Shanmugam vs. Reliance Jio Infocomm Ltd.

Citation: Case No. 98 of 2016

Date of Order: June 15, 2017

Court: Competition Commission of India

Facts

Mr. C. Shanmugam and Mr. Manish Gandhi (“Informants”) filed an application before Competition Commission of India (“CCI”) against Reliance Jio Infocomm Limited (“RJIO”), Department of Telecommunications (“DOT”), Telecom Regulatory Authority of India (“TRAI”) and Bharat Sanchar Nigam Limited (“BSNL”),  alleging, inter alia, contravention of Section 4 of the Competition Act, 2002 RJIO.

Informants in this case alleged that RJIO had launched “Reliance Jio” services by infusing a huge investment of Rs. 1,50,000 Crore. However, RJIO provided all of its services (which included voice calls, internet data, roaming services, browsing, etc.) free of cost for three months and indulged in predatory pricing on account of its strength to bear the losses. This compelled every competitive service providers to reduce their tariffs to a very large extent for a certain period. Further, the Informants alleged that RJIO had mala fide intention of abusing its dominant position to control and regulate the industry independently of the market forces and enjoy monopoly in the telecom industry.

Issue

Whether RJIO indulged in anti-competitive practices through predatory pricing and thus contravened provisions of Sections 4(1), 4(2)(a), 4(2)(c), 4(2)(e) and 19(4) of the Competition Act 2002.

Held

CCI observed that the relevant market is characterized by presence of several established players ranging from established foreign telecom operators (like Vodafone) to prominent domestic business houses like, Airtel, Idea, Aircel, Reliance, etc. In addition, many of these players are comparable in terms of economic resources, technical capabilities and access to capital. This resulted in sufficient choices for consumers who can now shift from one service provider to another with ease. This also implied that the dependence of consumers on any single telecom operator is not of much significance. Hence, CCI found it difficult to conclude that RJIO indulged in any abuse of the dominant position in the relevant market.

Further, CCI explained that financial strength of a company, though relevant, cannot be the sole factor to determine dominant position of an enterprise. Considering the comparable investments and financial strengths of the competitors, the success of RJIO in managing large scale investments did not suggest abuse of dominant position by RJIO, especially when its customers constituted less than 7 % of the total subscriber base at pan-India level.

Furthermore, CCI clarified that providing free services cannot by itself raise competition concerns unless the same is offered by a dominant enterprise and is shown to be tainted with an anti-competitive objective of excluding competition/ competitors, which was not the case here. It also noted that it is not anti-competitive for an entrant to incentivise customers towards its own services by providing attractive offers and schemes. Such short-term business strategy of an entrant to penetrate the market and establish its identity cannot be considered as anti-competitive and as such cannot be a subject matter of investigation under the Competition Act.

Outcome: CCI held that there was no prima facie case of contravention Section 4 of the Act by RJIO.

Conclusion:

Financial strength of a company, though relevant, cannot be the sole factor to determine dominant position of an enterprise. Providing free services cannot by itself raise competition concerns unless the same is offered by a dominant enterprise and is shown to be tainted with an anti-competitive objective of excluding competition/ competitors.

Editor: Vivek Verma

Full Text of the Order here

Image from here

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