Conglomerate-Financed Entry, Predatory Pricing and Regulatory Interfaces in BRICS Telecommunications Markets: Lessons from the Indian Jio Decisions

Imagine a marketplace where the price of a product is not just about how much it costs to make, but about how much money a company has in its back pocket to keep selling it at a loss for years. In the world of high-speed telecommunications, building the network of towers and cables requires a massive upfront investment, a fixed cost that is the same whether one person uses the service or a million do. Once that network is built, the cost to add one more user is tiny. This economic reality creates a unique danger: a wealthy company can enter a market, sell its service far below the cost of production, and stay there long enough to drive out every competitor. Once the rivals are gone, the company can raise prices again. This is known as predatory pricing. The central question for regulators is how to spot this trap before it snaps shut. Traditional rules often look at whether a company is already the biggest player in the market before they investigate if its low prices are illegal. But what happens when a new, smaller company is backed by a giant parent corporation with money from completely different businesses?

This paper explores that exact scenario through the lens of the Indian telecommunications revolution, focusing on the entry of Reliance Jio in 2016. The researchers, Hamza Khan and Sheikh Inam Ul Mansoor, examine how the country's competition laws handled a situation where a new entrant, with a very small share of the market at the start, used deep pockets from its parent conglomerate to offer free services and rock-bottom prices. The study looks at whether the existing legal framework, which requires proving a company is "dominant" before it can be accused of unfair pricing, was strong enough to catch this specific type of market manipulation. The authors analyze court decisions, regulatory rules, and the actual outcome of the market, comparing India's experience with similar legal approaches in other large emerging economies like Brazil, China, Russia, and South Africa. Their goal is to determine if the current rules are blind to a new kind of threat where financial power from outside the market allows a small player to reshape the entire industry.

The story begins in September 2016, when Reliance Jio began operations in India. Almost immediately, the company launched a strategy of offering free services and extremely low tariffs. This triggered a fierce price war that caused the average revenue per user to drop sharply. The result was a rapid and dramatic change in the market structure. A previously fragmented industry with many players was quickly reconcentrated into a market dominated by just three major firms. Bharti Airtel, one of the established giants, accused Jio of predatory pricing, arguing that the low prices were not a sign of healthy competition but a calculated move to eliminate rivals. However, when the case went to the Competition Commission of India, the regulator closed the investigation. The reasoning was straightforward: at the time of the complaint, Jio's share of the total subscriber base was less than seven percent. Under the law, a company must first be proven to be "dominant"—meaning it holds a position of strength that allows it to control the market—before its pricing can be judged as an abuse. Since Jio was small, the regulator concluded it could not be dominant, and therefore its low prices were not illegal.

The paper argues that this decision, while legally correct based on the text of the law, missed a crucial economic reality. The researchers point out that the law relies on a "snapshot" of the market at a single moment in time. It looks at the market share on the day the complaint is filed. In the case of Jio, that snapshot showed a small player. But the paper explains that this snapshot fails to account for the power of the parent company, Reliance Industries, which is a massive conglomerate with businesses in oil, gas, and retail. Jio was able to sustain losses for years because its parent company could fund those losses from profits made in completely unrelated sectors. This is what the authors call "conglomerate-financed entry." The money did not come from the telecom business itself, but from outside it. Because the law required Jio to be dominant in the telecom market before it could be investigated, the regulator could not see the threat posed by the parent company's deep pockets. The result was that the market was allowed to undergo a transformation that led to a new, durable concentration of power.

By June 2026, the long-term effects of that initial price war became clear. The wireless subscriber base had settled into a stable structure of three firms. Reliance Jio held 39.27 percent of the market, Bharti Airtel held 37.96 percent, and Vodafone Idea held 15.50 percent. The average revenue per user, which had plummeted during the price war, began to recover, rising from roughly 149 rupees in 2023 to 174 rupees in 2024. This pattern illustrates the classic cycle of network industries: an initial period of intense, subsidized competition followed by a return to higher prices once the market has been reorganized. The paper suggests that the legal system's focus on the initial market share allowed this cycle to complete without intervention. The "dominance-first" rule, designed to protect new entrants from being punished for low prices, inadvertently protected a strategy that used outside money to crush competition and then rebuild the market in a way that favored the wealthy entrant.

The authors also examine the complex relationship between the competition regulator and the telecom sector's own regulator, the Telecom Regulatory Authority of India. For years, there was confusion over which body had the authority to handle disputes about pricing and market access. The Supreme Court eventually clarified that the two agencies have different roles but must work in harmony. However, the paper notes that in practice, the formal mechanisms for these two agencies to talk to each other are rarely used. This lack of coordination creates a gap. In a fast-moving market where network effects can change the landscape in months, waiting for a slow, sequential process can mean that the damage is already done by the time the regulators act. The study highlights that while the legal framework has been refined by recent court decisions, the practical tools for agencies to work together remain underdeveloped.

Looking beyond India, the paper compares the situation with other major economies in the BRICS group. In South Africa, the law explicitly includes a concept called "average avoidable cost," which looks at what costs a company saves if it stops producing, offering a slightly more nuanced view than India's current rules. In China, regulators have begun to pay more attention to how large platforms use cross-subsidies from other parts of their business to fund losses in one market. Brazil has also shown awareness that external financing can allow a company to sustain losses longer than its competitors. Despite these differences, the paper finds a common thread: all these jurisdictions struggle with the same problem. They have laws designed for traditional competition, but they are finding it difficult to address strategies where a company uses money from unrelated businesses to buy market share. The current rules often miss the forest for the trees, focusing on the size of the player in the specific market rather than the size of the financial backing behind it.

The researchers propose four practical steps to fix this gap without rewriting the entire law. First, they suggest that regulators should interpret the existing list of factors used to determine "dominance" more dynamically. Instead of just looking at market share, they should consider a company's ability to sustain losses for a long time because of outside funding. Second, they argue that credible evidence of cross-subsidization from unrelated businesses should be treated as a sign that a company is trying to exclude competitors, even if it is not yet the biggest player. Third, the paper calls for a formal agreement between the competition regulator and the telecom regulator to ensure they share information quickly and coordinate their investigations. Finally, they recommend that when regulators decide to use a different method for calculating costs, they must clearly explain why, to ensure the process remains fair and predictable.

The paper concludes that the current legal architecture in India, and in many other emerging markets, is not broken, but it is incomplete. It works well for protecting new entrants who are genuinely competing on price, but it has a blind spot for entrants who are backed by massive, unrelated financial resources. The dominance-first rule was designed to prevent regulators from punishing companies for being cheap, but it has inadvertently created a loophole where a company can use outside money to drive out rivals and then dominate the market. The authors do not suggest that the law needs to be torn down and rebuilt. Instead, they argue for a more sophisticated way of applying the existing rules. By looking at the full picture of a company's financial backing and the speed at which network effects can change a market, regulators can better distinguish between healthy competition and a strategy designed to monopolize the industry. The lesson from the Jio episode is that in the modern economy, the source of a company's money matters just as much as the price of its product.