How Reliance Jio proved that it’s practices were not Anti-Competitive despite providing Services at free of cost for considerable period

Introduction:

Reliance Jio, A company which changed the habit of using less than 1.5 GB of data per month to 1.5 GB per day and which changed the perspective from being a conservative prepaid customer worried about voice and SMS charges to a customer having unlimited access to voice calls with a nominal charges and which has changed the composition of telecom industry which was originally having 11 competitors (before inception of Jio) to now being only 4 competitors including Jio (Of which Vodafone-Idea is now a single entity after merger).

Upon roll out of services in the year 2016, it has provided services of data, voice, video and the full banquet of Jio Applications at free of cost from 05th September 2016 to 31st March 2017 (Which was originally announced as ‘Jio Welcome Offer’ for a period of 90 days and ‘Happy New Year Offer’ for remaining period) which has caused major disruption to existing competitors

Issue Involved:

Bharti Airtel Limited (i.e., Airtel) has presented case against Reliance Industries Limited (Holding company of Jio) and Reliance Jio Infocomm Limited (i.e., Jio) before Competition Commission of India (CCI) saying the practices adopted by Reliance Jio are Anti-Competitive (i.e., against the existing competitors in the industry).

Relevant Provisions from The Competition Act, 2002 – analysis of Section 4:

An act by an entity having dominant position which is having an adverse impact on competition prevailing in India is termed as Anti-Competitive (Practice of predatory pricing i.e., Price which is below the cost is one of them) and thus Void

Airtel has challenged following practices adopted by Jio:

1. Relevant market (i.e., the market in which Jio is operating) is 4G LTE Telecom Services – a product market since 4G LTE services could not be obtained in device having capacity to operate 2G/3G devices and user willing to obtain such services has to incur an additional cost of buying for obtaining a device for availing 4G LTE services (i.e., he need to buy a new mobile phone having 4G option) and also the speed of connection and download in 4G LTE is significantly different from that of previous technologies (i.e., 2G/3G)

2. Huge Investment approximately of Rs 1.6 Lakh Crores which was done by Reliance Jio (which was originally obtained from Reliance Industries Limited) is an indication of Jio having a dominant position in the Industry

3. Practice of providing services of data, voice, video and the full banquet of Jio Applications at free of cost by the dominant player in the Industry has caused adverse impact on prevailing competition

4. Introductory offer of Jio which was originally to expire by 09th December 2016 was further extended till 31st March 2017 as ‘Happy New Year Offer’ which is substantially same and it has extended the period of originally planned offer to provide services for 90 days.

Analysis of facts and allegations by CCI CCI has carefully examined and concluded the following:

1. Jio has presented Latest Annual Report of Airtel before CCI which does not differentiate telecom services provided using different technologies and hence CCI has concluded that relevant market in this scenario is market providing wireless telecom services

2. Aggregate investment made by Airtel in telecom industry is much more than amount Rs 1.6 Lakh Crores which is being invested by Jio. Mere obtaining of funds from the holding company for the purpose of expansion by a new entrant in the market cannot be termed as penetration

3. Further as per TRAI press release dated 17th February 2017 (which is before the date of order passed by CCI), Telecom Market is led by Airtel holding market share of 23.5% followed by Vodafone (18.1%), Idea (16.9%), BSNL (8.6%), Aircel (8%), RCOM (7.6%) and Jio (6.4%) and few other competitors.

Thus, having regard to subscriber base, size, resources and economic power, it cannot be said that Jio is having a dominant position in the market and hence its offers are only in nature of promotion rather being predatory.

Further the market is characterized by existence of several competitors resulting in providing sufficient choice for customers who can shift from one service provider to another without any material cost of switching.

Having regard to various terms of the offer, CCI has concluded that Jio Welcome Offer and Happy New Year Offer are different and hence cannot be compared.

Conclusion:

After above analysis, CCI has concluded that mere provision of services at free of cost by itself cannot be termed as Anti-Competitive unless the same is evidenced by dominant enterprise and an Anti-Competitive objective of excluding competition / competitors which does not seem to be the current scenario after considering relevant market and competitors

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Disclaimer: The contents of this article are for information purposes only and do not constitute an advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc before acting on the basis of the above write up.  The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that Author / TaxGuru is not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof. This is not any kind of advertisement or solicitation of work by a professional.

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