UncategorizedJio-Facebook Deal – Impact in India: Giants Unite

THE DEAL 

Launched in September 2016 and owned by Mr. Mukesh Ambani has spread its wings from digital money to online retail. Jio is a subsidiary of his Reliance Industries (RIL).

Meanwhile, for Facebook, India is the world largest user base. It is a huge market for social media platform’s messaging service, Whatsapp. At 80 million users, India is seconfto the US only in terms of its photo sharing app, Instagram.

Since, it is formally announced that Reliance Industries Limited, Jio Platforms Limited and Facebook Inc had signed binding agreements for an investment of Rs 43,574 crore by Facebook into Jio Platforms. Resultant of which, Facebook will acquire a 9.99% stake in Jio Platforms. Reliance Retail and Facebook-owned Whatsapp have also entered into a commercial partnership under which Reliance Retail’s Jio Mart platform will support small businesses on Whatsapp. 

THE CONCERNS 

Data Privacy 

This deal has brought data privacy concerns at the forefront as the vast amounts of data (WhatsApp, now has over 400 million users and Jio has about 390 million telecom subscribers in India) will be collected by these entities.

Justice BN Srikrishna is the chief architect of India’s data privacy law and he has raised a red flag over privacy concerns originating from Reliance Jio-Facebook deal.

Justice B N Srikrishna says, “It is a strategic investment. A strategic investment by definition means it is an investment intended to further the business interest of the investee as well as the investor”.

The discussion around privacy also stems from the current policy position of the company. Though on Jio’s website the privacy policy states

“We do not sell or rent personal information to any third party entities”

It also states certain exceptions. The policy also says that disclosure of personal information is limited such as name, phone number, address, photographs and proof of identity documents such as PAN Card, Passport etc.

In certain situations in which scenarios such as a mergers or acquisitions that affects the company and also to its partners. There are certain exceptions in the policy to sharing the data with ‘Partners’ that include:

“vendors, consultants, contractors and companies or affiliates who provide a host of services including contact information verification, payment processing, customer service, website hosting, data analysis, infrastructure provision, IT services, and other similar services.”

Though the concerns around the privacy have still not been given green signal, this is perhaps one of the motivations why the country urgently needs privacy laws. Without law there is no regulator who can tame and keep a check. 

Competition Law 

In this deal, the partnership is planned to facilitate horizontal movement into newer territories for both the companies. In digital business models working at scale, the focus is always on developing a user base so as to encash on network effects, and instant revenue is a secondary concern. Thus, deals that do not meet the asset or turnover brink yet cause major competition risks are largely unregulated.

The Competition Act, 2002 outlaws anti-competitive practices like

“Predatory Pricing” – the practice pricing of goods or services at low levels with a view to reduce or eliminate competition – treating it as an abuse of dominant position and thus prohibited under Section 4 of the Act and “Anti-Competitive Agreements”.

It is yet to be seen how the competition regulator will respond to this deal, and whether it establishes any apparent restrictions on matters such as data sharing. However, what this deal makes clear, more than ever before, is that the competition regulations may need to be reconsidered to sufficiently address digital business models.

Another area of concern that requires consideration is the indicators of dominant position. Presently, the attention is on factors such as market share, size and commercial advantages. With digital business models, an up-and-coming indicator of dominant position is access to data. Given the network effects, access to data in this deal it has the potential to be in a significant position.

Startups in India have shown their distress about the complexity, or incapacity, to compete with these giants and their effect on the Indian market ecosystem. Also, there are issues that this dominant pair could easily become a monopolistic entity that disturbs all competition.

CONCLUSION 

This deal is a win-win situation for both the parties. As India is the biggest market with over 400 million users for Facebook’s Whatsapp messaging service. Jio is India’s No.1 telecom brand by user base. And the JioMart is an idea which seeks to connect local retailers with consumers.

Reliance can take aid of this popular service to build its marketplace. It has also received easy money to reduce the debt. This deal especially in these unprecedented times speaks volumes about India’s potential. This is the largest FDI in the technology sector so far.

This deal is also going to be a game changer in the E-commerce sector. It is now likely to be seen that how the data privacy concerns and competition law concerns are regulated. As, it is also an issue that needs to be dealt in an exhaustive manner by the authorities.

ABOUT US 

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