Ola, Uber & the CCI: This one’s for the road
Smrithi Punnoose January 27, 2016
While all of us have raved and ranted in equal measure about booking a cab in today’s time, it may be safely said that most people would, by now, have a ‘preferred choice’ of cab company which they use while trying to make it from point A to point B. However, the minute a ridiculous surge price kicks in, your preference would change and like-wise, when a discount is introduced. This blog post looks at the Competition Commission of India’s (“CCI”) view on the impact of excessive discounts and other incentives offered by taxi companies on their competitors and discusses how much (in their view) is too much?
In the matter of In Re Meru Travel Solutions Private Limited (“Meru”) and Uber India Systems Private Limited (“Uber”), Meru had alleged that the number of incentives offered by Uber to its drivers, and the large discounts and offers presented to its customers qualified as predatory pricing under the Competition Act, 2002 (“Act”) due to Uber’s dominant position in Kolkata. Meru alleged that the aggressive offers provided by Uber to both its customers as well as drives, resulted in a dip in Meru’s market share in terms of the number of cars attached to its network as well as the number of trips provided in a day as Meru could not match the low price per kilometer fare offered by Uber. Upon a perusal of the facts of the case the CCI noted that a case for predatory pricing could not be made out unless the entity engaged in such alleged acts occupied a dominant position in the relevant market. In the present case, the CCI delved into the details of the relevant market and observed that Kolkata was a peculiar market in itself due to the presence of yellow taxis along with other radio taxis, thus the relevant market for the purposes of the present case was found to be ‘services offered by radio taxis and yellow taxis’ and not merely the services of radio taxis as projected by Meru. The CCI proceeded to further discount the report which Meru had relied on to prove that Uber held a dominant position in Kolkata (“TechSci Report”). The CCI noted that the TechSci Report was based on incomplete information as the research organization had not interviewed Uber while conducting the study. Further, it did not take into account the number of yellow cabs in the city or their market share, and hence it did not provide a holistic picture of the relevant market. In arguendo, if the definition of ‘relevant market’ proposed by Meru were to be accepted, the CCI observed that Uber would still not hold a dominant position in the market due to Ola cabs, its competitor, which held a larger share in the market. The presence and inclusion of yellow taxis would further dilute Uber’s position in the market. Thus, the CCI concluded that as Uber did not hold a dominant position in the market, its conduct in the market was irrelevant and its pricing strategies and other incentives would not be regarded as predatory pricing.
This issue of methods and business models of the new age cab operators coming under scrutiny is not unheard of and in fact this is the second CCI order on the topic. Earlier in April 2015, the CCI held that Ola had indeed abused its dominant position in the radio taxi market in Bangalore in a case between Fast Track Call Cabs Private Limited (“Fast Track”) and ANI Technologies Private Limited, which owns and operates Ola cabs. The CCI had noted that Ola
seemed to be spending more money on discounts and incentives on customers and drivers as compared to the revenue it was earning and engaging in predatory pricing to oust other players from the relevant market thus contravening the provisions of section 4 of the Act, which prohibits the abuse of dominant position. The CCI subsequently referred this matter to the Office of the Director General (“DG”) for a more detailed and thorough investigation into the issue. It is interesting to note, that while the DG’s findings were still pending, Fast Track moved the CCI for an interim order directing Ola to restrain from indulging in alleged predatory pricing. However, the CCI, not being convinced that there was a need for interim relief to be granted, declined to pass such an order and the DG’s final order is still awaited.
With the increased foreign funding being received by the top players in the cab services market and the discounts and incentives pouring through, the rising number of complaints against taxi aggregators in various cities has only increased. While the business policies and models of cab operators continue to come under the CCI’s scanner, one can only wait and watch to see if there is likely to be a complete ban or the imposition of controls on their aggressive pricing strategies and business methods. Until then, please excuse me while I book a cab!
- Celebrating an Amazing Decade of The Lexygen Experience!
- Takeover Code & Exemptions for Debt Restructuring
- Markets on the Internet and Foreign Investment
- Fund Managers: Welcome to India
- Business Income or Capital Gains? Question Resolved!
- Startup funding: All you want to know about term sheets
- Companies Law Committee Report, 2016 – Recommendations Galore!
- Reorganization and Arrangement under the DTAA – Get it right
- Startup India – Is the Action Plan Adequate?
- Ola, Uber & the CCI: This one’s for the road
- AIF Committee Recommends Revamp of Regulations
- Green Bonds – Use them to clean up
- Exit Offers for Dissenting Shareholders
- Arbitration in India: The Seat is Still Vacant
- POEM: The Shifting Sands of Substance & Form (or, A Tale of Two Circulars)
- A Warm Welcome to Payment Banks
- CCI Amends the ‘Investment Exemption’
- External Commercial Borrowing – On which ‘Track’ are you?
- FDI in Defense: Recent Reforms
- FDI in e-commerce: The confusion continues
- Draft Civil Aviation Policy: Wind beneath the Wings of the Indian Aviation sector?
- FDI – Steps in the right direction?
- FDI in AIFs – will there be any takers for hedge funds?
- Companies Act, 2013: Craving Compliance Clarity
- Paypal: Not the RBI’s pal
- The CCI, Investment Funds & Affirmative Rights
- Proposed changes to Bankruptcy Laws – A Step in the Right Direction
- FATCA – Impact on Domestic Funds