CCI ORDER SETTLES THE PROLONGED OLA CONTROVERSY: AN ANALYSIS

-Atyotma Gupta[1]

I.     Introduction

Two different Informations[2] were filed by taxi services providers- Fast Track Call Cab and Meru Travel Solutions (hereinafter “Informants”) under Section 19(1)(a) of the Competition Act, 2002 (hereinafter referred to as the “Act”) against the Opposite Party ANI Technologies (hereinafter “Ola”) alleging the abuse of dominant position.

The Competition Commission of India (hereinafter “CCI”) found no weight in the allegations of the Informants. It held that Opposite Party is not dominant in the relevant market and hence there is no question of abuse of dominant position. This article intends to analyze the diversity of contentions by both the parties. It also seeks to discuss the applicability of reasons provided by the CCI for determining the relevant market and its refusal to adhere to the dominance of the Opposite Party in such determined relevant market.

II.     Factual Scenario: What Went Wrong?

All the parties are engaged in provision of radio taxi services. The information was filed alleging that the discounts and incentives provided by the Opposite Party to its customers and drivers is in contravention of Section 4 of the Act and resulted in foreclosure of market for new entrants. On the stage of admission, the CCI held that, prima facie, Opposite Party is in the dominant position and the same is being abused by its conduct.[3] This opinion of the CCI was based purely on the high market share[4] of opposite party.

The CCI, under Section 26(1) of the Act, (which empowers the CCI to direct investigation into the matter if, in its opinion there exists a prima facie case[5]) directed the Director General (hereinafter “DG”) to investigate the matter.

III.     The DG’s Report and Reasoning

The DG arrived at two issues to be considered.

  1. Whether the Opposite Party held dominant position in the relevant market?
  2. Whether the conduct of the Opposite Party amounts to a predatory pricing as prohibited under Section 4(2)(a)(ii) of the Act?

With respect to the existence of dominant position of the opposite party in the relevant market the DG defined relevant market to comprise of only radio taxi services because of the wide range of services that they offer apart from merely being a means of transport. The DG also opined that the opposite party is a part of the relevant market as it operates as per the aggregator based model (when the operator does not own the cabs but merely acts as a “platform” to connect the drivers and consumers).

As transport is a State subject in the Constitution of India, the relevant market was confined to Bengaluru. The DG held that the companies under the asset based model (where the cabs are owned by the operator) and the aggregator based model are functionally substitutable and hence falls in the same relevant market.

The DG, on the basis of the market shares of the companies (assessed primarily on the basis of the number of trips/rides of the company during a specified period and the fleet size), held that the dominance of opposite party has been reducing since Uber has entered the market and as it has not been able to hold its share for a reasonable time period, opposite party cannot be said to be dominantin the relevant market. As far as other factors under Section 19(4)[6] of the Act are concerned, the DG opined that due to low entry/exit barriers, external factors determining the growth of a company, lack of market power, excessive countervailing power of consumers the opposite party is not in a dominant position in the market and hence question of abuse of dominant position does not arise.

IV.     Proceedings before the CCI: Dissecting the DG’s Report

Agreeing to the construction of relevant market in the report, the Informants submitted that it is merely based on the existence of Uber and its practices which are similar to that of the opposite party. It was also contended that the opposite party is not merely a platform to connect drivers and customers but its services are of a radio taxi provider.

The informants submitted public statements of along with the data for higher market share of the opposite party to establish that it is a dominant enterprise. The existence of high external factors coupled with high capital requirement in the market itself acts as a strong entry barrier. The opposite party as alleged was paying high incentives to its drivers and also entered into exclusive contracts with its drivers which restricted the growth of other players in the market. The opposite party was also alleged to have indulged in predatory pricing which increased its customers’ base.

The informants alleged that the large network of opposite party acts as a detriment to the buyer’s power in the market and hence the customers have no power to negotiate the prices and substantially affect the service provider by shifting to other companies. Therefore, the predatory pricing engaged by the Opposite Party is anti-competitive and constitutes an abuse of its dominant position.

The opposite party challenged the finding of DG with respect to the relevant market and the nature of services provided by it. It alleged that it acts as a facilitator and falls within the definition of “information society service” under the European Union directive.[7]It also submitted that its pricing is only balanced so as to attract both sides (drivers and consumers). It relied on the judgment of MCX Stock Exchange Limited v. NSE and Others[8]to argue that if there is another company to exert substantial competitive pressure the party cannot be said to be in a dominant position.

V.     CCI’s Order and Analysis

The CCI held that:

  • The opposite party is a part of the relevant market and the different business model followed by it does not make a difference. Section 2(t) of the Act defines relevant market as inclusive of those products and services which are interchangeable and functionally substitutable.
  • The aggregator based model has replaced the asset based model and hence, both fall under the same relevant market. The same is confirmed by the Delhi’s City Taxi Scheme, 2015 where the aggregators are included in the category of radio taxi service provider.[9]The CCI agreed with the view point of DG that the relevant market is radio taxi services in Bengaluru for the same reasons.
  • The criteria to determine the market share of a company is the number of trips/ride and not the fleet size of a company as it may lead to double counting (due to the possibility of drivers getting registered in two companies).
  • The market share of the opposite party, as per statistics, have gradually declining with a commensurate fluctuation in market share of other competitors. However, the market share cannot be considered in isolation of all the other factors to determine the strength of the opposite party in the market.
  • Uber has an edge over the opposite party in all the factors. The existence of network externalities and the countervailing market forces in the industry also results in lack of control with the industry over the entry and exit of competitors. The presence of Uber in the market has resulted in its aggressive competition with the opposite party. The low shifting costs for consumers and easy accessibility of the mobile applicationhas reduced the power of a company to act independently of its competitors.
  • The entry barriers have been reduced in the industry with the invention of aggregator based model as the asset requirement is almost negligible for a new entrant.
  • The conduct of the enterprise, although a relevant factor, cannot be viewed in isolation to assess its dominance in the market. If this is not done, then the innovative ideas of a new entrant to affect the consumers can be viewed as his dominance in the market.
  • Lastly, with respect to the pricing strategy of the opposite party, it was held that the pricing of opposite party is reactive to its losses and the presence of Uber and not aggressive. Therefore, the opposite party is not held to be in a dominant position in the market.

[1] Student of 4th year pursuing BA LLB (Hons.) from National Law University, Jodhpur.

[2] Section 19(1)(a), Competition Act, 2002.

[3]Case No. 6 & 74 of 2015, Competition Commission of India, July 19, 2017, ¶ 5.

[4] Section 20(4)(h), Competition Act, 2002.

[5] Section 26(1), Competition Act, 2002.

[6] Section 19(4), Competition Act, 2002.

[7] Directive 98/34 of the European Parliament, 22 June 1998, accessed from http://eur-lex. europa. eu/Lex Uri Serv /LexUriServ.do?uri=CONSLEG:1998L0034:20070101:EN:PDF.

[8]MCX Stock Exchange Limited v. NSE and Others, Case No. 13/2009, Competition Commission of India.

[9] Delhi’s City Taxi Scheme, 2015, dated February 26, 2012 accessed from http://delhi.gov.in/wps/wcm/ connect/ f9c68480499d268a87b99f018ef168b1/Taxi.compressed.pdf?MOD=AJPERES&lmod=-1512797399.

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