The Competition Commission of India (CCI) has dismissed allegations of predatory pricing against Ola filed by two Bengaluru based taxi operators..Fast Track Call Cab Pvt. Ltd and Meru Travel Solutions Pvt. Ltd had approached the CCI in 2015 alleging that ride-hailing unicorn Ola had abused its ‘dominant position’ in the market by offering heavy discounts to passengers and incentives to cab drivers..Thus, the questions which arose were a) whether Ola held a dominant position and; b) if it did, whether its conduct would amount to ‘abusive behaviour’ (predatory pricing) under section 4(2)(a)(ii) of the Competition Act, 2002..The CCI found no merit in the informants’ allegations that a market share of greater than 50% de facto made them ‘dominant’..The CCI rejected these claims by saying that the 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..In this case, the CCI observed that Ola as well as Uber hold ‘dominant’ position in the relevant market. But more importantly, CCI observed in its order that it was not the legislature’s intention to punish ‘more than one’ player for being dominant,.“Section 4(2) states that “There shall be an abuse of dominant position, if an enterprise or a group—.” The term ‘a’/‘an’ used in section 4(2) evidently states the singular form, which shows that the intention of the legislature was never to hold more than one enterprise to be in a dominant position, unless they are part of the group within the meaning of Section 5 of the Act.”.“Furthermore, in Section 28 of the Act, which specifically deals with division of enterprises enjoying dominant position, the usage of the words unambiguously indicates that the Act does not provide for more than one enterprise to be dominant in the relevant market.”.The CCI further noted that even while considering entry barriers, the market in which Ola operates does not have high entry barriers inasmuch as they don’t own any inventory; whereas the informants themselves come from a more capital intensive business form. A disruptive technology being adopted by newer players is no reason for a regulator to interfere, observed CCI..Even as the informants accused the massive private equity funding infusion into Ola as a reason for its ability to engage in predatory pricing, the CCI noted,.“What is notable and of significance in this context is the existence of a level-playing field in access to finance. This is evidenced by the experience of technology start-ups across sectors in the country which could access funding from various sources such as venture capital, angel networks, private equity funds etc………..there is no evidence that the access to such funding was inequitable and that the market for financing was not competitive and had aberrations”.The CCI in this case looked at two-sided market i.e., the customer and the taxi drivers. The CCI observed that Ola did not initiate the strategy of aggressive pricing strategy as it is a reactive strategy to Uber’s aggressive pricing which is indicative of the competitive constraint put by Uber on Ola..Lastly, for the reasons quoted below, the CCI dismissed all allegations,.“competitive process in the relevant market is unfolding, market is growing rapidly, effective entry has taken place thereby leading to gradual decline in OP’s market share, entry barriers are not insurmountable, there exist countervailing market forces that constrain the behavior of OP and the nature of competition in dynamic, innovation-driven markets, the Commission is of the considered view that OP’s dominance in the relevant market remains unsubstantiated.”.Senior Advocate Ramji Srinivasan represented Ola and was briefed by Trilegal through a team led by Nisha Kaur Uberoi (Partner) along with Nandita Sahai (Senior Associate)..Somasekhar Sundaresan along with Zerick Dastur represented Meru and Udayan Jain represented Fast track, briefed by Lakshmikumaran & Sridharan..(Read the order)
The Competition Commission of India (CCI) has dismissed allegations of predatory pricing against Ola filed by two Bengaluru based taxi operators..Fast Track Call Cab Pvt. Ltd and Meru Travel Solutions Pvt. Ltd had approached the CCI in 2015 alleging that ride-hailing unicorn Ola had abused its ‘dominant position’ in the market by offering heavy discounts to passengers and incentives to cab drivers..Thus, the questions which arose were a) whether Ola held a dominant position and; b) if it did, whether its conduct would amount to ‘abusive behaviour’ (predatory pricing) under section 4(2)(a)(ii) of the Competition Act, 2002..The CCI found no merit in the informants’ allegations that a market share of greater than 50% de facto made them ‘dominant’..The CCI rejected these claims by saying that the 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..In this case, the CCI observed that Ola as well as Uber hold ‘dominant’ position in the relevant market. But more importantly, CCI observed in its order that it was not the legislature’s intention to punish ‘more than one’ player for being dominant,.“Section 4(2) states that “There shall be an abuse of dominant position, if an enterprise or a group—.” The term ‘a’/‘an’ used in section 4(2) evidently states the singular form, which shows that the intention of the legislature was never to hold more than one enterprise to be in a dominant position, unless they are part of the group within the meaning of Section 5 of the Act.”.“Furthermore, in Section 28 of the Act, which specifically deals with division of enterprises enjoying dominant position, the usage of the words unambiguously indicates that the Act does not provide for more than one enterprise to be dominant in the relevant market.”.The CCI further noted that even while considering entry barriers, the market in which Ola operates does not have high entry barriers inasmuch as they don’t own any inventory; whereas the informants themselves come from a more capital intensive business form. A disruptive technology being adopted by newer players is no reason for a regulator to interfere, observed CCI..Even as the informants accused the massive private equity funding infusion into Ola as a reason for its ability to engage in predatory pricing, the CCI noted,.“What is notable and of significance in this context is the existence of a level-playing field in access to finance. This is evidenced by the experience of technology start-ups across sectors in the country which could access funding from various sources such as venture capital, angel networks, private equity funds etc………..there is no evidence that the access to such funding was inequitable and that the market for financing was not competitive and had aberrations”.The CCI in this case looked at two-sided market i.e., the customer and the taxi drivers. The CCI observed that Ola did not initiate the strategy of aggressive pricing strategy as it is a reactive strategy to Uber’s aggressive pricing which is indicative of the competitive constraint put by Uber on Ola..Lastly, for the reasons quoted below, the CCI dismissed all allegations,.“competitive process in the relevant market is unfolding, market is growing rapidly, effective entry has taken place thereby leading to gradual decline in OP’s market share, entry barriers are not insurmountable, there exist countervailing market forces that constrain the behavior of OP and the nature of competition in dynamic, innovation-driven markets, the Commission is of the considered view that OP’s dominance in the relevant market remains unsubstantiated.”.Senior Advocate Ramji Srinivasan represented Ola and was briefed by Trilegal through a team led by Nisha Kaur Uberoi (Partner) along with Nandita Sahai (Senior Associate)..Somasekhar Sundaresan along with Zerick Dastur represented Meru and Udayan Jain represented Fast track, briefed by Lakshmikumaran & Sridharan..(Read the order)
