CUTS wants CCI to investigate against Facebook

Financial Express, August 03, 2011

New Delhi: Consumer right activist CUTS International has urged competition watchdog CCI to investigate potential misuse of dominant position by social networking site Facebook.

CUTS has written to the Competition Commission of India (CCI) regarding Facebook Inc and its newly introduced payment system ‘Facebook Credits’, which could be spent across various games or applications on the popular website.

“Facebook can potentially engage in anti-competitive and unfair business practices in the market for virtual goods purchased in social games through its Facebook Credit terms in India and therefore its activities in this regard need to be investigated by the CCI,” CUTS said in a statement.

When contacted, Facebook India declined to comment. In July, Facebook launched ‘Facebook Credits’ in India. Under the new contractual arrangements, game developers using the Facebook platform must exclusively utilise Facebook Credits in the operation of their games; must agree not to charge lower prices to consumers outside of Facebook, and must pay a 30 per cent service fee for all Facebook Credit purchases.

CUTS indicated that “Facebook Credits is likely to affect the market for virtual goods sold in social games, a market that is expected to grow rapidly within the next 5 years, concomitant with the explosive growth of social networking”.

Meanwhile, sources in the CCI said it has received the information on Monday and is yet to take a view.

It is to be noted that a similar complaint was recently filed against Facebook in the US by a consumer group.

In the US, more than 0.5 million active applications are operated through the Facebook platform alone.

The majority of applications are built by outside developers who reach users through the Facebook platform under terms dictated by Facebook, CUTS said.

Facebook is the largest social network service provider in the world and has become the largest in India as well in the last two years with 33.158 million users as on July 2010.

The Indian market is big for Facebook and reportedly it is the second largest market, CUTS said, adding: “Hence, the impact of their dominant practices will adversely affect Indian consumers also.”

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