Thursday, June 18, 2020

Jio-Facebook deal under scrutiny of Indian antitrust watchdog

The much ballyhooed $5.7 billion (Rs 43, 574 crore) investment by Facebook in Jio Platforms, a subsidiary of India's most valued firm, Reliance Industries, may face investigations from the Indian antitrust watchdog.

According to a news report from Bloomberg, the Competition Commission of India (CCI) is reviewing Facebook’s purchase of 9.9% stake in Jio Platforms.

The news report, based on an email interview with Ashok Kumar Gupta, the chairman of CCI, did not specify anything in particular about the Jio-Facebook deal. But Ashok Kumar was quoted saying that, if need be, the existing rules of CCI may be amended to investigate some existing deals.

"Currently, some mergers and acquisitions escape the threshold for scrutiny even if potential harm is evident,” Ashok Kumar Gupta said.

"Peculiarities such as 'strong network effects, high returns to scale and access to a huge amount of data' may incentivise digital firms to engage in anti-competitive conduct," he is reported to have said, without referring to any particular case.

The CCI is mandated to forestall misuse of data in all the deals it assesses.

Data, the driver

The Facebook-Jio Platforms deal is expected to build on the data that the two biggies have access to through their existing business operations.

Jio Platforms has more than 388 million subscribers. 

Facebook, on the other hand, has 350 million users in India, while its messaging service WhatsApp has amassed over 400 million users in India. WhatsApp is the most popular instant messaging service in country.

Without doubt, data is by far the biggest cornerstone of the Jio and Facebook deal. 

Data will drive the business of Reliance's ambitious Jio Mart, launched in India recently, and it would fall back on the access that WhatsApp provides.

WhatsApp has already launched in beta mode WhatsApp Pay. Though its mainstream rollout in India has been delayed for various reasons,  once it becomes accessible to all it is expected to be a game-changer.

So far so good

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.” 

The alliance is also expected to help Reliance and Facebook to take on the Indian digital payment space, which is expected to rise five-fold to reach $1 trillion by 2023, and compete with the likes of PhonePe, Amazon Pay, Paytm, and Google Pay. 

India, with its 1.3 billion population, is one of the world’s fastest growing online arenas, where biggies like Amazon to Google are vying for dominance.

The CCI, for the record, is investigating Amazon and Walmart’s Flipkart Online Services over exclusive arrangements between the retailers and certain mobile phone brands, and preferential treatment given to some sellers.

The general belief in the market is that the CCI chief's words are only of academic interest, and the talk of scrutiny in Jio-Facebook deal without any specifics, is just a storm in a teacup. "Expect nothing major to come out of it," is what one source said.

(Your one-stop guide to Jio Platforms and its investors is here).

Via: Bloomberg.


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