TaxTMI 
TaxTMI 
TaxTMI 
2021 (1) TMI 1211
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....-2. JUDGMENT (Virtual Mode) [Per.: Dr.Alok Srivastava, Member (Technical)] The two appeals, viz. (i) Competition Appeal No. 19 of 2017 filed by Appellant Meru Travel Solutions Pvt. Ltd.,and (ii) Competition Appeal No. 20 of 2017 filed by Fast Track Call Cab Pvt. Ltd. assail the common order dated 19.7.2017 passed by the Competition Commission of India (hereinafter called 'Commission') under section 26(6) of the Competition Act, 2002 (hereafter called the 'Act') in Case No. 06 of 2015 and Case No. 74 of 2015. 2. The Commission has decided by the impugned order that,on the basis of information submitted by Fast Track Call Cab Pvt. Ltd. (which is Informant 1 called 'Fast Track' hereafter) and Meru Travel Solutions Pvt. Ltd. (which is Informant 2,called 'Meru' hereafter) and analysis of DG's investigation report, the dominant position of Ola (which are radio taxi services operated by ANI Technologies Pvt. Ltd.) in the relevant market and abuse of its dominant position is not established and Ola has not been found to have anti-competitive agreements with drivers which are in violation of the provisions of the Act. 3. We are disposing off both the appeals, viz. Competition App....
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....m Fast Track, the Commission considered the matter and formed a prima-facie opinion that the conduct of Ola (Opposite Party in the case before the Commission) amounted to abuse of dominant position within the meaning of section 4 of the Act. In accordance with the provisions of section 26(1) of the Act, the Commission directed the Director General (hereafter called 'DG') to cause an investigation into the matter and to complete it within a period of 60 days from the date of receipt of the order. It also directed the DG to investigate the conduct of officials of Ola in order to fix liability with respect to contravention of the Act's provisions in case Ola was found to have violated them. Later in another case where Meru was Informant (on which Competition Appeal No. 19 of 2017 is under consideration in this judgment), the Commission passed a preliminary order and directed DG to investigate both cases together and submit report. 6. Thereafter, the DG completed investigation as directed by the Commission and submitted report to the Commission. The Commission after considering the report of the DG and hearing the parties passed an order dated 19.7.2017 under section 26(6) of the Act ....
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....is no violation of section 4 by Ola. 8. The Appellants have sought the following reliefs in their appeals:- (i) To set aside the impugned order passed by the Commission and hold Ola guilty of violation of sections 3 and 4 of the Act. (ii) To pass an order directing Ola to cease and desist from its anti-competitive practices/activities. (iii) If the Appellate Tribunal approves the possibility of more than one dominant party in the relevant market, then it may hold Ola to have abused its position of dominance and remand the matter back for investigation against Uber. (iv) To set aside the confidentiality order passed by the DG and Commission. 9. Detailed arguments were heard from the Learned Senior Counsel/Counsel for Appellants (including Ola and Meru) and Respondents No. 1 and 2. We have also considered the DG's report, Impugned Order, pleadings and written submissions submitted by the parties in both the appeals. 10. Arguments of Ld. Counsel for Appellant Fast Track: (i) The information filed by Informant 1 Fast Track against Ola highlighted violations under sections 3 and 4 of the Act. (ii) Ola's market share as on January 2015 was a staggering 75-76% and before i....
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....sideration the below cost pricing by Ola vis-à-vis other competitors than just Uber to record its findings to judge its dominant position. It has been held Wanadoo judgment (Case COMP/38.233, at pg. 151; Convenience Compilation of Appellant) as also in MCX-SX Stock Exchange Limited vs. National Stock Exchange of India Limited (case no. 13/209, at pg. 39, Convenience Compilation of Appellant) that actions of the offending party in the relevant market determine to a large extent whether is in dominant position. (ix) Ola had market share of more than 60% for two years, which is sufficient indication of its dominant position till January 2015 while the presence of Uber in the same market was only from February, 2015 onwards. Moreover, it managed to log over 73% in number of trips from 13.6 lakhs trips in February, 2015 to 23.18 lakhs trips in September, 2015 despite competition from Uber in this period. (x) The comparison of the financial strength of Uber Group globally to Ola's in India is a fallacious argument of the Commission, especially when the Commission was considering their operation only in the Bengaluru market. (xi) Ola has operated at loss from 2012-13 onwards,....
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....the Act against Ola to be correct, and accordingly under provisions of section 26(1) of the Act, directed the DG to investigate matter and also investigate the conduct of officials of Ola Cab for fixing liability in case Ola Cab is found to have violated the provisions of the Act. Since the investigation ought to cover all allegations made in the information provided, we are of the clear opinion that the provisions of the Act under sections 3 and 4 insofar as they have been contravened by Ola, are to be covered under the investigation. 12. We rely on the decision of Hon'ble COMPAT in the matter of The Air Cargo Agents Association of India v. CCI and Ors. in Company Appeal No. 98 of 2015 in COMPAT [2016 CompLR 1223 (COMPAT)] wherein it was held that on receipt of the order passed by the Commission under Section 26(1), the DG is required to conduct investigation in accordance with the provisions of Section 41 read with the relevant provisions of the Regulations and submit report under Section 26(3) read with Regulation 20(4), which postulates that the report of the DG shall contain findings on each of the allegations made in the information or reference, as the case may be. On this ....
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....nant position in the relevant market. Since the Commission has not found Ola to be in dominant position in the market, there is no need to examine any abuse due to pricing strategy of Ola. (iii) The Commission has correctly concluded that Ola does not hold dominant position in the relevant market, because the market is evolving and growing rapidly, competitor like Uber has entered into market in the relevant period and therefore, the entry barriers are not insurmountable. It was correctly held by the Commission in the Impugned Order that Ola and Uber both cannot be considered dominant under the scheme of the Act. (iv) No evidence was led to show that access to funding was inequitable and the market for financing is not competitive. In fact, the mere fact that some business models are found to be attractive by investors does not imply that the market for financing is inequitable, more so in the context of judging dominance of an enterprise. (v) Ola leveraged technology very effectively and sufficiently and the emergence of platform based model, which connected riders with drivers owned taxis, thus obviating the need for capital investment in acquiring and maintenance of exclusive....
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....n due importance while analyzing the dominance of enterprise. Further, the Commission has noted the following:- 'As apparent from the figures available in the investigation report, the market has seen a growth nearly 1900% in terms of number of trips between June 2012 and September 2015. In a span of none year between September 2014 and September 2015, in terms of number of trips, the market in Bengaluru witnessed a growth of about 555%. Thus, though the operators under the platform-based model provided the same product/service (taxi services), the technology enabled them to expand the market at both ends (i.e., the consumer and driver base) immensely. It is against this backdrop that the market position of OP need to be evaluated.' (xii) The Learned Senior Counsel for Respondent No. 2 has cited the judgment of Competition Commission of India in MCX Stock Exchange Limited v. National Stock Exchange of India (Case No. 13 of 2009, pg. 18 of the Convenience Compilation of Respondent No. 2), wherein the Commission concluded the dominance of National Stock Exchange based on multiple factors under section 19 (4) of the Act. In the Raghavan Committee Report (pp. 2-3 of the Convenience ....
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....reement entered into between enterprises or associations of enterprises or persons or associations of persons or between any person and enterprise or practice carried on, or decision taken by, any association of enterprise or practice carried on, or decision taken by, any association of enterprises or association of persons, including cartels, engaged in identical of similar trade of goods or provision of services, which - (a) directly or indirectly determines purchase or sale prices; (b) limits or controls production, supply, markets, technical development, investment or provision of services; (c) shares the market or source of production or provision of services by way of allocation of geographical area of market, or type of goods or services, or number of customers in the market or any other similar way; (d) directly or indirectly results in bid rigging or collusive bidding, shall be presumed to have an appreciable adverse effect on competition: Provided that nothing contained in the sub section shall apply to any agreement entered into by way of joint ventures if such agreement increases efficiency in production, supply, distribution, storage, acquisition or contr....
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....er, 2015. Hence the objection of Fast Track that the period of investigation was unnecessarily extended upto September, 2015 is not found tenable. The Hon'ble Supreme Court has held in the Excel Corp vs. CCI case that while examining the conduct of parties, DG can look into past and subsequent conduct of parties to ascertain trend of behaviour even though findings will be confined to a period post investigation of the relevant proceedings of the Act. 19. In examining the allegation of Informants Fast Track and Meru that Ola indulged in abuse of its dominant position by adopting predatory pricing in the market, we shall first look at what constitutes "dominant position' and 'predatory price' in a market. They are defined in Explanation provided in Section 4 of the Act which is as follows: 'Abuse of dominant position. - (a) xxxxx xxxxxxx (b) xxxx xxxxxx (c ) xxxx xxxxx (d) xxxx xxxxx (e ) xxxx xxxx Explanation.-For the purposes of this section, the expression- (a) 'dominant position' means a position of strength, enjoyed by an enterprise, in the relevant market, in India, which enables it to- (i) operate independently of competitive forces prevailing in the....
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....antage by way of the contribution to the economic development, by the enterprise enjoying a dominant position having or likely to have an appreciable adverse effect on competition; (m) any other factor which the Commission may consider relevant for the inquiry.' 21. We have seen that the market share of Ola increased from 5-6% in 2012-13 to about 75-76% in January, 2015, and thereafter it saw a significant decline. Ola, that started services in the year 2011, uses a platform-based aggregator model in which it uses technology in an effective manner to provide ease of booking to riders, security during rides through tracking of taxis and easy post-ride payment of fares. The claim of Ola that it is basically a technology company has a big element of truth in that it leverages smart phone/internet-based technology to provide the riders not just ease of booking and payment for the ride, but also facilitate booking taxi at a very short notice and almost anywhere in its area of operation. This "end to end' provision of service from booking till alighting from the taxi with GPS-based tracking system of the taxi - all provide a high degree of reliability and assurance of availability of ....
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....r is in dominant position. Particularly pertinent factors mentioned in Section 4(4) are size and resources of enterprise, size of competitors, commercial advantage of enterprise over competitors, vertical integration of enterprise, dependence of consumer on the enterprise, technical entry barrier and market structure and size. We note that the technological edge that the platform crested by Ola which provide ease of taxi bookings, rider security, payments, drivers welfare made many riders comfortable with the network of Ola. The customer incentives worked in conjunction with these facilities and conveniences to attract riders to Ola and a certain brand image was created and reinforced over a period of time. The market also expanded in size and Ola was able to grab a big chunk of this new addition to market size. Apart from the leveraging of technology by Ola, it went full throttle in attracting riders and drivers to its network and combined it with customer discounts and drivers' incentives to increase its market share. Most of these factors are subjective and there is no quantitative description available in DG's report, yet the impact of these subjective factors can be inferred b....
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...., in the relevant period between September 2014 and January 2015, Ola's market share jumped from 42-43% to around 75-76%. 26. Quite obviously the system of customer discounts and drivers' incentives was working in Ola's favour with its market share registering a significant increase between September 2014 and January 2015. This is also the period when Ola received a large quantum of foreign funding which certainly helped Ola to provide customer discounts and drivers' incentives. The details of funding received by Ola is as follows (included in Para 6.20.26 of the DG's report, pg. 692 of Appeal Paperbook Vol.-3 in CA no. 19 of 2017): Period Investment (Rs. In Crore) March-Nov 2013 76.23 July-2014 209.77 Sep-2014 145.99 Nov-2014 150.94 March-2015 2034.97 Apr-2015 580.72 Sep-2015 1478.29 Total 4676.91 27, Hence while Ola received regular funding from March 2013 onwards, it received two major chunks of funding in March 2015 and September 2015. DG's report also notes (Para 6.20.29) that while no drivers' incentives were offered to drivers during FY 2012-13 and 2013-14, Ola did offer customer discounts totaling Rs. 49.78 Lakhs and Rs. 34.90 Lakhs respectively during t....
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....exed margin from October 2013 onwards. Therefore, we are inclined to agree with Ola's arguments that Uber was a significant competitor in the relevant market and it (Ola) was responding to pricing actions of Uber while trying to establish itself in the Bengaluru market of radio tax services. Available data in DG's report (on pg. 702 of Appeal Paperbook Vol-3 of CA no. 19 of 2017) shows that Meru operated at positive indexed margin adopting aggregator model from February 2014 onwards and hence it was present in the market. It is of course true that it could not get enough market share in total number of trips because of funding constraint. 30. The Ld. Counsel of Appellant has cited the following judgments in support of his contentions: (i) Uber India Systems Pvt. Ltd. v. CCI & Ors [2019 8 SCC 697] wherein it is held that if there is a loss for trips made, Explanation (a)(ii) of Section 4 would be attracted inasmuch as this would certainly affect the dominant party's competitors in its favour or the relevant market in its favour. (ii) Meru Travel Solutions Pvt. Ltd. v. CCI & Ors [2017 CompLR 43 (COMPAT)] wherein it is held that it could not be said definitively that there is an ab....
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....ket in its favour. We do not think Ola could operate independently of other competitors in the relevant market, and hence it did not enjoy a dominant position in the market. 32. The Ld. Senior Counsel of Respondent No. 2 has rebutted the reliance placed on Uber India Systems case (supra) stating that the reasoning provided by Hon'ble Supreme Court was only a qualifier for a prima facie view, and full investigation was later carried out to see if the prima facie view was correct. We tend to agree with Ld. Sr. Counsel's understanding. He has also referred to the Report of Competition Law Review Committee, 2019 (pp. 13-15 of the Convenience Compilation of Respondent No. 2) in support of his contention that Section 4 of the Act does recognize the concept of 'Collective Dominance' by enterprises. 33. The finding in case of Wanadoo Interactive (pg. 24-26 of the Convenience Compilation of Respondent No. 2) is that the dominance analysis must be carried out considering the 'market dynamics' and not just 'market shares' which is applicable in the present case. 34. Therefore, we are of the opinion that the below cost pricing by Ola was not predatory pricing with a view to dislodging any c....
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....es (7) & (8) in regard to Zero Tolerance Policy(leave 2) of the Master Services Agreement are reproduced below:- '28(i) The Service provider agrees that he shall not enter into any same or similar agreements with competitors of Olacabs shall include any all entities or individual so partnerships or any other persons, who are caring on the same or similar business as that of OLACABS, directly or indirectly. xx xx xx xx 31. Refusal of Duty: Driver shall not refuse a duty assigned to him by Olacabs or by avoiding communication with Olacabs by switching off the GPS firmware, switching of his mobile phone or by any other means whatsoever. Any refusal of duty will attract a fine of Rs. 2500/- per instance, whatsoever. Any refusal of duty will attract a fine of Rs. 2500/- per instance. Zero Tolerance Policy. Leave 2 Sr. # Breach Cases Breach Consequences Fine 7 Driver shall not reject the booking on his own at the time of allotment under any circumstances (unless permitted by Olacabs). Warning shall be given and fine shall be imposed. INR 1000/- 8 Driver shall not reject or report for the duty once he accepted to duty and logged in and shall not switch off his mobile u....
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.... The option to move away from Ola's network is always there in case the drivers so want. We, therefore, do not find the drivers agreements anti-competitive in violation of section3of the Act. 39. We are of the opinion that the competitors of Ola could have accessed funds from venture capital investors and angel investors, who would have provided funds if they (the investors) saw good potential in the enterprise and good return on investment. We are also of the clear opinion that Ola used the funds so obtained to carry out multifarious tasks such as upgradation of its network and technology, promoting riders and drivers awareness, broadening its rider and driver base and creating awareness regarding its brand amongst its consumers (who would create a demand) and the drivers (who are suppliers) about the ease of using App and also using a end to end solution to their benefit and advantage. Pricing including discounts and incentives were part of an integral part of overall strategy and not a standalone action to target its competitors through predatory pricing. Moreover, while Ola was rolling out its strategy it was not in a dominant position in the market for any long period of time....