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Reliance Jio’s Free Services Not Anti-Competitive: Competition Commission Of India

Apoorva Mandhani
10 Jun 2017 3:51 PM GMT
Reliance Jio’s Free Services Not Anti-Competitive: Competition Commission Of India
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Fair-trade regulator Competition Commission of India on Friday rejected telecom major, Bharti Airtel’s predatory pricing complaint against Reliance Jio and Reliance Industries Limited.

“The Commission notes that providing free services cannot by itself raise competition concerns unless the same is offered by a dominant enterprise and shown to be tainted with an anti-competitive objective of excluding competition/ competitors, which does not seem to be the case in the instant matter as the relevant market is characterized by the presence of entrenched players with sustained business presence and financial strength. In a competitive market scenario, where there are already big players operating in the market, it would not be anticompetitive for an entrant to incentivize customers towards its own services by giving attractive offers and schemes. Such short-term business strategy of an entrant to penetrate the market and establish its identity cannot be considered to be anti-competitive in nature and as such cannot be a subject matter of investigation under the Act,” the six-member CCI bench, headed by Chairperson D.K. Sikri ruled.

Sunil Bharti Mittal-owned Bharti Airtel had approached the CCI against Mukesh Ambani-owned Reliance Jio, alleging that the latter was indulging in “predatory pricing” with free services to eliminate competition in the telecom market.

Bharti Airtel had submitted that Reliance Jio had been offering free services since the inception of its business, through several offers. This, it had contended, amounted to predatory pricing, in contravention of the provisions of Section 4 (2) (a) (ii) of the Competition Act, 2002. It had further contended that Reliance was in contravention of Section 4(2) (e) of the Act as it had allegedly used its financial strength in other markets to enter into the telecom market.

Bharti Airtel had further contended that Jio is providing telecom services below its average variable cost with the sole intention of eliminating competitors. These measures, it had submitted, cannot be regarded as measures to meet competition as no other telecommunication operator in the Indian market is offering services free of cost or below cost or free unlimited voice calling on the networks of other operators.

Reliance, on the other hand, had contended that merely making investments into a telecom start-up could neither be construed as leverage of dominant position nor an anti-competitive agreement.

Considering the submissions, the Commission, at the outset, noted that the relevant market in the present case is the market for ‘provision of wireless telecommunication services to end users in each of the 22 circles in India’. It then went on to hold that Jio, with its 6.4% market share, did not hold a dominant position in the market so as to operate independently of the market forces to affect its consumers or competitors.

“The Commission does not find it appropriate to hold OP-2 dominant in a scenario where its customers constitute less than 7 per cent of the total subscriber base at pan-India level, various functions of telecom service providers are regulated and entrenched players have been in existence for more than a decade with sound business presence, comparable financial position, technical capabilities and reputation,” the Commission observed in this regard.

It thereafter observed that in the absence of any dominant position being enjoyed by Jio, the question of examining the alleged abuse does not arise. The Commission further held that no agreement of the nature prohibited under Section 3 of the Act is discernible from the facts and allegations leveled against Jio.

Furthermore, with regard to the investment made by Reliance in Jio, the Commission noted, “Mere investments cannot be regarded as leverage of dominant position, particularly when OP-1 itself is not engaged in business of providing telecom services or any activities incidental thereto. If one were to construe such investment as anti-competitive, the same would deter entry and/or expansion and limit the growth of markets.”

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