Yesterday, Zuckerberg-led US Social Media Conglomerate, Facebook had announced that they are going to invest ₹43,574 Crores into Reliance Industry Limited (RIL), specifically their digital umbrella operation, Jio Platform. Today, industry experts are saying that this $5.7 Bn deal needs to be scrutinised by our country’s competition watchdog, at least regarding the amount of data these collaborating entities will be privy to.
In terms of the private data, RIL and Facebook separately control a bulk of what Indians use. Government officials have cited the fact that the combined reach of Reliance Jio Platform, Facebook and its popular messaging app, WhatsApp, could provide undue advantage against competitors from any sector they have a foothold in. These competitors include tech giants like Amazon and Google along with small Indian tech start-ups.
As per company officials, a CCI approval is the only regulatory clearance needed for the deal to go through and RIL is going to approach CCI soon.
Industry analysts are seeking more transparency when it comes to the way Jio and Facebook will function after the deal.
Neil Shah, VP at Counterpoint Research has stated, “The government needs to look into the data-sharing agreement between these two parties and it should be made transparent to both consumers and the government.”
Furthermore, he added, “One needs to look into intrusive advertising. Since they are using WhatsApp channels for digital commerce, it opens up transaction details of these SMEs to a foreign company. It needs to be clarified that once FB gets access to the millions of Jio users, how will it use (the information)?”
Another Government official has assured that Telecom Regulatory Authority of India (TRAI) is currently analysing the implications that this deal will have for Indian consumers and Jio’s telecom competitors.
Apar Gupta from Internet Freedom Foundation (IFF) said, “Our legal and regulatory systems need to grow in independence, strength and maturity to tackle the risks of concentration of market/network power.”
Netizens might recognize IFF as the organization which ran the Save The Internet Campaign against Facebook’s Free Basics programme. Talking about how laws have to catch up to the ever-growing digital space, he stated, “Today, competition law does not consider any privacy rights related harms which emanate from market concentration in information societies that are exaggerated by power and information asymmetries. These power asymmetries and lack of real consumer choice are spurred by network effects which characterise digital markets.”
Reliance Jio, which began its commercial operation in the latter half of 2016, upended the local telecom market by offering a bulk of 4G data and voice calls to its users, for six months, at no charge. The telco kickstarted a price war that forced local network providers Vodafone and Airtel to revise their data plans and mobile tariffs. However, they have constantly struggled to match the offerings of Jio, which has become the top telecom operator in India with a subscriber base of 38.8 Crore.
Government officials are alarmed about the data sharing prospects that this deal could very well entail even though Ajit Mohan, MD of Facebook India, has assured press that there’s no data sharing on the table.
“Access to data is an interesting aspect of this deal, these two companies are like two elephants and the combined entity may have an unfair data advantage,” said the government official cited above. “Once WhatsApp and Jio join (hands), they may end up killing all competition and distort fair market practices.”
Competition Commission of India (CCI) scrutinizes select investments and mergers and acquisitions (M&A). One of the primary aspects it analyses is the market share of the entities involved in a transaction. It has the authority to take suo motu action if it sees cartelisation or if there are complaints that a company or consortium has higher concentration of market power.
“There is a policy gap and CCI should address this gap—how can one (set of companies) have all the data… After that, who will be able to compete in the market with them,” pointed out one official. “Whether it is payments or retail, the combined entities will concentrate too much power in their hands, then how are we going to regulate that?”
Facebook, has enjoyed an unparalleled reach in many countries across the world, India being its largest, at 400 million users. But, historically, they have not made as much money from each user in Asia. WhatsApp couldn’t operationalize its payment module in India over regulatory concerns for storing user data, locally. Indian government has been pushing WhatsApp to allow traceability of messages on its platform to curb misinformation. Facebook had also attempted to expand its free Internet initiative, Free Basics, in India. it failed due to net neutrality laws in India. The company has since been able to expand Express Wi-Fi in India even though its scale and relative potential remains small.
Reliance has been trying to expand its digital ventures on the back of its massively successful telecom venture, Jio. Jio Platforms is the flagship that provides telecom and other e-based services to its huge subscriber base. This means that their services are direct competitors of the ones Facebook provides.
Government officials will also watch out for any violation of net neutrality rules once the integration of Jio and Facebook products is complete.
“At present we don’t have any laws on OTT (over-the-top) regulation in the country and this deal will have to be analysed from a larger angle. Obviously, there are concerns if Facebook products including WhatsApp tend to work better on a Jio network? However, this possible violation of net neutrality can only be observed once the deal comes through,” said a senior TRAI official.