Two technology giants sealed a deal last week to work towards a holistic digital transformation in India. The world’s largest social media company, Facebook Inc. invested 5.7 billion dollars for a 9.99 % stake in Reliance India Limited’s (RIL) Jio Platform. The sale of a near 10% stake in a wholly-owned subsidiary of RIL’s telecom platform is not merely a deal of share transfer in a company for cash consideration. The statement of Mr Mukesh Ambani, Chairman and Managing Director, Reliance, resonates the deeper value that the deal beholds i.e., ‘to combine power of Jio’s world-class connectivity platforms and Facebook’s intimate relationship with Indians to offer innovative, new solutions to each one.’ As noble the aim be, it is a turning point in the Indian telecom and e-commerce platform, nudging the sectoral regulators namely, Telecom Regulatory Authority of India and the Competition Commission of India to stay on toes and effectively ensure that the transaction does not cast an adverse impact on the accepted norms of ‘net neutrality’ and ‘unhindered competitive markets’.
Facebook and Jio have identified four areas of collaboration namely, e-commerce, smart video-conferencing solutions, mixed reality and media. While the companies aim to use the synergies to achieve this goal, the distinct nature of operation and functionality where one provides an edge over data and the other provides innovation and advanced technological implements on internet, may have a disruptive impact on e-commerce and telecom markets. As of early January 2020, Jio captured almost 57% of India’s total data subscriber base. With a major market share in the Indian telecom industry, an investment by the world’s largest social media platform brings with it looming concerns for competitors in the e-commerce and telecom segment.
A net neutrality violation may seem absurd right now, given the assertions made by the officials of the companies that a data sharing agreement is not in place. However, the manner of alignment of the synergies in the overall ‘digital transformation’ may result in unavoidable non-discriminatory practices where the content of the minority stakeholder when circulated on Jio’s internet space is given preference over other unrelated content. The penetration of Jio’s internet even in the remotest areas of rural India and its edge over data may create a possible benefit for Facebook to have deeper penetration and better quality of data/ internet service. Interestingly, a part of the deal aims to commercialise the JioMart project to have improved accessibility to citizens. By mobilizing WhatsApp, JioMart will be able ‘help three crore kirana stores to digitally function and have access to customers in the neighbourhood’ as said by Ambani. While the contours of this JioMart – Whatsapp collaboration is not open to public scrutiny, the use of Facebook-owned Whatsapp platform in return for quality service, speed and better data accessibility may capsize the concept of a neutral internet. Zero rating and preferential speeds to content related to Facebook are issues which may surface shortly.
On the positive side, the deal promises to usher in benefits for the local business community. As per the Reliance Managing Director, the JioMart and WhatsApp tie-up will target farmers, students, small and medium scale enterprises, teachers, medical health experts and women and children, to provide ease of living and ease of doing business. However, the bigger fear lies for the e-commerce players. The Jio- Facebook combination will guarantee an edge in terms of enhanced data, technology and innovation which other e-commerce platforms may not be able to achieve, unless they secure similar investments from technology and innovation giants. Deep discounts and platform neutrality aspects may bring in competition concerns, disrupting the e-commerce space. With the Indian competition regulator scrutinizing the e-commerce space with a hawk’s eye and its push for self-regulatory mechanism in this sector, any adverse impact on the market pursuant to the Jio-Facebook digital transformation scheme may put the companies at odds with the Competition Commission of India.
The above may seem a speculation until it knocks us over. For now, the deal sends a strong message, opening greater scope for foreign investments in Indian entities. This seems to be a major highlight in a sinking economy in times of Covid- 19.
The views expressed in this article are of the author’s alone and do not necessarily reflect Qrius Editorial Policy
Atmaja Tripathy is an advocate based out of Delhi. She may be reached at atmajatripathy@gmail.com / atmaja.tripathy@tmtlaw.co.in
References:
https://www.business-standard.com/article/companies/facebook-reliance-deal-to-offer-smart-videoconferencing-mixed-reality-120042301571_1.html, (last accessed 27.04.2020, at 17:00 hours)
https://www.livemint.com/market/mark-to-market/five-charts-that-show-how-india-s-telecom-industry-has-fared-post-reliance-jio-11579082872199.html , (last accessed 27.04.2020, at 17:00 hours)
https://www.cci.gov.in/sites/default/files/press_release/FinalPressreleaseMarketStudy.pdf, (last accessed 27.04.2020, at 18:00 hours)
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