The Department of Telecommunications is seeking government exemption for the telecommunications sector from the ambit of the Competition Act 2002. The move was triggered after the Competition Commission raised concerns over plans to allow automatic clearance of certain mergers and acquisitions for mobile phone companies.

In December 2011 the Telecommunications Commission cleared a proposal by the sector's regulator, the Telecommunications Regulatory Authority of India (TRAI), allowing:

  • automatic clearance of mergers in the sector if the combined market share was less than 35%; and
  • case-by-case clearance of mergers if the combined market share was between 35% and 60%.

No such provisions are detailed under the act.

The department's request for exemption comes as little surprise - it has been anticipated since TRAI's proposal was cleared. This is the third such request to the government, following similar requests from the banking and railway sectors, which are pending consideration. Although sector regulators exist for the banking sector (ie, the Reserve Bank of India) and the telecommunications sector (ie, TRAI), there is no such regulator for the railway sector, which is still a state monopoly.

It has been argued that sector regulators should not be responsible primarily for deciding on competition issues - instead, such issues should be referred to the Competition Commission, as provided for by the act. So far, no such 'block exemption' to an entire sector has been granted, although provisions for granting such an exemption for specific periods, when in the public interest, are detailed in the act.

For further information on this topic please contact MM Sharma at Vaish Associates by telephone (+91 11 4929 2525), fax (+91 11 2332 0484) or email ([email protected]).