Unraveling Samir Agrawal v. Competition Commission of India & Ors.: A Case Analysis of Competition Law Dispute

Introduction

The rise of ride-hailing platforms such as Ola and Uber has revolutionized the way people commute, offering convenient and affordable transportation options. Behind the scenes, these platforms rely on complex algorithms that calculate the number of ride requests at any given point and match them with the available fleet of cabs. This algorithm-based approach is crucial for ensuring efficient utilization of resources and providing timely service to customers. However, the use of such algorithms by Ola and Uber has also raised legal and regulatory concerns, particularly in the context of competition law. This article delves into the case of Ola and Uber creating algorithms to calculate ride requests and how it has implications from a competition law perspective, exploring the potential antitrust issues and regulatory challenges associated with these practices.

Facts of the Case ?

Informant, an independent practitioner of the law, by an Information filed on 13.08.2018, sought that the CCI initiate an inquiry, under section 26(2) of the Competition Act, 2002, into the alleged anti-competitive conduct of Ola and Uber, alleging that they entered into price-fixing agreements in contravention of section 3(1) read with section 3(3)( a) of the Act, and engaged in resale price maintenance in contravention of section 3(1) read with section 3(4)(e) of the Act.

A trip’s fare is calculated by an algorithm based on many factors and due to algorithmic pricing, neither are riders able to negotiate fares for rides booked through the apps, nor are the drivers able to offer any discounts. Thus, the pricing algorithm takes away the freedom of riders and drivers to choose the best price on the basis of competition.

CCI rejected the application on the ground that the informant does not have any locus to file the application.

The legal question involved is as to who can approach CCI?

What Law Say About ?

Some Important Definitions

Cartel (Section 2(c) of Competition Act, 2002)

-  According to Section 2(c), a cartel includes an association of producers, sellers, distributors, traders, or service providers who, by agreement, formal or informal, directly or indirectly, engage in practices such as fixing prices, limiting production, allocating markets, or bid-rigging, with the aim of manipulating or controlling the supply, demand, or prices of goods or services in a market.

Consumer (Section 2(f) of Competition Act, 2002)

- It means any person who-

1. Buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised, or under any system of deferred payment when such use is made with the approval of such person, whether such purchase of goods is for resale or for any commercial purpose or for personal use;
2. Hires or avails of any services for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any beneficiary of such services other than the person who hires or avails of the services for consideration paid or promised, or partly paid and partly promised, or under any system of deferred payment, when such services are availed of with the approval of the first-mentioned person whether such hiring or availing of services is for any commercial purpose or for personal use. 

“ In Simple terms , a consumer refers to an individual or entity that purchases goods or services for personal or commercial use in the market. In the context of the Competition Act, 2002, a consumer may be understood as an end-consumer who directly purchases goods or services for their own consumption or an intermediate consumer who purchases goods or services for further processing or use in their business operations.”

Other Important Provisions of Competition Act, 2002 in respect to this case

Some potential issues that could be involved in this case include:-

- Alleged anti-competitive conduct: The case involve allegations of anti-competitive behavior, such as anti-competitive agreements, abuse of dominant position, collusion, or other violations of competition laws as per the provisions of the Competition Act, 2002.

- Adverse effect on competition: The case may revolve around determining whether the alleged conduct of the parties involved has an appreciable adverse effect on competition (AAEC) in the relevant market, as defined by the Competition Act.

- Competition Commission of India's (CCI) investigation and decision-making: The case involve a challenge to the CCI's investigation process, findings, or orders related to the alleged anti-competitive conduct, including issues related to evidence gathering, interpretation of competition law provisions, and exercise of powers by the CCI.

- Penalties and remedies: The case  involve disputes over the penalties or remedies imposed by the CCI, such as fines, cease and desist orders, or other corrective measures, and their appropriateness in relation to the alleged anti-competitive conduct.

- Appellate review: The case involve an appeal against the CCI's decision or orders to the NCLT (National Company Law Tribunal) or higher courts, challenging the legal or factual basis of the CCI's decision.

Anti-Competitive Agreement (Section 3 of Competition Act, 2002)

Section 3 of the Competition Act, 2002, deals with anti-competitive agreements or arrangements. This section prohibits certain types of agreements or arrangements between enterprises that may have an adverse effect on competition in the market. The key provisions of Section 3 are as follows:

Anti-Competitive Agreements: Section 3(1) of the Competition Act, 2002, prohibits agreements between enterprises that cause or are likely to cause an appreciable adverse effect on competition in India. Such agreements may include agreements relating to the production, supply, distribution, acquisition, or control of goods or provision of services, including cartels, price-fixing agreements, output restriction agreements, bid-rigging, and market-sharing agreements, among others.

Horizontal and Vertical Agreements: Section 3(3) of the Competition Act, 2002, categorizes anti-competitive agreements into horizontal and vertical agreements. Horizontal agreements are agreements between enterprises that are at the same level of the production or distribution chain and compete with each other, while vertical agreements are agreements between enterprises that are at different levels of the production or distribution chain and do not compete directly with each other.

Exemptions: Section 3(5) of the Competition Act, 2002, provides for exemptions to certain agreements that may otherwise be anti-competitive. These exemptions are subject to conditions, and agreements falling within these exemptions may not be considered anti-competitive.

Penalties: Section 3(6) of the Competition Act, 2002, imposes penalties on enterprises that enter into anti-competitive agreements. The penalties may include fines up to 10% of the average turnover of the enterprise for the preceding three financial years.

Section 3 of the Competition Act, 2002 is a crucial provision aimed at promoting competition and preventing anti-competitive practices in the market. It empowers the Competition Commission of India (CCI) to investigate and take action against anti-competitive agreements or arrangements, and has significant implications for enterprises operating in India with respect to their business practices and agreements with other entities. It's important for businesses to be aware of and comply with the provisions of Section 3 to ensure compliance with competition law in India.

Procedure for Inquiry and Appeal (Section 26(2) and Section 53B of Competition Act, 2002)

Section 26(2) and Section 53B are provisions under the Competition Act, 2002, that outline the procedure for inquiry and appeals in cases related to competition law in India.

Section 26(2) relates to the procedure for inquiry under Section 19 of the Competition Act. When the Competition Commission of India (CCI) receives a reference from the central government, state government, statutory authority, or information under Section 19, and it is of the opinion that there is no prima facie case, the CCI can close the matter immediately and pass appropriate orders. The CCI is required to send a copy of its order to the relevant government or authority, or the parties involved.

Section 53B, on the other hand, deals with the right to appeal to the Appellate Tribunal. Any aggrieved party, including the central government, state government, local authority, enterprise, or any person, who is dissatisfied with a direction, decision, or order referred to in clause (a) of Section 53A, has the right to file an appeal with the Appellate Tribunal. Clause (a) of Section 53A includes directions, decisions, or orders of the CCI relating to anti-competitive agreements, abuse of dominant position, or combinations, among others.

These provisions highlight the procedures and avenues for recourse available to parties involved in cases related to competition law in India. They provide for the closure of matters where no prima facie case is found by the CCI and the right to appeal to the Appellate Tribunal for parties aggrieved by the CCI's directions, decisions, or orders. It's important for stakeholders to be aware of these provisions and follow the prescribed procedures for inquiries and appeals as per the Competition Act, 2002.

Arguments by Appellate and Respondent

The appellant (the party filing the case) has alleged that Ola and Uber, as popular cab aggregators, fixed prices without considering the choices of the riders and drivers (Transportation Service Providers or TSPs), and exercised unilateral control over pricing, creating a 'hub and spoke' cartel between the aggregators and TSPs. The appellant argued that this conduct violated Section 3(3) of the Competition Act, 2002, which prohibits anti-competitive agreements.

The appellant further argued that the apps run by the aggregators could not fix or restrict prices for users as it was against the law of the land, and that the option for TSPs to switch to another platform was meaningless as customers would eventually run into another cartel run by Ola.

The respondent, Ola Cabs, countered the allegations by stating that there was no competitive behavior with their existing business model, as they acted only as an intermediary connecting commuters and cab drivers. They argued that the question of forming and operating a cartel under Section 3(3) of the Competition Act did not arise as Ola and its affiliated drivers were not on the same level of the supply chain and there was no agreement between them regarding fixing or restricting cab fares. They also highlighted that both drivers and commuters had the option to use multiple platforms without incurring serious costs.

Uber, another respondent in the case, stated that its pricing mechanism was similar to that of metered taxis and auto-rickshaws, and that its drivers had the liberty to charge lower than the amount displayed on the app. They argued that their pricing algorithm protected commuters from arbitrary high prices, and that their surge pricing model was in compliance with government rules under relevant laws.

Both respondents argued that their pricing algorithms took into account various factors such as time, distance, weather, and availability of cabs, making it humanly impossible for anyone to fix or restrict prices.

The arguments presented by the appellant and respondents revolve around whether Ola and Uber engaged in anti-competitive conduct by fixing prices and creating a cartel, and whether their pricing mechanisms comply with the laws and regulations governing competition in India. The court will likely consider these arguments and relevant provisions of the Competition Act, 2002, in its decision.

SC Decision and Reason

Supreme Court Decision

 The person making the application need not be incurring any loss himself, any person can make an application in public interest.

Reasoning behind the Decision:

The Supreme Court, after considering the arguments presented by the appellant and respondents, and analyzing the provisions of the Competition Act, 2002, came to the following decision:

Allegations of Cartelization: The Supreme Court found that the appellant's allegations of cartelization between Ola and Uber and their affiliated drivers (TSPs) were not substantiated. The Court noted that there was no agreement between Ola and its drivers or between the drivers themselves regarding fixing or restricting cab fares. The Court also observed that both Ola and Uber operated as intermediaries connecting commuters and cab drivers, and they were not on the same level of the supply chain. Therefore, the Court concluded that the allegations of cartelization under Section 3(3) of the Competition Act did not hold.

Pricing Practices: The Supreme Court considered the submissions of Ola and Uber regarding their pricing mechanisms. Ola argued that its app-specific pricing algorithm considered multiple variables and made it humanly impossible for anyone to fix or restrict prices. Uber, on the other hand, stated that its pricing mechanism was similar to that of metered taxis and auto-rickshaws, and that its drivers had the liberty to charge lower than the amount displayed on the app. The Court found that both Ola and Uber's pricing mechanisms were in compliance with relevant laws and regulations, and were aimed at protecting commuters from arbitrary high prices.

Definition of "Any Person" under Section 19(1)(a) of the Competition Act: The Supreme Court accepted the appellant's argument that the appellant fell within the definition of "any person" under Section 19(1)(a) of the Competition Act, which includes an individual who can file information virtually like an FIR in a criminal case. The Court acknowledged that the appellant had the right to approach the Court with their grievances.

Based on the above reasoning, the Supreme Court dismissed the appellant's allegations of cartelization and anti-competitive conduct against Ola and Uber, and upheld the compliance of their pricing mechanisms with relevant laws and regulations.

Conclusion

In conclusion, the case of Samir Agrawal v. CCI, involving allegations against Ola and Uber for anti-competitive conduct and cartelization, was ultimately dismissed by the Supreme Court. The Court held that there was no evidence of collusion or agreement between Ola, Uber, and their affiliated drivers to fix or restrict cab fares, and that both companies operated as intermediaries in the supply chain. The Court also upheld the compliance of Ola and Uber's pricing mechanisms with relevant laws and regulations, and rejected the appellant's allegations. This case highlights the importance of substantiating claims of anti-competitive conduct with solid evidence and the need to comply with the principles of competition law in the context of emerging technology-driven industries such as ride-hailing services.

 

Article Compiled by:-

Mayank Garg

+91 9582627751

Disclaimer: Every effort has been made to avoid errors or omissions in this material in spite of this, errors may creep in. Any mistake, error or discrepancy noted may be brought to our notice which shall be taken care of in the next edition In no event the author shall be liable for any direct indirect, special or incidental damage resulting from or arising out of or in connection with the use of this information Many sources have been considered including newspapers, Journals, Bare Acts, Case Material. Charted Secretary etc.

 

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