Uber’s alleged anti-competitive practices and abuse of market dominance in India will be investigated, after the Supreme Court green-lighted a probe. The investigation into Uber comes after a case was filed against it by Meru Travel Solutions Pvt. Ltd in 2015. Meru complained to antitrust body Competition Commission of India (CCI) that Uber was intentionally pricing rides lower than they were supposed to be, in order to eliminate competition and was using “abusive” practices.
In its original complaint, Meru had said that Uber was losing Rs 204 on every ride and alleged that Uber is spending nearly $885 million to generate a revenue of $415 million, which did not make economic sense. The SC said that based on this information alone, it was hard to say that there was no abuse of dominant position.
The Supreme Court order by Justice RF Nariman and Justice Surya Kant said that if Uber was incurring losses on trips made, there could only be two explanations for it. One, that Uber was affecting competition in its favour. The second with regard to Uber abusing its dominant position, the court said that if Uber was indirectly or directly imposing an unfair price, then it is abusing its dominance.
Because of this, the Supreme Court said that it will not interfere with the order made by the Appellate Tribunal, and directed the Director General to complete the investigation within six months.
The case
This 2015 case that Meru filed with the CCI was dismissed by the antitrust body a year later. The CCI said that Uber, at the time, did not appear to hold a dominant position in the market. Since it wasn’t proven that Uber was dominating the market, the other allegations such as predatory pricing and abusive practices did not arise.
Meru then appealed against this in 2016 at the Competition Appellate Tribunal (COMPAT). In December 2016, COMPAT ordered the CCI to probe Uber’s alleged abuse of dominance.
"The size of discounts and incentives shows 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," COMPAT had then said.
COMPAT saw good enough reason for the CCI’s Director General to investigate the matter at the time. “It will also help in settling an issue which has agitated business discourse for quite some time," COMPAT said.
It had reached the conclusion that an investigation needed to be conducted because the practice of discounting and incentives showed that either the business model was very effective or it was anti-competitive, either of which can be proven by an investigation.
Uber then appealed to the Supreme Court against this order in 2017. This appeal has now been dismissed by the SC, thus upholding COMPAT’s order to probe Uber’s practices.
The Director-General (DG) will now look at the size and nature of the market, whether or not Uber was in a dominant position on the basis of its fleet size, customer base and funding. The DG will have to look at incentives and anti-competitive agreements Uber had with drivers.
Charanya Lakshmikumaran, a partner at legal firm Lakshmikumaran & Sridharan, told Business Today, “The DG will be expected to answer whether in competition law economics Uber can be termed as a dominant player or not, either in the market for radio taxis in Delhi or in Delhi-NCR. He will also have to answer if indeed there was predatory pricing that was neutralising competitors or whether exclusivity arrangements with drivers - directly or indirectly - were preventing them from accessing other platforms.”
This isn’t the only time that Meru has filed complaints against Uber. In 2017, Meru filed four complaints against Ola and Uber for allegedly abusing their dominance. Meru was a major organised player in India until Ola and Uber launched their services in the country and took over the market. Meru lost out subsequently and has now been relegated to less than 1% of the market share.