February 15, 2016     

 India: CCI Dismisses Mega Cabs’ Allegation against OLA of Abuse of Dominant Position

 

In a recent order dated February 09, 2016, the Competition Commission of India (CCI) has rendered its decision in a case between M/s Mega Cabs Pvt. Ltd. and M/s ANI Technologies Pvt. Ltd. relating to alleged abuse of its dominant position and entering into anti-competitive agreements with its taxi drivers by OLA in the Delhi-NCR region, India. Rejecting the allegations forwarded by Mega Cabs, the CCI ruled in OLA’s favour holding that it did not abuse its dominant position or enter into anti-competitive agreements with the drivers in its network.

 

Brief Facts of the Case

 

Mega Cabs Pvt. Ltd. (hereinafter referred to as “Mega Cabs”), the Informant in the Complaint under discussion, filed a complaint against ANI Technologies Pvt. Ltd. (hereinafter referred to as “OLA”) accusing it of entering into anti-competitive agreements and of abusing its dominant position in the Delhi-NCR market. Both Mega Cabs and OLA are engaged in the business of radio taxi services, in the Delhi-NCR region, India.

 

Contentions by the Informant, Mega Cabs

  • That OLA is dominant in the Delhi-NCR market and is abusing its dominant position in terms of Section 4 of the Competition Act, 2002.

  • That OLA has also indulged in anti-competitive agreements with the taxi drivers registered on its network which has adversely affected the competition in the market within the meaning of Section 3 of the said Act.

  • That OLA has managed to raise huge investments by way of multiple rounds of venture funding to acquire a position of dominance in Delhi-NCR region, and has engaged itself in abusive tactics like predatory pricing, offering periodical discounts to consumers and incentivising driver with the sole intention to eliminate competition from the market.

  • Further, OLA’s recent acquisition of its competitor ‘Taxi for Sure’, has strengthened its market position tremendously enabling it further to indulge in abusive tactics.

  • As per a market report for radio taxis in the Delhi-NCR region titled “Delhi/NCR Radio Taxi Market Analysis (2015)’ prepared by market research and consulting firm named ‘6Wresearch’ (hereinafter, “6Wresearch report”), OLA along with its recently acquired Taxi For Sure holds a dominant position in the radio taxi services market in Delhi-NCR on the basis of fleet size (52.9%), monthly revenue (52.3%) and number of trips per day (57.5%).

  • That for every cab trip, OLA receives 15% of the actual billing and remaining 85% is remitted to service providers as revenue. Further, over and above the 85% share, OLA provides rebates and incentives to its drivers.

  • That OLA also suffers a loss of INR 15.80 per trip but engages in below-cost pricing to oust other players from the market.

  • That OLA provides many rebates and discounts to customers like free rides, cash back schemes, recharge schemes, reduction in minimum fares, special bonuses, special prizes etc. leads to discrimination of pricing.

  • That due to actions of OLA, the radio taxi services market is becoming distorted and the Informant is losing its revenues and radio taxis on its network as its bookings have reduced by 29% since April 2013, bookings have gone down by 31% during 2013-2015 and the average number of trips per day has also gone down by 31% during the said period.

  • That the pricing strategy of OLA is predatory which is impossible to be matched by other competitors in market.

Reply by the Opposite Party, OLA

  • That Mega Cabs has wrongly relied on financial statements of OLA for the year 2012-13 and 2013-14 when OLA was not even present in the Delhi-NCR market, as it had entered the said market only in 2014. Thus, the reduction in Mega Cabs’ booking by 29% since April 2013 cannot be contributed to OLA.

  • That the 6Wresearch report, which has been relied upon by Mega Cabs in the complaint to prove OLA’s dominance in the market, is unreliable, reflects the poor performance of Mega Cabs and cannot be used as a basis to prove OLA’s dominance.

  • That Mega Cabs operates on own-assets model wherein all taxis in its fleet size are owned by it as opposed to OLA which operates on aggregators’ model wherein it does not own taxis, rather taxis are attached to its network by taxi owners. Hence, the connotation of ‘active fleet size’ cannot be applied to Mega Cabs which has full control over its taxi fleet.

  • That Mega Cabs has 650 taxis in its fleet out of which 400 are active and 250 are inactive. Further, daily trips of each radio taxi of OLA are 6 whereas for Mega Cabs it is only 4, thereby showing its inefficiency.

  • That while Mega Cabs is complaining of OLA’s losses and linking it to predatory pricing, Mega Cabs is also suffering losses for 6-7 years after entering the market.

  • That giving discounts and rebates is very natural in every market and essential in the competition process, especially for new players trying to gain a presence in the market.

  • That being an aggregator, OLA needs to ensure that the taxi drivers attached to its network stay motivated, and therefore it needs to provide incentives to drivers.

  • That OLA is an efficient and innovative player in radio taxi services market and its strategies aim at meeting the competition and establishing a presence.

The Competition Commission of India’s Observations and Holding

  • Relevant Product Market

The features of radio taxis like convenience of time saving point-to-point pick and drop, pre-booking facilities, round the clock availability, predictability in expected waiting/journey time etc. makes them different from other modes of transport like auto-rickshaws, buses, private taxis etc. A dedicated category of commuters would only use radio taxes irrespective of costs. Thus, similar relevant product market definition would be appropriate due to dependence of commuters on radio taxis.

  • Relevant Geographic Market

That having regard to transport being a state subject, radio taxi services being regulated by State Transport Authorities and demarcation of Delhi and NCR in apps (applications), the relevant geographic market in the present case would be ‘Delhi’. In view of the above, the relevant market would be market for ‘services offered by radio taxis in Delhi’.

  • OLA’s Dominant Position in the Relevant Market

The CCI observed that the veracity of the 6Wresearch report relied upon by Mega Cabs in the case was highly doubtful as the same was commissioned on instructions of a particular anonymous client and most of the data used in the report is silent as to specific source from where the data is taken. Thus, it remains questionable as to whether radio taxi operators were interviewed or not and if the data was reliable. Thus, conclusions based on incomplete information were not found to be reliable. Hence, OLA’s dominance in the relevant market based on the 6Wresearch report could not be proved.

 

Held

 

In view of the aforesaid observations and data, the CCI held that OLA does not hold a dominant position in the relevant market and there are other players with significant presence in the market. Hence there was no need to go into the examination of OLA’s conduct in such relevant market.

 

Also, allegations raised by Mega Cabs are opposed to basic tenets of competition law, and inability of existing players to match innovative technology by any player or the model created for operating in a particular industry cannot be said to be creating entry barriers in itself.

 

Further, option of venture funding, used by OLA to bear costs of giving incentives to drivers and discounts to customers are not exclusively available to OLA alone and can be accessed by any existing player in the market. Thus, Mega Cabs’ contentions appear to be misplaced and liable to rejection.

 

Conclusion

 

On account of heavy discounts and attractive offers, radio taxi services offered by start-ups and companies like OLA, Uber, Taxi For Sure etc. have gained immense prominence and consumers are heavily relying on this mode of transportation. Thus, there is exists fierce competition and frequent adoption of predation in this segment of business. Therefore, it is not surprising that there is a sudden rise in disputes of such nature before the CCI. We had earlier covered a similar dispute between Meru Cabs and Uber in context of the relevant market ‘services offered by radio taxis and yellow taxis in Kolkata’ in our Issue No. 1 dated January 04, 2016, available here. Interestingly, Meru had recently made a similar complaint against Uber with regard to the relevant market of ‘services offered by radio taxis in Delhi-NCR’, based on a report prepared by TechSci, where the CCI again observed that the NCR region was distinct from Delhi, hence the relevant market was ‘services offered by radio taxis in Delhi’ and held that Uber does not have a dominant position.

 

Thus, it can be observed that largely due to procedural lapses like alleged incomplete or conflicting reports of market research and consulting firms like TechSci and 6Wresearch, complaints by older players in the said market against new and seemingly more dynamic entrants regarding predatory pricing and abuse of dominance are not able to hold ground. However, this realm of disputes is relatively new in the industry, and how the scenario shapes out in the future is yet to be seen.

        

 

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