SUBJECT- COMPETITION LAW
The
Competition Act, 2002 was enacted to repeal and replace Monopoly and
Restrictive Trade Practices Act, 1969. The objective of the act was to ensure
prevention of anti-competitive activities which have an adverse impact on the
competition of markets in the country. The Competition Act does not frown upon
dominance or certain players but only on abuse of such dominance in the
relevant market. Predatory pricing is one such anti-competitive activity which
leads to adverse impact in competition of a market often creating abusive
dominant position. It is a practice of selling goods or providing services to
consumers at a price often even lower that the cost incurred in their
production, with a view to eliminate competition. It has been given as one of
the grounds for abuse of dominant position under section 4(2)(a)(ii)[1]
of the said Ac as follows:
Competition Act, 2002 was enacted to repeal and replace Monopoly and
Restrictive Trade Practices Act, 1969. The objective of the act was to ensure
prevention of anti-competitive activities which have an adverse impact on the
competition of markets in the country. The Competition Act does not frown upon
dominance or certain players but only on abuse of such dominance in the
relevant market. Predatory pricing is one such anti-competitive activity which
leads to adverse impact in competition of a market often creating abusive
dominant position. It is a practice of selling goods or providing services to
consumers at a price often even lower that the cost incurred in their
production, with a view to eliminate competition. It has been given as one of
the grounds for abuse of dominant position under section 4(2)(a)(ii)[1]
of the said Ac as follows:
There shall be an abuse of dominant position under
sub-section (1), if an enterprise or a group.
sub-section (1), if an enterprise or a group.
(a) directly or indirectly, imposes unfair or discriminatory—
(i) condition in purchase or sale of goods or service; or
(ii) price in purchase or sale (including predatory price)
of goods or service.
of goods or service.
Brief
Facts
Facts
1.
M/s Fast Track Call Cab Pvt. Ltd., the “Informant”, filed a complaint against
M/s ANI Technologies Pvt. Ltd., the “Opposite
Party”, alleging that the Opposite Party acted in contravention of Section
3 (Anti-competitive agreements) and Section 4 (Abuse of Dominant position) by
engaging in the practice of predatory pricing.
M/s Fast Track Call Cab Pvt. Ltd., the “Informant”, filed a complaint against
M/s ANI Technologies Pvt. Ltd., the “Opposite
Party”, alleging that the Opposite Party acted in contravention of Section
3 (Anti-competitive agreements) and Section 4 (Abuse of Dominant position) by
engaging in the practice of predatory pricing.
2.
The Informant claims on the basis of an
article published on ‘vccircle.com’
that the opposite party received investment worth of over $ 276 million from
various companies and that this amount is being utilised to unleash a series of
abusive practices of unfair condition and predatory pricing. The Opposite
Party, as claimed by the Informant, enjoys a dominant position as it has 43% of
the active fleet in Bengaluru with 47% of the market share and has acquired the
business of ‘Taxi for Sure’, making its share about 69% in the relevant market.
The Informant claims on the basis of an
article published on ‘vccircle.com’
that the opposite party received investment worth of over $ 276 million from
various companies and that this amount is being utilised to unleash a series of
abusive practices of unfair condition and predatory pricing. The Opposite
Party, as claimed by the Informant, enjoys a dominant position as it has 43% of
the active fleet in Bengaluru with 47% of the market share and has acquired the
business of ‘Taxi for Sure’, making its share about 69% in the relevant market.
3.
Informant also states that the Opposite
Party is abusing its dominant position by incentivising its drivers in an
unrealistic manner and also providing the customers with equally unrealistic
discounts with the help of the money received by the foreign investments. It is
difficult for the other existing radio cab operators to match the standards of
the Opposite Party.
Informant also states that the Opposite
Party is abusing its dominant position by incentivising its drivers in an
unrealistic manner and also providing the customers with equally unrealistic
discounts with the help of the money received by the foreign investments. It is
difficult for the other existing radio cab operators to match the standards of
the Opposite Party.
Issue for Consideration
1.
Whether the Opposite Party has abused
its dominant position in as given under Section 4 of the Competition Act, 2002
by indulging in the malpractice of predatory pricing?
Whether the Opposite Party has abused
its dominant position in as given under Section 4 of the Competition Act, 2002
by indulging in the malpractice of predatory pricing?
Decision of the Commission
1.
The Commission established ‘Radio taxi
services’ as the relevant market. It held that geographic market will be
different for each city as the operations of cabs is restricted to city limits;
in this case Bengaluru. Thus, the relevant market was established as ‘Radio Taxi services in the city of
Bengaluru’.
The Commission established ‘Radio taxi
services’ as the relevant market. It held that geographic market will be
different for each city as the operations of cabs is restricted to city limits;
in this case Bengaluru. Thus, the relevant market was established as ‘Radio Taxi services in the city of
Bengaluru’.
2.
The Commission was also of the opinion
that Opposite Party enjoyed a dominant position in the relevant market owing to
the acquisition of another service provider, Taxi for Sure, due to which its market share in the relevant market
went up to 69%.
The Commission was also of the opinion
that Opposite Party enjoyed a dominant position in the relevant market owing to
the acquisition of another service provider, Taxi for Sure, due to which its market share in the relevant market
went up to 69%.
3.
On the issue of the Opposite Party
offering unrealistic incentives to its drivers, the Commission was of the
opinion that it is not concerned with the exclusion of other players from the
market on the grounds of inefficiency. However the abusive practice of
predatory pricing was taken up as under Section 4(2) of the Competition Act.
On the issue of the Opposite Party
offering unrealistic incentives to its drivers, the Commission was of the
opinion that it is not concerned with the exclusion of other players from the
market on the grounds of inefficiency. However the abusive practice of
predatory pricing was taken up as under Section 4(2) of the Competition Act.
4.
On the basis of the material placed on
record, on an average, the Opposite Party spent around Rs. 574 per trip but the
average revenue was Rs. 344, creating a loss of Rs. 230 on an average. Thus,
the Commission was of the opinion that this indicated predatory pricing aiming
to eliminate other competitors from the relevant market.
On the basis of the material placed on
record, on an average, the Opposite Party spent around Rs. 574 per trip but the
average revenue was Rs. 344, creating a loss of Rs. 230 on an average. Thus,
the Commission was of the opinion that this indicated predatory pricing aiming
to eliminate other competitors from the relevant market.
5.
The conduct of the Opposite Party,
according to the Competition Commission of India, resulted in abuse of dominant
position under Section 4 of the above mentioned Act.
The conduct of the Opposite Party,
according to the Competition Commission of India, resulted in abuse of dominant
position under Section 4 of the above mentioned Act.
6.
The Commission ordered an investigation
as per Section 26(1) of the Competition Act for fixing liability with respect
to the contravention of the said Act.
The Commission ordered an investigation
as per Section 26(1) of the Competition Act for fixing liability with respect
to the contravention of the said Act.
On 6th August, 2015, the Chairman of the
CCI stated that the investigation in
this matter is at the preliminary stage.
CCI stated that the investigation in
this matter is at the preliminary stage.
