The Supreme Court recently dismissed an appeal filed by Uber India, thereby giving a green signal to Competition Appellate Tribunal to initiate an investigation into allegations of abuse of dominant power by Uber in the National Capital Region.
Timeline of the events:
In 2015, Meru – a radio taxi service business –approached the Competition Commission of India (CCI) alleging that Uber was engaging in predatory pricing. Meru's complaint basically revolved around the fact that besides reduced tariffs, Uber was offering massive discounts to its customers and was also offering unreasonably high incentives to its fleet of drivers.
In the information provided by Meru, it detailed how Uber was losing Rs. 204 per trip, which according to Meru made no economic sense and only pointed towards Uber's intention of eliminating competition in the market.
To demonstrate the dominant position held by Uber in the market, Meru relied upon the findings of a market research report conducted by New Age TechSci Research Pvt. Ltd. However, not only did CCI question the findings of New Age TechSci by comparing it with the findings of 6W research but also argued that the relevant geographical market was Delhi and not Delhi NCR, as contented by Meru. CCI observed that as far as Delhi is concerned, there exists stiff competition in the radio taxi service market and hence, Uber was not dominant in the relevant market.1
Subsequently, Meru filed an appeal under Section 53B of the Act before the Competition Appellate Tribunal (COMPAT). COMPAT observed that consumers are not concerned with political demarcations and hence, distinction between Delhi and Delhi-NCR made by the CCI was unnecessary. COMPAT further observed that the fact that the two reports showed contradictory findings was all the more reason to probe into the matter. COMPAT then directed the Director General to conduct an investigation into the allegations and submit report to the Commission.
Uber filed an appeal before the Supreme Court of India against the order of COMPAT.
Decision of the Supreme Court:
The Supreme Court found no reason to interfere with the investigation. The fact that Uber was losing Rs. 204 per trip also caught the Court's attention and solidified its view that it would be difficult to state that there is no prime facie case under Section 26(1) as to infringement of Section 4 of the Competition Act, 2002.
The Supreme Court relied on the definition of 'Dominant position', as laid down in Explanation (a) of Section 4, as a position of strength, enjoyed by an enterprise, in the relevant market, which
- enables it to operate independently of the competitive forces prevailing; or
- is something that would affect its competitors or the relevant market in its favour.
The Court also remarked that if a loss is made for the trips, Explanation (a)(ii) would prime facie be attracted, as this would affect Uber's competitors in its favour or it would affect the relevant market in its favour.
The Hon'ble Court thus dismissed the appeals and decided to not interfere with COMPAT's order.2
Impact of the decision:
The most interesting aspect of the Supreme Court's decision is that the Court decided not to lay emphasis on Section 19(4), which lays down multiple factors to assess the dominance of the business. The decision is chiefly based on Uber's pricing practices. Hence, dominant position of the business is analyzed mainly on its ability to offer incentives and discounts.
In any case, since the Supreme Court has directed the Director General to finish the probe within six months (from 3rd September 2019 – the date on which the judgment was passed) we will gain more clarity on the subject in the near future.
References:
1 https://www.cci.gov.in/sites/default/files/26%282%29_96%20of%202015.pdf
2 https://sci.gov.in/supremecourt/2017/2103/2103_2017_5_2_16524_Judgement_03-Sep-2019.pdf
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