IP Connect

Competition Commission India Dismisses Meru’s Allegation against Uber of Predatory Pricing

In a recent order dated December 22, 2015, the Competition Commission of India (CCI) ruled in a case between Meru Travel Solution Pvt. Ltd. and Uber Group relating to alleged predatory pricing strategy by Uber Group in Kolkata, India. Rejecting the allegations forwarded by Meru, the CCI ruled in Uber’s favour holding that it did not enjoy a dominant position in the relevant product market.

Brief Facts of the Case

Meru Travel Solutions Private Limited (hereinafter referred to as Meru), the Informant / Complainant in the Complaint under discussion, filed a complaint against Uber India Systems Pvt. Ltd. (hereinafter referred to OP1) and Uber BV (hereinafter referred to OP2) accusing them of entering into anti-competitive agreements and abuse of dominant position.

Here it would be relevant to mention that both Meru and Uber are engaged in the business of radio taxi services, and the present case relates to radio taxi business in the city of Kolkata, India.

Contentions by the Informant, Meru

• Uber has indulged in anti-competitive business activities and practices by adopting predatory pricing strategies in abuse of its dominance in the relevant market, thus is in contravention to the Competition Act, 2002.
• That prior to the launch of Uber, the average market price of radio taxi services in Kolkata was about INR 20-22/ km, however Uber launched its services in Kolkata in August, 2014 at INR 15/ km.
• That Meru entered the Kolkata market in September, 2014 and launched its services at INR 20/km, but due to the predatory pricing strategy and anti-competitive practices of Uber, it had to drop its rate to INR 15/km and also give incentives to its drivers so that they remain attached to their network.
• That thereafter, Uber dropped its rate to INR 9/km alongwith increased incentives to drivers. Resultantly, Meru’s business in Kolkata alongwith the business of other radio taxis also suffered loss and its market share started to decline.
• As per TechSci report, Uber holds a dominant position in the radio taxi services market in Kolkata on the basis of fleet size (52%) and number of trips per day (61%).
• That Uber enjoys a dominant position in the relevant product market as per the factors laid down under Section 19(4) of the Competition Act.
• That the pricing strategy of Uber is predatory which is impossible to be matched by other competitors in market.
•  That discounts and loyalty rebates offered by Uber to its customers through its wallet system leads to discrimination of pricing.

Reply by the Opposite Party(ies), Uber

• That the relevant product market is much broader than the provision of “radio taxi services” and should include all modes of public as well as private transportation.
• That the active presence of yellow taxis in Kolkata poses a strong competitive constraint on radio taxis which warrants its inclusion in the relevant product market definition.
• That the research report prepared by TechSci, which has been relied upon by Meru in the complaint to prove Uber’s dominance in the market, is unreliable and cannot be used as a basis to prove the dominance of any enterprise.
• That Uber Group has only been in existence in Kolkata for approximately 1 year and any assessment as to its market share based on the data pertaining to such short period of time would be inconclusive.
• That Uber launched its lower cost services namely “Uber Go” in numerous cities including Kolkata and pricing on the Uber Go platform at the time of launch across several cities in India, including Kolkata was INR 9/km. Subsequently, in February 2015, prices for Uber Go were reduced in several cities across India to INR 7/km, with the exception of Kolkata where the fare remained at INR 9/km. Therefore, Uber was not reducing its prices in Kolkata only as a result of Meru’s entry into the said market.
• Uber challenged the authenticity of the TechSci report and provided data pertaining to its fleet size according to which its market share is 38.54%, which is lesser than OLA’s market share of 41.7%.
• That Uber’s business model is based on efficiencies, with a view to lower costs and pass such benefits to the consumers i.e. consumer welfare, which is precisely what the competition laws in the country seeks to promote.

The Competition Commission of India’s Observations and Holding

• Relevant Product Market

Commuters in Kolkata rely on yellow taxis for their day to day transportation requirements owing to their ease in booking, availability and low pricing. Therefore, Kolkata is a peculiar market in itself and active presence of yellow taxis pose a significant competitive constraint on the radio taxi operators. Hence, it may be appropriate to include yellow taxis within the relevant product market in Kolkata. Therefore, the relevant product market in the present case would be the market for ‘services offered by radio taxis and yellow taxis’.

• Relevant Geographic Market

That having regard to distinctive conditions of competition in Kolkata, the relevant geographic market in the present case would be ‘Kolkata’.

Hence, the relevant market would be market for ‘services offered by radio taxis and yellow taxis in Kolkata’.

• Uber’s Dominant Position in Market

CCI observed that the veracity of the Techsci report relied upon by Meru in the case was highly doubtful as Uber was not even interviewed by the TechSci Research Private Limited prior to preparing the said research report. Thus, conclusions based on incomplete information were not found to be reliable. Moreover, the TechSci report was prepared without taking into account the data pertaining to yellow cabs, which is part of the relevant market as delineated by the Commission. The existence of yellow taxis posed a significant constraint on the behaviour of other taxi operators in the city of Kolkata. Hence, Uber Group’s s dominance in the relevant market based on the TechSci report could not be proved.

Additionally,

In view of the aforesaid observations and data, the Commission held that Uber Group does not hold a dominant position in the relevant market and hence there was no need to go into the examination of Uber Group’s conduct in such relevant market.

Conclusion

On account of heavy discounts and attractive offers, radio taxi services offered by companies like Uber and Ola 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.

However, in the present case, on account of procedural lapses like non- inclusion of yellow taxi services in Kolkata and alleged incomplete report prepared by TechSci, the alleged predatory pricing and abuse of dominance by Uber could not be evidenced. Aggrieved by the same, whether or not Meru pursues its case against Uber  further, is yet to be seen.