Supreme Court issues notice in Meru Cabs plea challenging NCLAT, CCI orders in favour of Ola Cabs

The Supreme Court on Monday issued notice in Meru Cabs' plea challenging orders of the National Company Law Appellate Tribunal (NCLAT) and the Competition Commission of India (CCI) dismissing its complaint against alleged anti-competitive practices on the part of Ola Cabs [Meru Travels Solutions Pvt Ltd v. Competition Commission of India & Anr]..A Bench of Justices L Nageswara Rao and BR Gavai issued notice after hearing brief arguments by Senior Advocate Abhishek Manu Singhvi, appearing for Ola's competitor Uber, and Senior Advocate P Chidambaram, who represented Meru..Meru has challenged an order of the NCLAT which upheld a CCI order saying that Ola had not abused its dominant position in the cab aggregators market by indulging in predatory pricing. The Appellate Tribunal had also observed that there was no below-cost pricing by Ola for any sustained period of time which could be labelled as predatory pricing.The plea before the apex court argued that the said orders set a dangerous precedent as they legitimise below-cost pricing to edge out competition. Meru has relied on the decision of the top court in Uber India Systems Private Limited v. Competition Commission of India & Ors to state,"It is unfortunate that the Impugned Order has provided justification to Ola’s pernicious behavior of below cost pricing on the ground of it creating demand and reinforcing its brand image, a concept which is completely contradictory to the principles of competition law, precedents of this Hon’ble Court and other international jurisdictions. The Impugned Order contains observations, which in effect, gives a handout to all players who have financial might to trample upon bootstrapped companies in India by engaging in blatant predation on the pretext of building a brand image and creating demand."It is contended that Ola, through its predatory pricing policies and heavy foreign funding, accumulated losses of over ₹15,000 crore. Such policies affect other players in the market, and the issue thus warrants consideration, it was submitted..The CCI had in 2017 dismissed allegations of predatory pricing and abuse of dominant position against Ola, filed by two Bengaluru-based taxi operators, including Meru Travel Solutions in 2015.The Commission had found no merit in the informants’ allegations that a market share of greater than 50 per cent de facto made them ‘dominant’.It was held that the Competition Act doesn’t provide for any numerical threshold to ascertain what constitutes ‘dominant’, but enshrines factors in Section 19(4) which relate to the ‘size and importance’ – factors which need to be evaluated subjectively in each case.Ola as well as Uber held ‘dominant’ positions in the relevant market, and it was not the legislature’s intention to punish ‘more than one’ player for being so, the CCI had reasoned..Earlier this year, the NCLAT upheld the same, observing: Ola employed a technology in a much more effective and enabling fashion to provide services which previous radio taxi operators were not able to;Merely the size of the fleet does not decide the dominant position of a particular radio taxi service provider;Ola was itself facing competition from established players such as Meru and Fast Track and later from Uber while it was trying to establish its brand, and it would not be correct to infer that Ola enjoyed a dominant position and was trying push out new competitors by using abusive practices;Ola's pricing strategy was in response to market conditions, helped by heavy infusion of foreign funding. There was no below-cost pricing by Ola for any sustained period of time which could be labelled as predatory pricing and abuse of its dominant position in the market;Below cost pricing adopted by Ola from May-June 2014 onwards could be treated as variable cost which was the expenditure that Ola undertook to establish/consolidate its brand in the market and also increase its market share simultaneously.With regard to the agreements the cab aggregator had with drivers, the Tribunal noted that the same contained welfare measures for drivers, helping them source credit for buying vehicles.It was held that the same were not anti-competitive as Ola stands as guarantee for the loans taken by drivers who are not bound to remain loyal to Ola because of financial lock-in. The incentives provided to drivers are dynamic and not constant in time, and drivers have the option to shift to other competitors depending on their requirement and convenience, the NCLAT had opined."Ola tries to create a win-win for the riders and drivers, and of course to its enterprise. We do not think this cycle of demand generation and its satisfaction through sufficient supply of drivers through discounts and incentives should be viewed as predatory pricing employed to oust competitors from the market" the NCLAT's order stated. .Advocate-On-Record Sonal Jain and Advocates Udayan Jain, Abir Roy, Ishkaran Singh, Raj Surana, and Kajal Sharma also represented Meru Cabs before the Supreme Court.