Last year in October, Reliance Industries Limited owned “Jio Infocomm” took the Indian Telecommunications market by storm. In an era where call rates were peaking and mobile data burned big, round holes in your pocket, Jio launched itself with a uniquely crafted welcome offer and most Indians jumped ship without a second thought. Much to the chagrin of the existing mobile and wireless telecommunications service providers, Jio decided to offer its data, voice, video services and full bouquet of applications and content absolutely free from October till the end of the year. However, the Telecom Regulatory Authority of India (TRAI) snipped the period down till 3rd December, 2016. Regardless of such regulatory curtailment, Jio continued this offer till 31st December, 2016 and followed it up with a “Happy New Year” Offer which, in essence, extended the contents of the previous offer till 31st March, 2017, i.e., it gave all its users unlimited data, voice calls and messages until 31st March, 2017. It also provided an iPhone exclusive, ‘Jio iPhone offer’, offering unlimited local, STD, and national roaming on voice calls on any network in India, 20 GB of 4G data per month, unlimited 4G data during night, 40 GB Wi-Fi data and unlimited Short Message Service (SMS) from 1st January, 2017 to 31st December, 2017.
As a result of Jio’s antics, like a ripple effect, all other service providers also had to lower their rates and introduce special tariffs to retain its customer base.
Alleging the conduct of Jio to be anti-competitive by virtue of being an abuse of dominant position and being enabled by an anti-competitive agreement between it and its parent company, Reliance, which could afford to fund Jio unlimitedly, Bharti Airtel Limited (Airtel) approached the Competition Commission of India.
In its information filed before the Hon’ble Commission, Airtel alleged that Jio is indulging in zero pricing and predatory pricing. Furthermore, Jio and Reliance together were using the latter’s financial strength gained from other markets to enter into the telecom market.
Briefly stated, Airtel alleged contravention of Section 4 (2) (a) (ii) of the Competition Act, 2002, which states that any direct/indirect imposition of unfair/discriminatory price in the purchase or sale, including predatory price, of goods or service amounts to an abuse of dominant position. Additionally, it was alleged that Section 4(2)(e) of the said Act, which renders the use of dominant position in one relevant market to enter into or protect another relevant market to be an abuse of dominant position was also being contravened by Jio and Reliance. Furthermore, Airtel has also alleged a contravention of Section 3 of the Act stating that the provision of unfettered access to its resources by Reliance to Jio was resulting in an appreciable adverse effect on competition in the relevant market and was, hence, an anti-competitive agreement as per the provisions of the Act.
The Hon’ble Commission held a preliminary conference, on 23rd February, 2017, to hear both sides. Subsequently, on 9th June, 2017, the Hon’ble Competition Commission decided, on a prima facie analysis (as envisaged under Section 26 of the Act), that Jio did not occupy a dominant position in the relevant market, as delineated by the Hon’ble Commission. It further clarified that the provision of free services in itself was not anti-competitive unless offered by a dominant enterprise, backed by an objective of foreclosing competition. The reasoning of the Hon’ble Commission has been analysed as follows.
Since no competition analysis vis-a-vis dominant position is possible without first determining a relevant product market and a relevant geographic market, collectively ‘relevant market’, the Hon’ble Commission commenced its analysis by defining the relevant market to be the ‘provision of wireless telecommunication services to end users in each of the 22 circles in India’.
It rejected Airtel’s narrow product market definition by recognizing that the distinction between data services and voice services was not pertinent to the present case as such services are provided in a bundled package by all service providers. The Hon’ble Commission also relied on the fact that the Department of Telecommunications (DoT) grants a Unified Access Licence to all telecommunications service providers without any distinction.
With regard to the relevant geographic market, the Hon’ble Commission noted that the territory of India has been divided into 22 circles for which the spectrum to service providers for offering their services is allocated by way of separate auctions. Moreover, the determination of tariffs by service providers was also seen to differ from circle to circle. Additionally, from the demand side of view, it was considered very unlikely that a resident of one locality will avail services from an other territory rather than looking at the options available to it locally.
In assessing the market position of Jio as compared to other service providers, the Hon’ble Commission relied on TRAI’s press release dated 17th February, 2017. It was found that Airtel itself had the largest market share (wireless subscriber base) of 23.5%, followed by Vodafone at 18.1%, Idea at 16.9%, BSNL at 8.6%, Aircel at 8%, RCOM at 7.6%, Jio Infocomm at 6.4%, Telenor at 4.83%, Tata at 4.7%, Sistema at 0.52%, MTNL at 0.32% and Quadrant at 0.27%. The Hon’ble Commission concluded that the existence of several market players provides consumers with free choice and they can shift from one service provider to another with ease. Furthermore, the market share of Jio was not found to exceed 7% in any of the 22 defined circles. Hence, it was not found to be a dominant enterprise, consequently, it was held that no case of abuse of dominant position could be made out against it.
Airtel’s contention of Jio enjoying a dominant position by virtue of holding the premier spectrum bands most compatible for offering 4G services and having access to RCOM’s band by way of a spectrum sharing arrangement was negated by the fact that as per extant regulatory requirements, DoT provides a cap on the overall and band wise spectrum holdings of all service providers. This regulation in itself had the objective of making the market less prone to anti-competitive conduct and ensured that spectrum did not get concentrated in a few hands.
Furthermore, since Airtel could not show any reduction in competition or elimination of competitors as a result of the free services provided by Jio, its allegation of below-cost pricing was also rejected. The Hon’ble Commission stated that, “the relevant market is characterised 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 anti-competitive for an entrant to incentivise 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 Hon’ble Commission also noted that no anti-competitive agreement between and Jio and Reliance could be discerned from the facts and circumstances of the case. It stated that investments did not amount to unilateral conduct or leveraging of dominant position since Reliance itself was not a provider of telecommunication services or services ancillary to it. The Hon’ble Commission clarified that construction of such investments as anti-competitive would prevent market growth and deter new players from entering the market.
Thus, the Hon’ble Commission found no contravention of the Competition Act, 2002 and dismissed the matter under Section 26(2) of the Act by passing an order to such effect.
It is most pertinent to note that just a few days ago, on 28th May, 2017, acting on a complaint made by Jio, TRAI had blocked Airtel’s discriminatory and misleading offers to customers under the same plan. Further, Airtel was warned to register new tariff offers with TRAI within 7 days of launching. (Source)
Thus, two sectoral watchdogs have already meted out their decisions. Watch out this space for more as this war intensifies.