Fast Track Call Cab Pvt. Ltd. Vs ANI Technologies Pvt. Ltd. (Competition Commission of India)
Brief Background of the Case
The present case is a dispute between Ola (ANI Technologies Pvt. Ltd.), an app-based taxi aggregator, and two radio taxi service providers (Fast Track Call Cab Pvt. Ltd.). The informants essentially accused the company of abusing its dominating position and violating Section 4 of the Competition Act, 2002.
Under the brand name “OLA,” OP is a company that provides radio taxi services. The Informant’s main allegation is that OP engaged in predatory pricing in violation of Section 4(2)(a)(ii) of the Act by giving large discounts to customers and incentives to the taxi drivers who serve them. This is a misuse of OP’s dominant position in the relevant market. According to the Informant, this behavior has affected other market competitors who are unable to provide commuters and drivers with comparable discounts or incentives.
At that stage, the Commission, based on the high market share of OP, The Commission ordered the Director General (DG) to conduct a thorough investigation into the situation in an order dated April 24, 2015. By order dated September 30, 2015, the Commission combined this information with the earlier matter that the DG was looking into and instructed the DG to provide an investigative report. During the course of the investigation, the DG sought information from the parties and other radio cab companies (third parties), including Uber India Pvt. Ltd. (‘Uber’), operating in the geographic region of Bengaluru. As a result, on April 12, 2016, the DG submitted a confidential version of the joint investigation report. The DG then filed the investigation report’s public version on November 24, 2016, taking into account the Commission’s orders regarding the confidentiality requests made by OP and Uber. The public version of the investigation report was sent to the parties for their response/objections.
Issues
1. Whether Ola held a dominant position in the relevant market or not? and
2. If it held a dominant position, whether its conduct amount to abuse (predatory pricing) within the meaning of Section 4(2) (a)(ii) of the Act?[1]
Laws Applied
Predatory pricing is commonly described as setting the price of any good below what is reasonable in order to drive out rivals in the near term and reduce competition in the long term. A practice that affects both competitors and the market as a whole also acts as a roadblock to market expansion. Usually, the decrement in price is targeted at increasing market share, and thus, it would not be wrong to say that Predatory Pricing creates Monopoly. To define Predatory Pricing in precise economic terms is difficult. According to a layman’s definition, it is forfeiting present returns with the intention of eliminating competitors from the market with the motive of recovering lost revenues through monopoly profits afterward. In order to demonstrate that a seller is using predatory pricing, the claimant must prove that either 1) a competitor is charging a price below his average cost in the competitive market, or 2) the competitor is charging a price below its short-term, profit-maximizing price and that the barriers to entry are high enough to allow the discriminator to benefit from predation before a new entry is feasible.[2]
In the present case, the DG analyzed the Indian taxi industry in general and that of Bengaluru in particular. In order to define the relevant product market, the DG considered Ola’s contention that the company was merely a technology company and an ‘aggregator of taxis’, and was not in the business of radio taxis, unlike Meru, Mega, Easy Cabs, etc. Due to the inherent difference in business models, Ola indicated that it merely connected drivers with prospective consumers and did not own the cabs themselves.
The DG also reviewed whether other commercial means of transportation would serve as taxi replacements and whether they would effectively restrain Ola’s taxis’ ability to compete. The DG did this by distinguishing the radio taxi service providers from other means of transportation based on the following features that set the former apart from the latter:
