New Delhi: India’s top telecom tribunal on Thursday quashed controversial rules on predatory pricing, in a relief for Bharti Airtel Ltd and Vodafone Idea Ltd, which had complained that the rules would benefit rival Reliance Jio Infocomm Ltd.

The Telecom Regulatory Authority of India (Trai) had issued the new rules arbitrarily and without deliberation or effective consultation, the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) ruled. The tribunal rejected Trai’s new definition of “significant market player" (SMP), besides sparing telecom firms from disclosing on their websites segmented offers or tariff discounts aimed at retaining customers.

During the TDSAT hearings, the telecom firms argued that information on segmented offers were a trade secret and its disclosure would help rivals and, hence, confidential information of such nature should not be asked to be disclosed.

According to the TDSAT order, instead of reporting all segmented offers/discounts, Trai may call for details of any segmented offer about which it receives complaints.

The tribunal directed Trai to reconsider within six months provisions related to predatory pricing and segmented offers, barring it from imposing any penalty on this count.

“Authority (Trai) is required to take fresh decision on relevant issues in case of segmented offers and whether prevailing facts and health of sector would require major changes in meaning of tariff plans," the order said.

Trai will challenge the verdict in the Supreme Court, an official at the regulator said on condition of anonymity.

In February, Trai directed telcos to transparently disclose segmented offers and set the penalty for violations at 5,000 for every day of delay, subject to a maximum of 2 lakh. Operators were required to report any new tariffs to Trai within seven working days from the date of their implementation, after conducting a self-check to ensure the tariffs are transparent, non-discriminatory and non-predatory.

Moreover, under the new rules, Trai could examine tariffs of an SMP—an operator holding a share of at least 30% of total activity in a relevant market—to check for predatory pricing. The new definition of “total activity" was based on any of two parameters—subscriber base and gross revenue—while an earlier definition included subscriber base, revenue, switching capacity and volume of traffic. According to other operators, excluding traffic from the definition of SMP would help Jio, which enjoys huge traffic on its network.

Under the new rules, Trai had also said that it would look at whether the tariff is below the firm’s average variable cost over a certain period, in addition to whether there was evidence of a specific intent to engage in predatory pricing; and if the tariff was found predatory, an operator was liable to pay a penalty of up to 50 lakh per tariff plan per telecom circle.

While Bharti and Idea moved TDSAT against the Trai rules, Vodafone challenged them in the Madras high court, alleging that the order would result in an unfair advantage to Reliance Jio, as it took away their flexibility to compete and retain customers in a circle in which they are significant market players.

The tribunal was critical of the Trai order: “By this definition, Trai has encouraged and permitted non-SMPs to indulge in predation by creating a presumption that only SMPs can be capable of predation," it said.

“The concept that only an SMP is capable of predation and therefore fit to be subjected to scrutiny for purposes of clause 7 and penalty is over-theoretical and divorced from all practical considerations well-known to competition laws," TDSAT said. It added that Trai had exceeded its role and powers by developing a complex concept of SMP and non-predation.

Bharti Airtel, Vodafone-Idea and Reliance Jio did not comment on the verdict.