Case Study 1
RJio’s behavior and the manner of its entry into country’s telecommunications industry may be considered as predatory for a few specific reasons;
1. It acquired the BWA/4G spectrum in 2010 and benefitted as the government changed its rules retrospectively. Thus, enabling RJio to provide both voice calls and data services on the same spectrum.
2. RJio is data centric and works only on 4G mobile handset. Therefore, consumers may end up paying more for RJio services under the guise of free voice calling than other providers.
3. RJio’s free services of the trial period were supposed to be till December 30, 2016. However, they had constantly extended deadlines until the introduction of Jio Prime.
The situation is not same as it was during its inception i.e. September 1, 2016. As of April, 2017, Jio had garnered around 72 million subscribers and is being considered one of the top telecom players in the country. Its competitor Airtel has reported a fall in net profit by 54% last year. Further, Idea-Vodafone is planning to merge in order to compete effectively.
The Competition Commission of India (CCI) has investigated a number of instances of unfair competition. For example, the CCI has investigated complaints of “predatory pricing” against transport-technology companies, Uber and Ola, as well as allegations made against e-commerce websites, Flipkart and Amazon. These complaints were made after these companies started offering large discounts to consumers. Each of these companies has since been exonerated of any charge of “predatory pricing” as none of them had a “dominant position” in their respective markets. While investigating these cases, the CCI considered a firm’s market share as the sole determinant of dominant position. The CCI is, however, expected to consider a range of factors while ascertaining market dominance.
When Jio first launched its services in September, 2016 it was a fresh entrant in a market with several established players. Its price point of zero was certainly below cost but there was no question of it being a “dominant player”. Any regulatory intervention to stop the pricing plans at that stage, whether by the sectoral regulator TRAI or the CCI, would have been premature.
This position has come to change over the last few months. Jio has managed to acquire a sizable presence in the market for high-speed data services – it holds about one-third of the country’s broadband subscriber base and about 85 percent of the market in terms of mobile data traffic. Its share in the overall market for telecom services (voice plus data) still remains small since telecom subscribers continue to outnumber Internet users by a wide margin. The manner in which CCI delineates the “relevant market” will therefore form the crux of its analysis in this case. The first step for CCI would be to determine whether there is a market for data services that is distinct.
QnA:-
Q.1. How might predatory pricing be characterized?
(A) As an exploitative abuse
(B) As an anti competitive abuse
(C) As an indicator of dominance
(D) As a feature of the relevant 4 product market
Q.2. In this case , CCI could prove that Reliance Jio is held guilty of predatory pricing and had abused:
TRUE
FALSE
Q.3. Which were the factors the CCI is expected to consider a range of factors while ascertaining market dominance:
(A) sizable presence in the market
(B) being dominant player in the identified market
(C) Both a and b
(D) assess whether its current prices are in fact "above cost"
Q.4. RJio's behavior and the manner of its entry into country's telecommunications industry may be considered as:
(A) Acquired the BWA/4G spectrum in 2010 and benefitted
(B) Consumers paid less for free voice calling
(C) constantly extended deadlines of free trial period.
(D) Both a and c
Q.5. What is the primary indicator of dominance in the relevant market?
(A) Profitability
(B) Market Share
(C) Production Capacity
**All The Best**
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