Is RJio being predatory? PDF Print E-mail
Friday, 02 December 2016 00:00
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Textbook definition of competition law under question


When incumbent telcos argued, at the time of RJio’s commercial launch some months ago, that its free voice-and-data services were predatory, the standard response was that it was not. After all, the textbook definition of predatory pricing requires the firm to have significant market power – by this definition, even if a new entrant offers services for free, it cannot be accused of predatory pricing. Naturally, given RJio’s pricing, it acquired 50 million subscribers in as little as 82 days and, as a consequence of its entry, incumbent telcos slashed their offers to, in some cases, even lower than those offered by RJio. While their stocks reflected this likely collapse in profits, most believed the pain would stem by December 31 and, once RJio started charging for its services after that, there would be a slowdown in its growth. But with Reliance chairman Mukesh Ambani declaring that both new and existing subscribers of RJio would get free services till March 31 under a Happy New Year offer – existing subscribers whose offers ended on December 31 would automatically get enrolled in the new offer – there also the possibility of a Happy Holi offer and may be even more; while the law says a promotional offer can last only up to 90 days, it says nothing about new offers after that.


If RJio or anyone with deep pockets can change the industry dynamics completely, the question is whether the textbook definition of predatory pricing needs to be redefined. To some extent, this is already being done. When etailers like Flipkart and Amazon came in and started discounting heavily, traditional retailers protested against what they saw as predatory pricing. Of course it was not, since neither etailer had any market power – indeed they were market-places – but the government still put various checks in place. Etailers were told to limit the presence of their subsidiaries on the market-place and to ensure that they did not influence prices of goods sold – traditional retailers say the rule is being breached but what matters is that the government went beyond the textbook definition of predatory pricing. In the case of imports, similarly, when prices start hitting local industry, the government doesn’t wait till the quantum is a significant share of local production before levying anti-dumping duties. There is also the issue of ‘relevant markets’ that comes up. At 50 mn, RJio’s market share is already over 30% of the mobile broadband market and higher than Bharti Airtel’s 41.3 mn, Vodafone’s 35.9 mn or Idea’s 34.8 mn – Rjio’s press release says it is carrying four times more data than all other Indian telcos put together. So, if older telcos are to make the charge of predatory pricing, will the ‘relevant market’ be the mobile broadband one or the mobile internet one or the total voice-plus-internet one? Any way you look at it, a new chapter is about to be written in India’s competition law.


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