Competition Law Hotline
February 09, 2016
End of bumpy ride for Uber? CCI smoothens the road
The Competition Commission of India (“Commission”) in In Re: Meru Travel Solutions (Private) Ltd v Uber India Systems (Private) Ltd.1 (“Uber Order”) held that Uber India did not hold a dominant position within the city of Kolkata and therefore no case could be made out for directing an investigation by the Director General for abuse of dominant position.
The Commission rejected allegations that Uber was held a dominant position in the marlet for as the evidence put on record did not justify the conclusion. Consequently, the Commission dismissed the claim against Uber. This must come as a welcome relief to Uber particularly since in 2015, the Commission thought it fit to direct investigation into Ola regarding its practices in Bengaluru.2 (“Ola Order”)FACTS
Meru Travel Solutions (Private) Ltd (“Informant”) alleged that Uber India Systems (Private) Ltd, Uber BV and Uber Technologies International Inc. (collectively “OPs”) held a dominant position in the market and were abusing their dominant position, in contravention of Section 3 and Section 4 of the Competition Act, 2002 (“Act”), by engaging in practices such as predatory pricing.
The Informant averred that the average market price for radio taxis in Kolkata prior to the OPs’ launch in the market was between Rs 20 and 22 per km. In August 2014 the OPs strategically launched their service in Kolkata, much below the prevailing market price, at Rs 15 per km.
Later the OPs reduced the price charged per km to Rs 9. In response the Informant was compelled to reduce the price it charged to Rs 15 km per hour. In addition to following a strategic pricing policy, the OPs enticed taxi drivers and customers by providing driver incentives and customer discounts, respectively. As a result, the Informant alleged, other players in the market, including the Informant, observed a reduction in their market share.CONTENTION OF PARTIES
Contentions of the OPs
The Commission examined the material on record to conclude that a prima facie case under Section 26 (1) of the Act was not made out. The Commission noted the argument by the OPs that the ubiquitous yellow taxis played an active role in providing taxi services to the public. These taxis being substitutable with radio taxis constituted a significant competitive constraint to the operations of radio taxis such as the Informant and the OPs, since they were relied on extensively by the public for commuting. The Commission therefore was of the view that the relevant product market included services offered by radio taxi operators as well as yellow taxis within the city of Kolkata.
The Commission noted that the due to “region specific demand by the end consumer” and “difference in regulatory architecture” each city or state, as the case may be would constitute a different market in itself.
The Commission rejected the Report and Informant’s reliance on the same to contend that OPs were in a dominant position. The Commission noted that the Report did not take into consideration data pertaining to yellow taxis though they formed a part of the relevant product market. The Commission also noted that the Report was prepared based on incomplete information and that the Report was deficient since the OPs were not even interviewed while preparing it.
The Commission noted that Ola, another radio taxi operator had a large market share and there was healthy competition between the OPs and Ola. OPs contended that if yellow taxis were considered the OPs market share was merely 5.8% and hence, OPs could not be considered to be enjoying a dominant position. The Commission, accepting the arguments made by the OPs held that it could not be said that OPs were in a dominant position and consequently, no case of violation under Section 3 and 4 of the Act was made out by the Informant.ANALYSIS
In the Uber Order, Kolkata’s ubiquitous yellow taxis merited inclusion in the relevant product market since they were relied upon extensively by the general public for transport. These submissions by the OPs had a material bearing on the ultimate decision of the Commission.
Earlier in 2015, upon consideration of a complaint filed by Fast Track (another radio taxi operator) against Ola the Commission directed the Director General to investigate into the allegations of anticompetitive practices such as predatory pricing.3 The informant in that case made averments that Ola, a recipient of foreign investments, was engaging in predatory pricing and was offering unprecedented incentives to drivers. In this case, based on material placed before it the Commission was of the prima facie view that a case was made for the Director General to conduct an investigation.
The Commission while considering an application for interim reliefs filed by Fast Track4 directed Ola to restructure its pricing policy in such a way that the incentives offered to drivers of the radio taxis would not exceed the passenger revenue collected by it. These orders also highlight the importance of presenting material facts and evidences at the initial stage because of which the OPs were able to refute allegations of abuse of dominant position.
– Mithun Verghis, M.S. Ananth & Pratibha Jain
You can direct your queries or comments to the authors
1 Case No. 81 of 2015. Order dated December 22, 2015
2 In Re: Fast Track Call Cab Company Pvt Ltd and M/s Ani Technologies, Case No 6 of 2015. Order dated April 24, 2015
3 Supra N.2
4 In Re: Fast Track Call Cab Company Pvt Ltd and M/s Ani Technologies, Case No 6 of 2015, Order dated September 9, 2015
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