ABUSE OF DOMINANT POSITION

HAS RELIANCE JIO INDULGED IN ABUSE OF DOMINANT POSITION?

The Competition Act, 2002 follows the philosophy of contemporary competition laws and aims at encouragement of competition and at protecting Indian markets against anticompetitive practices by enterprises/corporate. The Act prohibits anti-competitive agreements, abuse of dominant position by enterprises, and regulates combinations (mergers, amalgamations and acquisitions) with a view to ensure that there is no adverse effect on competition in India.

The Act defines dominant position in terms of a position of strength enjoyed by an enterprise, in the relevant market, which enables it to run independently of the competitive forces prevailing in the relevant market; or affect its competitors or consumers or the relevant market in its own favor. It is the ability of the enterprise to behave / act independently of the market forces that determines its dominant position. Dominance is not considered bad per se but its abuse is. Abuse is stated to occur when an enterprise or a group of enterprises uses its dominant position in the relevant market in an exploitative manner.

The most recent case study on this very aspect would surely be of Reliance Jio. Entry of Reliance Jio in the Indian Telecom market turned out to be a game changer. Reliance Jio proved the might of the Reliance Group once again by creating euphoria for their newest business, enticing customers with freebies. It started with a show of complete grandeur and then Mr. Mukesh Ambani launched his newest service by understanding the very pulse of the Indian consumers who are very price sensitive and the only way to win them is by offering more for less-a trait. The effect of Reliance Jio was such that even before its commercial launch, it had completely shaken up the market and forced giants like Airtel and Vodafone to cut their tariffs and offer free calls and services in order to remain relevant and compete with Jio.

Though, Reliance Jio was embraced with open arms by customers sick of dropped calls, uncompetitive rates and general stagnation in the telecom marketplace, a war between Jio and existing operators raged on regarding the legality of the said testing. It was not too long when other operators filed a case against the Ambani-led group for alleged violation of competition laws in the Competition Commission of India (“CCI”). Airtel in its complaint accused Jio of “abusing dominant position” and “predatory pricing” with the intention of killing the competition. There were also complaints made by the competitors of Jio before the Telecom Regulatory Authority of India (“TRAI”).

Before accessing whether Reliance Jio did abuse its dominant position in the market, it is essential to study whether the same enjoys a dominant position in the market or not.

As per the provisions of the Act, dominance refers to the ability of an enterprise to operate independently of market forces, and its position of strength, which enables it to affect competitors or consumers or the relevant market in its favor. Various factors to be taken into consideration for determination of dominance are listed under S. 19(4) of the Act. Thus, it might be said that market share, though a major factor, is not the sole standard in determination of dominance.

With regard to Reliance-Jio in this context many experts are of the opinion that Jio cannot be accused of any abuse of dominance as the same do not even enjoy the dominant position in the market. Charges of abuse is only relevant when a company or corporate already has a dominant position in the market. Therefore, the said corporate has to necessarily be an incumbent with significant market power in the form of high market share and accessibility to resources. Jio, being a new venture to enter the telecom market cannot be accused of the same as it does not fit in the description. Hence, if a corporate is not even enjoying a dominant position, it cannot be accused for its abuse and invoking predatory pricing to hamper healthy competition in the relevant market. If one goes by past rulings by the CCI in similar issues and new industries like Uber-Ola or Flipkart-Amazon, the body has largely ruled that if a corporate doesn’t have a dominant position in the market, it can’t be seen to have engaged in predatory pricing. This being the sole reason that TRAI and CCI dropped the abovementioned charges by Airtel and other Corporate against Reliance Jio. CCI further observed that in the absence of any finding of anti-competitive conduct by Jio, its parent RIL cannot be held to be in contravention of the competition laws just because it has made huge investments in its telecom venture. If one were to construe such investment as anti-competitive, the same would deter entry and/or expansion and limit the growth of markets. According to the CCI, it would not be appropriate to hold Jio dominant in a scenario where its customers constitute less than 7 per cent of the total subscriber base at a pan-India level. The CCI further observed that it would not be anti-competitive for an entrant to incentivize customers towards its own services by giving attractive offers and schemes.

With respect to the views of the Ld. CCI, it can also not be ruled out that the prevailing view was only valid when Jio was seen as an entrant in the telecom market. In the current context however, when Jio has garnered significant share in the market and has still continued to price its service below the market rates with claims of absolute contravention of competition laws made by its competitors against it, it would be interesting to see if the CCI has the same views if a fresh cause of action is raised against Reliance Jio in light of it not being an entry level player anymore.

 

Article by

Sushant Chaturvedi (Associate)

Vikalp Srivastava (Intern, KIIT University)

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