PIR against Facebook by CUTS International for violation of Competition Act

Bar & Bench News Network, August 05, 2011

Consumer Unity and Trust Society International (CUTS), an NGO headquartered at Jaipur, Rajasthan, has filed a Preliminary Information Report (PIR) with the Competition Commission of India against Facebook, alleging it for violating the Competition Act, 2002.

CUTS believes that 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, as has been mentioned in the letter enclosing the PIR to CCI.

The NGO has urged the Commission to undertake a detailed investigation into the matter, averring that the anti-trust laws in India have not been very stringently practiced, thus providing a leeway to such malpractices.

Speaking to Bar & Bench, Mr. Madhav Krishna Dar, Senior Policy Analyst, CUTS C-CIER (CUTS Centre for Competition, Investment & Economic Regulation), informed us that in case the CCI fails to take suo motu action against Facebook, CUTS International will continue with a detailed investigation into the issue and will also file a further complaint with the Commission to that effect. Mr. Dar also highlighted that the said PIR is in line with the one filed by an NGO named Consumer Watchdog in the USA.

Facebook launched ‘Facebook Credits’ in India last month. 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, reports The Hindu.

CUTS also 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”, The Financial Express reports.

It thus remains to be seen whether the CCI takes a proactive action against the alleged party, or CUTS International will have to continue with its investigation

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