Kapil Srivastava and Shashwat Singh, both students of Institute of Nirma University discusses the Facebook-Jio deal and its implication on the Indian telecom market.
The recent Facebook-Jio deal has had a turbulent effect in the Indian telecom market. A deal estimated to be around INR 43,574 Crore will allow Facebook to acquire a 9.99 percent stake in Jio Platforms, making it the single largest Foreign Direct Investment (‘FDI’) in the Indian telecom sector so far. This move will club Jio’s 370 million users with Facebook’s 250 million users in India. WhatsApp, with a user base of over 400 million in India, has simultaneously partnered with Reliance Retail to propel JioMart; and change the landscape of Indian Kirana (grocery) stores.
However, what is inherently problematic is the concerns this deal raises in terms of competition and privacy. It is paramount to bear in mind that network effect is an intricate part of such global acquisitions. The network effect is essentially the benefits which a large user base of consumers and sellers brings to the corporates by giving them exclusive access to multiple data sources, and subsequently providing them with unrivaled business opportunities. Furthermore, India’s 2019 Draft e-Commerce Policy cautions Lawmakers from disregarding network effects while analyzing mergers and acquisitions as the existence of network effect creates a barrier to entry which infers that it is almost impossible for ‘second-movers’ to enter the market. It became more important for the present deal because Jio is backed by investors with deep pockets who are ready to suffer sustained losses in order to create an eventual predatory market for Jio.
Data privacy is a big concern because both the companies have shown intent to cross-leverage the e-Commerce platform JioMart and recently approved WhatsApp Pay. There is no denying the fact that Jio will gain access to WhatsApp’s and Facebook’s huge repository of user data, but its potential manipulation by Jio to usher out competitors is a major cause of concern. Moreover, there is a grim prospect of WhatsApp resorting to advertisements to cross-leverage data to Jio.
The 2018 Cambridge Analytica data breach scandal is a testimony to Facebook’s capacity to maneuver user data for nefarious purposes. Currently, neither the Competition Commission nor the Personal Data Protection Bill seems to offer any unambiguous section of legislation to mitigate the possibility of cross-leverage. A compulsory ‘opt-in mechanism’ for the users wherein they allow data sharing in parts or in totality seems to be the only viable option.
In K.S Puttaswamy v. Union of India, the Supreme Court of India unanimously held that the right to privacy is a fundamental right and intricate to the freedoms guaranteed under Part Ⅲ of the Constitution. Nonetheless, a disparity exists due to the draft e-Commerce policy’s characterization of data as a public good or a national asset. Meanwhile, global tech companies continue to harness countless data available from developing countries for their own advantage, as highlighted in the UNCTAD’s Digital Economy Report 2019.
Furthermore, recently in the sector of technology and communication, a significant question of mergers and acquisitions (M&A) that arises is whether, in Competition assessment, the data privacy of consumers can be relevant parameter. European Commission (E.C.) in Microsoft/LinkedIn merger held that though privacy matters fell under data protection law, in the assessment of competition, privacy can be considered as a non-price competition aspect in mergers and controls to the degree that consumers considered itself as a substantial factor in the quality of the services offered. Unlike E.C., the Competition Commission of India (CCI) in its WhatsApp order Has shown hesitation to include privacy issues in the purview of the Competition Act, 2002.
Monopolization of Digital Market
Monopolization continues to be the least consistently enforced area of competition law globally, albeit its abuse has led to Competition Law Review Committee (CLRC) discussing a probable provision to penalize a mere attempt to monopolies in the relevant market in its 2019 report, herein the digital market. Jio managed to create an anti-competitive telecom market through its unilateral conduct. Its market share grew exponentially, ushering out its competitors gradually. A telecom market initially comprising ten private sector wireless providers diminished to three with companies overburdened by a cumulative debt amounting to ₹ 7.7 lakh crore and revenue under ₹ 2.5 lakh crore. The European Union (‘E.U.’) and the U.S. have differed on the assessment of unilateral conduct, with the former approving a more interventionist approach triggering a debate around multilateral competition rules.
Currently, there are no binding multilateral competition rules. There is a general consensus that competition law and policy should “protect competition, not competitors However, the existing legal framework inhibits e-Commerce websites or telecom companies from suing Facebook or Jio in their respective jurisdictions. Commonalities existing in national competition regimes can be used to create measures which include prohibitions against cartels, control on mergers and acquisitions based on their anti-competitive nature, and suitable action against such firms.
Breach of Level Playing field
The Apex Court of India in Reliance Energy Ltd. v Maharashtra State Road Development Corp. Ltd held that ‘level playing field’ is a significant factor to be kept in mind. Reliance Jio and Facebook both are ‘Data Elephants’ in terms of regulating private data of Indians, together if combined, would undeniably give an undue advantage to these companies.
Therefore, the sharing of data may be big trouble for different players in the market as well as the regulatory authorities. As a result, the agreement of data-sharing must be given effect with full transparency by sharing the details of which with the government and customers. To avoid concentration of market control, CCI must scrutinize every aspect of data sharing in this deal as data of the consumer has become one of the most essential aspects of competition in any market.
In addition, both firms have a business undertaking that could compete with each other. This also raises serious concern if it is seen through the lens of antitrust laws in India. In the field of E-commerce currently, Reliance functions in its online space through Ajio while Facebook has its own Marketplace, On the payment side to there is overlap Reliance already has Jio Money while Whatsapp lie in wait for government nod, Jio tv, and Facebook watch, Jio chat Facebook messenger is more or fewer competitors in their respective areas. Therefore, the coming together of both the giants would definitely give an undue advantage against its rivals, be it technology giants or local startup.
Any agreement which prevents any enterprise or association from entering into any such agreement which causes or is likely to cause an appreciable adverse effect on competition within India is void under section 3(1) of the competition act 2002. Therefore if CCI found this data-sharing agreement between two companies is anti-competitive, the same will be held to be a void agreement.
A comprehensive analysis of the deal suggests that it is crucial to amend the Competition Act in favour of penalizing a potential attempt to market monopolization to alleviate the concern of the competitors in the digital market, lest investors with deep pockets continue to create a monopoly over the market. The report of Competition Law Review Committee 2019 has recommended non-monetary considerations like personal data and preferences revealed to digital market players to come under section 2(o) of the Competition Act, 2002. Data privacy concerns can only be mitigated by reaching a consensus on binding multilateral cooperative rules, enforceable on the participating countries by recognizing their mutual competition rules, and therefore, it may be opportune for the CCI to consider the privacy concern as a relevant parameter in competition assessment.
Kapil Srivastava and Shashwat Singh are law students of Institute of Nirma University, Ahmedabad
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Justice K.S. Puttaswamy (Retd) v. Union of India. (2018) 4 SCC 651.
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Surabhi Agarwal, Devina Sengupta, Anandita Singh Mankotia, Facebook-Reliance Jio deal to go to CCI, Trai may also step in, The Economic Times, (April 23, 2020, 11.18 AM) https://economictimes.indiatimes.com/tech/internet/deal-to-go-to-cci-trai-may-also-step-in/articleshow/75306062.cms?from=mdr
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