This article is written by Ishita Raghav who is pursuing a Diploma in M&A, Institutional Finance and Investment Laws (PE and VC transactions) from LawSikho.
Table of Contents
Introduction
Facebook’s announcement of the recent mega-deal by acquiring fully diluted 10% shares in its very own, Reliance Industries is a case study closely scrutinised by many legal and economics experts. I am here to throw some light on the deal on this strategic investment move made by Facebook Incorporation and the possible legal implications it can have in coming times in India.
The 7.5 billion deal concerns not just one, but many legal aspects and that’s exactly why Indian authorities and public in general need to be vigilant and look out for Facebook’s or Reliance Industries possible market monopoly and other possible unfair advantages to either of the companies. The deal broadly affects three basic legal sectors, namely, competition law in India, data privacy issues and net neutrality.
Commercial aspects of the deal
First, let us explore the healthy impact and benefits of the deal and why these companies chose to come together for such an arrangement. It is sincerely believed by the Managing Director of Reliance Industries that, this synergy between Facebook and Jio Platform, a fully owned subsidiary of Reliance Industries is capable of developing and fulfilling India’s mission of “Digital India” where it’s possible for every Indian citizen realise the dream of- “easy of living” and “ease of doing business”, the very two fundamental goals of “Digital India” mission.
The investment shall fairly impact the growth of Reliance most recent endeavour, JioMart. The JioMart along with Facebook’s most favoured asset, WhatsApp, aims to create a simple yet sophisticated and valuable platform that will provide opportunities to consumers to connect with kirana stores and other small businesses, instantly and to provide further access to place order, all in a single platform, WhatsApp.
The deal and its impact on competition laws of India
The Competition Commission of India (CCI) must diligently watch the synergy for emergence of any possible conflict of interest between the two said companies, while also keeping a close tap on the futuristic impact both the companies can have, together, on other competitors in the industry. The possible abuse of market dominance by an enterprise depends on whether the said enterprise is dominant or can become a dominant player in its relevant market.
As per the latest reports of Telecom Regulatory Authority of India, Reliance’s Jio, has already established its dominance in the telecom market by holding around 32% market share in Indian mobile service industry in the financial year of 2020. As for, Facebook, its subsidiary, WhatsApp, already secures more than 400 million users. It can be safe to predict that by utilizing JioMart’s pre-embedded facility whilst installing WhatsApp, both the companies would be able to control the market by creating a single digital platform for small and medium scale businesses.
Facebook’s primary and more obvious gain would be promoting its long-standing project. WhatsApp Pay, from which Facebook will be able to reach various sectors of consumers in the country, be in business houses, farmers or students etc by gibing a direct and way more biased competition to the current payment apps like Paytm, Google pay and others.
The CCI would have to consider all possible indicators to analyse both the companies potential abuse of power either in the market of online grocery market and/or in the digital payment market. This is specially when Reliance Jio has previously been accused of predatory pricing in the telecom sector.
One of the many indicators would be studying the data-sharing agreement executed between the companies. Consumer’s private data is one of the most crucial aspects to understand the strategic plans of the investment and how the combined power may affect the market.
Previously, like in the case of Google’s compulsory usage of its inbuilt payments apps while making financial transactions, the CCI has made exceptions and thoroughly analysed the company’s current market dominance or possible dominance that is exercised in associated markets, whether it being directly related or not. Though the deal will benefit the Indian economy in a great way, the CCI must perform thorough examination of the current and post deal consumer behaviours of both the companies in order to maintain healthy competition for the players in the market.
Net Neutrality
The subject of net neutrality requires thorough understanding. The principle behind maintain net neutrality is that internet service providers of the country, must at all the times, without imposing any discrimination, allow content makers to access the internet. The general idea behind the principle is that interest is a space provided for everyone and there should be an equal playing ground for all the players. The service providers must not implement unfair practices of reducing the speed or the restrict the content and any other such activity due to any factor. In order to take unfair advantage of net neutrality regulations, companies might deliberately reduce the speed of internet of some players while increasing the speed of other preferential players.
Reliance and Facebook’s strategic deal may challenge India’s current regulations regarding 5G, Virtual Reality (VR) and Internet of Things (IOT) in the coming times. It must be noted that back in the year 2016, due to grave net neutrality concerns, the Telecom Authority of India (TRAI) along with the massive protest from various telecom companies, rejected and levied temporary ban against Free Basics, a free but restricted project, created in the joint partnership of Facebook and Reliance Communication. Safe to say that this strategic investment of the companies is construed by many, as Facebook’s back door entry to the Indian market for the very same objective.
India currently does not have net neutrality laws and to protect the growing issues, the TRAI via Prohibition of Discriminatory Tariffs for Data Services Regulations, has now clearly stated that no company or service provider can charge discriminatory rates to consumers based on the content published. This practice has been regarded as anti-competitive and anti-trust and TRAI held its no-tolerance for other similar zero-rating schemes. Concerns have raised with the Jio-Facebook deal, as industry experts believe that, such Jio might be leveraged with biased and preferential treatment from Facebook, as against other telecom companies.
Issues of Data Privacy and Protection
With 400 million users of WhatsApp and 390 million subscribers for Jio, the amount of data that will be shared, stored and manipulated by these companies for the upcoming projects like, JioMart, will be a serious issue for the country. the importance of data can not be undermined, it is the new fuel, the new and most efficient marketing techniques to predict and influence consumer behaviour. The concerns of data privacy are even more overwhelming for today’s times as the country still doesn’t have any regulations regarding the use (and misuse) of personal data.
In areas like telecommunication, data even though being a non-price factor, prove to be more relevant over price of the transactions and its fluctuations, in cases of mergers or investment deals. This is because the manipulation of data can be so effective as a business tool that it can create entry barriers for new players in the market. the companies in question, can form exclusive agreements with third parties or engage in practice of bundling and tying and restrict or refuse the access of consumer data owned by them.
Justice BN Krishna, the chief architect of India’s Personal Data Protection (PDP) Bill, firmly believes that the two companies took and were able to undertake such unfair advantage of the data storage due to the absence of data protection laws and regulators to highlight and restrict such deals. And that such deals would continue to occur if India doesn’t welcome a firm law regarding the same.
Conclusion
The mega-deal of Jio and Facebook would most definitely speed up the dying economy of the country, especially now that it is worst hit by the pandemic but its implications on other aspects should not be overlooked. With the emergence of digital markets and wide data available, it is expected that TRAI and CCI will be cautious while performing its role to watch over the deal and restrict the unnecessary interference of powerful companies to monopolize the market and harm both the competition and consumers in general.
References
- BIZ WRAP, ‘Facebook-Reliance Jio Deal: Social Media Giant Pumps In Rs 43,574 Crore In Mukesh Ambani’s Telco; 10 Points’ (Businesstoday.in, 2021).
- Aggarwal P, ‘Facebook-Jio Deal: An Analysis Of The Competition Law Issues’ (Libertatem Magazine, 2020)
- Prasid Banerjee, ‘Indian Antitrust Regulator Opens Case Against Google’ (mint, 2021).
- Dhruv Jadhav, ‘The Reliance Jio – Facebook Deal – A Challenge For Net Neutrality’ (Law School Policy Review & Kautilya Society, 2020)
- ‘Jio-Facebook Deal And Its Implications’ (Drishti IAS, 2021)
- Angela Dua and Rashi Rawat, ‘The Reliance-Facebook Deal: A Case For Data-Driven Mergers | The RMLNLU Law Review Blog’
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