Disha Agarwal | ICFAI Law School, Hyderabad | 15th June 2020
MERU TRAVEL SOLUTIONS PVT LTD V. UBER INDIA SYSTEMS PVT LTD
Facts of the case:
Meru Travels Solutions Pvt. Ltd (Informant) is engaged in providing radio taxi service in 21 major cities across India. It entered Delhi-NCR market in the year 2008. In 2016, Meru filed an information with the Competition Commission of India (CCI) under Section 19(1)(a) against Uber India System Private Limted, alleging that Uber adopted various anti-competitive practices like engaging in predatory pricing and abuse of dominance contravening Section 3 and 4 of the Competition Act,2002 in order to establish its monopoly in the market and eliminate existing competition.
Meru alleged that Uber provided reduced tariffs, deep discounts to its customers. Further, it was also alleged by Meru that Uber has entered into exclusive contracts with taxi owners so as to restraint them from getting associated with any other radio taxi operators which are in competition, thereby violating Sections 3(1), 3(2) and 3(4) of the Act. The Informant contended that due to such practices by Uber, Informant started incurring losses.
Subsequently, to prove Uber’s dominance, Meru (Informant) relied on a market research report namely “Delhi-NCR Radio Taxi Service Market Analysis”. It disclosed that Uber had 50.1% of the market share in the relevant market namely Delhi NCR. Meru (Informant) also alleged that Uber was losing on an average Rs. 204 per trip due to the contract entered into with the drivers deep discounting and other monetary benefits offered to the customers. Therefore, It was alleged that Uber has abused its dominant position and has indulged in predatory pricing violating Sections 4(2)(b)(i), 4(2)(c) and 4(2)(a)(ii) respectively.
Issues:
- Whether Uber holds a dominant position in the relevant geographic market, if so is there a prima facie case against Uber for abuse of the same.
Decision of Competition Commission of India (CCI):
The CCI did not find a prima facie case against Uber and therefore, closed the complaint and gave no orders for investigation. The CCI determined Delhi to be the relevant market as it has in a catena of cases clarified that the conditions of competition existing in radio taxi service markets should be homogenous for it to be considered as relevant market. The CCI held that the relevant market ( which includes both relevant geographic market and relevant product market) was Delhi and the region of NCR was not included in the definition of relevant market as the Commission explained that the regulatory framework with respect to taxi services and the use of CNG for public transport were both distinct in both the regions- Delhi and NCR.[1] Further, The CCI did not find the TechSci Report reliable. Thus, concluded that Meru failed to prove Uber’s dominance in the relevant market as there was no authentic evidence on record.
The Commission observed that there was a healthy and stiff competition in the radio taxi industry between Ola and Uber in Delhi. The case was thus closed by the CCI under Section 26(2) of the Competition Act, 2002.
Decision of Competition Appellate Tribunal (COMPAT):
The CCI order was challenged under section 53B of the Act before COMPAT. The appellate body reversed the Uber order passed by CCI. Firstly, The CCI held Delhi NCR to be the relevant geographic market. The COMPAT stated that the distinction made by the CCI in regard to relevant geographic market does not exist in any practical/statutory sense.[2] The COMPAT also stated for consumers are not affected by political demarcations and such a distinction in Delhi NCR makes no considerable effect on the consumers.
The COMPAT stated distinct view in regard to the TechSci report, it stated that CCI has relied on the Tech Sci report in the previous Fast Track case[3]. It further held that only the credibility of the report was challenged, the report was not challenged in its entirety on substantive terms. And further based on the results, if conflicting results were found between TechSci and 6Wresearch report, then investigation could be ordered. COMPAT also drew attention of the CCI to sub-clauses (b), (c), (d) and (e) of Section 19(4) of the Act which provides various factors to be considered while assessing if an enterprise holds a dominant position in the relevant market. It also observed that market share alone should not be the factor determining the question of dominance held by an entity. Several other factors such as technology, consumer welfare etc are also to be considered.[4]
The COMPAT, therefore, ordered the Director-General to initiate an investigation into the allegations put-forth by Meru cabs regarding Uber’s market dominance and predatory pricing and submit a report to the commission within the prescribed period.
Decision of the Supreme court of India:
An appeal was preferred by Uber before the Supreme Court against the order of COMPAT. The Hon’ble Supreme Court expressed that it would be difficult to say there is no prima gacie case of abuse of dominance against Uber, therefore there is a need for investigation.
The Bench was of the opinion that the fact of Uber was losing a considerable amount of Rs. 204 per trip and proving such deep discounting and monetary benefits to customers did not make any economic/ business sense. It pointed out that Uber intended to eliminate competition in the market. The Court further observed that if a loss is made for trips, as in the present case Explanation (a)(ii) would be attracted a such a loss would certainly affect the competitors already existing in the market and would also sway the relevant market in favour of the Appellant. The Supreme Court dismissed the appeal and further refused to interfere with erstwhile COMPAT order.
Analysis:
The current judgment suffers from various lacunas and it is for the investigation report to decide whether Uber has dominant position in the market and if yes, whether the same has been abused. The first issue which is extremely vague is the relevant market, as there were different decisions held by CCI and COMPAT, Supreme Court should have clarified the issue w.r.t relevant market. Secondly, whether the enterprise exercised dominance in the market was not examined as per the statutory law laid down in that behalf. In the present case, It has restricted itself only with the factor of market share and deep discounting strategy which is unfair. Supreme Court has taken a slightly divergent view and held that enterprises engaging in predatory pricing itself amounted to proof of dominance thereby calling for investigation whereas it does not ipso facto prove dominance as other factors enlisted under Section 19(4) of the Act are not considered. The CCI set a standard in Fast Track Call Cab (P) Ltd. v. ANI Technologies (P) Ltd by rejecting the view that predatory pricing was an evidence of dominance in itself. But, in the present case Supreme Court has held a different approach. In order to better facilitate the concept of predatory pricing, ambiguities should be cleared by Supreme Court by strictly putting a bench mark and thereby following it.
One of the essentials in identification of predatory pricing is that the objective of such pricing is to drive out the competitors from the market. [5] In the present case, Uber did not per se drive out the competitors plus there is no data which shows that competitors were forced to leave market. It resorted to deep discounting strategies only to compete with Ola which was already holding a significant market share. Also, the explanation to Section 4(2)(a) lays down that discriminatory price does not include such discriminatory condition or price which may be adopted to meet competition. Therefore, deep discounting strategy adopted by Uber can also be considered a way to meet competition with Ola. With respect to procedural law, the SC has failed to consider the importance of establishing dominance of an entity before investigation is ordered.[6]
The present case, It is also suggested that the Parliament should give clarity as to the demarcation of autonomy of the statutory bodies (CCI and COMPAT) under the Act, so as to remove ambiguities and set a correct benchmark. The powers given to the statutory bodies must be exercised in a very cautious manner and the reasoning should also be clear in order to set a precedent.
[1] Parveer S Ghuman, Analysis of Competition Cases Against Uber Across the Globe, Cuts International, (Feb.19, 2020, 1:33 PM), http://www.cutsccier.org/pdf/Analysis_of_Competition_Cases_Against_Uber_Across_the_Globe.pdf.
[2]Basu Chandola, ‘Supreme Court of India Upholds Investigation against Uber’, Kluwer Comp9etition Law Blog, (Feb.19, 2020, 2:49 PM), http://competitionlawblog.kluwercompetitionlaw.com/2019/09/18/supreme-court-of-india-upholds-investigation-against-uber/
[3] Fast Track Call Cab (P) Ltd. v. ANI Technologies (P) Ltd, 2017 SCC OnLine CCI 36.
[4] Meru Travel Solutions Private Limited v. Uber India Systems Private Limited, (2015).
[5] Transparent Energy Systems (P) Ltd. v. TECPRO Systems Ltd, 2013 SCC OnLine CCI 42.
[6] Fast Track Call Cab (P) Ltd. v. ANI Technologies (P) Ltd, 2017 SCC OnLine CCI 36.
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