Monday, June 22, 2020

Indian startups to file plea against Jio-Facebook deal

A clutch of consumer internet startups and venture capital investors are reportedly mulling a plea with the Competition Commission of India opposing Facebook’s investment in Reliance-owned digital entity Jio Platforms, citing concerns of data sharing and misuse.

According to a report in Mint that quoted anonymous sources in the know of things, the appeal is likely to be filed with the CCI in a few days, even as the CCI itself is contemplating suo motu scrutiny of the deal.  The names of the startups filing the appeal were not given.

It may be recalled that in April  Jio announced Facebook’s $5.7 billion  (Rs 43,574 crore) investment for a 9.99% stake in the Mukesh Ambani-led telecom major. 

The news report had mentioned Naspers Ventures as being one of those likely to approach the antitrust watchdog. The South African internet giant has however denied this.

Apart from outside startups, the deal is also expected impact the companies that Jio Platforms and Facebook are already separately in ties up with.

Facebook has invested in social commerce firm Meesho and online learning firm Unacademy.

Jio, for its part, Jio has made more than ten investments in internet firms such as Fynd, EasyGov and Embibe.

Facebook, in its application to the CCI, had claimed that the deal does not alter the competitive landscape in any relevant market. 

Facebook has formed a separate subsidiary company "Jaadhu Holdings" for the deal, and in its filing with CCI, it said: “The Proposed Transaction and the Proposed Commercial Arrangement are pro-competitive, benefits consumers, Kirana (corner) stores and other small and micro local Indian businesses, and take forward the vision of digital India.”

Questions over data privacy

Right from the day the deal between the two biggies was announced, data privacy warriors have raised a red flag as the two companies have access to vast amounts of data.

Facebook holds more than 328 million users in India, while Jio has around 380 million active users. Reliance Retail and Facebook-owned Whatsapp have also entered into a commercial partnership under which Reliance Retail's Jio Mart platform will support small businesses on Whatsapp. And WhatsApp now has over 400 million users in India.

Justice BN Srikrishna,  the chief architect of India's data privacy law, talked about the privacy concerns originating from Reliance Jio-Facebook deal.

He said:  "It is a strategic investment. A strategic investment by definition means it is an investment intended to further the business interest of the investee as well as the investor".

The deal was also seen as being discriminatory to competition in the ecommerce segment by monopolizing data. It was claimed that it will hit, in the long run, direct-to-home and over-the-top platforms. Overall, it will be a big blow to net neutrality was one of the arguments. 

Talking of net neutrality, Facebook has had a bitter experience once before in India. In 2015, Facebook and Anil Ambani-led Reliance Communications forged a tie-up to offer Free Basics in India —a plan that promised free internet but bundled along with a slew of digital products and services.

India’s telecom regulator TRAI, however, found it to be “discriminatory" as it violated net neutrality norms, after which the service was discontinued in the country.

While the two companaies go ahead with the new deal, the ball is now in the courts of the CCI and the Telecom Regulatory Authority of India to investigate whether the deal is in violation of any law or norm.

Via: Mint

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