Over the past few years, there has been a sudden surge in radio taxi services market wherein Ola, Uber, Taxi for Sure etc. operate. The options for varied modes of transport poses as a threat to auto-rickshaws, taxi drivers and other transportation service providers in India. An exponential demand for convenient and easy pick up and drop transportation services has put small players out of business and the may have an effect on competition in the market. The Competition Commission of India (CCI) has assessed and passed several orders dealing with the market of ‘radio taxi services’ in the past 2 years. The CCI has not only taken into consideration the competition aspects such as market share of these service providers but also factors such as convenience, availability, coverage etc.
Cases dealing with the Competition in ‘Radio Taxi Services’ Market
The competition aspect of radio taxi services (such as Ola, Taxi For Sure and Uber) came into question before the CCI for the first time in M/s Fast Track Call Cab Private Limited v. M/s ANI Technologies Private Limited. Fast Track Call Cab (i.e. the Informants) contended that ANI Technologies abused its dominant position in violation of Section 4 of the Competition Act, 2002 (Act) and indulged in a series of abusive practices including unfair conditions and predatory pricing in the radio taxi services market in Bengaluru. Fast Track Call Cab also alleged that ANI Technologies were offering unrealistic discounts and rates to lure customers and unviable incentives to drivers, resulting in loss of its business.
ANI Technologies, in response, contended that its complex pricing mechanism, incentives and discounts were designed to compete with similarly placed service providers in the market such as Uber. On an investigation conducted by the Director General (DG), the Commission observed that the facts and figures provided by the Informants could not be relied upon and that interim relief could not be granted. This view was dissented by Mr. Augustine Peter, who observed that ANI Technologies commands around 69% of the market while its competitors such as Meru Cabs and Uber have command over 13.7% and 2% respectively. Further, Mr. Augustine Peter observed that ANI Technologies is:
i. pricing below average variable cost which is inconsistent with rational business behavior by a dominant player,
ii. diverting its substantial fund flow to incentivize drivers and provide lower prices to customers, which is unjustified by any business rationale.
Further, it was also observed by Mr. Peter that the conduct of ANI Technologies is resulting in higher concentration and reduced competition in the relevant market. Furthermore, ANI Technologies is not competing on price but on discounts, and that the market performance is not based on its efficiency but on deep pocket and predatory strategy. The predatory pricing behaviour of ANI Technologies would have its effect, not only in radio taxi service market in Bengaluru, but also in other similar markets in which ANI Technologies operates, in India. The dissenting member, in his Order directed ANI Technologies to organize its pricing system in the relevant market such that the incentives paid to drivers and operators together with the share of the passenger revenue passed on to the cab operators and other variable costs do not exceed the passenger revenue collected by it.
This was the first case in which the Commission observed the that features of radio taxis, such as convenience, time saving, point to point pick and drop, pre-booking facilities, ease of availability even at obscure places, round the clock availability, predictability in terms of waiting, journey time etc., makes them a different mode of transportation as opposed to auto-rickshaws, buses and private taxis.
The CCI has also discussed competition aspects in a dispute between two taxi radio companies i.e. in Meru Travel Solutions Private Limited v. Uber India Systems Private Limited, Uber BV and Uber Technologies International Inc. In this case, Meru Travel contended that Uber was abusing its dominant position in the radio taxi services market in Kolkata. According to Meru, Uber reduced the market price of radio taxis in Kolkata from Rs. 20-22 km to Rs. 15 per km, in 2014 and then to an unreasonably low rate of Rs. 9 per km in addition to aggressive incentives to drivers, customer discounts and promotional discounts through its wallet system, thereby leading to price discrimination.
Uber India contended that the relevant product market is broader than ‘radio taxi services’ and should include all modes of public transportation as well as private transportation which are substitutable with one another. It was contended that at the very least, yellow taxis should form a part of the relevant product market in Kolkata. Further, services such as Uber X and Uber Go were launched by Uber to compete with the operations launched by Ola. Further, Uber asserted that there has been a drastic increase in the availability of radio taxis and significant reduction in prices in Kolkata, highlighting the fierce competition, benefits to drivers, and consumer welfare discounts.
In respect to the question of the relevant product market, the Commission was of the opinion that the relevant product market would be ‘services offered by radio taxis and yellow taxis’ on considering the fact that there is an active presence and reliance of consumers on yellow taxis in Kolkata and that these taxis provide a viable alternative to radio taxis. With respect to the relevant geographic market, the CCI was of the view that each city or State constitutes a different market in itself as the operations of taxis are restricted to the city or State limits. In the present case the geographic market was observed to be Kolkata and the relevant market was observed as ‘services offered by radio taxis and yellow taxis in Kolkata’. The CCI was of the view that the yellow taxis posed as a significant constraint on the behaviour of other taxi operators in the city of Kolkata and found that Uber did not hold dominant position in the relevant market.
Once again, in M/s Mega Cabs Private Limited v. M/s ANI Technologies Private Limited, ANI Technologies was accused of abusing its dominant position, this time in the Delhi-NCR region and entering into anti competitive agreements with its taxi drivers thereby Section 3 of the Act. The Informants in this case i.e. Mega Cabs alleged that ANI Technologies have raised huge investments in order to acquire a position of dominance in the Delhi-NCR region and have engaged in predatory pricing, providing driver incentives and customer discounts. Further, the acquisition of ‘Taxi for Sure’ by ANI Technologies has strengthened its position in the market i.e. the market comprising of radio taxis. Mega Cabs submitted that the relevant geographical market ought to be Delhi-NCR market i.e. a separate and independent geographic market. There relevant market proposed was the ‘radio taxi services in Delhi-NCR’.
ANI Technologies submitted that discounts are natural in every market, especially for new players trying to gain a presence in the market. It also relied on the CCI order in H.L.S. Asia Limited v. Schlumberger Asia Services Limited and Others, wherein the Commission observed that giving rebates and adopting similar practices are not essential components of the competitive process and law cannot condemn such practices. ANI Technologies stated that providing incentives to drivers is intended to keep them motivated and necessary to meet competition to establish a presence in the market. The Commission demarcated the relevant geographic market, keeping in mind aspects such as city or State in which operations are conducted, regions which the application (Ola App) is designed to cover and taxi availability in those regions. The CCI was of the view that taxis operating in Delhi region face homogenous competitive constraints distinct from those in other cities and States and that the relevant market is ‘radio taxi services in Delhi’. The CCI laid down that the inability of the existing players or new entrants to match the innovative technology or application developed by any player or the model created for operating in particular industry cannot be said to be a barrier to entry into the market.
Meru filed a complaint before the CCI against Uber in Meru Travel Solutions Private Limited v. Uber India Systems Private Limited, Uber BV, and Others, for allegedly indulging in anti-competitive practices inter alia unfair conditions, predatory pricing and abusing its dominant position in different markets so as to eliminate competitors. Meru contended that the unreasonable discounts and high incentives provided by Uber to its customers and drivers, respectively resulted in major losses. The relevant market proposed by Meru was ‘radio taxi services in Delhi-NCR’. However, the Commission was once again of a similar view that the relevant market ought to be ‘radio taxi services in Delhi,’ on considering the clear demarcation on the application between the taxi availability in the Delhi region and availability in the NCR region. The Commission observed that the fluctuating market figures of the various players exhibited the dynamism and vibrant competitiveness in the relevant market and that Uber was not holding a dominant position.
In a recent 2016 case before the CCI, Mr. Vilakshan Kumar Yadav and Others v. M/s ANI Technologies Private Limited, the informants who are drivers of auto rickshaws and taxis currently operating their vehicles in Delhi and some in the National Capital Region (NCR) contended that ANI Technologies through its radio taxi services such as Ola and Taxi for Sure was holding a dominant position in the ‘paratransit services market’ which includes auto-rickshaws, black yellow taxis and city taxis. The informants stated that ANI Technologies were charging low fares such as Rs. Zero/km for a period of time and generally less than one-third of the government prescribed rates. This act of predatory pricing is gradually forcing other competitors out of the market. ANI Technologies challenged the relevant market proposed and stated that auto-rickshaws, black yellow taxis and city taxis could not be stated to be competing in the same relevant market and denied the accusations of the informants.
The CCI on considering the facts and allegations, found that auto rickshaws and taxis are different from radio taxi services despite offering similar services owing to the difference in comfort, time taken by various modes of transportation, buying power of the consumer etc. and thereby they do not qualify to be substitutes for each other.
With regard to the Informants’ allegations on abusive pricing strategy of ANI Technologies in the auto-rickshaw segment, the CCI would assess the relevant product market as ‘market for auto-rickshaw services’ in addition to the ‘radio taxi services market’. The CCI observed that the relevant geographic market would be ‘Delhi’, on lines similar to the previous cases and therefore the relevant markets to be studied were: (i) ‘provision of radio taxi services in Delhi’ and (ii) ‘provision of auto rickshaw services in Delhi’. In respect to the the first relevant market, the CCI observed that not only are there several players in the relevant market but there exists stiff competition Ola and Uber, hence, ANI Technologies could not be said to be holding dominant position or abusing its position. In respect to the second relevant market i.e. the market for auto-rickshaws in Delhi, the CCI opined that ANI Technologies does not hold a dominant position as it constitutes around 19.75% of the market share.
In view of the recent rise in the consumer demand for and use of radio taxi services in India such as Uber, Meru, Ola and Taxi for Sure, there is a need to clearly demarcate the relevant market in which these taxi service providers operate. Attractive offers, heavy discounts and incentives offered by companies such as ANI Technologies and Uber have helped them gain substantial prominence and consumer reliance in the market, thereby affecting companies offering similar services, auto-rickshaws and taxi drivers in their respective cities and States.
One of the key takeaways that ought to be highlighted is the definition of the relevant market. In all of the above mentioned cases, the CCI has opined that the relevant product market is the ‘radio taxi services’ market and not the market for radio taxis, auto-rickshaws, taxis and other modes of transportation. Also, the CCI has emphasized that the relevant geographic market is the city or State in which radio taxi services operates and is based largely on the coverage of the application. However, there is a need for further clarity as these cases raise several questions with respect to the implications on independent auto rickshaw drivers, taxi drivers, and start up companies. The CCI has clearly stated that the markets are not the same and may be differentiated owing to the difference in convenience, coverage, and availability and therefore than are not comparable from the competition point of view.