2020 (5) TMI 746 - AT - Companies Law

Unfair price fixation mechanism and abuse of dominant position - Contravention of provisions of Section 3 of the Competition Act, 2002 - alleged collusion on the part of drivers through the cab aggregators App who purportedly used algorithm to fix prices which the drivers were bound to accept - Allegation of hub-and-spoke cartel involving drivers and cab aggregators - price discrimination under Section 4(2)(a)(ii) of the Act - HELD THAT - It is apt to notice the procedure governing inquiry by the Commission in allegations of anti-competitive agreements, including price fixation, cartelisation and abuse of dominant position. Section 19 of the Act provides for inquiry into certain agreements and dominant position of enterprise. It is true that the concept of locus standi has been diluted to some extent by allowing public interest litigation, class action and actions initiated at the hands of consumer and trade associations. Even the whistle blowers have been clothed with the right to seek redressal of grievances affecting public interest by enacting a proper legal framework. However, the fact remains that when a statute like the Competition Act specifically provides for the mode of taking cognizance of allegations regarding contravention of provisions relating to certain anti-competitive agreement and abuse of dominant position by an enterprise in a particular manner and at the instance of a person apart from other modes viz. suo motu or upon a reference from the competitive government or authority, reference to receipt of any information from any person in section 19(1) (a) of the Act has necessarily to be construed as a reference to a person who has suffered invasion of his legal rights as a consumer or beneficiary of healthy competitive practices - There is nothing on the record to show that he has suffered a legal injury at the hands of Ola and Uber as a consumer or as a member of any consumer or trade association. Not even a solitary events of the Informant of being a victim of unfair price fixation mechanism at the hands of Ola and Uber or having suffered on account of abuse of dominant position of either of the two enterprises have been brought to the notice of this Appellate Tribunal. We are, therefore, constrained to hold that the Informant has no locus standi to maintain an action qua the alleged contravention of Act. Admittedly, under the business model of Ola, there is no exchange of information amongst the drivers and Ola. The taxi drivers connected with Ola platform have no inter se connectivity and lack the possibility of sharing information with regard to the commuters and the earnings they make out of the rides provided. This excludes the probability of collusion inter se the drivers through the platform of Ola. In so far as Uber is concerned, it provides a technology service to its driver partners and riders through the Uber App and assist them in finding a potential ride and also recommends a fare for the same. However, the driver partners as also the riders are free to accept such ride or choose the App of competing service, including choosing alternative modes of transport. Any view taken by the Commission without recording reasons would demonstrate lack of application of mind and exercise of arbitrary power which cannot be supported. In the instant case, the Commission has dealt with the allegations clearly identifying the issues and recording its opinion thereon in the light of law and contemporary decision occupying the field. Nothing to the contrary could be demonstrated by the Informant to warrant interference. There is no substance in the allegations emanating from the Informant - The opinion of the Commission in regard to non-existence of a prima facie case warranting closure of the information cannot be faulted on any ground - there are no legal infirmity in the impugned order - appeal dismissed.

Summary

Issues Involved:
1. Alleged contravention of Section 3 of the Competition Act, 2002 by cab aggregators Ola and Uber.
2. Allegation of price fixing through algorithmic pricing.
3. Allegation of hub-and-spoke cartel involving drivers and cab aggregators.
4. Allegation of price discrimination under Section 4(2)(a)(ii) of the Act.
5. Abuse of dominant position by Ola and Uber.
6. Locus standi of the Informant to file the information.
7. Commission's powers under Section 26(2) of the Act.

Issue-wise Detailed Analysis:

1. Alleged Contravention of Section 3 of the Competition Act, 2002 by Cab Aggregators Ola and Uber:
The appellant, an independent law practitioner, alleged that Ola and Uber used their algorithms to facilitate price fixing between drivers, which is a contravention of Section 3 of the Competition Act, 2002. The Commission found no prima facie case as there was no agreement, understanding, or arrangement between the cab aggregators and their respective drivers or between the drivers inter se regarding price fixing.

2. Allegation of Price Fixing through Algorithmic Pricing:
The Informant alleged that the algorithmic pricing adopted by Ola and Uber takes away the liberty of individual drivers to compete with each other, amounting to price fixing. The Commission observed that the algorithmically determined pricing for each rider and each trip tends to be different due to the interplay of large data sets, and thus, it does not amount to price fixing or a hub-and-spoke arrangement.

3. Allegation of Hub-and-Spoke Cartel Involving Drivers and Cab Aggregators:
The Commission dismissed the allegation that Ola and Uber's platforms acted as a hub for collusion between the drivers. It noted that there was no exchange of sensitive information between competitors through a third party that facilitated cartelistic behavior. The drivers' acceptance of algorithmically determined prices by the platform cannot be considered collusion.

4. Allegation of Price Discrimination under Section 4(2)(a)(ii) of the Act:
The Informant did not allege that any of the OPs was dominant in the app-based taxi services market. The Commission noted that Ola and Uber, being two independent enterprises, could not be said to hold a dominant position collectively as the Act does not recognize collective dominance. Therefore, the allegation of price discrimination was rejected.

5. Abuse of Dominant Position by Ola and Uber:
The Commission found that Ola and Uber did not hold a dominant position in the relevant market. Both enterprises are not operating as a joint venture or a group, and thus, they cannot be deemed to hold a dominant position. The allegation of abuse of dominant position was outrightly rejected.

6. Locus Standi of the Informant to File the Information:
The Informant, being an independent law practitioner, did not demonstrate that he suffered a legal injury as a consumer or as a member of any consumer or trade association. The Commission held that the Informant had no locus standi to maintain an action regarding the alleged contravention of the Act.

7. Commission's Powers under Section 26(2) of the Act:
The Commission is empowered to close the matter if it finds no prima facie case. The Commission must record minimum reasons without entering into any adjudicatory or determinative process. The Commission, in this case, dealt with the allegations clearly, identifying the issues and recording its opinion in light of the law and contemporary decisions. The Appellate Tribunal found no legal infirmity in the impugned order.

Conclusion:
The appeal was dismissed as there was no substance in the allegations emanating from the Informant. The Commission's opinion regarding the non-existence of a prima facie case was upheld, and the impugned order was found to be legally sound.