The RelianceJio-WhatsApp test for India’s regulatory regime

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Published: April 24, 2020 2:30 AM

India’s regulatory regime has been prone to capture; vital to grow out of this if complex deals have to be approved.

Rjio has 388 million users while WhatsApp has 400 million in India—does not kill competition in the market over a period of time.

While the $5.7-billion Facebook-RJio deal will have to be cleared by the competition authorities, this may end up being relatively easy, if time-consuming. Much more difficult, as it happens, will be ensuring the combined juggernaut—Rjio has 388 million users while WhatsApp has 400 million in India—does not kill competition in the market over a period of time.

Regulating any large entity, or a group of brick-and-mortar entities planning to combine operations, is always difficult, but it is even more tough in the digital space. Unlike in traditional M&As or combinations, where the usual fear is the to-be monopolist/oligopolist hiking prices once the competition has been finished off, this is hardly ever an issue in the digital world. Given how so many digital offerings—email, messaging, even payments—are either free or next-to-free, the customer is never in danger of being price-gouged even after a merger; indeed, this may result in her getting a lot more services bundled up.

And, the merged entity is able to earn more from other sources—as the competition gets wiped out—whether it is advertising, or using the data gathered about consumer habits to sell more products. In the net neutrality debate, for instance, one of the issues raised was that of telcos ‘throttling’ the data speeds of some players while giving faster speeds to others; charges such as these are notoriously difficult to actually prove, and competition authorities like the Competition Commission of India (CCI) and the Telecom Regulatory Authority of India (Trai) will have to show that they are up to the job.

Possibly due to the fact that most competition authorities in India have really tiny budgets, and nowhere near the staff that their US counterparts do, they have come across quite poorly in many cases. The CCI’s inability to act on RJio’s below-cost pricing, for instance, is a big reason for the state the telecom industry is in today, and Trai has even been pulled up for its performance by the Supreme Court and the telecom appellate tribunal (Tdsat); indeed, even the highest government-body on telecom has asked Trai to justify its recommendations in the past (bit.ly/3eDeMbs).
Another important issue, though unrelated to competition, is that of the power that such platforms have in the political process.

Facebook has been accused of meddling in the US election process, and there are enough instances of how WhatsApp has been used as a force multiplier for fake news; indeed, a constant tension between the Indian government and WhatsApp has centred around the US messaging platform being asked to give the Indian government more information on the flow of this fake news. There is no easy way to tackle this—it also raises issues of privacy—but civil society needs to try and come up with acceptable solutions.

While it will be interesting to see how the issue of traceability pans out—Rjio’s own messaging system is not encrypted—the government’s role is also important from the standpoint of regulatory neutrality. An important part of the Facebook-RJio partnership will, for instance, relate to e-commerce, and it doesn’t help that, so far, the government has different rules for Indian players—who, as it happens, also have large dollops of FDI—and global ones like Amazon and Walmart. The prohibition on ‘deep discounting’, difficult as it is to actually quantify, doesn’t apply to Indian e-commerce players, for instance (bit.ly/3eGkoBQ). How the regulators and the government navigate such issues will go a long way in shaping investor perceptions about India.

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