National Company Law Appellate Tribunal (NCLAT): The Coram of Justice Jarat Kumar Jain (Judicial Member) and Dr Alok Srivastava (Technical Member) held that Ola’s below-cost pricing was not predatory pricing with a view to dislodging any competitor from the market but towards establishing itself as an effective and reliable brand in the market and also opening up a latent market to its advantage.
Two appeals filed by appellant Meru Travel Solutions (P) Ltd. and Fast Track Call Cab (P) Ltd. assailed the common order passed by the Competition Commission of India under Section 26(6) of the Competition Act, 2002.
Commission decided that on the basis of information submitted by Fast Track and Meru and analysis of DG’s investigation report, the dominant position of Ola in the relevant market and abuse of its dominant position was not established and Ola had not been found to have anti-competitive agreements with drivers.
By the present decision, both the appeals will be disposed off.
Analysis and Discussion
Technology | Ola v. Other Radio Taxis
Tribunal noted that before the advent of technology-leveraged, network-based aggregator models, taxi services such as Meru, Fast Track, Easy Cab, Taxi For Sure etc. also leveraged technology to pride ease of booking and taxi ride, yet Ola’s model differed from them in many ways, particularly its use of the smartphone-based application which could be used with remarkable ease by the riders and provide taxi services anywhere in the area within minutes of ‘hailing’ through the mobile phone.
Hence, it could not be said that Ola employed technology in a much more effective and enabling fashion to provide services which previous radio taxi operators were not able to.
Market Share
Ola market share is seen to increase from 5-6% in 2012-13 to 59-60% in 2014-15 and to 61% in 2015-16. Thus, there was a significant rising trend noted upto January 2015, whereafter Ola market share had been plateauing or witnessing a gradual decline.
Though the active fleet size increased but in Tribunal’s opinion merely the size of the fleet does not decide the dominant position of a particular radio taxi service provider.
“We note that the technological edge that the platform crested by Ola which provide ease of taxi bookings, rider security, payments, drivers welfare made many riders comfortable with the network of Ola. The customer incentives worked in conjunction with these facilities and conveniences to attract riders to Ola and a certain brand image was created and reinforced over a period of time.”
Further, another highlighting factor noted was that Ola was itself facing competition in the relevant market from established players such as Meru and Fast Track and later from Uber while it was trying to establish its brand.
Below Cost Pricing | Predatory pricing by Ola?
In Tribunal’s opinion, the strategy adopted by Ola was in view of the market conditions, helped by a heavy infusion of foreign funding. Hence, there was no below-cost pricing by Ola for any sustained period of time which could be labelled as predatory pricing and abuse of its dominant position in the market.
Coram also agreed with the finding of DG that the below-cost pricing adopted from May-June 2014 onwards could be treated as the variable cost which, as argued by Senior Counsel of Respondent Ola, was the expenditure that Ola undertook to establish its brand in the market and increase its market share.
It was also noted that Uber also adopted an almost similar network approach for the provision of radio taxi, hence Tribunal was inclined to agree with Ola’s arguments that Uber was a significant competitor in the relevant market and Ola was responding to pricing actions of Uber while trying to establish itself in the Bengaluru market of radio taxi services.
Tribunal found that the situation in the present matter was akin to that in the matter CCI v. Fast Way Transmission (P) Ltd., (2018) 4 SCC 316, wherein the Supreme Court held that when an enterprise enjoys a dominant position in the relevant market, it is enabled to operate independently of competitive forces or affect its competitors or consumers or that relevant market in its favour.
“We do not think that Ola could operate independently of other competitors in the relevant market, and hence it did not enjoy a dominant position in the market.”
Conclusion
Stating that Ola started from a low market share of about 20%, Tribunal held that it cannot agree that Ola was at that initial time in a dominant position and was trying to push out competitors from the market by employing below-cost, predatory pricing. An increase in its market share over a period of time, was due to a combination of factors, of which below-cost pricing was one.
Another significant factor, with regard to Ola’s agreements with its drivers, Tribunal noted that the agreements cover many aspects, which concern welfare measures for drivers and helping them source credit for buying vehicles. The incentives provided to drivers are dynamic and not constant in time. The drivers have the option to shift to other networks depending on their requirements and convenience.
Hence the driver’s agreement that Ola has with drivers with entirely optional and does not in any way bind the drivers to Ola’s network in any way.
Therefore, Tribunal did not find the driver’s agreements anti-competitive in violation of Section 3 of the Act.
Ola is working on generating demand through customer discounts and then bringing in more drivers to cater to the increased demand. Ola tries to create a win- win for the riders and drivers, and of course to its enterprise.
Lastly, Tribunal held that the Orders of CCI do not require any interference and therefore the appeals were dismissed. [Meru Travels Solution (P) Ltd. v. Competition Commission of India, 2022 SCC OnLine NCLAT 37, decided on 7-1-2022]
Advocates before the Tribunal:
For Appellant:
Ms. Sonal Jain, Mr. Udayan Jain, Mr. Abir Roy, Mr. Ishkaran Singh, Ms. Kajal Sharma and Ms. Riya Dhingra, Mr. Vivek Pandey, Mr. Raj Surana, Mr. Ishaan Chakrabarti, Advocates.
For Respondents:
Ms. Shama Nargis, Deputy Director, CCI.
Mr. Ajay Kumar Tandon for R-1, CCI. Ms. Purnima Singh, Ms. Neha Bhardwaj, Ms. Shivani Malik, Ms. Astha Baderiya, Advocate for R-1.
Mr. Rajshekhar Rao, Sr. Advocate with Ms. Nisha Kaur Uberoi, Mr. Gautam Chawla, Mr. Raghav Kacker, Ms. Sonal Sarda and Mr. Samriddha Gooptu, Ms. Sakshi Agarwal, Mr. Ishan Arora, Mr. Madhav Kapoor, Advocates for R-2.