Shubhodip Chakraborty
INTRODUCTION
Technology Market refers to market platforms driven by new technologies, shrouding over the age-old market platforms. With the advent of e-commerce facilities selling, purchasing, hiring of any goods and services is seen to be in the hands of the consumers. Not only it is easier for the consumer to have access to such goods and services with ease but also at a price cheaper than available in the normal market platforms. But at times on the verge of providing such benefits, in making the consumer’s king, the suppliers get into conflict amongst themselves as one adopts means which are considered abusive conduct on their part. In light of this, this article takes up the recent case of OLA Cabs and fleetingly discusses on the regulatory issues which are coming up with such technology markets.
Among the plethora of case related to this issue coming to the eye of the Competition Commission of India, one of the recent case to come up was the case of Fast Track vs. OLA Cabs, where Fast Track had contended that, Ola occupies a dominant position in the market and they have abused this dominance by engaging in predatory pricing, which according to Section 4 of the Competition Act, 2002 means sale of goods or provision of services at a price below the cost, with a view to eliminate competitors. Such new technologies in the market even though it might serve the consumers an easier mode of access to the market it can affect the industry to a greater extent. Therefore, technology market tend to serve the consumers a better and an efficient service, but at the cost of disrupting the competitors in the market.
Role of Competition Law in regulating the conflict
Competition Law has been regarded as the most efficient mechanism in countering anti-competitive agreements, prohibiting abuse of dominant position, regulating mergers and combinations and provoking efficient allocation of resources to ultimately benefit the consumers, providing them with wider choices, better quality products at a reasonable price. The Competition Law has always provided a welcome assurance to new and innovative product serving the interests of the consumer in a better-way but having said that, not at the cost of removing the other competitors at hand by indulging in activities such as bid-rigging, collusive bidding, predatory pricing, etc. Competition Law enacts a prohibition to the industries if they indulge themselves in horizontal agreements. Horizontal agreements refer to those agreements which are entered into within the firms of an industry. The primary objective of Competition Law is to prevent abusive practices in the market, promote and sustain competition in markets and ensure that the consumers get the proper products at a reasonable price and better quality. Now, let us look into the specific provisions and compare with the relevant facts of the case.
In the case of Fast Track vs OLA Cabs,[1] the petitioners (Fast Track) complained that the market strategies of OLA happens to affect in the market in an adverse way. There main contention was that OLA by applying predatory pricing technique is abusing its dominant position and hence it is disturbing the market and also driving the other competitors out of the market. Section 4 of the Indian Competition Act of 2002 discusses about abuse of dominant position. Position of dominance refers to the seller possessing the power of controlling the market since it being the sole seller of the product. Dominance over a specific area of market can be earned by any enterprise through monopoly power, this is not per se violation of anti-trust law but abuse of this position is illegal and has a detrimental effect on the market. An enterprise tend to become dominant if the relevant market is narrowly defined and it ceases to be so if it is defined widely.[2] Therefore the mere fact of the enterprise being dominant is not illegal but its abusive conduct is prohibited. This dominance is measured by a number of terms, for example, market share, availability of substitutes, relevant market area and product. In the instant case, the Competition Commission of India held that OLA holds a dominant position but the Commission restricted its views on the market of Bangalore and not taking the instance of the whole of India, in addition, it had also not taken the availability of substitute product such as uber, mega cabs, etc. If we take into account all these other factors, it can be deduced that along with OLA all the above mentioned substitute products are also involved in abusing their position by predatory pricing techniques. Predatory pricing is defined under section 4 of the Competition Act, 2002, where it says it is a pricing technique adopted by the firms to sell product or services at such a level which is below the market cost, so as to eradicate the other competing firms. Therefore, this technique is adopted so as to attain the dominant position and hence abuse the dominant position in the market. Now, lowering of price of the product or service does not always amount to adverse effect to the competition, the firm may also lower the price so as to achieve competition among the other competing firms?
Similarly in this instant case CCI have to look into the factual matrix of the case and look into the aspect that whether the services provided is to attain competition or is it to eliminate other competitors. In order to determine whether Ola Cabs or the like products are actually affecting the market adversely or not by predatory pricing, the CCI has to look into the fact that whether they are lowering price to such an extent so as to eliminate the other competitors or not. Firstly, we need to look into one fact that these services do provide certain incentives such as phone booking facility, tracking the automobile, etc. along with price being much lowered than the normal cab services. Even if we eliminate the other facilities provided, since it belongs to the technology driven market, at times services provided by uber and others, they lower the price to nil (For example, first customer free ride service, promo code sharing free ride service, etc.), applying this strategy the firm can attain the dominant position easily, and thus abusing such position thereafter.
Predatory Pricing
The idea of predatory pricing revolves around the dominant firm deliberately reducing the price to a loss making level when faced with competition from an existing competitor or a new entrant to the market; the existing competitor having been disciplined, or the new entrant having been foreclosed. The dominant firm then raises its prices again, thereby causing consumer harm. Where a dominant undertaking has a reputation for acting in a predatory manner, this in itself may deter new entrants not only predatory pricing itself but also the reputation for predation may be a barrier to entry[3]
Competition primarily exists as a battle between the pricing of the product mainly. It has been seen that rebates and providing certain incentives for the buyer are the essential elements through which competition invigorates and the regulating statue should be such that it does condemn these practices. In particular a dominant firm should not be deterred from passing on its efficiency to customers in the form of lower prices.[4] The law on predatory pricing cutting has to trend a fine line between not condemning competitive responses on the part of dominant firms on the one hand and prohibiting unreasonable exclusionary conduct on the other.[5] It would be perverse if the effect of competition law were to be that dominant firms choose not to compete on price for fear that, by doing so, they would be found guilty of an infringement.[6] Bork argues that in practice predation is too expensive for the predator; that the predator will not earn monopoly profits until some distant future time when the new firm has disappeared; and that if it is easy to drive the firms out, it will be correspondingly easy for the new firms to enter when the predator begins to reap a monopoly profit in the future.[7]
EU law
This technique is being used by this technology market entrepreneurs in order to reap out the profits as already discussed. But as also said, the conflict seems to arise as to whether the new entrant decreases the price in order to make an entry to the market or with the motive of driving everyone out from the market. In order to counter this conflict, the judicial authorities can take recourse to the regulations laid down under the EU law in the certain cases and what was laid down in those cases.
According to Areeda and Turner test of predatory price cutting, according to which pricing above AVC should be presumed lawful.[8] But in the case of AKZO v Commission,[9] this approach was negated. The rule laid down in the said case was with regard to the price ranging capacity of the product and when it is said to be as predatory and when not. The Court of Justice in AKZO v Commission, went on to hold that where prices are above AVC but below ATC they will be regarded as abusive if they are part of a plan which is aimed at eliminating a competitor,[10] such a pricing policy might mean that a dominant firm drives from market undertakings that are as efficient as it but which, because of their smaller financial resources, are incapable of withstanding the competition waged against them The Court of Justice upheld the Commissions rejection of the Areeda/Turner test. The rule established under this case was,
1. If the dominant firm is selling above Average Total Cost, it is not guilty of predation under the rule established under AKZO v Commission.
2. If the dominant enterprise is selling less than Average Total Cost, but above Average Variable Cost, it is guilty of predation where this is done as a part of plan to eliminate a competitor.
3. If the dominant firm sells below Average Variable Cost, its conduct is presumed to be abusive in nature.
In the case of Tetra Pak v. Commission,[11] the Commission found Tetra Pak guilty of predatory pricing in relation to its non-asceptic cartons; it considered that Tetra Pak was able to subsidise its losses from its substantial profits on the market for asceptic cartons, where virtually it had no competition. The commission concentrated on the position in Italy where the cartons were being sold at a price lesser than AVC. The Commission held that it had gathered substantial and unequivocal data to be able to conclude that, in that country at least sales at a loss were a deliberate policy aimed at eliminating competition from the market. The Commissiin concluded that the pricing strategy was a part of an ‘eviction strategy’. The Court of Justice upheld the Commission’s finding of abuse.
CONCLUSION
Therefore, placing reliance to EU’s findings on predatory pricing, the CCI needs to consider the case looking at the pricing structure, whether it is below AVC, or above ATC. But at times, this principle also might fail while considering the as pect of whether the firm is actually trying to promote the product or it is trying to attain the dominant position. Therefore, the intention of the particular firm also needs to be looked into.
Recent cases on this technology market should be dealt very carefully by the CCI looking to factors such as relevant market area, the price at which the product is being sold, the impact on the physical market, etc. Looking at these factors the Commission has to decide. Technology market offers a varied range of opportunities to the consumer, so it can be said to be a boon for the consumer, but unfortunately in a country like India, it only attracts a particular class of consumers and not all. Therefore, this technology market shall not be given the privilege so as to subdue the physical market because it will again affect the consumers. This emerging battle between technology market and physical market will be a question of fact and the Commission has to decide judiciously and keep the balance in equilibrium between preserving competition and consumer benefits.
REFERENCES:
1. Bork Antitrust Paradox
2. Case C-62/86 AKZO v Commission [1991] ECR I-3359, [1993] 5 CMLR 215
3. Case C-333/94 P Tetra Pak International SA v Commission [1996] ECR I-5951
4. Competition Law by Richard Whish and David Bailey
5. Fast Track vs. OLA Cabs, Competition Commission of India Case No. 06 of 2015
6. ‘False positives and false negatives’
7. Matsushita vs Zenith Radio 475 US 574
8. Case C-333/94 P Tetra Pak International SA v Commission [1996] ECR I-5951
9. The Areeda and Turner test
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[1] Case No. 06 of 2015
[2] Vinod Dixit on “COMPETITION LAW” Annual Survey of Indian Law, 2011 Vol. XLVII
[3] Bolton, Broadley and Riordan ‘Predatory Pricing: Strategic theory and legal policy’ (2000) 88 Georgetown Law journal 2239
[4] Competition Law by Richard Whish and David Bailey
[5] ‘False positives and false negatives’
[6] Matsushita vs Zenith Radio 475 US 574
[7] Bork Antitrust Paradox
[8] The Areeda and Turner test
[9] Case C-62/86 AKZO v Commission [1991] ECR I-3359, [1993] 5 CMLR 215
[10] Case C-62/86 AKZO v Commission [1991] ECR I-3359, [1993] 5 CMLR 215, para 72
[11] Case C-333/94 P Tetra Pak International SA v Commission [1996] ECR I-5951
(Author is Student of KIIT School of Law, KIIT University, Bhubaneswar and is in 2ndYear (4th Semester) BBA. LLB. and can be reached at [email protected])
