TELECOM OPERATORS - A CHAPTER THAT NEEDS REVISITING

 

When Bharti Airtel knocked on the doors of Competition Commission of India (CCI) to have a look into the actions of JIO Private Limited (JIO) & its parent company Reliance Industries (Reliance) to observe if there are any anti-competitive practices being carried out in the market which hinders fair competition (Case: Bharti Airtel v Reliance Industries Limited and Reliance JIO Infocomm Limited)[1], then CCI concluded its proceedings finding JIO not in contravention of any provisions of the Competition Act (the Act)[2]. There were numerous arguments which were raised during the proceedings from both the sides. 
The informants concentrated their arguments on the “market share of JIO in 4G network”, “predatory pricing policy” and “using the dominant position in one relevant market to enter into other relevant market”. Later on when the decision was not in the favour of the Informant then the subject matter was changed to the Jurisdictional aspect. It was then contended that the CCI does not have any jurisdiction to entertain such matters as they should be first decided by Telecom Regulatory Authority of India (TRAI). As to ascertain whether an enterprise is carrying out actions which are in contravention with section 4 of the Act, the first and the foremost thing is to define the “relevant market”. 
Usually the parties who are arguing that the opposite party has a dominant position in the market tend to limit the relevant market to its minimum; this is done to make it easier to establish that the opposite party is having a higher market share. Determination of Higher market share further helps them to establish dominance of firm in the market. To prove that there has been abuse of dominance one needs to prove that there was dominance. So this is the chronology usually followed. It needs to be understood that the “market share” is only one of the factor and not the only factor to determine dominance. Factors which are used to determine dominant position are mentioned under section 19(4) of the Act.
The informants contended that the relevant product market for the present case should be “providing 4G LTE services of telecommunication”/“providing 4G LTE services using 4G Technology”. The relevant geographical market should be “whole of India”. Therefore, the relevant market was contended to be “providing 4G LTE services of telecommunication in India”. And in addition to this it was further submitted that JIO that JIO owns 66% of the 4G LTE network and thus can be clearly observed as the enterprise holding almost 2/3rd of the market.
It was further submitted that the “predatory pricing policy” which in this case refers to the “JIO welcome offer”, “Happy new Year offer” and “JIO Iphone Offer” according to this offer whoever subscribes to JIO as their telecom operator then they would enjoy a year full of unlimited calls and data services. It was stated that this predatory pricing policy which is actually is a zero pricing policy is anti-competitive in nature. Reliance was further placed on the decision of Competition Appellate Tribunal in the case[3] filed by MCX Stock Exchange Limited alleging predatory pricing by National Stock Exchange (NSE) of India, where the commission found the predatory pricing followed by NSE to be in contravention of the provisions of the Act.
Arguments were raised that JIO is offering free services and not incurring any profit. Therefore, it is safe to assume that Reliance is providing investment and giving JIO the ability to incur huge losses and still maintain the position in the market.
The Commission in its judgment stated that the relevant market cannot be limited to “providing 4G LTE services of telecommunication in India” and should be expanded to “provision of wireless telecommunication services to end users in each of the 22 circles in India”. This was done because the commission was of the view that the 4G services may have been recently evolved but the same can be substituted by the 3G or 2G services and though it is observed that the 4G services require new technology handset but the same also support 2G as well as 3G services thus ensuring that the on-going technology evolution is “backward compatible”. 
It was also observed that the Department of telecommunication (DoT) grants a uniform license to each and every telecom operator and does not differentiate on the basis of network service being provided. In this relevant market JIO owns 6.4 % shares, therefore, nullifying the whole argument related to relevant market.
It was further stated that every new entrant has a right to make its existence felt in the market and if the same is done through lucrative offers for a limited period of time to attract customers then the same cannot be said to be anti-competitive. It was also observed that since the entry of JIO there have been several other new entrants in the market which indicates that there has been no creation of entry barriers in the market. After observing that JIO does not have a “dominant position in relevant market” this assures that no question of abuse can arise. 
Therefore, in conclusion JIO was not in a dominant position at that time and thus cannot be said to have abused the dominant position in relevant market. In paragraph 22 of the Judgment the commission observed that:
“Notwithstanding this, the offers of OP-2 do not appear to raise any competition concern at this stage.”[4]
OP-2 refers to JIO and the Commission was of the view that the offers do not appear to raise any concern “at this stage”. This judgment is of 2017 and the commission was of the view that at that stage there were no competition concerns raised, therefore, JIO cannot be said to be in a dominant position to abuse the market. 
The year end of 2019 noted that Reliance JIO has now come to second spot with approximately 30.26% of the Market share and is just behind Vodafone-Idea which constitutes 31.73% of the Market share. This information was delivered by TRAI in its monthly report[5] on subscription data of Telecom networks in the country. Since 2017 when the Judgment was delivered by CCI many things have changed and especially if we look at the market share of JIO it has changed a lot and it is now the second largest when it comes to market share. It would have been the largest if Vodafone and Idea would not have merged.
So now is the time for the Competition Law “Watchdogs” to revisit the chapter of JIO to find whether it is in contravention of any provisions of the Act or not?
Reasons for the same are mentioned below:
  1. The predatory pricing (zero pricing policy) which was undertaken by JIO at the time of its inception later changed into plans (plans which offered services for a limited period of time against money). It was expected that the same will be done because one need to make profits to make it up for the losses faced and the same was done. The plans which were offered by JIO set a margin for other enterprises to set rate for their plans. Recently, there was a hike in plans of JIO and the same was done by the other enterprises. This indicates that the market is controlled by JIO as other telecom operators who have incurred huge losses at the time of inception of JIO due to its lucrative offers and marketing policies now want to make profit out of their investments. This need of making profits makes them follow the footsteps of JIO and thus knowingly or unknowingly JIO is controlling the market.
  2. Revisiting the market shares by concentrating on the fact that JIO has very quickly gained a lot of percentage of the market and at this rate will soon gain a lot more thus becoming the enterprise with highest market share. Market share is one of the factors of determining dominance.
  3. Concentration needs to be placed upon the facts that JIO has offered call rates which indicates that if any JIO user calls the user of any other telecom operator then they will be charged accordingly. The catch is that there will be no charge if the call is made from JIO-JIO user. Thus following a market strategy which eliminates competition rather than encouraging it. And if this market strategy is in the market for a long time then it will in hinder new entrants as they will not be able to attract customers because of such strategy. Thus, creating entry barriers in the relevant market.

Conclusion
In conclusion it can be said that the Commission needs to revisit the terms “not at this stage” so as to ensure fair competition in the market. The CCI being a watchdog should keep an eye on the telecom sector to ensure that there are no anti-competitive activities being carried out.  The CCI should also work in comity with TRAI as both have the intent of safeguarding the market. Emphasis can be placed on Section 62[6] of the Act, which states that Competition Act is in addition and not derogation to any other law. 

References
[1] Bharti Airtel v. Reliance Industries Limited and Reliance JIO Infocomm Limited, available here.
[2] The Competition Act, 2002. available here.
[3] MCX Stock Exchange Ltd v. NSE India Ltd, 2014 Comp LR 304 (COMPAT).
[4] Supra note 1.
[5] TRAI monthly report on Telecom operators in Wireless Market. Retrieved from here.
[6] Supra note 1.

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