Competition Concerns in the Cab Aggregators’ Market

[Lavanya Gupta and Shreya Mukherjee are final year students at Symbiosis Law School, Pune]

Five years after the initiation of the case, the Competition Commission of India (“CCI”) recently rendered its decision on Uber’s alleged dominance in Meru Travel Solutions Pvt. Ltd. v. Uber India Systems Pvt. Ltd. In its case against Uber, Meru alleged that Uber was misusing its dominant market position to eliminate competition, and violated sections 3 and 4 of the Competition Act, 2002 (“Act”). In particular, Meru alleged that Uber was indulging in anti-competitive practices such as imposing unfair conditions and entering into unjust agreements by implementing an ‘incentive policy’ that exclusively engaged drivers to Uber’s network. Furthermore, Meru also contended that Uber’s deep discounts due to the company’s enormous resources and funding pattern were crippling the cab aggregators’ market.

After the CCI preliminarily adjudged Uber as a non-dominant player, an appeal by Meru before the Competition Appellate Tribunal prompted the Director General’s (“DG”) investigation. Uber’s attempt to impede the investigation by appealing before the Supreme Court of India was not of much help, and the Indian apex court ordered the DG’s probe to be completed without further delay.

This post seeks to, firstly, analyse the CCI’s final decision in the Meru-Uber case, and, secondly, examine the CCI’s stance on radio taxi aggregators that operate in the Indian milieu.

Relevant Market

In the said case, the DG delineated the relevant market as that for ‘Radio Taxi Services in Delhi NCR’. As a general practice, ‘relevant market’ is determined based on the goods and/or services that consumers perceive as substitutable. In the Meru-Uber case, the CCI did not consider the other modes of transport, such as auto-rickshaws, as interchangeable with radio taxis. This, the CCI noted, was owing to the unique features that radio taxis provide, viz., comfort, boot space, the status of passengers, and point-to-point pick-up and drop facility.

The CCI has devised the relevant market on similar lines in previous cases as well. In Mega Cabs Pvt. Ltd. v. ANI Technologies Pvt. Ltd., CCI noted that the relevant market should be precisely the market for radio taxi services, and not anything broad. According to the watchdog, radio taxis are not substitutable with other means of transport such as auto-rickshaws and buses, and there is an increasing consumer dependence on radio taxis. (Also, Vilakshan Kumar Yadav v. ANI Technologies Pvt. Ltd.)

Thus, to determine the relevant market in the Meru-Uber case, the CCI, very aptly and in line with its past decisions, examined the other modes of transport that could be considered substitutes for radio taxis. In this, the CCI emphasized on understanding transport alternatives for radio taxis, and accordingly narrowed down the market.

Dominant Position

Besides Uber’s market share, factors like the company’s financial resources, its funding pattern, and current market competitors were analysed by the DG to determine Uber’s market position. Accordingly, the DG opined that Uber was not dominant in the delineated market since it was not in a position of strength to act independently of its competitors.

While the CCI agreed with the DG’s finding, the regulator promptly noted that market shares could not be the sole assessment criteria, especially in cases concerning digital markets. Concomitantly, the CCI acknowledged the variance in different markets, and called for a case-by-case understanding of market dynamics and competitive strategies.

Collective Dominance

Although the case was primarily filed against Uber, Meru had also alleged abusive behaviour on Ola’s part. However, the CCI did not delve into the question of collective dominance, considering that Ola was not arraigned as a party to the case. Moreover, the CCI has previously clarified that the Indian competition regime does not recognize collective dominance under section 4. In the CCI’s view, the fact that two strong players are present in the market is indicative of a competitive setup, and not something which falls under the scope of section 4(2) of the Act.

In its arguments, Meru had submitted that while Uber may not be dominant, Uber and Ola collectively held more than 95% of the market, resulting in a duopoly depriving the consumer of choice. However, the CCI did not concur with Meru on this submission. Instead, the antitrust regulator stressed on the goal of competition regulation, which is to ensure competitive markets, and not to protect players in the market. The CCI held a similar opinion in Fast Track Call Cab Pvt. Ltd. v. ANI Technologies Pvt. Ltd., wherein it noted that markets could be competitive, regardless of the number of players in it. What needs to be ensured is that the incumbent players present competitive forces, and prevent any independent or abusive behaviour by one player.

Network Effects

Opinion favouring Ola and Uber maintaining competition by co-existing also found a place in the Meru-Uber case when the CCI observed that network effects were an inherent feature of the cab aggregators’ market. The success of a cab aggregator and radio taxi platform is directly related to the number of drivers joining the platform, since the said figure would influence the number of riders on the platform. Conversely, having an extensive network of drivers on limited platforms would lead to greater market efficiencies. The recognition of network effects and double-sided nature of cab aggregators has been consistently acknowledged by the CCI, first in the Fast Track-Ola case and recently in the Meru-Uber case.

On the whole, in the Meru-Uber case, apart from considering the players’ market shares and traditional market concerns, the CCI has also looked into the digital aspects of the cab aggregators’ markets to determine dominance. The CCI’s approach in the Meru-Uber case is congruent with its progressive outlook on the complex antitrust issues posed by digital markets.

Predatory Pricing

The second allegation levelled against Uber claimed that Uber’s deep pockets and dominant position allowed the international radio taxi aggregator to offer unreasonable discounts in its Indian set up, and thereby engage in predatory pricing. Uber’s below-cost pricing strategy was claimed to be economically detrimental to other cab aggregators.

According to the DG, since Uber was not a dominant player, it could not have abused its dominant position by engaging in predatory pricing. Despite noting that Uber was non-dominant, the DG went ahead and considered Uber’s massive discounting strategy. It was observed that Uber did adopt a below-cost pricing strategy for over four years. However, because Uber’s aggressive pricing strategy was not a deterrent to Ola’s business, the DG concluded that Uber’s pricing scheme was not harming market competition.

The DG’s finding in the Uber case mirrored its finding in the Fast Track-Ola case. In both cases, the CCI also agreed with the DG’s decision that contravention of section 4 was a necessary precursor to adjudging an entity guilty of predatory pricing.

Conclusion

The cab aggregators’ market and its players exhibit peculiar characteristics like platform-based business model, operations in the digital sphere, and pricing. Accordingly, the CCI has very aptly adopted a nuanced approach to understanding the said market. In conformity with recent cases, in the Meru-Uber case, the CCI has duly noted the idiosyncrasies arising in digital markets, which carry the equal potential to boost or hinder market competition. Moreover, the CCI’s consistent approach towards the cab aggregators’ market will serve as guidance for understanding competition regulation in this sector.

Pertinently, submissions have been made to the Organisation for Economic Cooperation and Development that the CCI is considering undertaking a study on ‘Competition and Regulatory Issues related to Taxi and Cab Aggregator Industry’ to understand surge pricing in the sector. Given that the CCI has been active in appreciating various markets through its intuitive policy tools, the initiation of the cab aggregator industry study to understand the new age issues posed by the cab aggregator business model will help the CCI mould its future decisions.  

Lavanya Gupta & Shreya Mukherjee

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