Meru V Uber: Taxis collide at the CCI

By February 3, 2016 December 20th, 2019 No Comments
subject matter of the case is related to the Competition Act, 2002 (hereinafter
‘The Act’). It was established to prevent activities that have an adverse
effect on competition in India. This case is filed under Section 19 of The Act
which is in contravention of Section 3 and 4 of the Act and deals with the
dominant position of an enterprise.

Brief Facts:

per the facts of the case the Informant is a company engaged in radio taxi
business in India through its fully owned subsidiaries Meru Cab Company Pvt.
Ltd., (MCCPL) and V-Link Automotive Services Pvt. Ltd. (hereinafter “V-Link”).
The Informant claims to have started offering radio taxi service in Kolkata
through its subsidiary V-Link in September 2014 with brand name “Meru Flexi”.

No. 1 is a company incorporated under the Companies Act, 1956. Respondent is
engaged in the provision of radio taxi services under the brand name “Uber”. Respondents
entered into the Indian market sometime in the year 2013 and it started its
operations in Kolkata in August 2014. The radio taxi services in Kolkata are
being offered by Respondent Group through two different categories/ brands, “Uber
” (sedan cars) and “Uber Go” (low range hatch back cars).
Respondent no. 1 and 2 are in contract with each other where Respondent No. 1 promotes
its business.  

Contention of Informant:

Informant contended that the Respondent no. 1 is merely a face of Respondent
no. 2 & 3 in India. They alleged that the Respondent armed with global
funding, has adopted anti-competitive business model and unleashed a series of
abusive practice that are prohibited within The Act to strengthen its position
of dominance in different markets and to eliminate otherwise equally efficient
competitors from the market. As per them the average market price of taxis
before the introduction of Respondent was 20-22 per km. Respondent introduced
themselves at the price of 15 per km. Thereafter informant came in Kolkata with
market prize of 20 per km but was forced to reduce themselves at 15 per km and
offering incentive to their drivers so as to match with the Respondent group. It
is further alleged by the Informant that seeing the growth of them Respondent
further reduced the price to unreasonable low rate of 9 per km due to which
their market started coming down. The Informant has asserted that Respondent
Group holds a dominant position in the relevant product market in Kolkata by
virtue of their market share and other factors laid down under section 19(4) of
The Act.    

Contention of Respondent:

Respondent group denied the contentions made by the Informant and alleged that in
November 2014, OLA launched operations in Kolkata under the brand of “OLA
Sedan”. Subsequently, OLA launched its low cost “OLA Mini” services in Kolkata
in March 2015. Informant has submitted that its business began to suffer only
after February 2015, i.e. March 2015. Therefore, the Informant’s fall in
business cannot be attributed to it and in fact seems to be attributable more
to the entry of OLA Mini. Further Respondent claimed that its business model is
based on efficiencies, with a view to lower costs and pass such benefits to the
consumers. Kolkata has already witnessed a drastic increase in the availability
of radio taxis and a significant reduction in price. This is precisely consumer
welfare that competition law seeks to promote. 

Issue for Consideration:

the Respondent can said to have a dominant position in Kolkata under Section 4
of the Competition Act?

Decision :

Commission held that, as far as the relevant product market is concerned, the decisive
factor for ascertaining the contours of relevant product market is
substitutability of the product/service as perceived by the consumer. The basic
characteristics, intended end-use, price etc. of different alternatives are
some of the factors that help in determining whether the two products are
substitutable or not. In this regard, however, it is notable that commuters in
Kolkata rely on the yellow taxis for their day to day travelling/transportation
requirements owing to their ease in booking, predictability in terms of
availability, low pricing etc. Therefore, the Kolkata is a peculiar market in
itself. The active presence of yellow taxis and the continuous reliance of
commuters on such taxis indicate that yellow taxis provides a viable alternative,
in effect posing a significant competitive constraint on the radio taxi
operators. Therefore, the relevant product market in the present case would be
the market for ‘services offered by radio taxis and yellow taxis’.

with regard to the relevant geographic market the Commission also held that,
owing to region specific demand by the end consumer and difference in
regulatory architecture, each city/ State would constitute a different market
in itself. The operations of taxis are restricted to the city/ State limits and
they generally do not have the permit to go beyond the boundaries of a city/
State. Moreover, customers desirous of taking a taxi for travel in a city/
State would have to rely upon existing taxi operators in the city/ State. The
alternative to opt such services from a company beyond the geographical limit
of the city/state would not be feasible for the consumers but also for the
company considering the distance, cost factor, etc. Moreover, since transport
is a state subject under the Indian constitution, the taxi services market is
largely regulated by State transport authorities making the conditions of
competition homogenous only within a particular city/ State. Keeping into
consideration the foregoing, and having regard to the distinctive conditions of
competition in Kolkata, the relevant geographic market in the present case
would be “Kolkata”.

it appears that there exists stiff competition between Uber and OLA with regard
to the services they offer in the radio taxi industry in Kolkata. Therefore,
even if the relevant market definition proposed by the Informant
is accepted, the Respondent Group does not seem to hold a dominant position
owing to an even larger share held by one of its competitors. 

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