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Trilegal wins for Ola in Bangalore abuse of dominance case • LKS, Zerick, Som for others • CCI looks into platforms

Trilegal has represented Ola Cabs owners ANI Technologies before the Competition Commission of India (CCI) against a complaint alleging abuse of a dominant position in Bangalore made by Meru cabs and Fast Track Call Cabs.

Fast Track was represented by Lakshmikumaran & Sridharan (LKS) partner Abir Roy, with Udayan acting as arguing counsel.

LKS’ Roy also advised Meru cabs, with Meru's main briefing counsel being Zerick Dastur, who had gone independent from J Sagar Associates (JSA) in February.

Dastur instructed former JSA Mumbai partner Somasekhar Sundaresan, who became an independent counsel last year.

Ola Cabs was represented by Trilegal partner Nisha Kaur Uberoi and senior associate Nandita Sahai, who both joined the firm from AZB & Partners earlier this year.

Arguing counsel for Ola was senior counsel Ramji Srinivasan.

Uberoi is understood to have been handling the matter since before she had joined AZB, at Cyril Amarchand Mangaldas.

According to a Trilegal press release:

The CCI considered platform markets, network effects and the role of technology in reducing transaction costs as well as the role of an early adopter of disruptive technology for the first time. The CCI has stated that competitive constraints in the relevant market are to be assessed in holistic manner, not solely on the basis of market shares of the alleged dominant entity. The CCI in this case looked at two-sided market i.e., the customer and the taxi drivers. The CCI observed that Ola did not initiate the strategy of aggressive pricing strategy as it is a reactive strategy to Uber’s aggressive pricing which is indicative of the competitive constraint put by Uber on Ola.

The CCI has also clarified that there can be only one dominant player in a relevant market at one point of time, and reiterated that the concept of collective dominance does not exist under the Competition Act, 2002.

Given the competitive constraints which exists on Ola, evolving market dynamics, technology and innovation in the platform markets, the CCI held that Ola is not dominant in Bangalore and consequently there is no abuse of dominance by Ola.

The CCI held in its order:

119. Taxis are not a new feature in the transport sector in India. Historically, the sector featured a mix of black-yellow and private taxis, which were mainly unorganised. While the black yellow taxis could be booked by hailing a hand or approaching at a taxi stand, the private taxis were restricted in terms of accessibility owing to information asymmetry between the riders/drivers about the demand/supply situation. The introduction of radio taxi model in the year 2008, by Meru, brought some transformation that enabled booking of taxis via telephone calls or online. Soon, other players like Mega Cabs, Easy Cabs etc. entered the market. All of these were operating under the asset-owned model.

120. The emergence of platform-based model, introduced by OP in the relevant market, challenged the well-established asset-owned model in this industry. The platform-based model allowed real time tracking of prospective riders and drivers on an App to facilitate quick booking and availability of taxis at a click/touch of a button/icon. The drivers were no more constrained to run the taxis idle, after dropping a rider and the riders were also not obliged to pay for the taxi’s return fare, which was a norm, at least in the unorganized sector.

121. However, popularizing taxi, as a preferred mode of transport, was not free from challenges, especially considering the common perception by consumer of it being a luxury good in most Indian cities. The platform-based model in the taxi industry, like any other two-sided market, was dependent upon the growth of taxi network for benefits to permeate to riders and drivers. However, riding in taxis operated under asset-owned model was not only expensive in terms of the price, but, as discussed earlier, also entailed transaction and search costs. Thus, to attract prospective consumers/rider to experience the taxi services on this newly introduced model, it was necessary to make it attractively affordable to riders and profitable to drivers. The data on record shows that the taxi industry grew exponentially after the emergence of platform-based model (as much as 1900%) which can be attributed to the strategies adopted by the app based taxi operators. OP and Uber have, in a manner, revolutionized the taxi market by providing radio taxi services at abysmally low prices.

122. The Commission does not fully disagree with the Informants that the low prices of OP are not because of cost efficiency, but because of the funding it has received from the private equity funds. But as discussed above, there is no evidence that the access to such funding was inequitable and that the market for financing was not competitive and had aberrations. Moreover, it was their penetrative pricing strategy that facilitated them to garner high market shares in short span of time as well as develop the networks to a size that could provide sufficient positive externalities to the participants of the network.

123. At this stage, it is difficult to determine with certainty the long-term impact of this pricing strategy as the market is yet to mature. Without going into the legitimacy of OP’s pricing strategy, suffice to say that besides statutory compulsion of non-intervention in the present case, as OP is not dominant in the relevant market, the Commission is hesitant to interfere in a market, which is yet to fully evolve. Any interference at this stage will not only disturb the market dynamics, but also pose a risk of prescribing sub-optimal solution to a nascent market situation.

Read CCI order Ola Meru Fastrack (PDF)

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