Yesterday, a 3-judge bench of the Supreme Court upheld the Competition Commission of India (CCI) order which dismissed complaints against Ola and Uber of facilitating cartelization or anti-competitive practices between drivers. The complaint was filed by an independent lawyer Samir Agarwal against the two companies in August 2018.
Context
On August 13, 2018, Samir Agarwal (the Informant) had written to the CCI to initiate an inquiry against Ola and Uber (Opposite Parties or OPs) for their alleged anti-competitive practices. He had accused both the firms of functioning like a trade association, facilitating the operation of a cartel through the manipulation of supply and demand guaranteeing higher fares for drivers.
The CCI, in its order dated November 6, 2018, had dismissed the allegations of the Informant about price discrimination. The Informant then filed an appeal before the National Company Law Appellate Tribunal (NCLAT). In its order dated May 29, 2020, the NCLAT also agreed with the CCI order and dismissed the allegations levelled by the Informant.
Informant’s complaint to CCI:
Excerpts from the CCI website containing the complaint is reproduced below:
…The Informant has alleged that the algorithmic pricing adopted by the OPs takes away the liberty of individual drivers to compete with each other and thus, amounts to price fixing by the OPs, in contravention of the provision of Section 3 of the Act…
…The Informant has alleged that Ola’s/Uber’s pricing algorithm artificially manipulates supply and demand, which guarantees higher fares to drivers who would otherwise compete against one another on price and would not be able to command such high prices…
…The Informant has further submitted that Ola/Uber App prevents drivers from competing on fares akin to a trade association that facilitates a cartel, and in this regard has cited Builders Associations v. Cement manufacturers Association and Ors. (Case no. 29 of 2010) wherein a trade association that facilitated a cartel was penalised. The Informant has submitted that a cartel is a cartel, even if price fixing is achieved by way of an App and the OPs cannot claim any immunity from the provisions of the Act on the pretext of ‘App’ based pricing…
…The Informant has further alleged that Ola/Uber and its drivers are in a vertical relationship wherein Ola/Uber imposes a minimum price level on the drivers, resulting in a contravention of Resale Price Maintenance under Section 3(4)(e) of the Act. The Informant has stated that Ola/Uber’s algorithm determines the price, below which drivers cannot charge which results in a minimum fixed price. The Informant has relied upon the Commission’s order in Fx Enterprise Solutions India Pvt. Ltd. v. Hyundai Motor India Limited, Case no. 36 and 82 of 2014, decided on 14.06.2017, wherein the Commission observed that an agreement that has as its direct or indirect object in the establishment of a fixed or minimum resale price level, may restrict competition…
CCI’s order:
Excerpts from the CCI’s order is reproduced below:
…The Informant has not alleged collusion between the Cab Aggregators i.e., Ola and Uber through their algorithms; rather collusion has been alleged on the part of drivers through the platform of these Cab Aggregators, who purportedly use algorithms to fix prices which the drivers are bound to accept…
…In the case of ride-sourcing and ride-sharing services, a hub-and-spoke cartel would require an agreement between all drivers to set prices through the platform, or an agreement for the platform to coordinate prices between them. There does not appear to be any such agreement between drivers inter-se to delegate this pricing power to the platform/Cab Aggregators. Thus, the Commission finds no substance in the first allegation raised by the Informant…
…Resale price maintenance, under the provisions of the Act, is essentially setting of a floor price on resale. In case of app-based taxi services, the dynamic pricing can and does on many occasions drive the prices to levels much lower than the fares that would have been charged by independent taxi drivers. Thus, there does not seem to be any fixed floor price that is set and maintained by the aggregators for all drivers and the centralized pricing mechanism cannot be viewed as a vertical instrument employed to orchestrate price-fixing cartel amongst the drivers…
…Based on the foregoing, the Commission is of the view that no case of contravention of the provisions of Section 3 has been made out and the matter is accordingly closed herewith under Section 26(2) of the Act…
P.S. In the same judgment, the Supreme Court set aside the NCLAT ruling that the Informant had no locus standi on the case. “Obviously, when the CCI performs inquisitorial, as opposed to adjudicatory functions, the doors of approaching the CCI and the appellate authority, i.e., the NCLAT, must be kept wide open in public interest, so as to subserve the high public purpose of the Act,” the court said.