The aims and objectives of patent and antitrust laws may seem, at first
glance, wholly at odds. However, the two bodies of law are actually
complementary, as both are aimed at encouraging innovation, industry and
- Atari Games Corp. v. Nintendo of America, Inc.
As the entire world is undergoing a crisis due to a Global Health Emergency, the
businesses i.e. production, distribution, services remain at a halt worldwide.
Meanwhile two of the major corporations of the world entered into an acquisition
agreement, i.e. Facebook Inc. buying 9.99 % stakes worth $5.6 billion or Rs.
43,567 crores in Reliance Jio which is an Indian telecom giant having 388
million active subscribers, thus having approximately 32.14% market share in the
Indian telecom and communication sector[i]. This is perhaps the largest Foreign
Direct Investment in the technology sector in India.
This acquisition of stakes of Jio by Facebook is an example of Horizontal
Acquisition. A horizontal acquisition is an acquisition of one company by
another or a certain percentage of the stakes of one company by another and
those companies are either in the business of same goods or services or at same
level of production.
The deal was worked upon by Shardul Amarchand Mangaldas,
AZB & Partners, Hogan and David Polk. The deal will be under the scrutiny by
Competition Commission of India for their examination whether this deal will
lead to concentration of market power and undue advantage of this newly formed
acquisition over other market players in India.
The combined services which can be offered by Jio and Facebook
In this portion, we need to look at the broader picture, i.e. the acquisition is
not just between Facebook which is not just a social media platform and Reliance
Jio which is a telecom company. But the acquisition by Facebook Inc. which is
the parent company and includes WhatsApp and Instagram; and Reliance Industries
Ltd. which is the parent company of Jio.
These two parent companies combined
have the potential to possess an unfair advantage over other market players
hence; they can prove to be a threat to the policy of free competition in India.
Here is a list of sectors and services where this acquisition will work:
- Online Payments & Digital Wallet- (Callibra+ WhatsApp pay +
Messenger Payments) + ( Jio Money Wallet + Jio Coin)
- Health Tracking & Services- ( Preventive Health Tool) + ( Jio Health Club)
- Events & Entertainment- ( Facebook Local) + ( Jio Cinema +
Jio Music + Reliance Entertainment + Bookmyshow)
- Retail and messaging services- ( WhatsApp Messenger ) + (
Jio Mart + Reliance Fresh)
- Clothing & Fashion- ( Facebook marketplace) + ( Reliance
Trends + AJIO + Project Eve)
- Commerce Enabling Software – ( Meesho + WhatsApp and
Facebook for business) + ( Jio Mart + Jio POS + MyJio)[ii]
Scanner of Competition Commission of India
Competition Commission of India (CCI) which is the anti-trust watchdog of India,
has this deal under its scanner, for its potential to adversely impact the
telecom and retail sectors of India.
Facebook Inc. has an enterprising project called WhatsApp Pay but has been
interrupted for long due to data localisation requirement which was initially
being resisted by Facebook Inc. Facebook is looking this deal to kick –start its
long –stalled and ambitious project called WhatsApp Pay.
Facebook now agreeing
to data localisation, it can be predicted that WhatsApp pay which had run a beta
test with 1 million subscribers, could be merged along with Jio Mart and would
be rolled out digitalising all local merchants, small vendors and kirana stores
on one E- Commerce platform. With this Jio's one unique ID to be used for all
Jio related transactions would provide them advantage over their rivals.
Reliance Jio in the past has also been accused of predatory pricing by its
telecom rival Bharti Airtel.
Scrutiny under the Competition Act 2002
Competition Commission of India being a market regulator and the anti-trust
watchdog for the Government of India has the responsibility to see that no
company whether on the individual basis or through any form of merger or
acquisition uses its huge market capital or size dominance uses any form of
predatory pricing or any other unethical tactic to wipe out the competition in
Chapter 2 of the Act contains the provisions for Prohibition of certain
agreements, abuse of dominant position and regulation of combinations
Section 3 of the Act specifically dealing with the anti-competitive agreements
and demarcates which type of anti- trust agreements are barred under this
section. As sub-section 1 states that no corporation is allowed to enter into
any agreement which is likely to cause an adverse effect on competition within
India. Jio and Facebook will need to clear this hurdle to show as to why their
agreement will not lead to an adverse effect on competition in India.
specified above, there are total six categories where this agreement can give
competition to other corporations or start-ups in India. Retail and
entertainment sector being the major ones. Jio Mart using its market presence
and its connectivity to local traders and small kiarana stores, which are
present in even the small cities and towns of India, can form a separate E-
Commerce platform supported by WhatsApp Pay.
Moreover, in a press- conference Mr
Mukesh Ambani, Chairman of Reliance Industries Limited revealed about his plans
of having one Unique Jio ID per consumer which can be used on all Jio platforms
right from Jio Mart to Jio Cinema. This activity in future, might result prove
to be an adverse effect on the competition in India. Start-ups and companies
involved in payment banking and retail sector would also be adversely affected
from this agreement. [iii]
This also raises privacy issues regarding data sharing between Jio and Facebook.
Although privacy issues are not something in which CCI has a say. It is for the
Courts to look into.
A different connotation to this acquisition is whether there is an expressed
agreement between Reliance Industries Limited and Facebook Inc. to do business
beyond the telecom industry? The answer to this question lies in the judgement
of CCI itself.
In the case of Builders Association of India v. Cement
Manufacturers of India,[iv] CCI imposed fine on fifteen cement manufacturing
companies for their act of cartelisation in cement industry. More importantly,
CCI sat precedent that an express agreement need not be present to show the
abuse of dominant position or cartelisation need not be there; instead CCI can
proceed with the case if there is any circumstantial evidence proving the claim.
It is rather very early to state that whether this deal would be violative of
Competition Act 2002 or not. The main goal of CCI is to facilitate competition
in India so that consumers can get best available services in India.
CCI functions based on three possible outcomes or rather decision mechanism:
- It can declare the deal null and void if it violates Competition Act and
is against the consumers' interest.
- It can ask the accused party or parties to modify or alter their
- It can impose fine on the accused if their agreement has already done
However, CCI's Director General stated that, CCI generally does not believe on
imposing fines, rather it emphasises more on the point that corporates following
the law. Thus the acquisition of 9.99 % of the shares of Jio by Facebook will
have to go through the scanner of Competition Commission of India to see whether
it is harmful for the competition in India or not and more precisely whether it
harms consumer interests or not.
- Wireless subscriber market share in India as of December 2019, by
service provider company, Statistica (2020), https://www.statista.com/statistics/258797/market-share-of-the-mobile-telecom-industry-in-india-by-company/
(last visited May 1, 2020)
- Ananya Bhattacharya, One table that shows how massive the Facebook-Reliance
Jio universe can be, Quartz India (2020),
(last visited May 2, 2020)
- Srijan Soni, CCI to Overlook $5.7 Billion Acquisition Deal Between
Facebook and Jio, Telecom Talk (2020),
visited May 5, 2020)
- Competition Commission of India Case No. 29 of 2010