In a major set back to the three big telecom operators -- Bharti Airtel, Vodafone Essar and Idea Cellular -- anti-monopoly watchdog MRTPC on Thursday issued 'notice of enquiry' against them for allegedly forming a cartel to distort competition.
Admitting a report of MRTPC's investigative unit DGIR, a Bench of the quasi-judicial body, headed by Justice O P Dwivedi, issued 'notice of enquiry' and started judicial inquiry against these operators for cartelising and increasing prices of telecom services simultaneously.
The Monopolies and Restrictive Trade Practices Commission Bench also directed the three companies to file their reply before it within four weeks.
In the investigation report, director general of investigations and registrations has said that the three GSM operators, by colluding, have simultaneously increased the price.
The report stated that despite having different cost factors, structures and profits, they all fixed the tariff of their local call at Rs 1.20 a minute.
The report further said that though the rental and tariff charges of calls and SMS fall under the forbearance category under the Telecommunications Tariff (23rd amendment) and GSM operators are free to fix any tariff for their services, "But it can not be mere coincidence" that the tariff revision by them is of the identical scale."
It also said that the area of operation was different. Also, the operation cost of each operator was not on same scale and number of subscribers was different. In such a scenario, how they landed at the same tariff is a matter of nvestigation.
"In such circumstances, it is intriguing as to how all the respondents (operators) have revised their tariff rates in Delhi circle on the same date," MRTPC said.
"It is also pertinent to mention that all the three respondents have announced the revision of tariff rates effective from August 10-13 in 2007 but all intimated the Trai post revision on August 16 that year," said the report, adding that this pointed towards a "preplanned and concerted action".
DGIR further said that to prove cartel in the sector, two things are needed. First is price parallelism and second is that it must have been arrived at by prior meeting of minds.
"With issuance of letter collectively to Trai on August 16, 2007 . . . proved beyond doubt that there was meeting of mind," the report further said.
The DGIR said this was a Restrictive Trade Practices by the operators as it distorted the competition and recommended to take action against the three operators under section 2(O) read with 33 (1)(D) of the MRTP Act, 1969.
The investigative arm of MRTPC also slammed the big three for not giving adequate notice to their customers before hiking tariffs as it has inherent effect of 'unjustifiably imposing' increased cost on them.
Calling it as 'arbitrarily burdening' their customers, the report said that it amounted to unfair trade practices under section 36 of the MRTP Act, 1969, and asked to investigate it further by issuing 'notice of enquiry'.
Airtel, Vodafone and Idea had in August 2007 raised tariffs for STD, local calls, SMS and value-added services.
While Vodafone raised STD call charges to Rs 2.65 from Rs 2.40 for pre-paid users, Bharti increased STD tariffs for pre-paid and post-paid customers in Delhi region to Rs 2.65 and Rs 2.40 a minute respectively from Rs 2 earlier.
On August 13, 2007, the three companies increased local charges within their own network to Rs 1.20 per minute for prepaid customers from Re one a minute. The three operators also raised local SMS rates to Rs 1.20 per message for both prepaid and postpaid users from Re one earlier.
These three companies control around 65 per cent of the GSM-based mobile services market and raised local call charges by 20 per cent and STD charges by 20-32 per cent.
Moreover, they also refrained from publicising the tariff hike and brought out customary notices by way of small advertisements tucked inside newspaper pages.
Later, in the second week of September, 2007, taking suo moto cognizance, the Commission directed DGIR to investigate the issue and submit a report.
MRTPC was suspecting formation of cartelisation in the sector and the three big telecom firms were distorting competition in the market.
The commission has listed the matter for July 31 for next hearing.