‘Anti-Competitive’ Practices By Uber: Supreme Court Orders Probe Against Taxi-Hailing App [Read Judgment]

The Supreme Court on September 3, 2019, in the case of Uber India Systems Pvt. Ltd. v. Competition Commission of India & Ors., has ordered a probe into the alleged abuse of dominance and anti-competitive practices by popular taxi-hailing app Uber India Systems.

A Bench comprising of Justice Rohinton Fali Nariman and Justice Surya Kant dismissed an appeal filed by Uber against the probe ordered by Competition Appellate Tribunal (COMPAT) and requested the director general to complete the investigation within six months.

Background

The trouble for Uber started following a complaint filed by Meru Travel Solutions Pvt. Ltd. before Competition Commission of India.

In the complaint it was alleged that Uber was intentionally suffering losses on the rides on its application, pricing them below cost to gain customers (predatory pricing) and directly or indirectly forcing cab drivers to remain exclusively on its platform, thus indulging in anti-competitive practices. It said that Uber was willingly losing Rs 204 per trip. It was also alleged that Uber is spending about $885 million to generate a revenue of $415 million.

However, the CCI in February 2016 rejected Meru’s complaint, saying inability of the existing players to match the innovative technology of any player or the model created for operating in a particular industry cannot be said to be creating entry barriers in itself.

Subsequently, Meru filed an appeal before the COMPAT which taking note of Uber's substantial market share had said, besides the appellant (Meru), there are a few very small players in the market who can be seriously affected if any of the bigger players adopts anti-competitive practices. It also observed that aggregator-based radio taxi service is a new paradigm of public transport in Indian cities which has revolutionised the manner in which we commute and work.

"Reportedly, it has done wonders to consumer satisfaction in whichever city it has started. Therefore, it cannot be said definitively that there is an abuse inherent in the business practices adopted by operator such as respondents (Uber) but the size of discounts and incentives show that there are either phenomenal efficiency improvements which are replacing existing business models with the new business models or there could be an anti-competitive stance to it. Whichever is true, the investigations would show," COMPAT had said.

Accordingly, COMPAT directed CCI's probe unit Director General (DG) to conduct a fresh probe into the allegations of abuse of dominance and anti-competitive practices by Uber. Uber then approached the Apex Court assailing this order by COMPAT.

Supreme Court decision

While upholding the COMPAT order, the Supreme Court Bench took note of the allegation that the Uber was losing Rs.204 per trip in respect of the every trip made by the cars of the fleet owners, which does not make any economic sense other than pointing to Uber's intent to eliminate competition in the market. The Bench further observed that two important ingredients which section 4(1) of the Competition Act, 2002, is (1) the dominant position itself, and (2) its abuse.

It said: “Given the allegation made, as extracted above, it is clear that if, in fact, a loss is made for trips made, Explanation (a)(ii) would prima facie be attracted inasmuch as this would certainly affect the appellant's competitors in the appellant's favour or the relevant market in its favour. Insofar as 'abuse' of dominant position is concerned, under Section 4(2)(a), so long as this dominant position, whether directly or indirectly, imposes an unfair price in purchase or sale including predatory price of services, abuse of dominant position also gets attracted. Explanation (b) which defines 'predatory price' means sale of services at a price which is below cost.”

[Read Judgment]