Скачать или смотреть How JIO conquered the telecom market?

The Competition Commission of India hears claims that are alleged to be anti-competitive. Any company cannot do any act which results in a monopoly in the market.

A similar thing happened in the case of Jio when it introduced its plans at nominal rates. Such pricing was challenged before the CCI as being anti-competitive on the grounds of being predatory.

What is the concept of Predatory Pricing?

Pricing of goods or services at such a low level that other firms cannot compete and are forced to leave the market. The ultimate goal behind this pricing strategy is to establish a strong market position and to drive out competitors. Predatory pricing may require a firm to sustain losses for a certain period of time and, thus, is typically only undertaken by large, established firms capable of absorbing short-term losses. The strategy is considered successful if the firm is able to recoup its short-term losses with much higher prices (and thus, higher profits) in the long term.

The Story of JIO

On 5th September 2016 Reliance Jio Infocomm Limited(RJIL) (hereinafter referred to as ‘Jio’) released its free data and voice scheme ‘Jio welcome offer’ which was further extended till December. Next, it introduced a ‘Happy new year offer’ which extended the previous plan till 31 March 2017.

Even in 2018 and 2019, it was charging nominal rates to provide high-speed data and voice which instigated the Indian digital revolution. For the first time in India, humongous investments were done and a new entrant penetrated the telecommunication market which was held tightly by a few incumbents.

They successfully penetrated the market within a year. However, their zero pricing strategy was flagged to be “predatory” and hence, anti-competitive by other market players.

”Intention” and “recoupment” are the two pillars of a test of predation.

In M/s. Transparent Energy Systems Pvt. Ltd. v. TEC PRO Systems Ltd., the CCI laid down the following three conditions for the identification of predation:

1. The prices of the goods or services of the dominant firm are below the cost of production of such goods or acquisition of such service.

2. Such a decline in the prices of the dominant firm was brought with the intention of driving the competitors out of the market.

3. There is significant planning in order to recover or recoup the losses that are incurred by increasing the prices again after the competitors are forced out of the market.

Section 4 of the Competition Act, 2002:
An entity could be said to indulge in predatory pricing only when it is said to enjoy a “dominant position” in the “relevant market”.

What was held by the CCI? CCI held that the act of JIO does not fall under predatory pricing. With regard to the Jio case, the four factors stand as follows:
1. Dominance - When the penetration pricing strategy was applied it was not a dominant entity, rather its rivals were close to holding dominant positions.
2. Price- this factor remains foggy as to where exactly Jio’s zero pricing policy would stand in the price test.
3. Intention-the intention was to penetrate the market which may be confused with predation, but owing to its nascent nature, the presumption for penetration seems apparent.
4. Recoupment- this factor which characterizes every predation, was not observed in Jio’s case. Even after penetrating the market, it charged minimal rates which entirely punctured the allegation of recoupment.

Thus, the CCI held that the pricing strategy of JIO is not predatory rather it is penetrative and JIO won the claim.
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Host: Suyash
Edited by: Harish

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