Fast Track Call Cab and Meru appealed to set aside the order passed by CCI absolving Ola of abuse of dominant position and get a cease-and-desist order against Ola to restrain it from its anti-competitive practices.
NCLAT dismissed the appeals filed by Fast Track Call Cab and Meru (“Appellants”) against “Ola” run by ANI Technologies, on January 7, 2022. NCLAT declared that Ola was not in a dominant position and did not indulge in predatory pricing, upholding the CCI’s order in 2017.
CCI had directed a DG investigation on a prima facie allegation of dominance by Ola in the relevant market of “radio taxi market in Bengaluru”. CCI passed an order basis this DG report-
-that there isn’t any evidence that Ola held a dominant position in the relevant market and that it was not an abuse of its position under Section 4 for Abuse of Dominant Position under the Competition Act, 2002 (Act).
Appellants appealed against this CCI order on broadly the following:
1. Incorrect understanding of “disruptive technology” and business model by CCI- Appellants stressed that Ola was not a technology company. It essentially controlled all aspects of taxi services.
Ola’s growth was not significant since its entry in 2011, it had to offer discounts to its customers and incentives to the drivers to grow. Its competitors could not afford the discounts and incentives and thus Ola’s market share started increasing. This was the core reason for its growth and not technology usage.
Ola was operating on an asset-based model and not technology-driven and acquired a dominant position in the market because of this and not technology.
2. Predatory Pricing– Ola was able to offer these discounts as predatory pricing to eliminate competitors from the relevant market since it had received funding in 2014. Ola operations continued despite losses because of predatory pricing.
3. Anti-competitive Agreements with drivers– Ola, in violation of Section 3 (Predatory pricing) of the Act, executed anti-competitive agreements with drivers and included incentives as well as a specific exclusivity clause with a lock-in period, locking them to Ola. That Ola, in its Master Service Agreement with the drivers, had a “Zero Tolerance Policy” preventing drivers from entering into similar agreements with the competitors.
CCI’s order:
1. CCI’s rationale of two dominant players– CCI stated that since there are two dominant players (Ola and Uber) in the market and not one, which implies there is no violation of Section 4 (Abuse of Dominant Position) of the Act by Ola.
Appellant’s Counter: The Appellants’ argued that any enterprise could be in a dominant position as per Section 4(a) (directly or indirectly impose unfair/discretionary conditions or prices), since being in a dominant position is not reliant on being a single enterprise in the market.
-There seems some logic to this, since by being a single operator one could at best be labeled as a monopolistic player but would be hard to discount being in a dominant position.
2. Technology-based platform: CCI noted that Ola leveraged technology to be a platform-based aggregator taxi service with features like ease of booking, ride security and easy payment options. Appellants also leveraged technology, but in a different form and that Ola’s deployment of technology was indicative of it being a technology company as it used technology for its services.
Customer incentives and branding were not the essential features of Ola services. These added to the conveniences which expanded the market size.
3. Presence of Uber– CCI relied on the DG report to comment that the presence of Uber in the market was a competition to Ola, which forced Ola to have a different market strategy in an already competitive relevant market from the Appellants.
In CCI v. Fast Way Transmission Private Limited and Ors. Civil Appeal No. 7215 of 2014 (2018 3 SCC 316), the SC had held that when an enterprise enjoys a dominant position in the relevant market, it can operate independently of competitive forces or affect its competitors or consumers or the relevant market in its favour.
Ola was not operating independently of market influences, it had to innovate market strategy and offer pricing for increased demand with supply.
4. Voluntary Agreement– CCI accepted Ola’s defence of the “Zero Tolerance Policy” being for maintaining the standards and the quality of service offered. These were not policies using coercive efforts to get drivers attached to Ola’s network. Drivers could log in and log out at their own will from the application. The incentives to the drivers were welfare measures of drivers and credit for purchasing vehicles without any financial lock-ins since Ola stood as guarantor for vehicle loans.
CCI agreed that it would be incorrect to infer that Ola enjoyed a dominant position in the market for radio taxi services in Bengaluru.
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Sources: NCLAT Order, Bloomberg Quint, SCCOnline and Business Standard