9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (7) TMI 1343 - Commission - Law of CompetitionAnti-Competitive agreements - below-cost pricing strategy - abuse of dominant position in the relevant market by offering heavy discounts to the passengers and incentives to the cab drivers associated with them - predatory pricing under Section 4(2)(a)(ii) of the Act or not - HELD THAT - The Commission is of the view that competitive constraints in the relevant market are to be assessed in a holistic manner not solely on the basis of market shares of the alleged dominant entity. Market shares must be interpreted in the light of all the relevant market conditions. In the present case both OP and Uber are found to be aggressively competing with each other to attract participants i.e. drivers and riders on both sides of their platforms which is necessary for reducing search and matching frictions. Despite OP having the largest network the network effect was not strong enough to deter entry and rapid expansion of Uber - there are no significant costs preventing consumers from switching between different radio taxi apps. The radio taxi apps are offered for free and can be easily downloaded on smartphones and can coexist on the same handset. Thus availing the services of one aggregator s network does not preclude the use of another. Once these apps are installed on a device riders can switch from one app to another in no-time. In fact both drivers and riders can have applications developed by multiple service providers and can multi-home . In most markets every enterprise will have some degree of market power by virtue of which they can affect consumers or competitors in its favour to some extent. The narrow interpretation of the concept of dominance offered by the Informant would mean that an entrant armed with a new idea a superior product or technological solution that challenges the status quo in a market and shifts a large consumer base in its favour would have to be erroneously held dominant. To preclude possibilities of such anomalies in approach in assessing dominance the Act lays down a holistic framework for assessing dominance and lists out the relevant factors including relative strength of competitors entry conditions and countervailing power. Thus the Commission is not convinced that conduct of OP in the absence of other important factors that determine dominance can be accepted to be indicative of dominance. Based on collective consideration of the facts that the competitive process in the relevant market is unfolding market is growing rapidly effective entry has taken place thereby leading to gradual decline in OP s market share entry barriers are not insurmountable there exist countervailing market forces that constrain the behavior of OP and the nature of competition in dynamic innovation-driven markets the Commission is of the considered view that OP s dominance in the relevant market remains unsubstantiated - Provisions of Section 4 of the Act clearly stipulate that dominant position can be held by only one enterprise or one group. Section 4(2) states that There shall be an abuse of dominant position if an enterprise or a group-. The term a / an used in section 4(2) evidently states the singular form which shows that the intention of the legislature was never to hold more than one enterprise to be in a dominant position unless they are part of the group within the meaning of Section 5 of the Act. Section 19(4) of the Act which enlists factors assessment of dominance is also of relevant in this regard. The plain reading of the factors mentioned under Section 19(4) signifies that the focal point of such assessment is the alleged dominant entity around which the assessment revolves. If there was any scope of more than one entity being envisaged by the Act factors like size and resources of competitors economic power of the enterprise including commercial advantages over competitors etc. would not have found place under Section 19(4) of the Act - Furthermore in Section 28 of the Act which specifically deal with division of enterprises enjoying dominant position the usage of the words unambiguously indicates that the Act does not provide for more than one enterprise to be dominant in the relevant market. The Act does not allow for more than one dominant player under Section 4. Rather the existence of two strong players in the market is indicative of competition between them unless they have agreed not to compete which also can be only be looked into under Section 3 of the Act not Section 4. Hence the present argument of the Informant regarding the collective dominance of OP and Uber is rejected herewith - The in-depth analysis in the preceding paragraphs clearly demonstrates that during the period under investigation OP did not have the ability to act independently of its competitors or consumers in the market. In the absence of dominance of OP examination of abuse or any analysis of pricing strategy by OP is neither warranted nor permitted under the provisions of the Act. The Commission does not fully disagree with the Informants that the low prices of OP are not because of cost efficiency but because of the funding it has received from the private equity funds. But as discussed above there is no evidence that the access to such funding was inequitable and that the market for financing was not competitive and had aberrations. Moreover it was their penetrative pricing strategy that facilitated them to garner high market shares in short span of time as well as develop the networks to a size that could provide sufficient positive externalities to the participants of the network. The Commission is of the view that the evidence on record does not establish the dominance of OP and its consequent abuse within the provisions of Section 4 of the Act - the cases are thus hereby closed.
Issues Involved:
1. Whether the Opposite Party (OP) held a dominant position in the relevant market. 2. Whether the OP's conduct amounted to predatory pricing under Section 4(2)(a)(ii) of the Competition Act, 2002. 3. Whether the OP imposed exclusivity conditions on drivers under Section 3(4) of the Act. 4. Whether the OP's pricing strategy constituted an abuse of dominant position. Issue-wise Detailed Analysis: 1. Dominant Position in the Relevant Market: The primary allegation was that the OP abused its dominant position in the market for radio taxi services in Bengaluru by offering heavy discounts to passengers and incentives to drivers, amounting to predatory pricing. The Commission first delineated the relevant market as "market for radio taxi services in Bengaluru." The OP argued it was merely a technology platform, but the Commission found this argument implausible, stating that the OP provided the same functional product as traditional radio taxi operators. The market share analysis showed that the OP's share increased significantly from 5-6% in 2012-13 to 61-62% in 2015-16. However, the DG observed a decline in the OP's market share post-January 2015, coinciding with Uber's rapid market entry and growth. The Commission concluded that the OP did not hold a dominant position due to the competitive constraints posed by Uber and the dynamic nature of the market. 2. Predatory Pricing: The DG found that both the OP and Uber engaged in below-cost pricing strategies. However, since dominance is a prerequisite for establishing abuse under Section 4, and the OP was not found to be dominant, the allegation of predatory pricing could not be substantiated. The Commission noted that the OP's negative indexed margin since June 2014 seemed more reactive to Uber's aggressive pricing strategy, indicating competitive constraints. 3. Exclusivity Conditions on Drivers: The Informants alleged that the OP imposed exclusivity conditions on drivers. The DG found that drivers were allowed to opt for other platforms and were not restricted due to their association with the OP. The Commission agreed, stating that there was no exclusivity condition imposed on drivers, and thus, no contravention of Section 3(4) of the Act. 4. Pricing Strategy and Abuse of Dominant Position: The Informants argued that the OP's pricing strategy was exclusionary and demonstrated its economic strength. However, the Commission found that the market was still evolving, and the OP's pricing strategy was part of a competitive process in a nascent market. The low prices were attributed to the funding received by the OP, which was not inequitable. The Commission was hesitant to interfere in a market that was yet to mature, stating that any intervention might disturb market dynamics and pose a risk to the nascent market situation. Conclusion: The Commission concluded that the OP did not hold a dominant position in the relevant market and, therefore, did not abuse its position under Section 4 of the Act. The allegations of predatory pricing and exclusivity conditions were not substantiated. The cases were closed, and the parties were informed accordingly.
|
