiction to define predatory norms which fall under the ambit of competition laws overseen by the Competition Commission of India.

1. Rejection of Disclosure norms:

• The tribunal also rejected the norm which made it mandatory for telecoms to disclose on their websites segmented offers or tariff discounts aimed at retaining customers.

Additional Information:

1. The Telecom Regulatory Authority of India (TRAI)

• It is a statutory body set up by the Government of India under the Telecom Regulatory Authority of India Act, 1997.
• It is the regulator of the telecommunications sector in India

1. Telecom Disputes Settlement and Appellate Tribunal (TDSAT)

• TDSAT was set up in 2000 to adjudicate disputes and dispose of appeals with a view to protect the interests of service providers and consumers of the telecom sector and to promote and ensure orderly growth of the telecom sector.