Competition Law

Apex Court Affirms COMPAT’s Observation on Uber’s Alleged Anti-Competitive Conduct

There seems to be no respite for Uber from getting under the scrutiny of alleged anti-competitive behaviour causing an appreciable adverse effect on competition (“AAEC”). Recently, the Supreme Court affirmed the observation of NCLAT’s predecessor and ordered the investigative wing of the Commission i.e. the Director-General to investigate into Uber’s alleged involvement in anti-competitive activities. The commission’s decision was overruled by COMPAT which directed a fresh investigation of the case. This piece shall attempt to summarize and analyze the observations made by the judicial bodies at different stages and shall also highlight potential problems that the DG might face while investigating the present case on merits.

 

[The author is currently working on the position of Research Associate at CUTS Institute for Regulation and Competition (CIRC), New- Delhi and can be reached at faizsiddiqui953@gmail.com]

 

Commission[1]:

Meru Travel Solution Private Limited (MTSPL) approached Commission in 2015 against Uber alleging its indulgence into anti-competitive practices like predatory pricing, unfair conditions etc.  to eliminate competitors out of the market. The Informant substantiated its contention of predatory pricing by showing the data of average market prices for radio taxis before the launch of Uber was Rs. 23/ km in 2013 which was substantially brought down to just Rs. 7/km in 2015 after Uber started its operations in India by offering a high discount on already reduced prices and also offered lucrative incentives to drivers thereby losing approximately 204 Rs. per ride. The opposite party also questioned the authenticity of report relied on by the informant i.e. “New Age TechSci Report” which indicated that Uber’s market share has grown from nowhere to 50% within a span of 2 years in the relevant market of ‘radio- taxi services in Delhi- NCR’. The Commission was not convinced by the arguments presented by the informant as it differed in the delineation of the relevant geographic market by stating that regulatory conditions of two states are different and hence, NCR was not included in the relevant market while establishing dominance. The Commission finally observed that the fluctuating market share of competitors show that the market is highly competitive. Therefore, the Commission dismissed the case on the ground that no prima facie case was made out against the opposite parties under section 26(1) of the Act.

 

COMPAT[2]:

The aggrieved party approached appellate tribunal against the impugned order passed by the Commission. The Competition Appellate Tribunal opined that the Commission erred in defining the relevant geographic market by restricting it to Delhi only. It further stated that as the Motor Vehicle’s Act allows taxis under tourist permit to not be restricted to operate within municipal limits and passengers prefer hassle-free travel from one place to another. Therefore, the appellate tribunal delineated the relevant market as ‘radio taxi service in Delhi NCR’. COMPAT also noted that the Commission was caught in two minds on the treatment of market report for ascertaining dominance of Uber as it relied on the TechSci Report while deciding on the Fast Track case and in the present case, it refused to rely on the mere pretext that result was simply denied by Uber in the preliminary conference and it was also observed that nothing substantial was put forth before the Commission to support the same. Also, the Commission treated the report as unreliable on the one hand and on the other hand, the Commission placed its reliance on several parts of the report while coming to the conclusion. It was further observed that availability of financial resources, offering unreasonable discounts and a substantial increase in market share within a short span of time create a reasonable apprehension of existence of anti-competitive activity which the Commission failed to notice. Subsequently, COMPAT set aside the order of the Commission and ordered DG to conduct an investigation for the alleged involvement of Uber in anti-competitive practices.

 

Supreme Court[3]:

An appeal was preferred by Uber against the order of COMPAT directing DG to initiate investigation against the company. The apex court did not discuss the matter at length but upheld the observations made by the appellate tribunal. The Court was in consonance with the delineation of relevant market by the appellate tribunal and it also observed that incurring humongous loss per trip cannot have any objective rationale other than throwing competitors out of the market. The Court mildly touch upon the scope of section 4 and observed that while ascertaining abuse under section 4(2) (a), it covers unfair and unreasonable price in purchase or sale which also includes predatory pricing. The appeal was finally dismissed by the Supreme Court recently and now Uber will have to go under the scrutiny for alleged anti- competitive activities on merits.

 

Conclusion

The Apex Court’s decision has opened full-fledged litigation against Uber where the Commission will be revisiting all the important issues such as delineation of relevant market, authenticity of the report relied, determination of dominance and most importantly, whether that dominance was abused by opposite party after conclusion of investigation by the DG and after hearing both the parties on merits. One important thing that is to be taken into account is the timeframe when the case was instituted and when a formal investigation was initiated. The case was filed when the radio taxi market was at a nascent stage where Uber was trying to establish itself in India as a brand. The formal investigation is initiated where Uber is able to capture substantial market share by its business strategy and also a large number of people are availing cab services, especially in bigger cities. Uber has already faced similar antitrust litigation in other jurisdictions like South Africa and the United States where Uber was exonerated from all charges in South Africa and the case is still pending in the United States. It will be really interesting to show whether the Respondents (originally informant) are able to establish dominance of Uber because it faces its biggest competition from Ola and the question of predatory pricing will come only after the dominance is established. Also, the Indian regime doesn’t recognise the concept of Collective Dominance so it will be really interesting to see how things will turn out for Uber in the future.

 


Endnotes:

[1] https://www.cci.gov.in/sites/default/files/26%282%29_96%20of%202015.pdf, Meru Travel Solutions Private Ltd. v. Uber India Systems Pvt. Ltd & Ors

[2] http://compatarchives.nclat.nic.in/Attachments/JudgementList/4198_Meru.pdf, Meru Travel Private Solution Ltd. v. Competition Commission of India & Ors.

[3] https://sci.gov.in/supremecourt/2017/2103/2103_2017_5_2_16524_Judgement_03-Sep-2019.pdf, Uber India System Pvt. Ltd. v. Competition Commission of India & Ors.

 

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