TaxTMI 
TaxTMI 
2021 (1) TMI 1211
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.... Mr. Madhav Kapoor, Advocates for R-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 dispos....
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....tive practice. 5. On receipt of information from 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 o....
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....he fact that since there are two dominant players in the market instead of just one, there 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 highligh....
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....mmunities (Case T-340/3 dated 20.1.2007, of the Court of First Instance of Commission of European Communities) judgment. (viii) The Commission ought to have taken into consideration 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 In....
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....(case no. 13/209) when the Commission sought it fit to intervene. 11. On the basis of information provided, the Commission has prima facie found that the allegation of dominant position within the meaning of section 4 of 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....
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.... The Appellants are trying to mislead this Hon'ble Tribunal by constantly harping on the abusive pricing strategy of Ola, label it as predatory pricing, and diverting from the critical and primary issue of establishing whether Ola was in a dominant 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 enterpri....
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....t No. 2). (xi) The Commission has duly appreciated market conditions and other factors enshrined in section 19 of the Act in assessing whether the Ola is in a dominant position. In a technology driven market, 'market conditions' should be looked into and given 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....
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....mpetitors by Ola. Section 3(3) alongwith explanation and sub-sections 3 and 4 of section19 of the Competition Act, 2002,which are provisions relevant to these appeals, are reproduced below for ready reference:- '3. Anti-competitive agreements.- Xx xxx xxx xxx (3) Any agreement 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 riggin....
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.... 74 of 2015 was also presented to the Commission and vide order dated 30.9.2015, DG was directed to carry out investigation in both the cases together. We agree with the Commission that the proceedings before the Commission are in rem and not in personam, and therefore, we agree with the finding of the Commission that there is no infirmity in the period of investigation being upto September, 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: ....
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....he enterprise; (g) monopoly or dominant position whether acquired as a result of any statute or by virtue of being a Government company or a public sector undertaking or otherwise; (h) entry barriers including barriers such as regulatory barriers, financial risk, high capital cost of entry, marketing entry barriers, technical entry barriers, economies of scale, high cost of substitutable goods or service for consumers; (i) countervailing buying power; (j) market structure and size of market; (k) social obligations and social costs; (l) relative advantage 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....
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.... by a particular taxi service provider, Ola market share is seen to increase from 5-6% in 2012-13 to 59-60% in 2014-15 and to 61% in 2015-16. Thus there is significant rising trend upto January 2015, whereafter Ola market share has been plateauing or witnessing a gradual decline. While Ola's active fleet size registered a large increase from 2012-13 to January 2015, we are of the opinion that merely the size of fleet does not decide the dominant position of a particular radio taxi service provider. 24. Section 19 of the Act provides a list of factors that are relevant in adjudging whether any taxi service provider 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 ....
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....et share of Ola based on number of trips was in the range of 20 - 21%.The DG has found in the investigation that Ola offered small discounts to customers from September 2012, but did not offer any incentive to the drivers till April 2014. From May 2014 onwards, Ola started to increase customer discounts and also introduced incentives to drivers, which it kept on increasing till it touched peak in January 2015. It is further found in the investigation by DG that this strategy of aggressive discounts and incentives resulted in per trip loss of Ola which went up to Rs. 320 to Rs. 340 per trip in January 2015. As a result, 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....
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....nd in the market and also increase its market share simultaneously. Moreover, Uber which entered the market of radio taxi in Bengaluru from mid-2013 onwards also adopted an almost similar network approach for provision of radio taxi and an almost similar below-cost pricing strategy which is evidenced in the data included in Paras 6.20.42, 6.20.43 and 6.20.44 of the DG's report (pp.700-703 of Appeal Paper Book Vol. -3 in CA no. 19 of 2017). A comparison of monthly indexed margin provided in Para 6.20.44 of DG's report shows that while Ola was operating at negative monthly indexed margin from June 2014 onwards, Uber was actually operating at negative monthly indexed 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. I....
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....BC ensures it has dominant position in the market. The situation in this case is that the competitors are not new, and who enjoy a position of strength in the market including access to funds. Thus they do not face any entry barrier due to financial constraints. 31. We find that in the present case the situation is quite akin to that in the matter CCI v. Fast Way Transmission Private Limited and Ors. Civil appeal No. 7215 of 2014 (2018 3 SCC 316) wherein Hon'ble Supreme Court has held that when an enterprise enjoys dominant position in the relevant market, it is enabled to operate independently of competitive forces or affect its competitors or consumers or the relevant market 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....
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....n enterprise enjoys a dominant position in the market. 36. The Informants Fast Track and Meru have also alleged that Ola has entered into agreements with drivers that are anti-competitive, and therefore, violative of Section 3 of the Act. They have alleged that the Master Services Agreement dated 6 December 2014 with drivers has clause 28 (i) and clause 31 that penalize drivers for not conforming to certain norms of behavior which forces them to remain connected to Ola for fear of imposition of penalties. He has also pointed out to sub-clauses 7 & 8 and other clause included in the Breach Cases of the Master Services Agreement as anti-competitive. Clause 28(i), Clause 31 and Sub-Clauses (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 assign....
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....arantee on behalf of the drivers and the loans are given by the banks to drivers without any recourse to Ola. The vehicles are hypothecated by the respective banks.' 38. Thus we find that the agreements that Ola has with drivers covers many aspects, which concern welfare measures for drivers and helping them source credit for buying vehicles. It does stand guarantee for the loans thus there is no binding for the drivers to remain loyal to Ola because of financial lock-in. The incentives provided to drivers are dynamic and not constant in time. The drivers have the option to shift to other network depending on their requirement and convenience. Hence the driver's agreement that Ola has with drivers with entirely optional and does not in any way bind the drivers to Ola's network in any way. 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 potentia....