The $5.7 billion Reliance Industries-Facebook deal where the social media giant acquired 9.9% stake in Jio Platforms has now come under the scanner of the Competition Commission of India. Jio Platforms is the digital arm of Reliance Industries, which houses all of the group’s digital businesses, including Reliance Jio.
According to Bloomberg, CCI Chairman Ashok Kumar Gupta said that CCI is reviewing the deal to prevent the misuse of data, as it does in all the deals its assesses.
While Gupta did not elaborate on the Facebook-Jio deal, the Bloomberg report quotes him as saying that peculiarities such as ‘strong network effects, high returns to scale and access to a huge amount of data may incentivize digital firms to engage in anti-competitive conduct’.
While he didn’t disclose how long the review of the deal would take and when a decision would come, the Bloomberg report states that by law, if a decision doesn’t come in 210 days, the deal is deemed approved.
Both companies filed an application with CCI earlier in June. They said in their application that the deal was ‘pro-competitive, benefits consumers, Kirana stores and other small and micro local Indian businesses, and take forward the vision of digital India’, as per a Times of India report.
As per the report, Facebook and Reliance reportedly said that the two markets under consideration are consumer communication applications and advertising services and that there is not significant overlap in these two segments, which they claimed are characterised by ‘low entry barriers and a large number of competitors’. They claim that the deal would not alter the competitive landscape.
A deal with Jio, gives Facebook a massive foothold in India’s digital market. Jio is currently one of the largest telecom players in the country with over 380 million subscribers.
For Facebook, which has nearly 400 users on its platform and around 400 million WhatsApp users in the country, a local partner (especially Mukesh Ambani-owned Jio Platforms) could help it in navigating various regulatory issues, including those related to privacy and local storage. Additionally, having a good telecom partner could help Facebook improve its reach to masses.
However, given their massive userbase, both companies hold an immense amount of user data, giving them an undue advantage over other competitors in the country.
Apart from Facebook picking up a 9.9% stake in Reliance Jio for Rs 43,574 crore, Jio Platforms and Reliance Retail have entered into a commercial partnership with WhatsApp, which hints towards the group’s ‘new commerce’ move finally being set in motion.
The Facebook investment is the first of the 10 investments Jio Platforms has so far raised from global investors in seven weeks.
On Sunday, after the announcement of two new deals, the funds raised by Jio Platforms crossed Rs 1 lakh crore with TPG Capital buying 0.93% equity for Rs 4,547 crore and private equity firm L Catterton picking up a 0.39% stake for Rs 1894.50 crore.
The other global investors include Silver Lake, Vista Equity Partners, General Atlantic, KKR, Mubadala and ADIA.