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The Competition Commission of India (CCI) on Tuesday passed an order dismissing a complaint alleging price discrimination and cartelization on the part of cab aggregators Ola and Uber.
The informant Samir Agrawal had alleged that the algorithmic pricing adopted by Ola and Uber amounts to price fixing, in contravention of Section 3 of the Competition Act, 2002.
It was alleged that due to algorithmic pricing, riders are not able to negotiate fares with individual drivers for rides obtained through the apps. This, it was contended, takes away the freedom of the riders and drivers to choose the other side on the basis of price competition and both have to accept the price set by the algorithm.
Further, it was alleged that the cab aggregators were in a ‘hub and spoke arrangement’, by which they exchanged sensitive information in order to facilitate cartelistic behavior.
The informant compared the model adopted by Ola and Uber to those of Zomato, Trivago and Airbnb, which act as platforms that connect buyers and sellers.
“In none of these models, price is fixed by the platform. Rather the independent restaurants, properties or hotels fix the prices; however, in case of Ola/Uber, the driver is assigned a ride for a fare determined by the App, due to which suppliers/competitors/drivers indulge in price fixation.”
Price discrimination on the part of the cab aggregators was also contended, with the informant stating that they have greater bargaining power than riders owing to asymmetry of information. Through this, they are able to implement perfect price discrimination, whereby riders are charged on the basis of their willingness to pay. It was also stated that the aggregators use personalised data of the riders to manipulate prices, and drivers have a common motive to adhere to the pricing algorithm which results in artificially high fares.
Finally, it was contended that the aggregators and its drivers are in a vertical relationship wherein the former impose a minimum price level on the latter. This, it was argued, amounted to Resale Price Maintenance in contravention of Section 3(4)(e) of the Act.
The CCI, however, found no merit in any of the informant’s contentions, coming to the conclusion that no prima facie case exists against the aggregators. It held that there was no evidence of a ‘hub and spoke arrangement’ between Ola and Uber.
“For a cartel to operate as a hub and spoke, there needs to be a conspiracy to fix prices, which requires existence of collusion in the first place. In the present case, the drivers may have acceded to the algorithmically determined prices by the platform (Ola/Uber), this cannot be said to be amounting to collusion between the drivers.”
It was also held that in absence of any resale of services, the allegation of resale price maintenance is not tenable.
As regards price discrimination, the CCI held,
“The Commission is of the view that the Informant has come to an erroneous conclusion, without placing any evidence on record, that an algorithm determined price as explained above will eliminate price competition and that the price so determined will be necessarily higher than the prices that are negotiated by drivers and the riders on an individual trip basis.”
Further, the informant had failed to establish any arrangement or meeting of minds between Ola and Uber for the Commission to conclude that there was cartelization between them.
“…the Commission observes that existence of an agreement, understanding or arrangement, demonstrating/indicating meeting of minds, is a sine qua non for establishing a contravention under Section 3 of the Act. In the present case neither there appears to be any such agreement or meeting of minds between the Cab Aggregators and their respective drivers nor between the drivers inter-se…”
It was further observed that discriminatory pricing is prohibited under Section 4 of the Act, only when indulged in by a dominant enterprise. Since the market involves two players, a dominant position or abuse thereof could not be determined.
Moreover, the comparisons between the aggregators and apps like Zomato and Trivago were in the eyes of the CCI, inaccurate, as the Commission had decided in a previous case Ola was a radio taxi operator and not merely a platform. Reference was also made to a European Court of Justice verdict that held Uber to be a transport service company which not only intermediates between drivers but also acts as service provider.
Thus, the Commission held that no case of contravention of Section 3 of the Act was made out, and dismissed the complaint as per Section 26(2) of the Act.
Read the order: