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CCI declines interim action vs Ola (Cyril AM) predatory pricing (despite stinging dissent) [READ ORDER]

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App-based taxi operator Ola’s parent company ANI Technologies has won a favourable majority decision from the Competition Commission of India (CCI), which declined to pass any interim order around the allegation that the company was involved in illegal predatory pricing causing damage to a competitor in Bangalore,

Five CCI members held that since “the issue of predatory pricing by the Opposite Party is already under investigation by the DG, pending which the Commission is not convinced that any interim relief is required to be granted in this case”, adding:

Further, the balance of convenience also does not seem to lie in Informant’s favour. The Opposite Party has contended that its incentives and discounts are devised as part of its competitive strategy to compete with similarly placed aggregators in the market like Uber. The Informant has alleged the same to be predatory in nature aimed at ousting players like the Informant out of the market.The Commission has already stated earlier that the figures cited by the Informant regarding per trip loss incurred by the Informant were subsequently modified bythe Informant. Though such a discrepancy does not affect the prima facie view of the Commission, it cautions that such figures cannot be relied upon further unless the same are verified by the DG in its investigation.

Ola was represented by Cyril Amarchand Mangaldas Mumbai competition partner Nisha Kaur Uberoi with senior advocate Ramji Srinivasan.

Senior advocate AN Haksar represented the informant, Fast Track Call Cab Pvt Ltd, together with Advoc India Law Offices consultant Udayan Jain.

Fast Track had claimed that it had suffered irreparable loss due to Ola’s aggressive pricing in the market. The majority of CCI members held:

The existence of the second element, i.e., irreparable loss to the Informant or definite apprehension of adverse effect on competition in the market has also not been satisfied in the instant case. The Informant has contended that its active pool of 600 taxis in March, 2014, came down to a mere 250 taxis in March, 2015,because of the anti-competitive strategy of the Opposite Party. The Opposite Party, however, argued that out of 350 taxis which moved out of the Informant’s network, only around 120 taxis came on the network of the Opposite Party.Furthermore, the Informant has stated in the interim relief application that monthly revenue of the Informant in Bengaluru market has eroded from Rs. 23lakh in March 2014 to about Rs. 9.5 lakh by December 2014 leading to significant losses. The Opposite Party has contested these losses stating that in the absence of further evidence from the Informant, it is extremely difficult to conclude whether the said losses are attributable to the conduct of the Opposite Party or due to the inefficiency of the Informant. Further, the Opposite Party argued that the Informant has not able to demonstrate how its prices negatively affect other competitors or the consumers. The Commission observes that the figures submitted by the Informant need to be investigated before any conclusions can be drawn upon them at this stage. Also,since the damages in this case are quantifiable in terms of money, the harm does not appear to irreparable. Though the Informant has contended that it will be difficult to calculate the compensation at a later stage, this does not impress the Commission to grant an interim relief especially when the interim relief application clearly mentions the loss to the Informant in monetary terms.

However, CCI member Augustine Peter disagreed with the majority and ordered in a dissenting minority order that the director general conclude its investigation (that was ordered by the CCI in May) within 60 days, and that Ola should immediately “organize its pricing system in the relevant market in such a way that the incentives paid by the Opposite Party to the cab operators/drivers 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”.

He added that:

In case the Informant is made to wait for the final order by the Commission there is a very high likelihood that the Informant and other players in the market may by that time have been eliminated from the market and substantial reduction in competition would have occurred by weakening of the other players in the market and through the network being created purely based on incentives and below average variable cost pricing.

Once the Informant and other competitors are eliminated from the market, re-entry for those players is not at all easy given the nature of the market which is network based and is highly dominated by the Opposite Party who continues to have access to substantial financial resources which it is diverting for pricing below „average variable cost‟,irreconcilable with rational business behaviour. The Opposite Party is not competing on price, but on discounts and therefore its market performance is not based on its efficiency but on deep pocket and predatory strategy.

CCI order declining interim action against Ola (PDF)

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