Who Would Have Thought ?!?!

Apple has allowed developers to take payments outside the App Store !! Voluntarily without a Judgement or Order or any other form of legislation coercing them !! Who would have thought this day would come. 🙂 Atleast I admittedly didn’t.

It’s part of a settlement of course, so perhaps they saw the writing on the wall that the happy music was about to stop. But it still is a big stand down from Apple, a company known to steadfastly contest all suits and claims challenging its walled off ecosystem.

To quote from the report itself:

“The company is “clarifying that developers can use communications, such as email, to share information about payment methods outside of their iOS app,” Apple said in a statement.

Critically for Apple, the settlement excludes more significant App Store changes that were sought by some outside developers and legislators. The company is still requiring developers to sell their apps — as well as in-app items and subscriptions — using Apple’s payment system, which takes between 15% and 30% in commissions. Apple reduced the cut to 15% for all developers that generate $1 million or less annually last year. On Thursday, it committed to continuing that policy for the next three years.

The settlement also doesn’t require Apple to allow third-party app stores or the so-called sideloading of software. And the company doesn’t have to further reduce its revenue share.”

According to another report, “Apple also will set up a USD 100 million fund that will pay thousands of app developers covered in the lawsuit sums ranging from USD 250 to USD 30,000. App developers will get more flexibility to set different prices within their apps, expanding the options from about 100 to 500 choices.”

But the stand down doesn’t end here, shifting to news closer to home, South Korea’s National Assembly passed a bill last Tuesday requiring Google and Apple to open their app stores to alternative payment systems in South Korea. The move will definitely have a negative affect on the commissions on digital sales for both companies. Essentially, its an amendment to the Telecommunications Business Act, with the Korea Communications Commission, the Country’s media regulator, with the powers to enforce it.

And now right at home, we even have a Complaint having been filed before the C.C.I. as well !!

The big question – will these lead to reduced prices for consumers in the long run. My personal opinion – No. They’ll remain stagnant. Almost ninety percent of the Apps on both the stores are anyways free. The last ten percent, which comprise of paid as well as in App purchases, have not shown a trend of keeping costs low even when they were alternatives available to having to pay Google or Apple. The best example is Netflix, which has in fact been raising rates over time. Simply put, there are other factors besides an App Store/Play Store commission which determine pricing.

Note On Competition/Anti-Trust Law and its Efficacy in Tackling Issues Concerning Privacy (Part III) – And a Post Script.

[The previous post seemed way too long for a blog post, so decided to split it and post a ‘Part III’. The previous posts can be found here and here. Also as a bonus – an anticlimax post script. ;)]

INDIA

As already stated above, India has also till date been following the traditional model of competition law enforcement. The language and the concepts of the Competition Act, 2002 are heavily borrowed from the Treaty on the Functioning of the European Union (T.F.E.U.) and the enforcement structure enumerated under the act, i.e., the Competition Commission of India (C.C.I.) and the Director General of Investigations (D.G.) is also similar to the enforcement structure of the E.U.

The Commission displayed its cognizance of data collection, though not from a Privacy perspective, in the case of Matrimony.com Ltd. v. Google LLC, Case No. 07 of 2012. In its Final Order dated 31.01.2018, while imposing a fine of Rs. 135.86 crores on Google, it observed:

“In fact, it would not be out of place to equate data in this century to what oil was to the last one. The Commission is not oblivious of the increasing value of data for firms which can be used to target advertising better. Moreover, the data can be turned into any number of revenue generating artificial-intelligence (AI) based innovations.”

However, prior to this, in the case of Vinod Kumar Gupta v. WhatsApp Inc., Case No. 99 of 2016, specifically assailing the acquisition and the privacy policies of the respective entities, the Commission while dismissing the Complaint, specifically observed:

“14. On the issue of dominance of the OP in the relevant market as defined supra, the Commission notes that in India a number of other players such as Apple with iMessage, BlackBerry with BBM, Samsung with ChatON, Google with Google Hangouts and Microsoft with Skype are providing consumer communication apps and are also active in the provisions of smartphone hardware and operating systems. Besides, many other consumer communication apps providers such as Hike, Viber, WeChat and Snapchat are also active in market. As per the information available in the public domain, globally ‘WhatsApp’ is having a billion monthly active users and within India, it is having 160 million monthly active users. According to a study of ‘Jana and mCent’, 97% of the smartphone users in India use a communication app daily and the most popular is ‘WhatsApp’, which is installed on 96% of devices and has more daily active users than any other communication app in India. As per the said report, ‘WhatsApp’ is installed in 2.3 times more devices than home-grown messaging app Hike. According to a study conducted by ‘TNS/TNC Connected Life Study 2015’, 56% of the internet users in India use ‘WhatsApp’ and 51% use ‘Facebook’ every day. Further, amongst India’s internet users, ‘WhatsApp’ tops the list of instant messaging apps. Further, citing a study conducted by Global Web Index, the Informant has submitted that 64% of mobile users in India use ‘WhatsApp’ which is the largest as compared to any other mobile messaging app usage. Based on the the above, the Commission is of the opinion that the OP is in a dominant position in the relevant market as defined under para 13 above.

15. With regard to the abusive conduct of the OP in the relevant market, it is noted that the Informant has alleged that the OP is abusing its dominant position in the relevant market by introducing privacy policy which compels its users to share their account details and other information with ‘Facebook’. In this regard, the Commission observes that the data sharing terms of the privacy policy of the OP as updated on 25th August, 2016 relate to sharing of users’ ‘WhatsApp’ account information with ‘Facebook’ to improve the online advertisement and products experiences available on user’s ‘Facebook’ page. It is noted that the OP provides the option to its users to ‘opt out’ of sharing user account information with ‘Facebook’ within 30 days of agreeing to the updated terms of service and privacy policy. Moreover, the OP has submitted that ‘Facebook family of companies’ will use such information for the purpose of improving infrastructure and delivery systems, understanding how their services are used, securing systems, and fighting spam, abuse or infringement activities. The Commission also finds force in the submission of the OP regarding its users safeguards that all types of ‘WhatsApp’ messages (including chats, group chats, images, videos, voice messages and files) and ‘WhatsApp’ calls are protected by end-to-end encryption so that third parties and ‘WhatsApp’ cannot read them and also the message can only be decrypted by the recipient. Further, as stated in the key updates summary of the OP, nothing a user shares on ‘WhatsApp’, including his/ her messages, photos, and account information, will be shared onto ‘Facebook’ or any other apps of ‘Facebook family of companies’ for any third party to see, and nothing a user posts on those apps will be shared by ‘WhatsApp’ for any third party to see.

……..

19. The Commission also observes that there are no significant costs preventing the users to switch from one consumer communication apps to another. It may be due to the following reasons: (i) all consumer communication apps are offered for free of cost or at a very low price (mostly free), (ii) all consumer communication apps are easily downloadable on smartphones and can co-exist on the same handset (also called ‘multi homing’) without taking much capacity along with other apps, (iii) once consumer communication apps are installed on a device, users can pass on from one app to its competitor apps in no-time, (iv) consumer communication apps are normally characterised by simple user interfaces so that costs of switching to a new app are minimal for consumers, and (v) information about new apps is easily accessible given the ever increasing number of reviews of consumer communication apps on apps store like google play store etc. Furthermore, the expansion of Hike Messenger to nearly 100 million user base within three years of launching their services into the aforesaid market reflects that in this market, there are no significant barriers to entry and consumers appear to be price sensitive. Based on the above, the Commission is of the view that even though ‘WhatsApp’ appears to be dominant in the relevant market, the allegations of predatory pricing have no substance and the OP has not contravened any of the provisions of Section 4 of the Act.”

The most comprehensive discussion by the Commission on the aspect of data collection and sharing appears to be under the combination procedure in the Jhaadu Holdings LLC Case, i.e., the Acquisition of 9.99 percent of the equity share capital in Jio Platforms Limited by Facebook, Inc. The relevant portions of the Order of the Commission dated 24.06.2020 are as follows:

“(ii) Potential data sharing between the parties

50. Most of the data driven businesses are multi-sided platforms where one or more sides of the platform is designed to attract user presence and the other sides are used for monetizing the data relating to user behaviour. For instance, Facebook application is a social media platform. One side of its platform offers free services to users for social interaction and on the other side, the monitored behaviour of the users is used as an input to offer advertisement services (targeted display ads). As noted earlier, the social media and other applications of Facebook group are popular amongst internet users and Facebook is expected to have access to rich data regarding user behaviour. Facebook has submitted that it has a data policy that explains the nature of information collected by Facebook and how it is being used. It inter alia explains data sharing with third party partners.

51. Jio Platforms including RJIO, on the other hand, is also in a position to collect and possess consumer data. The privacy policy of RJIO defines Non-Personal Information as information that does not identify the user or any other individual, and includes session, web beacons and usage and transaction data, aggregate log data and aggregate information. It further states that RJIO uses this information, inter-alia, to tailor its services to the interests of its users, to measure traffic within its services, to improve the quality, functionality and interactivity and let advertisers know the geographic locations from where its users/ visitors come. The privacy policy further provides that the information provided by the users will be used for a number of purposes connected with RJIO’s business operations including (a) verifying the identity, access, privileges assigned and relationship with the user; (b) provisioning of products/services, testing or improvement of services, recommending various products or services; (c) communicating about bills, invoices, existing or new offers, content, advertisements, surveys, key policies or other administrative information; (d) analytics and reviews for improvement of RJIO’s services; (e) improving user experience while using RJIO’s services by presenting tailored advertising, products and offers; and (g) other usages that users may consent to.

52. Business combination between entities having access to user data can be analysed from the perspective of data backed market power. The assessment in such instances needs to focus on the incentives of parties to pool or share their databank and monetize such data in possible means.

53. In the instant matter, it is noted that the Proposed Combination is an acquisition of 9.99% stake in Jio Platforms by Facebook group. This may not result in unrestricted access to each other’s resources including user data. Nevertheless, the parties may have incentives to engage in mutually beneficial data sharing. In this regard, Jaadhu has submitted that “there is no data to be shared as part of the Proposed Transaction” (i.e. proposed acquisition of shares in Jio Platforms by Jaadhu). It has been further clarified in the response dated 12th June, 2020 by Jaadhu that:

“It is clarified that data sharing is NOT the purpose of the Proposed Commercial Arrangement, nor will either side be acquiring ownership of the other’s data pursuant to the Proposed Commercial Arrangement. However, for implementation of the Proposed Commercial Arrangement, WhatsApp and JioMart (which is owned by RRL and operated by Jio Platforms) will receive or send limited data. This data is:

(i)being provided only for the purpose of facilitating e-commerce transactions on JioMart. Its use is limited, proportionate and solely for the purpose of implementing the Proposed Commercial Arrangement. Further, ****** the MSA explicitly prohibits the Commercial Arrangement Partners from using confidential information received from the other party for their own business purposes, or from disclosing it to third parties, *********************************************** ********************************************************** ********************************************************** ************************************************;

(ii)neither exclusionary, inimitable nor rare, and substitutes exist…; and

(iii)processed in accordance with applicable law and parties’ data policies.”

54. The Commission observes that RJIO is a prominent telecommunication player in India with more than one-third of wireless subscribers on its network. The group entities of Jaadhu viz. Facebook Group, on the other hand, are the second leading player in online advertisement space and leading player in online display advertisement services. The user data possessed by Jio Platforms including RJIO and Facebook Group are complementary to each other given the symbiotic interface between telecommunication business and OTT content/ application users. Thus, any anti-competitive conduct resulting from any data sharing in the future could be taken up by the Commission under Sections 3 and/or 4 of the Act having due regard to the dynamics of the concerned markets and position of the parties therein.

55. Considering the material on record including the details provided in the Notice and the assessment of the Proposed Combination based on factors stated in Section 20(4) of the Act, the Commission is of the opinion that the Proposed Combination is not likely to have any appreciable adverse effect on competition in India. Therefore, the Commission approves the Proposed Combination under Section 31(1) of the Act. The Commission also notes that the parties confirm that the Proposed Combination does not contemplate any non-compete covenants.

56. This order shall stand revoked if, at any time, the information provided by Jaadhu is found to be incorrect.”

Recently, the Chairman of the C.C.I, Ashok Kumar Gupta, remarked that “Lowering of privacy protection by dominant enterprises could be construed to be an abuse of dominant position and therefore fall within the ambit of antitrust as low privacy standards implies reduction in consumer welfare.” However, no fresh investigation appears to have been initiated by the regulator as on date.

P.S. (As promised) –

So we have a bit of an anti-climax in this space, with TechCrunch reporting day before yesterday through Natasha Lomas that Google won’t end support for tracking cookies unless UK’s competition watchdog agrees !! It’s a long article, but well worth the read, especially for grasping the contours of Google’s self-styled “Privacy Sandbox” it announced earlier this year.

My favourite portion was and I quote:

“But the key issue here is how privacy and competition regulation interacts — and potentially conflicts — with the very salient risk that ill-thought-through and overly blunt competition interventions could essentially lock in privacy abuses of web users (as a result of a legacy of weak enforcement around online privacy, which allowed for rampant, consent-less ad tracking and targeting of Internet users to develop and thrive in the first place).

Poor privacy enforcement coupled with banhammer-wielding competition regulators does not look like a good recipe for protecting web users’ rights.”

Note On Competition/Anti-Trust Law and its Efficacy in Tackling Issues Concerning Privacy (Part II).

Continued from our previous post:-

EUROPEAN UNION (E.U.)

In the E.U., the European Commission (E.C.) and its Directorate General for Competition are responsible for the administration of competition law. In regard to privacy matters, the General Data Protection Regulation is regulated by the European Data Protection Board. European authorities have also had the opportunity to deal with data implications on several occasions.

Initially, in the 2014 Facebook-WhatsApp Merger Case, Case No. COMP/M.7217 it took at extremely conservative approach on the issue of privacy. To quote from the Commission’s Order itself:

“For the purposes of this decision, the Commission has analysed potential data concentration only to the extent that it is likely to strengthen Facebook’s position in the online advertising market or in any sub-segments thereof. Any privacy-related concerns flowing from the increased concentration of data within the control of Facebook as a result of the Transaction do not fall within the scope of the EU competition law rules but within the scope of the EU data protection rules.“

On the other hand, in 2016, in the Microsoft-Linkedin Merger Case, Case M.8124 the E.C. approved the acquisition of LinkedIn by Microsoft, subject to several conditions. Both companies retained large datasets comprised primarily of personal information. The E.C. found that the combination of Microsoft’s and LinkedIn’s datasets would act as a barrier to entry. The E.C.’s commitments included granting competing professional social network service providers access to Microsoft Graph, a gateway for software developers which is used to build applications and services that can, subject to user consent, access data stored in the Microsoft cloud, such as contact information, calendar information, emails etc. Software developers can potentially use this data to drive subscribers and usage to their professional social networks. Simply put, the Commission considered Privacy as a parameter for non-price competition Interestingly, the F.T.C. did not find anticompetitive implications in this transaction.

However, it is in fact the German Competition Authority Bundeskartellamt, and subsequently the Federal Court of Justice of Germany which have taken the first proactive to privacy protection through competition law.

In its decision of 6 February 2019 the Bundeskartellamt prohibited Facebook Inc., Menlo Park, USA, Facebook Ireland Ltd., Dublin, Ireland, and Facebook Germany GmbH, Hamburg, Germany from making the use of the Facebook social network by private users residing in Germany, who also use its corporate services WhatsApp, Oculus, Masquerade and Instagram, conditional on the collection of user and device related data by Facebook and combining that information with the Facebook.com user accounts without the users’ consent. The prohibition was based on Section 19(1) of the German Competition Act. The prohibition also applied to terms making the private use of Facebook.com conditional on Facebook being able to combine information saved on the “Facebook account” without the users’ consent with information collected on websites visited or third-party mobile apps used via Facebook business tools and use this data. The Court concluded that there was no effective consent to the users’ information being collected if their consent is a prerequisite for using the Facebook.com service in the first place.

The Bundeskartellamt found Facebook had abused its market power based on the extent of collecting, using and merging data in a user account and imposed on Facebook far-reaching restrictions in the processing of user data. The Bundeskartellamt saw the use of the conditions of use as an abuse of dominant position. It found Facebook dominant in the national market for the provision of social networks. It abuses this position by, contrary to the provisions of the General Data Protection Regulation (G.D.P.R.), making the private use of the network dependent on its authorization to link user and user device-related data generated outside of facebook.com with personal data without further consent of the users. With a resolution dated 06.02.2019, the Federal Cartel Office prohibited Facebook and other group companies from using the corresponding terms of use and processing personal data accordingly. The Federal Court of Justice on 23.06.2020 upheld this decision.

Margrethe Vestager, the current European Commissioner for Competition since 2014, has also recently stated before the European Parliament’s economy committee on Tuesday that there could be scope for “investigating if it’s actually legal for a dominant provider to stop supplying” services, adding that the EU “would have a number of tools to use.”

To be continued further….

Scope of Determination of Relevant Market under Horizontal Agreements

We have a guest post here by Tilak Dangi. Tilak is law student pursuing B. A. LLB. (Hons.) from the NALSAR University of Law and is currently in his 4th Year.

Introduction

Section 3 of the Competition Act (hereinafter the Act)[1] prohibits anti-competitive agreement(s) which cause or are likely to cause an Appreciable Adverse effect on Competition within India. Currently, Section 3 has two limbs. Firstly, horizontal agreements which are prohibited under Section 3(3) of the act and are presumed to be anti-competitive unless the presumption is rebutted. Secondly, vertical agreements are prohibited under Section 3(4) and are determined based on the ‘rule of reason’ approach. Also, section 3 does not mandatorily require the determination of the relevant market. The Competition Law Review committee (hereinafter CLRC) [2] deliberated the issue of making it mandatory and came to the conclusion that such a mandate will make a Section 3(3) enforcement too rigorous since the CCI has to delineate the relevant market for dealing with all the alleged contravention in this provision and thus the term ‘relevant market’ should not be introduced in section 3(3) of the act.

In this article, the author argues as to why the determination of the relevant market should be mandatory in cases concerning horizontal agreements under section 3(3) as well.

Analysis

In the case of CCI v Coordination Committee of Artists and Technicians of West Bengal Film and Television Industry[3], the case concerning Section 3(3), the apex court said that the primary step is to find out what constitutes the ‘relevant market’? Moreover, the court also mentioned that the factors mentioned under Section 19(7) to determine the relevant market that includes physical characteristics or end-use of goods, classification of industrial products price of goods and services, etc [4] are supposed to be taken into consideration while determining the same.

Thereafter, the CCI approached the apex court for a clarification as it was concerned that the judgment in respect of the “relevant market” may looks like that there is also a necessity to delineate the relevant market in all such cases of Section 3(3). The court clarified the same by mentioning that the determination of the “relevant market” is not a mandatory pre-condition for assessing the alleged violation Under Section 3 of the Act.

Now Section 3(3) states that:

“Any agreement entered into between.…xxx…..including cartels, engaged in identical or similar trade of goods or provision of services, which–…”

Thus, the wordings of the section makes it clear that the essential condition of Section 3(3) is that the opposing parties must be engaged in similar or identical trade.

To counter such allegations, the parties in the case can argue that they do not deal in a similar market and hence Section 3(3) wouldn’t apply to them. Therefore, the Commission has to establish that the entities are engaged under the same relevant market which has to be ascertained by taking factors mentioned under Section 19(7) [5] into consideration.

Factors under Section 19(7) assist to establish that the commodities provided by the different opposing parties are substitutes to each other and therefore both the parties deal with similar or identical trade. It is the question of fact and the CCI cannot presume that the opposing parties deal within a similar trade but have to establish the same. Therefore, only after determining relevant market by factors mentioned under Section 19(7), will the entities will be considered as dealing under the same relevant market.

The CCI has also consistently determined the market in the cases of horizontal agreements. The EPS systems market was mentioned in a suo motu case.[6] In another case,[7] the CCI took note that the market for the supply of such commodity was conducive for cartelisation wherein the DG also mentioned that other companies were market players involved in the cartel. In another case,[8] the Commission analysed anti-competitive conduct in the Dry-Cell Batteries Market in India.

The word ‘market’ in the above cases shall only have meaning of ‘relevant market’ and nothing else[9] which shows the determination of relevant market in terms of the wording ‘similar and identical trade’ of clause of Section 3(3) is mandatory. Therefore, to prove the allegations under section 3(3), it has to be established that the parties deal in the same trade i.e., deal in the same relevant market. This in turn has to be ascertained according to the factors mentioned under Section 19(7).

The reason for the determination of the relevant market being non-mandatory in cases of Section 3(3) as given by the CCI to the apex court is that the AAEC is presumed in such cases. [10] However, it is a settled position of law that the presumption is rebuttable as these agreements are not considered as conclusive proof of the fact that it would result in AAEC. [11] In case such evidence is led, which rebuts the presumption, then the CCI has to take into consideration the factors mentioned in Section 19(3) of the Act and see as to whether all or any of these factors are established.

Therefore, when an agreement under Section 3(3) has been established, the parties can rebut the presumption, and thus, the commission has to show that the presumption has not been rebutted. Before doing so, the parties will have to establish the relevant market to determine the AAEC and the same cannot be escaped.

The clarification of Supreme Court [12] and report of the CLRC with this aspect is per se problematic because a plain reading of Section 19(3) would show that the factors mentioned thereunder have to be taken into consideration to rebut and re-establish the presumption of the AAEC, which makes the determination of relevant market mandatory. Therefore, to determine AAEC which is inevitable, the requirement of the relevant market has to be necessary as the apex court has noted that the word ‘market’ used in Section 19(3) has reference to ‘relevant market’.

In case of Nagrik Chetna Manch v SAAR IT resource Pvt Ltd. and Ors, [13] the Commission considered the factors of Section 19(3) while dealing with the submission of rebuttal of presumption by the opposing party. The CCI observed that the argument of no entry barriers does not stand as the bidding process itself thwarts provision of goods and services by credible players, who lose out in the absence of conditions which foster competition. Therefore, commission observed anti-competitive effects in the case but ironically did not determine the relevant market.

In another case,[14] the Commission went on to mention that by mandating certain requirements, the distributors have been discouraged in entering the distribution channel, their entry may be restricted even if they are otherwise satisfying the requisite criteria. Further, such a restrictive practice does not accrue any benefits to end consumers in as much as the availability of products to the consumers can be adversely affected both in terms of quantity as well as its availability at competitive prices. The contravening trade association and company had failed to exhibit that such practice is in any manner beneficial in terms of factors laid down under clauses (d), (e), and (f) of Section 19(3) of the Act.

The abovementioned cases show the factors mentioned under Section 19(3) were taken into consideration but the irony being that these factors were considered without delineating the relevant market which is the prima facie condition under Section 19(3).

Conclusion

The CLRC report mentions that making determination of the relevant market under Section 3(3) will make it rigorous but at the same time the Commission can’t evade essential requirements mentioned under the Act itself. The pre-requisite mentioned under Section 3(3) itself requires entities entering into such agreements to be dealing in the same relevant market. Moreover, since the presumption is rebuttable and the practice of the Commission in dealing with AAEC arguments also shows the requirement of determination of relevant market. Therefore, the judgment by the apex court as well as the report with this aspect requires reconsideration as determination of relevant market in Section 3(3) is inevitable.

Endnotes:

[1] The Competition Act, 2002, No. 12, Acts of Parliament, 2002.

[2] Ministry of Corporate Affairs, Report of the Competition Law Review Committee, (2019)

[3] Competition Commission of India Vs. Co-ordination Committee of Artists and Ors., AIR 2017 SC 1449.

[4] The Competition Act, 2002, No. 12, Acts of Parliament, 2002.

[5] id.

[6] In Re: NSK Limited and Ors., MANU/CO/0041/2019.

[7] Hindustan Petroleum Corporation Ltd. vs. Allampally Brothers Ltd. and Ors., MANU/CO/0038/2019

[8] Cartelisation in respect of zinc carbon dry cell batteries market in India Vs. Eveready Industries India Ltd. and Ors., 2018 CompLR 467 (CCI).

[9] Competition Commission of India Vs. Co-ordination Committee of Artists and Ors., AIR 2017 SC 1449.

[10] Competition Commission of India Vs. Coordination Committee of Artists and Technicians of West Bengal Film and Television Industry, [2018] 144 CLA 403(SC).

[11] Rajasthan Cylinders and Containers Limited Vs. Respondent: Union of India (UOI) and Ors., [2018]150SCL1(SC)

[12] Competition Commission of India Vs. Coordination Committee of Artists and Technicians of West Bengal Film and Television Industry, [2018] 144 CLA 403(SC).

[13] Nagrik Chetna Manch Vs. SAAR IT Resources Private Limited and Ors., MANU/CO/0033/2019.

[14] Madhya Pradesh Chemists and Distributors Federation Vs. Respondent: Madhya Pradesh Chemists and Druggist Association and Ors., MANU/CO/0021/2019.

Facebook – Reliance Jio Tie up: Try, Try and Hope that you will Succeed.

(Business Today)

Initial informed rumours have finally culminated in an official announcement a few hours ago. Facebook will invest an amount of Rs. 43,574 crores for a 9.99 percent stake in Reliance Jio Platforms. The limited percentage is probably to prevent the investment from facing a regulatory hurdle before the C.C.I.

(Official video statement by Mukesh Ambani via Moneycontrol)

Financially, it makes sense for Reliance. It has for some time now been scouting for means to reduce Jio’s growing debt burden, and with the Reliance – Aramco investment deal definitely on hold for the foreseeable future as a consequence of the oil market debacle, it seems to have worked out fine for him (AS USUAL, if I may add). And an operations and commercial tie up with Facebook can only accelerate Jio’s growth and dominance in the country, and perhaps, over time even abroad (Africa is still one of the major markets with relatively low mobile and internet penetration).

Facebook, on the other hand, is relishing the opportunity to take another crack and penetrating the Indian market beyond social media (Remember the PR disaster that was “Free Basics” ?? – Our previous posts can be found here and here). And what better way to do it than to invest in the telecom company with officially the largest user base in India as well as revenue. Add to this the double icing on the cake which is the series of acquisitions made by Jio over the last three to four years with the obvious intent to create a formidable digital platform and the Promotor of the Company being without a doubt the biggest corporate influencer in the country. In fact, subject to correction, “Free Basics” seems to have been the first attempt by both the companies to try to work together and this is the second major attempt. Looks like Facebook has learnt a few lessons from its previous debacle.

While my previous concerns with Facebook’s attempts to penetrate the Indian market were primarily concerning network neutrality and the threat of information manipulation which accompanies Facebook everywhere in its “walled garden”esque operation style, a lot has happened since then. Typical of technology, issues concerning such investments have now jumped to a whole new dimension, where every big technology company is under scrutiny in multiple jurisdictions on competition and privacy concerns. In the past, the transaction probably shouldn’t have raised much concern for competition enforcers because Reliance would not be competing directly with Facebook. Today however, concerns are mounting on how tech companies are leveraging their control over data to push their own dominance not just in their original market, but also across vertical segments. And Facebook’s acquisition of both WhatsApp in 2014 and Instagram in 2012 has already created a Social Media behemoth which many worry about.

Even though C.C.I. has only recently begun to take nascent steps in examining Big Tech transactions, there is an additional dimension to the Reliance – Facebook tie up which definitely merits the C.C.I. taking the transaction seriously. My personal opinion is that this will definitely go through without any major hiccup, but how the two companies cooperate commercially is something to keep a watch on. Jio has today forayed into almost every form of digital media, including social media (Jio Chat). This coalescence which one sees in Jio’s acquisitions is however, not innovative. It is merely copying the playbook of a number of companies all across the planet, the most notable and successful examples being Alibaba and Tencent, of building entire ecosystems of digital media, communications and commerce with B2B and B2C connect. Google appears to have succeeded the best at this outside China, with a Google ID sign in now becoming a norm for most login transactions and a Google App available for almost every internet transaction you can think of. (On a side note, Google’s acquisition of FitBit has also raised similar concerns). Consequently, the lines between social media and other forms of entertainment have blurred over time. Facebook was simply late to the game, and is now playing catch up, and since it suffers from no dearth of cash, such investments help it to gain ground quickly, with a long term potential growth with Jio helping it to succeed where it has managed to only take a few tottering steps till now.

Delhi High Court Slaps Cost of Rs 1 Lakh. Writ against Section 26(1) CCI Order.

case dismissed In a rather interesting/unforeseeable turn of events, the Ld. single judge of the Hon’ble Delhi High Court (‘DHC’) has come down heavily on a Petitioner seeking relief against a Section 26(1) Order passed by the Competition Commission of India (‘CCI’).

The writ was filed against order passed by the CCI under Section 26(1) under Section 26(1) of the Competition Act, 2002 (‘the Act’), whereby the CCI had directed the Director General (‘DG’) to conduct an investigation on an allegation that the petitioner along with certain other manufacturers had contravened the provisions of Section 3(3)(a) and Section 3 (3)(d) of the Act.

The petitioner’s case was solely based on the contention that the said 26(1) order did not make any specific allegation against the petitioner.

A noteworthy background on this particular Sec 26(1) matter; is that the same petitioners had earlier moved to the writ court praying for relief of inspection of files of the CCI pertaining to the said order. And the same relief was granted by the DHC.

Now coming back to exactly what irked the Ld. Single Judge into imposing such heavy costs on the petitioner. Allegedly the whole controversy circles around an apparent untrue statement submitted before the court by the petitioners on their knowledge of the DG investigation in this particular case.

During the course of arguments , the counsel on behalf on the CCI, submitted before the court, certain documents relating to DG’s questionnaire, which was apparently sent to the Petitioners back in the year 2015, and the petitioners had duly participated in the investigation by replying to the said questionnaire. Without going into any finer details I will just say that this very movement was a true table turner. Because at this juncture the Ld. Single Judge went on to the extent of noting that the false statement and false affidavit of the petitioner make for a fit case to invite proceedings under section 340 of the Cr.P.C.

While not interfering with the operations of the said CCI order, and refusing to stay the DG investigation, the court while placing reliance on the Supreme Court case of Competition Commission of India v Steel Authority of India: (2010) 10 744; observed that that an order under Section 26(1) of the Act is in the nature of an administrative order and does not affect the rights of the parties. The Supreme Court had also examined the scheme of the Act and held that the legislative intent was not to permit any appeal against the order passed under Section 26(1) of the Act. Thus, an order under Section 26(1) of the Act cannot be interfered with unless it is established to be perverse or suffering from jurisdictional errors.

And accordingly the said petition was dismissed with with cost quantified at Rs.1,00,000/-. What will now remain interesting to see is how this order impacts the practice being followed by the Opposite parties of challenging the CCI’s order before the writ court under Article 226 of the Constitution. Would the attitude of not staying the operation of a 26(1) order finally mean that at last the Competition regulator will have proper time and opportunity of investigating into various alleged contraventions. OR maybe instead of an Article 226 remedy, a review/recall application before the CCI would be the appropriate way out for the Opposite Parties (Ah! btw hopefully an elaborate post discussing some thoughts on the CCI’s power of Review/Recall- soon). And maybe these investigations see the light of the day and aren’t just left hanging in the middle struggling for a decisive fate for years and years. And maybe just maybe this would be another step into the direction of having a stronger competition law regime in India.

C.C.I.’s 1st National Conference on the Economics of Competition Law, 2016

The Competition Commission of India (C.C.I.) is organising a two-day national conference on the ‘Economics of Competition Law’ on 3-4 March 2016 in New Delhi.

Important Dates and Deadlines

1. Submission of abstracts:- 5 October 2015; 2300 hrs IST

2. Intimation regarding selection of abstracts:- 10 November 2015

3. Registration of speakers:- 30 November 2015

4. Submission of final papers to the C.C.I.:- 31 January 2016

5. Conference Dates:- 3-4 March 2016

For further details, please click here.

I.C.N. Merger Workshop to go Online !!

In an excellent initiative by the C.C.I. (especially for the “aam aadmi” bourgeoisie like us who can’t get in !!), the Commission will be broadcasting the sessions of the I.C.N. Merger Workshop, 2014, which starts from tomorrow, on an Official Youtube Channel created exclusively for the Conference.

It is still not entirely clear whether the entire event will be broadcast live or only the relevant speeches by the speakers, but either way, it a great way to finally get a chance to listen in on the conference.

The link to the channel can be found here.