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
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.
