Jio Infocomm

THE CURIOS CASE OF JIO INFOCOMM: JIO AND COMPETITION LAW
PRAGYAN MISHRA
2013083
AIM: To Study the market affects of the launching of RJio’s free services and how it
has disrupt the telecom industry in India.
SCOPE: The Scope of the study shall be limited to the study of Jio’s pricing and how
it has utilized its other associations to disrupt the telecom market and its pricing in
India.
RESEARCH METHODOLOGY: The Research shall be using doctrinal
methodology with books, journals and economic reports as its primary sources.
HYPOTHESIS: Disruption by itself may not be bad. Consumers will gain and so
will the Internet start-up ecosystem. However, if the disruption is of such an order that
it wipes out large sections of the industry and eventually leads to the dominance of
just one or two players, it may not be good for the consumers in the longer run either.
INTRODUCTION
The Competition Commission of India (CCI) ruled on 30th April that there was no
prima facie case of predatory pricing,1 which Bharti Airtel still has the opportunity to
contest under article 26 (6) of the Competition Act. My guess is, however, that such
efforts would be futile. Seeing the facts listed above it might be your guess too. After
reading the short 17-page decision, one can clearly see that the CCI has a favorable
view concerning the competition dynamics in India’s mobile telecommunications
market, which may also foreshadow how it will decide the mergers under its review
(it already okayed Bharti Airtel’s merger with Telenor India, but other transactions
are still pending).
The decision may be summarized as follows: if winning a predatory pricing case
against an incumbent is difficult, winning one against an entrant is next to impossible,
considering that the complainant is arguably the dominant player. Bharti’s strategy
was what one would expect. It tried to put forward a very narrow definition of the
relevant market––4G services––where it argued Reliance Jio had, within less than a
year, acquired a dominant position. The CCI did not buy it. It defined the market as
the provision of wireless telecommunications services to end consumers, including
1
Competition Commission of India, Order under Section 26 (2) of the Competition Act, case No. 3 of
2017, available at http://www.cci.gov.in/sites/default/files/3%20of%202017.pdf.
2nd, 3rd and 4th generation technologies. Jio’s 6 percent share in this broader market
made it unnecessary to enter into the analysis on whether prices were predatory.
It strikes me as odd that Bharti would have considered pursuing this suit in the first
place. It might have thought that the CCI could have been impressed with the fact that
Jio is a part of a massive conglomerate with vast resources. Then again, it is hard to
believe that the authority could have been persuaded that incumbents were in a
disadvantageous position in this respect, as it rightfully was not.
From an economic standpoint, Bharti’s case was shaky, at best. It does not fit, at least
with the information at hand, with the common assumptions that have to be made for
a realistic price predation case2. It is hard to argue that Reliance Jio had such a cost
advantage that it could have endured a lengthy price war to drive enough operators
away from India’s market. The country is also experiencing fast growing incomes
which will increase the size of the broadband markets, a trend that plays against a
price predation strategy being effective. A growing market that can accommodate
more entrants is not easy to monopolize. Being an entrant, it is also impossible to
argue that Jio is in a position of having a low cost predator reputation that could keep
companies away from the market once it becomes the dominant operator and raises its
prices
LITERATURE REVIEW
1. Carlton is of the opinion that From an economic standpoint, Bharti’s case was
shaky, at best. It does not fit, at least with the information at hand, with the common
assumptions that have to be made for a realistic price predation case.
2. Petit views it as much as deviation is an internal force likely to undermine tacit

collusion, disruption is a powerful external force that can cause a return to the
competitive equilibrium. The sources of disruption may be technological (eg radical
innovation), economic (eg entry of a low-cost player) or legal (eg tax reform). But
disruption may never deliver its pro-competitive promises if oligopolists tinker to
restore a collusive equilibrium.3
2
See Carlton, D.W. & Perloff, J.M. (2005). Modern Industrial Organization, pp 352–357. United
States of America: Pearson/Addison Wesley.
3
Nocholas Petit, RE-PRICING THROUGH DISRUPTION IN TACITLY COLLUSIVE
OLIGOPOLIES: MAKING SENSE OF ABUSE OF COLLECTIVE DOMINANCE LAW,
DAF/COMP/WD(2015)52 , OECD.
3. As per Clayton, Disruption is often used as an effective strategy by a new and
powerful entrant to outcast strong incumbent competitors. Disruptions happening in
the corporate world can be categorised into two types: New-market disruptions and
low-end disruptions. New-market disruptions call for creating a novel market for the
product. So the challenge for new-market disruptors is 'non-consumption'.4
4. Kapil Yadav believes that India is currently considered the world's second-largest
telecom market. It has registered a strong compound annual growth rate (CAGR) of
19.96 per cent in its subscriber base during the last decade. The mobile segment's
teledensity swelled around six times, from 14.6 per cent in FY07 to 81.38 per cent in
FY16. The number of Internet subscribers in the country increased at a CAGR of
78.81 per cent, with the number reaching 342.65 million in March 2016 from 8.6
million in 2006. The sector is expected to witness an extremely high growth rate in
the coming years, given the favourable regulatory support by the government and the
introduction of 4G.5
4
Clayton M. Christensen and Michael E. Raynor , Successful Growth. Boston: Harvard Business
School Press, 2003.
5
Indian Journal of Science and Technology, Vol 8(S4), 194-199, February 2015 ... Kapil Yadav,
Shashank Tiwari and Rajiv Divekar

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THE CURIOS CASE OF JIO INFOCOMM: JIO AND COMPETITION LAW

2. Petit views it as much as deviation is an internal force likely to undermine tacit

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