Competition Law Issues in Facebook Jio Deal

INTRODUCTION

What is the Facebook Jio deal and why a green flag was required from the Competition Commission of India? The competition commission of India (CCI) is the Indian watchdog which ensures to eliminate practices which tend to have an adverse effect on the competition, promote and sustain the competition, protect the interests of consumers and ensure an environment for businesses to grow without facing any anti-competitive atmosphere.

On April 22 2020, when the whole world was going through COVID- 19 pandemic, facebook purchased a stake of 9.99% in Reliance Jio which valued around USD 5.7 Billion. This historic deal became one of the biggest foreign direct investment (FDI) deals which can never be forgotten in the Indian tech market.

The scope of the deal and its possible impact on competition in various sectors, in which these two companies’ projects operate, may be of great concern for the antitrust watchdog in India. Since the CCI has given a green flag to the deal therefore it is probable to conclude that the Competition Commission of India (CCI) while performing its duties would have investigated various aspects involved in the celebrated Jio- Facebook deal. One of the major tasks of CCI would be checking whether there exists any actual or possible conflict between the two parties and to analyze the impact of this historic deal on the other businesses involved in the market to compete with them.

The humongous user base of these two tech giants has already given cause for concern for the other market players as post the deal the two tech giants would be able to make a profit from each other’s network, thereby raising difficulty for the new players to enter, sustain and make considerable profit in the market. Furthermore, if this hypothesis is turned into reality then these giants would drive out the existing competition out the market forever. Facebook, as well as Jio, would be having a strong advantage of the user base of consumers and sellers, giving consumers and sellers exclusive access to data and providing them with various business opportunities.

In 2017, a nine-judge bench of the Supreme Court of India in the celebrated case of Justice K.S. Puttaswamy Vs. Union of India unanimously held that the right to privacy is a fundamental right enshrined under Part III of the Indian Constitution. Despite the ruling of the supreme court, the draft e-Commerce Policy has characterised data as a public good or a national asset.

In order to make most of the opportunities in the market, the BigTech companies compete with each other to extract as much customer information as possible for the optimal use of market opportunities. If this race to extract data by the big corporations continues then the impact of these corporate houses will be problematic for the society.

The Aspect of Dominance

Across their respective markets, Jio and Facebook tend to be dominant players. The data provided by the telecom regulatory authority of India points out that Jio has approximately 32 % stake in the 1.15 billion Indian mobile services industry. It has the highest customer base and revenue share in the telecommunications market. Jio outperforms its competitors Bharti Airtel and Vodafone-Idea. On the other hand, for Facebook, India is the biggest user base in the world. Furthermore, adding to what it has been previously stated, India is also the biggest market for the social media platform messaging service WhatsApp with over 400 million monthly active users.

After this deal, Jio with the help of Whatsapp intends to bring JioMark in the market which has the objective of integrating small and medium-sized ‘Kirana’ shops. Besides this revolutionizing step, no Whatsapp would be able to allow JioMart to operate through its messaging platform. If done so, and in a way that WhatsApp comes with a pre-installed JioMart platform, this would lead to abuse of dominant position which is punishable under section 4 of the competition act.

Post this deal if a user downloads Whatsapp then he’ll have pre-embedded JioMart in the interface which means the WhatsApp users won't now be able to use other e-commerce platforms in the manner they would have used JioMart. This would absolutely result in disruption of competition as other platforms would lose the consumer base that these tech giants will share.

IS THE DOMINANCE GOOD FOR THE TECH GIANTS

Facebook primarily operates its business through the following three platforms:

1. facebook.com,

2. Instagram and;

3. WhatsApp.

All of the above-mentioned platforms are dominant players in their own market. Since the JioMart only involves the interaction with Whatsapp our concern is limited with WhatsApp only. Its relevant market seems to be smartphone-based social media messaging platforms. WhatsApp has more than 400 million confirmed users in India, while around 600 million people have access to the internet in the country.

Post the deal one of the benefits the two corporates would enjoy would be the absolute control over consumer data. There is currently no agreement on the transfer of consumer data between the two tech giants. However, this does not erode the possibility of entering into such agreements in the near future.

The competition commission of India must have dealt with this deal with utmost seriousness as previously Facebook has been one imposed a $5 billion fine over the violation of data privacy. The control over the consumer data has been used reviewed by the Competition regulators to examine the anti-competitive conducts of e-commerce business in the famous Delhi Vyapar Mahasangh Vs. Flipkart Internet Private Limited, and Sonam Sharma Vs Apple Inc. USA & Ors, which empowers the Indian courts to set guidelines as to what business should work.

APPRECIABLE ADVERSE EFFECT ON COMPETITION

There exists a strong possibility that this strategic investment by Facebook in the Jio is done with an intention to penetrate in a market which is different from what the two tech giants claim. Furthermore, since both the companies have a huge customer base, after this deal they might jump into a different market and by using their dominance remove each and every other player out of the competition and create a monopoly. Therefore, CCI has to take each and every angle before giving a nod to this historic deal.

In the celebrated case of Umar Javeed Vs. Google LLC, CCI held that “there is a need to not only delineate primary relevant markets but also associated markets to relevant markets that have been affected by the conduct of the parties involved.” However, Section 20(4) of the Act provides the factors that CCI must consider before concluding that there is any appreciable adverse effect on the competition.

The rationale behind bringing this provision in the Act is to look for a horizontal or a vertical overlap once the deal has been done. Prima facie, on looking at this historic Jio- Facebook deal there seems no horizontal overlap, however, there might exist a case of vertical overlap. If we see the whole structure we'll analyse that Jio manufacture smartphones, provide internet to the smartphone, these smartphones use the internet to access Whatsapp and now post this deal JioMart will be accessible through WhatsApp.

This structure can be called as a vertical overlap, not just this but this arrangement is nothing but absolute use of dominant position in the used by the corporation to enter another market, this would be affecting the competition in the market.

It is true to state that post this deal many businesses will flourish in the Indian market. Those small vendors who don't have a reach in their local area where the customers live will now have a huge customer base. Also, the consumers would be able to buy each and everything that they want in no time. This model will be a boon for the local vendors. However, the possibility of creating barriers for the startups to enter the market would increase post the deal.

However, on the other side, the interest of consumer welfare should not be ignored. Since this deal is beneficial for consumers as they’ll have more easy options to buy their products but the weighing scale for both, consumers and sellers can never reach an equilibrium. What is crucial here is to understand that one should not step on the commercial prospects of a deal like this in or