COMPETITION COMMISSION OF INDIA

Case No. 6 & 74 of 2015

In Re:

Fast Track Call Cab Pvt. Ltd. Informant No. 1

Meru Travel Solutions Pvt. Ltd. Informant No. 2

And

ANI Technologies Pvt. Ltd. Opposite Party

CORAM

Mr. Devender Kumar Sikri

Chairperson

Mr. S. L. Bunker
Member

Mr. Sudhir Mital

Member

Mr. Augustine Peter

Member

Mr. U. C. Nahta
Member

Mr. Justice G. P. Mittal

Member

Appearances:
For Fast Track Call Cabs Pvt. Ltd: Sh. Udayan Jain, Advocate
Sh. Abir Roy, Advocate
Ms. Anju Thomas, Advocate
Sh. Prashanth Shivadass,
Advocate
Sh. Manas Gaur, Advocate
Sh. Kamal Sharma, Advocate

Case No. 6 & 74 of 2015 Page 1 of 48

 For Meru Travel Solutions Pvt. Ltd.: Sh. Someshekhar Sundaresan,
Advocate
Sh. Zerick Dastur, Advocate
Ms. Sonal Jain, Advocate
Sh. Abir Roy, Advocate
Sh. Manas Gaur, Advocate
Sh. Varun Kejriwal, V.P
Corporate (Meru)

For ANI Technologies Pvt. Ltd. (OLA): Sh. Ramji Srinivasan, Sr.
Advocate
Ms. Nisha Kaur Uberoi,
Advocate
Ms. Nandita Sahai, Advocate
Sh. Sammith. S, Advocate
Sh. Tushar Bharadwaj,
Advocate
Ms. Ridima Bhargava, Legal
Counsel (OLA)
Sh. Karanveer Singh Shekhawat,
V.P (OLA)
Sh. Arvind S., V.P-Corporate
Affairs (OLA)
Sh. Chetan Chopra, Litigation
Head (OLA)

Order under Section 26 (6) of the Competition Act, 2002

Fast Track Call Cab Pvt. Ltd. and Meru Travel Solutions Pvt. Ltd.
(the Informants) had filed information, separately, under Section
19(1) (a) of the Competition Act, 2002 (the Act) against ANI
Technologies (the Opposite Party/OP) alleging inter alia
contravention of the provisions of Section 4 of the Act. Since the
allegations were similar in both the cases, the Commission decided to
club the matters for the purposes of investigation and final disposal.

Case No. 6 & 74 of 2015 Page 2 of 48

Facts, in brief

2. The Informant in Case No. 06 of 2015 is a company engaged in the

business of providing radio taxi services, under the brand name Fast
Track, in the southern part of India.

3. The Informant in Case No. 74 of 2015 is a group holding company

engaged in radio taxi business through its wholly owned subsidiaries
namely Meru Cab Company Pvt. Ltd., (MCCPL) and V-Link
Automotive Services Pvt. Ltd. (VASPL or V-Link). Both these
subsidiaries of the Informant are engaged in the business of providing
radio taxi services under the brand names Meru, Meru Genie and
Meru Flexi in many major cities across India.

4. OP (common in both the cases) is a company engaged in the business of

providing radio taxi services, under the brand name OLA. The main
allegation of the Informants in both the cases is that OP has abused its
dominant position in the relevant market by offering heavy discounts to
the passengers and incentives to the cab drivers associated with them
which amounts to predatory pricing under Section 4(2)(a)(ii) of the Act.
This conduct, as per the Informants, has affected other competitors in the
market who cannot offer similar discounts/incentives to
commuters/drivers.

5. At that stage, the Commission, based on the high market share of OP,
was prima facie of the view that OP held a dominant position in the
market for Radio Taxi services in the city of Bengaluru and that it was
abusing its dominant position. Vide order dated 24th April 2015, the
Commission directed the Director General (DG) to conduct detailed
investigation into the matter. Thereafter, as stated earlier, another
information based on similar facts and allegations, in Case No. 74 of
2015, against OP was received by the Commission. The Commission,
vide order dated 30th September 2015, clubbed this information with the

Case No. 6 & 74 of 2015 Page 3 of 48

 earlier case which was being investigated by the DG and directed the DG
to submit investigation report covering both the Informants. During the
course of investigation, the DG sought information from the parties and
other radio cab companies (third parties), including Uber India Pvt. Ltd.
(Uber), operating in the geographic region of Bengaluru.

6. The DG accordingly submitted the confidential version of the joint

investigation report on 12th April 2016. Thereafter, the public version of
the investigation report was submitted by the DG on 24th November
2016, taking into account the orders of the Commission with regard to
confidentiality requests made by OP and Uber. The public version of the
investigation report was sent to the parties for their response/objections.
The observations and findings of the DG in the investigation report are
entailed in the ensuing paragraphs.

Observations and findings of the DG

7. The issues before the DG for investigation were twofold-(i) whether, OP

held a dominant position in the relevant market or not; and (ii) if it held a
dominant position, whether its conduct would amount to abusive
practice (predatory pricing) within the meaning of Section 4(2)(a)(ii) of
the Act.

8. The DG analyzed the taxi industry in India in general and Bengaluru, in

particular. The DG also looked into the emergence of radio taxi market
in India and the distinctive features which radio taxis have with respect
to the traditional taxis. Before the DG, OP contended that it is a
technology company which connects potential customers and the drivers
through technology platform. It referred itself as an aggregator of taxis
and claimed that it is not in the business of radio taxis, like other players
such as Fast Track, Mega Cabs, Easy Cabs and Meru which have
obtained license from the respective transport authorities as radio taxi
operators. The DG analyzed various business models prevailing in the

Case No. 6 & 74 of 2015 Page 4 of 48

 radio taxi service industry, i.e. assetowned model, aggregator model
and hybrid model. The DG observed that while the radio taxis are owned
by the radio taxi service providers under the asset-owned model; in the
aggregators model, the operator does not own the radio cabs but only
acts as an aggregator (platform) that connects the drivers with the
prospective consumers. OP operates under the aggregators model and
one of its competitors, working on the same business model, in the
relevant market, is Uber. The DG also observed that there are certain
players who operate as a mix of both these models like Mega and
Meru (one of the Informants).

9. Despite OPs argument that it is only a technology software service

provider, which is primarily engaged in providing internet and mobile
technology platform for taxi hiring by commuters and is thus different
from radio taxi companies operating under asset-owned model, the DG
opined that taxis operating under these different business models are
functionally substitutable.

10. OP also submitted, before the DG, that in Bengaluru, the radio taxis
running on OPs platform compete with equally other commercial modes
of transport and accordingly, the relevant market should be defined
broadly to capture all such alternative modes of transport as well as they
pose an effective competitive constraint on OPs taxis. The DG,
however, found no merit in this contention and observed that the key
features of radio taxi, viz. point-to-point pick and drop facility, ease of
booking, pre-booking facility, round the clock availability even at
obscure places, predictability in terms of expected waiting and journey
time, reliability in terms of GPS/GPRS tracking, ease of payment,
quality vehicles, professional and well trained drivers, feedback facility
etc. makes them, i.e. radio taxi services, different from other modes of
transport. Highlighting the distinctions between radio taxis and all these
other modes of transport, the DG delineated the relevant market as

Case No. 6 & 74 of 2015 Page 5 of 48

 market for radio taxi services. With regard to the geographic market,
the DG observed that transport is a State subject under the Constitution
and therefore, the radio taxi/city taxi schemes formulated by the State
Governments/ Regional Transport Authorities (RTAs) differ from State/
to State and City to city. Thus, the regulatory conditions of competition
are homogenous only in a particular city like Bengaluru and distinct
from conditions prevailing in any other neighboring cities/states.
Further, the radio/local point-to-point taxi service is a highly localized
service from demand side and supply side perspective. Based on these
considerations, the DG delineated the relevant geographic market as the
city of Bengaluru.

11. The DG then analyzed the position of strength of OP in the relevant

market of market for services of radio taxi in Bengaluru to assess
whether it held a dominant position in the said market during June 2012
till September 2015 or not. The DG has based its analysis taking into
account the market shares of OP in comparison to the other radio taxi
operators on the basis of number of trips (both monthly and annually).
The DG also obtained information regarding the total fleet size and
active fleet size for different players in the relevant market for
assessment of dominance. However, these parameters were not found to
be appropriate indicators for assessment of market shares because there
are chances of one radio taxi getting registered on multiple platforms,
giving rise to the problem of multiple counting.

12. The DG, as such, considered it appropriate to measure the market shares
of all the players on the basis of number of trips/rides during the relevant
time period. On the basis of annual data (2012-13 to 2015-16), it was
observed that in terms of number of point to point trips, the market
shares of Meru, Mega Cabs, Easy Cabs and Karnataka State Tourism
Development Corporation (KSTDC) declined from 2012-13 to 2015-16.
The DG further observed that OP, which entered in the market in early

Case No. 6 & 74 of 2015 Page 6 of 48

 2011, had a market share of only 5-6% in the year 2012-13 which
increased to 61-62% in the year 2015-16 (till September 2015). It was
also noted that Uber, which started its operation in August 2013, had a
negligible share of less than 1-2% in 2013-14 which increased to 9-10%
in the year 2014-15. However, in the first six months of 2015-16 (till
September 2015), the DG noticed that while OPs market share
increased from marginally by 2% to 3%, Ubers share increased at a
faster rate i.e. by about 20%-22%.

13. Further, based on the monthly data (June 2012- September 2015) for
point to point services, the DG observed that whereas till August 2014,
Meru (one of the Informants) maintained the lead position, while from
September 2014 onwards, OP took the lead position amongst other radio
taxi companies. It was further noted that from March 2015 onwards,
Uber has maintained the second position. The DG also noted that from
January to September 2015, Ubers trip size registered growth of nearly
1200%, while OPs growth has been about 63% during the same period.

14. The DG has opined that for a player to have a dominant position in the
relevant market, it should be able to hold its market share for a
reasonable period of time. In the present case, OPs market share has
started declining as Uber entered the relevant market almost three years
after OPs entry.

15. The DG also took into account the findings made by Raghavan
Committee Report to observe that factors other than market share are
relevant to assess whether a given entity is dominant in the relevant
market or not.

Findings of Raghavan Committee Report

[] even a firm with low market share of just 20% with the
remaining 80% diffusedly held by a large number of

Case No. 6 & 74 of 2015 Page 7 of 48

 competitors may be in position to abuse its dominance, while a
firm with say 60% market share with the remaining 40% held
by a competitor may not be in a position to abuse its
dominance because of the key rivalry in the market. Specifying
a threshold or an arithmetical figure for defining dominance
may either allow real offenders to escape or result in
unnecessary litigation. Hence in a dynamic changing economic
environment, a static arithmetical figure to define dominance
will be an aberration [..]
[.] As already stated there is no single objective market
share criteria that can be blindly used as a test of dominance.
[.]

16. Furthermore, the DG took into account the European case laws (AKZO
Chemie BV vs European Commission, United Brands Case and
Hoffman-La Roche Case) to establish that though market share is
important, it is only one of the indicators from which the existence of a
dominant position may be inferred. There can be factors other than
market shares which play a vital role in assessing dominance of an
enterprise.

17. Accordingly, the DG took into account various factors enumerated under
Section 19(4) of the Act to assess the relative strength of OP. With
regard to the financial resources, the DG viewed OP ahead of its rivals,
being able to attract additional funding of Rs. 2,059.01/- crore by the end
of 30th September 2015, in addition to the investment of Rs. 3445.50/-
crore by the end of 2014-15, raising its total resources to Rs. 5504.81/-
crore. Other competitors like Meru and Mega Cabs were found to be
lagging much behind OP in this respect. It was further noted that Uber
has been able to raise its funding from Rs. 2.39/- crore as at to Rs.
161.78/- crore by the end of 2014-15. Interestingly, DG found that Uber
Inc., which is the parent company for Uber had a total capital investment

Case No. 6 & 74 of 2015 Page 8 of 48

 of about 15 to 20 times of OPs financial resources.

18. The DG, thus, noted that backed by its marketing technology and
logistics and financial support, Uber was able to successfully counter the
pricing strategy of OP, and being able to sustain losses, which restrained
OP from exercising market power in the relevant market. This was
evident from the fact that similar strategy was followed by Uber and as a
result, the gap in market share between OP and Uber narrowed down
from 69% in January 2015 to 22% by September 2015.

19. The DG also noted that in a scenario where the cab drivers have an
option of getting themselves registered onto another platform and
customers have an option of booking taxis from another platform, it is
difficult for an incumbent to exercise market power. Thus, neither the
customers nor the drivers are locked up in any manner. The DG further
stated that, in the present case, competitive constraints can also be
exerted by the customers/commuters in the form of countervailing buyer
power, as they have an option of booking taxis from other platforms like
Uber.

20. It was further noted that the potential impact of expansion of the existing
competitors or entry of potential competitors is also relevant while
assessing the competitive constraints on an enterprise. The DG noted
that the regulatory requirement in the present case did not constitute a
barrier for a new entrant. Further, the key feature of the aggregator
model is that the company does not have to invest capital on purchase of
cabs and therefore, the capital investment as an entry barrier is not high
enough to deter new entrants.

21. In its analysis, the DG also pointed out the network externalities
prevalent in two sided markets, observing that the aggregators model of
radio taxi service can only be profitable when the service/platform
provider has a sizeable number of customers availing the service and

Case No. 6 & 74 of 2015 Page 9 of 48

 sizeable number of cabs/drivers at various locations within the city
providing the services to meet the demand. The demand for taxis
depends on the tariff structure and quick availability of the taxis while
the supply of taxis depends upon the incentive structure and minimum
assured bookings.

22. One of the Informants, Meru, argued before the DG that OPs market
share has been over 50% consistently for a period of two years, and
therefore, it was dominant in the relevant market. However, the DG
noted that after achieving a growth rate of 75-76% in January 2015,
OPs share started to decline and came down to 58-59% by September
2015. Further, with the steady increase in Ubers market share from 6-
7% in January 2015 to 36-37% in September 2015, it could not be said
whether OP would be in a position to hold on to its market share for a
sustainable period for assessment of dominance in the relevant market.

23. Based on the foregoing analysis, the DG concluded that OP is not in a

dominant position in the relevant market to act, to an appreciable extent,
independently of its competitors and customers.

24. The main allegation of abuse in the present case was below-cost pricing
strategy by OP. The DG noted that in the absence of dominance of an
entity, the question of abuse would not arise. However, the DG analyzed
the pricing strategy of OP vis--vis its competitors and rather found Uber
to be a more aggressive player, in terms of below-cost pricing, in the
relevant market than the OP. Thus, DG opined that both OP and Uber
have adopted below-cost pricing strategy. However, since the scheme
of the Act only attracts the provisions of Section 4 when an incumbent is
found to be dominant, the DG stated that OP can be said to have
indulged in abuse by way of predatory pricing, only if it is found to be
dominant in the relevant market. Since OP was not found to be
dominant, the DG concluded that OP did not contravene the provisions
of Section 4 of the Act.

Case No. 6 & 74 of 2015 Page 10 of 48

Replies/ objections/ submissions of the Parties to the Investigation Report

Replies/ objections/ submissions of the Informants (FastTrack and Meru)

25. The Informants have filed separate responses to the investigation report
and were represented by different counsels at the time of oral hearings.
However, considering the similarity in their arguments, their responses
are jointly summarized hereunder unless specified otherwise. The
Informants have stated that though the evidence on record indicate
contravention of the provisions of Section 4 of the Act by the OP, the
conclusion in the investigation report has been stated otherwise.

26. The Informants have vehemently argued that the finding of the
investigation report regarding (non) dominance of OP is solely based on
the fact that Uber is present in the relevant market and is engaging in a
similar conduct as OP.

27. The Informants have agreed with the delineation of the relevant market
proposed by the DG. It is submitted that the radio taxi market forms a
separate relevant market in itself and can be distinguished from other
modes of transport.

28. The argument of OP that it is merely a technology company has been

challenged by the Informant. The Informants contend that the services
offered by OP are that of a radio taxi provider and the services being
consumed by the users of OP are that of radio taxis. They are also
soliciting their business as radio taxi providers through advertisements.
It is stated that OP enters into contracts with the taxi owners and uses its
brand image, platform to offer the services of taxis to the customers. It
has also been submitted that OP determines the tariffs payable by the
consumers for the taxi services and has control over all aspects of taxi
services. Hence, it is submitted that the argument that it is merely a

Case No. 6 & 74 of 2015 Page 11 of 48

 platform which is connecting customers and drivers cannot be accepted.

29. As regards dominance, it has been submitted that OP is a self-

proclaimed dominant player in the market. There have been public
statements made by the promoters of OP that it has a high market share
in the radio taxi industry in India.

30. The Informants have relied upon various factors enumerated under
Section 19(4) of the Act to show that OP is dominant. In this regard, it is
submitted that market share of more than 50% of an entity creates a
presumption of dominance. The market share of OP is more than the
aggregate of all the competitors put together for the years 2014-15 and
2015-16. Further, the market share of OP on the basis of active fleet was
60-61% in 2015-16 as against the market shares of Meru (4-5%), Mega
Cabs (1-2%), Uber (33-34%). With regard to the absolute number of
OPs trips, it is stated that the number of trips by OP has increased from
46,571 in September, 2013 to 2,318,175 in September, 2015. HHI index
has also been relied upon to argue that in the present case, the
concentration of OP itself is over 3600 and that of the market is over
4700. This, as per the Informants, shows that OP is dominant in a highly
concentrated market.

31. The Informant has contested the findings of the DG with regard to the
fact that since the market share of OP has been declining from February,
2015 to September, 2015, OP is not dominant. As per the Informant, the
dip in the market share does not vitiate the fact that OP is dominant in
the market. To substantiate its claim, the Informant has placed reliance
on various case laws including the General Courts decision in Astra
Zeneca v. Commission (Case T-321/05) and British Airways plc v.
Commission (Case T-219/99) case, wherein it was noted that decline in
the market share cannot be taken as an evidence that the entity is not
dominant.

Case No. 6 & 74 of 2015 Page 12 of 48

32. Besides OPs high market share, the Informants have also alleged high
entry barriers in the relevant market. It is stated that radio taxi market is
characterized by network effects which can act as an entry barrier. Since
it would take considerable time for a new player to capture a good
position and compete against an established player, the network effects
result in high entry barriers for potential entrants. The Informants have
placed reliance on international case laws where network effects were
shown to be posing a significant barrier to entry viz, European
Commission decision in Microsoft case (COMP/C-3/37.792) and District
Court of New Yorks decision in MasterCard/Visa case. It is claimed
that OP was the first player to build a strong network with the help of its
predatory model by virtue of which, it tipped the market in its favour,
which has given it a strong edge in the market over its competitors.

33. The Informants have submitted that OP was paying an incentive of Rs.
302 per trip in January, 2015. The high incentives paid by OP hooked on
more number of drivers to its platform. Even post January 2015, the
number of trips of OP were high and there was no decrease in the
incentives paid by OP to its drivers. The ultimate effect of OP continuing
to pay such high incentives even post January, locked in a lot of drivers
and increased its customer base as well. Further, the agreement that OP
enters into with its drivers contains an exclusivity clause and thus, locks
in a lot of drivers. It is alleged that other operators in this industry do not
enter into agreements containing such clauses which further proves that
OP is in a dominant position.

34. The Informant has pointed out high capital requirement in the radio taxi
market as an entry barrier. It is submitted that OP has been able to
practice predatory pricing because of huge funding which acts as an
entry barrier for the small and medium enterprises which cannot enter
the market because of inadequate funds. This is also stated to be a barrier
for expansion for the existing players. However, the DG has wrongly

Case No. 6 & 74 of 2015 Page 13 of 48

 concluded that there is no entry barrier in the radio taxi market as Uber
was able to expand in the said market, when OP was already existing
and had a high market share. The Informants have also mentioned that
the first mover advantage is not limited to having a large presence in the
market, but also relates to the fact that most of the credible investors,
who have invested in OP, are not likely to invest in other companies.

35. Another argument put forth by the Informants is that the exclusionary
conduct of OP itself demonstrates the economic strength enjoyed by it.
The Informant has relied upon the European Commissions case of
United Brands v. Commission, to infer that the conduct of an alleged
dominant firm could be taken into account in deciding whether it is
dominant or not. The Commissions order in the MCX Stock Exchange
Ltd v. NSE and other has also been relied upon in this regard, wherein it
was noted that levying zero transaction fee by NSE and incurring huge
losses in the process demonstrated that NSE was in a dominant position.
Thereafter, zero pricing was held to be an abuse of dominant position by
NSE. The Informants have also relied upon the Commissions order in
M/s HT Media v. Super Cassettes Industries Limited to substantiate the
same.

36. The Informants have submitted data which, as per them, shows that OP
has been able to increase its market share only because of its predation
strategy backed by multiple rounds of funding. The Informants have also
placed reliance on the judgement passed by Competition Appellate
Tribunal (COMPAT) in the case of Meru Travel Solutions Private
Limited v. Competition Commission of India & Others, where the
COMPAT overturned the order passed by CCI under Section 26(2) of
the Act. It was noted in the said judgement that 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. [....].

Case No. 6 & 74 of 2015 Page 14 of 48

37. With regard to the countervailing buyer power, another relevant factor to
be considered under Section 19(4) of the Act, it is submitted that the
large network of OP acts as a sufficient detriment of any countervailing
buyer power. The essential requirement to prove that there is sufficient
countervailing buyer power, it is necessary to show that
buyers/consumers have the power to negotiate and to substantially affect
the service provider by shifting to a competing network. Both the
essential requirements are missing in the present case because of the
large network created by OP. Thus, DGs conclusion that there is enough
countervailing buyer power in the radio taxi market has been challenged
by the Informants.

38. The Informants have also challenged OPs assertion and DGs
observation that the radio taxi market is a dynamic market which is
going through a phase of disruptive innovation and because the market is
at its nascent stage, it will be very difficult to hold an entity as a
dominant entity. In this regard, it has been submitted by the Informants
that no disruptive innovation has been undertaken by OP.

39. As per the Informants, it is a fallacy that the pre-requisite of finding an

enterprise to be dominant is its ability to increase prices above
competitive levels. However, as per the EU guidelines, market power is
the ability to influence prices which would not only include the ability of
the firms to increase prices beyond competitive levels, but also their
ability to keep them suppressed over a longer period of time, thereby
adversely affecting its competitors in a market. Therefore, OP which has
built the network for itself and forced other competitors to follow its
model shows that it has market power.

40. According to the Informants, the DG has erroneously held OP to be not

dominant merely because of the existence of Uber in the relevant market.
It is argued that existence of another entity in the relevant market,
indulging in a similar conduct, does not preclude a finding on OPs

Case No. 6 & 74 of 2015 Page 15 of 48

 dominance. In the alternative, the Informants have averred that it is not
necessary that only one entity can be dominant in a particular relevant
market. There is a possibility of two entities exercising dominance at the
same time. In this regard, the Informants have claimed that the analysis
of the DG is pointing towards presence of more than one dominant
player in the relevant market. The DG has, in its report, admitted the
growth of both OP and Uber and also, that their growth is not the result
of any technological innovation or efficiency but the result of a practice
to charge substantially below the average variable cost. The Informants
have relied upon the observations of the Canadian Competition Tribunal,
which noted that both MasterCard and Visa can individually possess
market power in the relevant market. It has thus been submitted that a
conclusion of simultaneous dominance of OP and Uber is not
incompatible with the provisions of the Act.

41. The first Informant, Fast Track, has submitted that OP and Uber, through
their below cost pricing, have pushed the Informant to a situation of
virtual nonexistence. The second Informant, Meru, on the other hand,
has claimed that established players like itself and Mega have lost
market shares and are on the verge of elimination. Thus, DGs
observation OP is not dominant as hat none of the players are ousted
from the market has been challenged by the Informant, stating that
elimination is not a necessary condition for ascertaining dominance and
abuse.

42. The decision of the European Court of Justice in the case of AKZO
Chemie has also been relied upon by the Informants to infer that any
price below the average variable cost by means of which a dominant
enterprise seeks to eliminate a competitor must be regarded as an
abusive practice since there is no conceivable economic purpose for
charging a price below average variable cost by an enterprise other than
elimination of a competitor. Since OP has charged prices below average

Case No. 6 & 74 of 2015 Page 16 of 48

 variable cost, as has been demonstrated by the DG, it is sufficient to
imply that it has indulged in an anti-competitive conduct.

43. As per the Informants, the defence of below cost pricing in a nascent
market is untenable. It has been argued by OP that below cost pricing is
a result of promotions, achieving economies of scale and expanding
network. In this regard, it is submitted that market expanding efficiencies
are generally not accepted as a defence in predation cases. Further, it is
unlikely that any efficiency pursuant to predatory price would outweigh
its anti-competitive effects. The Informant has relied upon the European
Commissions decision in Wanadoo Interactive case (COMP/38.233)
(hereinafter referred to as Wanadoo Interactive case), in which it was
noted that economies of scale which are enjoyed by any enterprise by
virtue of such pricing cannot exempt the liability of such undertaking.

44. The Commission in its prima facie order passed, under Section 26(1) of
the Act, noted that OP has contravened the provisions of Sections 3 or 4
of the Act. However, the DG has failed to come to a conclusion on
Section 3 of the Act. In this regard, it is submitted that the agreements
entered into between OP and its drivers have caused an appreciable
adverse effect on competition in India. Therefore, the DG should have
carried out the investigation with respect to Section 3 of the Act.

45. Fast Track, the Informant in Case No. 6 of 2015, has stated that the
information was filed on 16th February, 2015 and was based on the
conduct of OP prior to and as of January, 2015. However, the DG has
investigated OPs conduct till September, 2015. This is argued to be an
over reach of its powers as prescribed under the Act and the General
Regulations.

Replies/ objections/ submissions of OP

46. OP endorsed the findings of the DG with regard to it not being
dominant, though the delineation of the relevant market has been

Case No. 6 & 74 of 2015 Page 17 of 48

 challenged by it. Further, OP has also challenged the observations and
findings of the DG in relation to the nature of services provided by it and
its pricing below Average Variable Cost (AVC).

47. OP submitted that it is only a technology software service provider

engaged in providing internet and mobile technology platform for taxi-
hailing by the commuters and the finding of the DG that it is a radio taxi
service provider is fundamentally flawed and not an accurate
representation of the service being provided by it.

48. OP claims to have created a software platform in the form of a mobile

application i.e., a portal that can be download by commuters as well as
licensed taxi drivers, on their respective mobile phones. Once the portal
is downloaded, it allows the commuters to register themselves, along
with allowing them a wide range of customisations such as, preferred
payment method, preferred type of cab, etc. In the case of licensed
drivers, the portal allows them to register themselves, after a thorough
screening process involving a valid commercial drivers license, a Know
Your Customer (KYC) complaint bank account, a car with a taxi
permit, a background check on the character of the driver, etc. It is
claimed that OP does not employ drivers (they are self-employed) and
does not own any cars. It is stated that the portal aggregates a wide range
of choices for the commuters and driver and once the commuter makes
his choice and the driver accepts the ride, the driver would provide the
end-to-end service of picking up the commuter from the preferred pick-
up point and dropping the commuter to the preferred destination. At the
end of the ride, the portal provides an opportunity for the driver as well
as the commuter to rate each other respectively.

49. Highlighting the above working model, OP submitted that it merely acts
as a facilitator, an intermediary which connects two ends of the supply
chain, the taxi service provider and a commuter. There is ample freedom
of choice on both the sides of the supply chain, with the Portal only

Case No. 6 & 74 of 2015 Page 18 of 48

 playing an intermediary role of connecting a commuter with a driver.
Further, OP relied on view taken by certain other jurisdictions to submit
that ride-sharing service operators namely Uber, Lyft, etc., have been
held to be digital platforms and not transportation companies.

50. Further, OP also relied upon the definition of information society

service under the Directive 98/34 of the European Union and contended
that it falls under that definition on numerous counts. Firstly, OPs
services are provided at a distance since the service is provided without
the driver and the commuter being simultaneously present. Secondly, the
services are clearly provided by electronic means, i.e., a mobile
software application. Thirdly, OPs services are provided at the
individual request of a recipient of services to both commuters and
drivers, which request the service by connecting to the portal. Finally,
the services are service normally provided for remuneration. While
OPs services can be termed as ride sharing or app hailing, there is a
clear pecuniary element to the transaction in that the driver expects a
payment for transporting the commuter. It is claimed that OP can be
described as an online platform in that it connects producers (in this
case, drivers) with consumers (in this case, commuters) and facilitates
their interactions and exchanges. In other words, OP does not create
value by performing transport services, but by enabling direct
interactions between two distinct categories of users.

51. It was also urged that the main purpose of OP is not to provide a
transport service but an intermediation service connecting drivers with
commuters. Further, OP is not directly involved in the physical act of
moving persons or goods from one place to another.

52. Drawing strength from the above analysis, OP argued that it is being
categorized as radio taxi service provider for various purposes such as,
service tax, STAs, etc., merely due to the lacuna of legislation in India
for such advanced technologies and such categorization is not a fair

Case No. 6 & 74 of 2015 Page 19 of 48

 representation of the actual services provided by it.

53. OP further submitted that it is functioning in a two-sided market that

brings together two different user groups providing network benefits to
each other. The peculiarity of a two-sided market is that an intermediary
is engaged in the activity of connecting two different and distinct ends of
the supply chain, by charging a fee or consideration for such a
connection. However, the intermediary is worthless and its utility is
nullified if one end of the supply chain stops using the intermediary.
Thus, the pricing structure must be balanced in a way to attract both
sides of the platform.

54. OP further submitted that though the DG has correctly concluded that it
is not dominant, the assessment based on market shares has not been
represented accurately. OP disagreed with the market share calculated by
the DG based on its active fleet size. OP submitted that on that parameter
of total active fleet, its market shares is merely (1.97%) in the city of
Bengaluru as opposed to wrongly computed figure of 60-61% by the
DG.

55. Further, OP also relied upon case laws of the Commission (Mr.
Ramakant Kini v. L.H. Hiranandani Hospital, M/s ESYS Information
Technologies Pvt. Ltd. v. Intel Corporation (Intel Inc) & Ors. etc.) to
contend that the market share of an entity is only one of the factors
which decides whether an enterprise is dominant or not, the same cannot
be conclusive proof of dominance.

56. Without prejudice, OP submitted that the market share of OP was not
sufficient enough to exercise market power and affect competitors or
consumers in the relevant market. OP also relied upon the DGs
observation of Uber being an effective competitor to OP, with greater
economic power, in the relevant market. Further, the dynamic nature of
the relevant market along with the volatility of market shares was

Case No. 6 & 74 of 2015 Page 20 of 48

 claimed to be sufficient to conclude that Uber exerted sufficient
competitive pressure on OP. OP also relied upon the Commissions
decision in MCX Stock Exchange Ltd v. NSE and other to profess that
position of strength is not some objective attribute that can be
measured along a prescribed mathematical index. Rather, what has to be
seen is whether a particular player in a relevant market has clear
comparative advantages in terms of financial resources, technical
capabilities, brand value etc. to be able to do things which would affect
its competitors who, in turn, would be unable to or would find it
extremely difficult to do so on a sustained basis. OP also stated that the
investigation report demonstrates that Uber was comparatively stronger
than OP, and was potentially capable of acquiring the market share of
OP in the event of OP operating independent of the market forces.

57. OP also challenged the methodology used by the DG to arrive at a

conclusion that OP has indulged in below Average Variable Cost (AVC)
pricing. It was reiterated that OP, being a technology software service
provider, connects two distinct user groups namely the taxi service
provider and the commuter. Thus, its revenue is based on a revenue
sharing model shared with the taxi service provider in terms of the
amount of commission. It is stated that the revenue sharing between the
taxi driver and OP varies between 95:5 (%) to 80:20 (%) depending
upon inter alia city and car category, with OP earning positive (5% to
20% of the Gross Merchandise Value (GMV)) revenue per ride. Since
the variable cost for OP (i.e. payment to the drivers, 80% to 95%) is
lower than the pricing by 20% to 5%, therefore the pricing at all times, is
more than the AVC. This argument of OP was based on the proposition
that customer discounts, bonus and driver incentives are not variable
costs. OP claimed customer discounts, bonus and driver incentive are
budgeted fixed costs and that its low Effective Net Take Rate (ENTR)
was not due to below cost pricing. As such, OP has not indulged in
predatory pricing by pricing its services below AVC. OP also submitted

Case No. 6 & 74 of 2015 Page 21 of 48

 that it has been subject to sufficient competitive constraint from Uber in
the relevant market.

58. Based on these submissions, OP prayed that DGs finding of it not being
dominant in the relevant market be upheld and the DGs finding with
regard to nature of services offered by OP and its pricing be dismissed.

Observations and Findings of the Commission

59. The Commission has examined the material available on record,

including the information, investigation report, written submissions filed
by the parties, and heard the oral submissions made by their respective
learned counsels on 15th February 2017 and 1st March 2017.

60. The primary allegation of the Informants in this case is regarding abuse
of dominant position by OP, by way of predatory pricing, in the relevant
market, in contravention of Section 4(2)(a)(ii) of the Act. This, as per the
Informants, has distorted fair competition in the market, resulted in
business loss to equally efficient but small players like the Informants
and has foreclosed market to potential entrants. For examining the
allegations pertaining to Section 4 of the Act, delineation of the relevant
market is essential to ascertain dominance and analyzing the alleged
abusive conduct of OP in the present case.

61. The Informants have also raised an objection as to the DG not

investigating the allegation of exclusivity condition imposed upon the
drivers by OP under Section 3(4) of the Act. In this regard, the
Commission notes that the prima facie order of the Commission directed
the DG to investigate with respect to allegations under Section 4 of the
Act. Moreover, while investigating under Section 4 of the Act, the DG
found that the drivers are allowed to opt for another platform and they
were not restricted because of their association with OP. Thus, the
allegation of the Informant is not established. Just because this fact was

Case No. 6 & 74 of 2015 Page 22 of 48

 not investigated specifically under Section 3(4) of the Act, it will not
alter the fact that there was no exclusivity condition imposed upon the
drivers. This point thus does not require any further deliberation.

62. The Informants have proposed the delineation of relevant product market
on the same lines as done by the DG i.e. market for radio taxi services.
The OP, however, has argued at length that it is only a technology
company and cannot be termed as a radio taxi service provider. The
Commission has considered the submissions made by OP but finds them
to be implausible for the reasons provided hereinafter. The Commission
is aware that OP acts as a platform and operates in the radio taxi service
market as an aggregator. It is also well acknowledged that it does not
own any of the taxis registered on its network and only acts as an
intermediary. However, none of these factors supports the argument of
OP that it is not part of the same relevant market as that of other players
operating under the asset-owned model. By merely adopting a new
business model of operation for providing the same goods/services, the
incumbent cannot qualify for a distinct relevant product market.

63. While defining the relevant product market under Section 2(t) of the Act,
all those products or services which are regarded as interchangeable or
substitutable by the consumer, by reason of characteristics of the
products or services, their prices and intended use, need to be included in
the realm of relevant product market. The purpose of defining the market
is to encompass all those products or services which are considered to be
the effective substitutes for the product or service in question, by the
consumers. It is observed that OP has, undoubtedly, replaced the
ownership/asset based model in the radio taxi service business and is
operating under the platform based model. It outsources the bookings to
the drivers/vehicle owners who are attached to its platform, instead of
providing the same by taxis owned by it. However, this fact alone cannot
make it a distinct category of service provider when the basic nature of

Case No. 6 & 74 of 2015 Page 23 of 48

 service provided by it is same as that provided by other players operating
under the traditional business model.

64. In this regard, the Commission agrees with the contentions of the
Informants that the services offered by OP are that of a radio taxi
provider and the services being consumed by the users of OP are that of
the radio taxis. OP enters into contracts with taxi owners/drivers and
uses its brand image, platform to offer these services to the customers.
The tariff payable by the consumers for the taxi services rendered is
determined by OP, which has control over all aspects of taxi services.
Moreover, the gross billing amount received from customers is shown as
revenue in OPs books of accounts, instead of commission. Also, the
amount paid/payable to the drivers is a share of revenue from the amount
so received from the passengers/customers and is shown as the fleet
operators cost. It is evident that OP is providing the same functional
product which the players operating under the asset-owned model are
providing. This is also clear from the fact that OPs Article of
Association, inter alia, also refer to Uber, Meru Cabs, and
TaxiForSure (subsequently acquired by it) as its competitors. For the
end consumer, who is booking a taxi ride through OPs platform,
identity of the driver who owns the taxi is inconsequential. The
consumer perceives OP as a service provider of radio taxi service whose
service is substitutable with the services provided by other radio taxi
service operators, irrespective of the business model followed by them.
Thus, substitutability, in the radio taxi industry, is between the operators
and not between the drivers.

65. The Commission has considered the regulatory framework along with
the advisory issued by the Ministry of Road Transport and Highways,
Govt. of India in October 2015 and subsequent amendments made by
various state transport authorities which indicate that the aggregators are
included within the scope of radio taxi schemes. Specifically, pursuant to

Case No. 6 & 74 of 2015 Page 24 of 48

 an amendment in the Delhis City Taxi Scheme 2015, aggregators are
included in the same category as that of radio taxi service providers. All
the requirements under the said scheme are equally applicable to
aggregators such as OP. Although, we are dealing with a different
geographic market, it can be safely inferred that app (application) based
aggregators are also covered under the category of radio taxi service
providers. Similarly, the Government of Karnatakas City Taxi Service
Scheme 1998 mandates that each motor cab is required to be connected
with radio telephone/GPRS/GPS/company/company operated control
room having facility to monitor the movements of the cabs. In view of
the existence of regulatory framework in various States in India
specifically stipulating the inclusion of aggregators under the category of
radio taxis, it can be inferred that services provided by OP are that of
radio taxis. Accordingly, the Commission finds no merit in the argument
of OP that it is only a technology software service provider and not a
radio taxi service provider.

66. Based on these reasons, the Commission is of the view that the relevant
product market in the instant case is market for radio taxi services.

67. With regard to the relevant geographic market, the Commission agrees
with observations made by the DG that transport is classified as a state
subject under the Constitution of India, therefore the regulatory
conditions governing competition are homogeneous only across a
particular city/State. Further, the consumers availing point-to-point radio
taxi service in a city would not avail the radio taxis operating in another
city/State. The point-to-point taxi service is a localized service that is
offered with the intent of meeting the local travel demand of consumer
within a particular city/State. From the supply side also, it would not be
feasible for a taxi service provider to generally offer taxi services in
another city for local point-to-point travel due to factors such as cost,
distance and regulatory barriers. Although in some cities/states, taxi

Case No. 6 & 74 of 2015 Page 25 of 48

 operators might provide services between two neighboring cities/states,
no such fact was highlighted by the Informants, OP or DG the present
case. Thus, in the absence of any evidence to the contrary, the relevant
geographic market would be the city of Bengaluru.

68. Accordingly, the relevant market in the present case would be the
market for radio taxi services in Bengaluru.

69. In this relevant market, OP is alleged to be engaging in abusive conduct

by way of predatory pricing within the meaning of Section 4 of the Act.
The discounts/incentives offered by OP to the commuters/drivers are
alleged to be anti-competitive, as the same are stated to be backed by
deep pockets rather than an efficient pricing model of OP.

70. The scheme of the Act is such that provisions of Section 4 are only
attracted when the entity under scrutiny holds a dominant position in the
relevant market. Thus, whether OP holds a dominant position in the
relevant market for radio taxi services in Bengaluru is a key issue for
determination.

71. The Act explains dominant position as a position of economic strength

enjoyed by the enterprise in the relevant market, which enables it to
operate independently of competitive forces prevailing in the relevant
market or affect its competitor or consumer or the relevant market in its
favour. Such ability of the enterprise to behave independently of
competitive forces needs to be assessed in light of all relevant
circumstances and the factors enlisted under Section 19(4) of the Act. A
complete and correct assessment warrants comprehensive examination
of the competitive conditions of the market, taking into account the
inherent characteristics of the market, the market structure, nature of
competition, competitive strategies adopted by the market participants
and all such factors that strengthen or weaken the market position of the
enterprise under scrutiny. Thus, the assessment of a case would be

Case No. 6 & 74 of 2015 Page 26 of 48

 unique to its own facts and market under consideration.

72. The market in the instant case is that of radio taxi services in Bengaluru.
As per the investigation report, radio taxis got introduced in the city of
Bengaluru in the year 2008 when Meru launched its services.
Subsequently, the market saw the entry of new players like Mega Cabs,
Easy Cabs and KSTDC. All these initial players were operating under an
asset-owned model, wherein either they owned the vehicles or had third
party owned vehicles exclusively attached to them. The mode of booking
of taxis was via telephone calls to customer care or online through the
respective website of the radio taxi operator.

73. The entry of OP into the relevant market, in the year 2011, marked a
shift in two key dimensions of the radio taxi market in Bengaluru. First,
the market witnessed the emergence of platform-based model, which
connected the riders with driver-owned taxis, thus obviating the need for
capital investment in acquiring and maintaining an exclusive fleet as
required in the then prevalent asset-owned model. Second, it capitalized
on the widespread use and adoption of internet and smartphone
technology which facilitated the matchmaking between the drivers and
commuters instantaneously in real time through a software application
(App) designed by OP and accessed by the riders/commuter on one
side and drivers on the other side. The App takes a request for a ride
from the prospective rider, search for the available (nearby) taxis on its
platform, makes a match and puts the driver and the rider in contact with
each other. An algorithm then sets the price and the revenue is shared
between the driver and OP. This platform-based model competed with
the labour intensive system of matching taxi drivers with riders through
telephones and dispatch centers/websites.

74. Leveraging technology, the new model reduced transaction costs

associated with matching dispersed drivers and riders which also meant
lower search cost for riders and drivers. The use of new technology

Case No. 6 & 74 of 2015 Page 27 of 48

 changed the nature of commercial transactions enabling OP to
appropriate the untapped demand by reaching markets that they would
not otherwise have reached. The platform facilitated transactions that
search and transaction costs would otherwise have prevented. It is also
pertinent to note that being the early adopter of the disruptive
technology, OP left other competitors in the market in the position of
followers. Thus, the entry of OP was a potential disruptive incursion into
existing markets, thereby resulting in a shift of commuters availing
transport services from other modes of transportation (not just from the
existing radio taxis) to the App based radio taxis, which is evidenced by
the manifold growth in the market for radio taxis that ensued. As
apparent from the figures available in the investigation report, the market
has seen a growth of nearly 1900% in terms of number of trips between
June 2012 and September 2015. In a span of one year between
September 2014 and September 2015, in terms of number of trips, the
market in Bengaluru witnessed a growth of about 555%. Thus, though
the operators under the platform-based model provided the same
product/service (taxi services), the technology enabled them to expand
the market at both ends (i.e. the consumer and driver base) immensely. It
is against this backdrop that the market position of OP need to be
evaluated.

75. The Informants, among other things, have delved into the issue of OPs
market share in the relevant market and its interpretation in the context
of assessment of dominance at great length. The Informants have
repeatedly hammered the argument that OP held a high market share in
the relevant market throughout the period of investigation and is, thus,
dominant. It is also submitted that a market share of more than 50% of
an entity creates a presumption of dominance.

76. Market shares have been computed by the DG in terms of fleet size,
active fleet size and number of trips, based on yearly and monthly data

Case No. 6 & 74 of 2015 Page 28 of 48

 collected from the players active in the relevant market. The DG has
evaluated the yearly market shares for the years 2012-13 to 2015-16 (till
September 2015) and the monthly market shares from June 2012 to
September 2015.

77. Before delving into the discussion on market shares based on the data
collected by the DG, the Commission notes that Fast Track, Informant in
Case No. 6 of 2015, has objected to the period of investigation being
stretched to September 2015, when the information was filed by it in
January 2015. It has been argued that the DG ought to have restricted the
period of investigation up to January 2015. The Commission finds no
merit in this objection. The proceedings before the Commission are in
rem, not in personam. While proceedings in personam are done or
directed with reference to a specific person, proceedings in rem are with
reference to no specific person, and consequently with reference to the
whole world. In the present matter, the DG was initially tasked with
investigating Case No. 6 of 2015. Subsequently, information in Case No.
74 of 2015 was filed which pertained to the same relevant market with
similar allegations against the OP. Therefore, the investigation in the
subsequent case (Case No 74 of 2015) was clubbed with the information
filed by Fast Track and the DG was directed by the Commission, vide
order dated 30th September 2015, to investigate both the cases
simultaneously. Though the allegations highlighted in the information
serve as a starting point for investigation, the same does not determine
its scope in entirety. Moreover, the purpose of investigation in the said
markets is not limited to visualizing the static nature of competition, but
to have an overall examination of the dynamic aspects. Thus, the
Commission finds no infirmity in the period of investigation selected by
the DG as the scope of investigation in clubbed cases has to be seen
collectively. Having disposed of this objection, the Commission will
now assess whether OP held a dominant position in the relevant market,
by taking into account the factors enshrined under Section 19(4) of the

Case No. 6 & 74 of 2015 Page 29 of 48

 Act.

78. As per the investigation report, in terms of annual active fleet size,
where active fleet size is defined by the number of taxis which accept at
least one booking from the taxi service provider in a day, OPs market
share has seen approximately six-fold increase from 2012-13 to 2015-16.
The monthly data on the same parameter shows largely an increasing
trend in the OPs share during June 2012 till January 2015. Thereafter,
OPs share of active fleet has registered a gradual decline in the relevant
market. However, as observed by the DG, the active fleet size of players
may not give a true picture of the market shares of each player owing to
the problem of double counting, thereby necessitating the requirement of
another parameter for computing market shares for assessing the
comparative strength of players in the market. Resultantly, a better
measure, based on the data available on record, is the number of
trips/rides by a taxi operator in a given period of time.

79. It is observed that in terms of annual number of trips, OPs market share
increased from a miniscule 5-6% in 2012-13 to 59-60% in 2014-15 and
to 61-62% in 2015-16. In terms of number of monthly trips, OPs share
witnessed a rising trend from June 2012 (0-1%) to January 2015 (75-
76%) and, thereafter, a gradual decline. However, the Commission is of
the view that market position/strength is a relative concept. Thus, to
assess the strength of OP in terms of market share, its competitors
market shares in the relevant market must also be examined in order to
arrive at a meaningful conclusion.

80. The data collected by the DG indicates that Meru was the market leader
in 2012-13 and 2013-14 with an annual market share of 59-60% and 50-
51% respectively in terms of number of trips. However, it lost its market
position in the subsequent years with its share coming down to a
miniscule 6-7% in 2015-16. Likewise, Easy cabs, which was the second
largest player in 2012-13, lost its share drastically to have only a

Case No. 6 & 74 of 2015 Page 30 of 48

 negligible market presence in 2015-16. On the other hand, Uber, which
entered the relevant market in 2013-14, expanded its network rapidly to
account for nearly one third of the active fleet in the relevant market in
2015-16. In terms of annual number of trips, its share increased from 1-
2% in 2013-14 to 30-31% in 2015-16.

81. On perusal of the market shares of OP and its competitors on the basis of
annual/monthly number of trips in the relevant market during the period
of investigation, two key observations are discernible. First, the
incumbents such as Meru, Mega Cabs, Easy Cabs etc. have witnessed a
decline in their market shares during the period of investigation, in terms
of number of trips. However, for a considerable period, till August 2014,
Meru held the highest market share. Moreover, barring Easy Cabs, all
the other incumbents saw an increase in their installed base in terms of
absolute number of trips from 2012-13 to 2014-15. In the new market
dynamics, the incumbents were left catching up with a new entrant
armed with a new technology which allowed it to arrogate to itself a
large unmet demand, resulting in the growth of OPs market share
during the same period. The emerging pattern indicates that the new
additions to the market, i.e. the new taxis and the new riders chiefly
opted for OP instead of the incumbents. Thus, the erosion in their market
shares is more attributable to the expansion of consumer base in the
market than them being deprived of the demand which they were serving
before. This is evident from the exponential growth (around 1900%) in
the number of trips in the relevant market during June 2012 to
September 2015.

82. Second, notwithstanding the rapid growth in the market share of OP, a
sharp deceleration in its share is observed in 2015-16, in terms of
number of trips. In terms of monthly data, a decline in the market share
of OP from February 2015 is evident. This decline was matched by a
commensurate increase in Ubers market share during the period.

Case No. 6 & 74 of 2015 Page 31 of 48

83. The Informants have argued that OP has maintained a healthy lead over
its competitors and maintained its market share in spite of the
competition posed by Uber. It is also averred that decline in market share
is not an indication of absence of dominance. Further, the market share
of OP is more than the aggregate of its next two competitors and that the
dip in the market share figures would make no difference to the analysis
of dominance. To substantiate these arguments, the Informants relied on
the judgements of General Courts in the European Commission in cases
such as Akzo case, United Brands v. Commission, Wanadoo Interactive,
British Airways, Astra Zeneca, Hoffman-la Roche etc., along with orders
of the Commission in HT Media v. Super Cassettes and MCX-SX.

84. It is a widely accepted view that high and durable market share can be
an important indicator for lack of competitive constraints and
accordingly for dominance. However, that does not imply that uniform
market share thresholds and a standard time-period to assess durability
of market share can be applied in the same manner to all
businesses/sectors. The variance across industries in terms of their
inherent characteristics, such as nature of competition, technology and
innovation dimensions, calls for a case-by-case assessment of market
share and its implications for dominance with reference to the totality of
the market dynamics and competitive strategies of firms. Thus, the
Informants proposition that market share of more than 50% leading to a
presumption of dominance cannot be accepted, especially when the
scheme of the Act does not specify any numerical threshold. Moreover,
market share is but one of the indicators enshrined in Section 19(4) of
the Act for assessing dominance, and the same cannot be seen in
isolation to give a conclusive finding. Particularly, in case of new
economy/hi-tech markets, high market shares, in the early years of
introduction of a new technology, may turn out to be ephemeral, as is
visible from the fluctuating trends in market shares across different
months in the relevant market throughout the period of investigation.

Case No. 6 & 74 of 2015 Page 32 of 48

85. The radio taxi market is a market for technology-enabled transportation
services. New technology and the new business model in the form of a
platform marketplace has had a transformative effect on how services are
provided in the sector and has altered the competitive landscape
concomitantly. It has been argued that OP held the highest market shares
from September 2014 onwards. In this regard, the Commission observes
that though OP held the highest market share from September 2014 to
September 2015 in the relevant market, any conclusions based only on
that period without referring to the market shares held by players during
the remaining period of investigation would be erroneous. The market
was in a state of flux throughout the period of investigation. Meru, one
of the Informants, held the highest market share during June 2012 till
August 2014. However, in the subsequent months its share started to
decline. In 2013, Uber, entered the relevant market in the year 2013 and
garnered a sizeable market share in just about two years time. In terms
of number of trips on monthly basis, its share increased from 0-1% in
August 2013 to 36-37% in September 2015. Further, Uber showed a
steady growth February 2015 onwards, with its share in terms of
monthly number of trips having increased from 6-7 % in January 2015 to
36-37% by September 2015. Its entry as well as steady growth during
the period of investigation shows that the market was evolving. While
Ubers entry, as the Informant has argued, did not dislodge OP during
the period of investigation, OPs declining market share post January
2015 reflects the competitive constraint posed by Uber and the fragility
of leadership position in a dynamic business environment, as discussed
earlier.

86. The Commission has also considered the case-laws relied upon by the
Informants. However, in each of those cases relied upon, for instance
United Brands v. Commission, British Airways, Michelin etc., the
European Commission was more influenced by the lack of competitive
constraints in the market. Notably, the competitors market shares in

Case No. 6 & 74 of 2015 Page 33 of 48

 such cases were significantly lower than the alleged dominant entity.
Rather, in some of these cases (e.g. Michelin, United Brands etc.), the
dominant entities market shares were multiple times those of its
competitors. Further, the AstraZenecas case relied upon by the
Informants, the European Commission was faced with the situation
where high market share, which was much higher than those of its
competitors, was held by AstraZeneca for many years in a row.

87. In this regard, the Commission notes that Section 19(4) of the Act
emphasizes on the size and importance of the competitors, rather than
the market shares of competitors. As a matter of record, in the present
case, OP does not have an edge over all its competitors in terms of the
size and resources. Interestingly, the investigation revealed that that
Uber Inc., which is the parent company for Uber had a total capital
investment of about 15 to 20 times of OPs financial resources.

88. Based on the foregoing observations, 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. The cases relied upon by the Informants,
when tested in the light of prevailing competition conditions in the
relevant market, are found to be not applicable to the facts of the present
case.

89. The Informants have argued that because of the strong network that OP
has, it is difficult for other players to enter into the market. In this
connection the Commission notes that, these sectors are often
characterized by network externalities. The Informants have alleged that
the network effects, posed by the platform-based model of OP, act as a
barrier to entry and/or expansion. Existence/absence of entry barriers is
also one of the relevant factors enshrined under Section 19(4) of the Act,

Case No. 6 & 74 of 2015 Page 34 of 48

 while determining dominance of an enterprise. Accordingly, the issue of
network effects and its bearing on dominance would merit careful
attention.

90. In two-sided markets, network effects may enable a large

platform/network to become dominant and insulate itself from potential
competition as entrants may find it difficult to challenge the large
incumbent. The strength of network effects thus becomes a key factor in
the determination of dominance in such market. However, the strength of
network effects will vary depending upon the nature of platform market
under consideration. Generally, the number of participants or consumers
using a platform is positively correlated with the value they get from
their use of the platform. In other words, large networks offer more value
to users than small networks. Thus, platforms de-facto have to reap
network effects to get a viable critical mass. In these markets,
competition is often for control of the market by way of having a large
and strong network. Aggressive competition in the early stages of
network creation takes place, until the market settles in favour of a few
enterprises. In such markets, market leadership position can be fragile or
transient during the initial stage of evolution of the market.

91. A successful network/platform requires that at both sides the platforms

network is wide and dense, i.e. larger the number of participants to both
sides of the network/platform, greater the possibility of each participant
having a substantial number of potential matches on the other side of the
market. This allows for positive cross side network externalities that
benefit the users on both sides of the market, i.e. the drivers and riders.

92. In the relevant market under scrutiny, there are certain countervailing
market forces that reduce the ability of even a very large platform to
insulate itself from competition. The Commission agrees with the
Informants that in a two/multi-sided market, network effects have a role

Case No. 6 & 74 of 2015 Page 35 of 48

 to play in determining the competition dynamics and relative position of
strength held by market players. The transportation service networks are
likely to exhibit indirect cross-side network effects because increase in
the number of riders attracts drivers and increase in the number of
taxis/drivers benefits the riders. However, whether the network effects
would act as an entry barrier in the relevant market depends on various
factors.

93. 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.

94. Further, 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
aggregators 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. The DG
has clearly brought out in its report that the drivers/fleet owners
connected to various aggregators through apps, can easily switch
between different aggregators depending on the incentive scheme etc. by
simply switching off or switching on their mobile handsets. The
possibility and ease of multi-homing constrains the power of the
platforms to act independently of the market forces. Absence of
switching costs between different networks in the relevant market limits
the constraints exerted by the established networks on newer entrants.
The Commission is, therefore, of the view that the network effects in the

Case No. 6 & 74 of 2015 Page 36 of 48

 present case do not seem to affect entry or expansion by the players
equipped with strategies capable of attracting drivers/riders to
new/existing networks. Moreover, as of now, competition in the relevant
market is still unfolding and the market certainly has not tipped in favour
of OP, as claimed by the Informants.

95. While examining entry conditions, it would be pertinent to also delve

into other factors relevant for entry. In the erstwhile asset/ownership-
based model, to be able to compete with the incumbent firms, an entrant
needed to possess a significant number of cars in order to attract
consumers. The new model, i.e. matching demand for and supply of
rides via a platform, has obviated this requirement because a large
number of individual drivers can be easily reached. Platform-based
players hence find it easier to enter the market than traditional entrants
given the reduced upfront costs of starting a business. Further, the entry
of these enterprises does not necessarily have to split existing demand.
Instead, innovative pricing and other business strategies allow them to
increase demand and supply in an existing market.

96. Massive amount of capital mobilized by OP has also been pointed out as
a key constraint faced by the smaller competitors or potential entrants in
the relevant market. The Informant has relied upon certain case laws to
argue that requirement of huge finances in this market, for funding
discount/incentive schemes, act as a barrier to entry/expansion. In this
regard, it is important to note that though a very high capital requirement
may have been perceived as an entry barrier traditionally, in new
economy sectors, the traditional concept of capital requirements may
not be applicable in totality. What is notable and of significance in this
context is the existence of a level-playing field in access to finance. This
is evidenced by the experience of technology start-ups across sectors in
the country which could access funding from various sources such as
venture capital, angel networks, private equity funds etc. Recently,

Case No. 6 & 74 of 2015 Page 37 of 48

 network industries financed by capital markets have observed very
intense competition in innovative activities in India. The key to success
in this fiercely competitive environment is fast adaptation to changes and
constant innovation in business models, technology, pricing models to
shake the markets out of equilibrium, and render old ways of doing
business uncompetitive, dislodging the existing market leaders.

97. The Commission further notes that the Informants have stressed upon
the circular approach to dominance and have suggested that the conduct
of OP, i.e. predatory pricing, is an evidence of dominance in itself.
Relying on international jurisprudence and the order of the Commission
in the case of MCX Stock Exchange Ltd v. NSE and other, the Informants
have suggested that abusive conduct of the enterprise can also be relied
on as a factor in assessing dominance. In this regard, the Commission
observes that the conduct of the enterprise can only be used as a
complement rather than a substitute for comprehensive analysis of
market conditions. Most firms, dominant or not, can engage in practices,
such as exclusive dealing, below cost pricing, loyalty discounts etc. New
entrants commonly engage in such practices to gain a toehold in the
market and holding them dominant based on simple observation of
conduct may have the undesirable result of chilling competition. On the
issue of interpretation of dominance based on the ability to affect
consumers/competitors/relevant market, it is to be borne in mind that
market power is a matter of degree. 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

Case No. 6 & 74 of 2015 Page 38 of 48

 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.

98. Besides the aforesaid arguments, the Informants have also contested
DGs finding on dominance, being solely based on the entry and
presence of Uber in the relevant market. It is argued that there has not
been any effective entry in the relevant market post 2013, which shows
the state of competitive interactions amongst the players in the market.
The Commission finds these arguments are bereft of the correct
understanding of basic tenets of competition law. Competition is not an
end in itself; it is a means towards a greater end which presumes that
competition in or for the market inter alia leads to desirable outcomes
for the consumers ensuring wide variety of quality products/services at
best possible prices. Towards that end, as long as there is competition in
and for the market satisfying these outcomes, regulatory intervention is
not warranted to either protect the existing players or to increase the
number of players in the market. Competition and competition law is not
about counting the number of firms in a particular relevant market to
determine whether or not that market is competitive.

99. Every market is unique with a unique number of players that are
determined organically by competitive forces. There can be no
sacrosanct number of firms that ensures the presence or absence of
competition. There can be markets which may not be competitive even
with large number of players and equally possibly there can be markets
which can work perfectly well with fewer players, constraining the
conduct of each other. What is significant is that the existing firms are
effective enough to constrain the behaviour of one another so as to
dissuade independent abusive conduct by any of them. Although, the

Case No. 6 & 74 of 2015 Page 39 of 48

 Commission is not inclined at this stage to go into an analysis of pricing
strategies of the players in the market, it will be unfair not to take into
account the following data which has been revealed during the
investigation:

Average Indexed margin per month : Aggregator Model

Month OP Uber Meru Mega

Sep-13 8.04 29.21 - 31.02

Oct-13 8.51 -495.31 - 31.37

Nov-13 9.52 -44.20 - 28.99

Dec-13 7.69 -85.56 - 27.39

Jan-14 14.06 -281.24 - 29.76

Feb-14 10.18 -42.73 56.96 30.65

Mar-14 9.21 -79.78 22.19 32.26

Apr-14 7.32 -44.94 13.42 32.44

May-14 3.06 -46.76 26.86 32.14

Jun-14 -2.11 -57.31 18.14 38.56

Jul-14 -9.43 -52.91 14.50 39.23

Aug-14 -19.47 -51.93 12.05 35.76

Sep-14 -35.32 -45.00 14.61 47.65

Oct-14 -36.25 -50.04 19.07 28.01

Nov-14 -43.40 -61.35 16.55 29.71

Dec-14 -99.75 -66.20 14.41 28.11

Jan-15 -135-91 -121.32 8.82 29.20

Feb-15 -61.03 -151.82 9.08 28.50

Mar-15 -36.94 -229.07 15.41 29.32

Case No. 6 & 74 of 2015 Page 40 of 48

Apr-15 -32.92 -118.00 23.07 27.76

May-15 -23.96 -123.75 22.42 25.60

Jun-15 -24.33 -126.29 26.85 27.07

Jul-15 -16.44 -114.62 26.07 30.08

Aug-15 -9.94 -100.54 27.43 31.02

Sep-15 -26.90 -41.07 17.99 31.39

*Meru started functioning on aggregator model from

February 2014

100. The aforementioned table, collated by the DG, compares the monthly
indexed margin of important players in the relevant market on a common
scale of index of 100 so as to assess the relative pricing behaviour of the
parties. For this, OPs and Ubers monthly margins have been calculated
on the index of 100. Since Meru Cabs and Mega Cabs work on hybrid
model (owned fleet model and aggregators model), their figures
pertaining to only aggregators model have been taken into account by
the DG to work out the indexed margin. The above table demonstrates
that from September 2013 to May 2014, OPs average monthly indexed
margin was positive. However, as noted by the DG, Ubers monthly
indexed margins has been negative from September 2013 till September
2015. On the other hand, OP was accounting for positive indexed margin
from September 2013 to May 2014 followed by negative indexed margin
since June 2014.

101. Two key observations can be safely made from this data: first, OP did
not initiate the strategy of aggressive pricing strategy and its negative
indexed margin since June 2014 seems more to be a reactive strategy to
Ubers aggressive pricing. Second, the loss of Uber in the relevant
market has remained substantially higher than OPs loss except for a
brief period from December 2014 to January 2015.

Case No. 6 & 74 of 2015 Page 41 of 48

102. Further, OPs response to the aggressive pricing strategy of Uber in the
relevant market since June 2014 is indicative of the competitive
constraint put by Uber to OP in the relevant market. Though the
Commission has already rejected the Informants (Fast-Track) objection
with regard to the period of investigation being stretched beyond January
2015 earlier in the order, the instant observations show that even during
the period up to January 2015, there were sufficient competitive
constraints that affected the ability of OP to act independent of the
market forces.

103. It can be inferred from the aforesaid observations that competition in the
relevant market was intense during the period of investigation and the
DGs reliance on the entry and presence of Uber in the relevant market
cannot be criticized for being overly emphasized.

104. Further, the Informants argument that decline in market share is not an
indication of absence of dominance is not relevance in the current
discussion as this was not the sole criteria for the Commissions
assessment of dominance. It is not only the decline in OPs market share,
but also the competitive constraints present in the relevant market that
guided the Commissions determination on the allegation of OPs
dominance.

105. In conclusion, 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 OPs 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 OPs dominance in the relevant market remains unsubstantiated.

Case No. 6 & 74 of 2015 Page 42 of 48

106. The Commission further notes that in the alternative, the Informants
have argued that Uber and Ola can both be held dominant
simultaneously in the relevant market. While doing so, the Informant has
also relied upon international case-laws, including a Canadian case law,
where two entities MasterCard/Visa were held to be dominant. To
substantiate their claim, the Informants have also stressed upon the
following sub-clause (b) of Section 27 of the Act:

Section 27 (b): Impose such penalty, as it may deem fit which shall be
not more than ten percent of the average of the turnover for the last three
preceding financial years, upon each of such person or enterprises which
are parties to such agreements or abuse:

[.]

107. It has been argued that the use of word enterprises which are parties to
such agreements and abuse implies that there can be more than one
enterprise which can be dominant and hence abusing their dominant
positions. In this regard, the Commission notes that the Informants have
mistakenly relied upon a penalty provision to infer an interpretation
which is contrary to the charging section. In doing so, the Informants
have applied the rules of literal interpretation in a very narrow sense to
Section 27(b) without realizing that the literal interpretation of statutory
provisions have to be dispensed with if they lead to absurd
interpretation. Although rule of literal interpretation suggests that words
used in a statute have to be construed as per their literal meaning, there
are sufficient exceptions if the same leads to absurdity or meaning which
is contrary to the other provisions of the Act. In any case the use of
words parties or enterprises in Section 27(b) seems to be meant for
parties entering into anti-competitive agreements and not for enterprise
indulging in unilateral conduct.

108. The Commission observes that there are various provisions in the Act

Case No. 6 & 74 of 2015 Page 43 of 48

 that signify the intent of the legislature that there cannot be more than
one dominant enterprise in the relevant market at a particular point of
time.

109. 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.

110. Besides the usage of a/ an in Section 4(2), the explanation (a) to

Section 4 of the Act states as follows:

dominant position means a position of strength, enjoyed by an

enterprise, in the relevant market, in India, which enables it to
(i) operate independently of competitive forces prevailing in the
relevant market; or
(ii) affect competitors or consumers or the relevant market in its
favour.
(emphasis supplied)

111. The usage of words operate independently appearing in the aforesaid

definition clearly shows that the concept of dominance is meant to be
ascribed to only one entity. Further, the underlined words in the above
explanation indicates that the whole essence of Section 4 of the Act lies
in proscribing unilateral conduct exercised by a single entity or group,
independent of its competitors or consumers. In the presence of more
than one dominant entity, none of those entities would be able to act
independent of one another.

112. Further, Section 19(4) of the Act, which enlists factors assessment of

Case No. 6 & 74 of 2015 Page 44 of 48

 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.

113. 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.

114. Lastly, the Commission finds it appropriate to refer to the Competition

(Amendment) Bill, 2012 (Bill No. 136 of 2012) which lapsed due to
dissolution of Lok Sabha. Clause 4 of the said Bill states as follows:

In section 4 of the principal Act, in sub-section (1), after the words "or
group", the words "jointly or singly" shall be inserted.
(emphasis supplied)

115. The aforesaid proposed amendment further reinforces the proposition

that there is no scope in the present scheme of the Act, either expressly
or by implication, to contemplate the presence of two independent
entities as dominant at the same time in the relevant market. Had there
been any scope for such interpretation, this amendment would not have
been required.

116. Based on the foregoing discussions, it can be concluded that 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,

Case No. 6 & 74 of 2015 Page 45 of 48

 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.

117. 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.

118. However, for the sake of completeness, the Commission deems it

appropriate to briefly touch upon the allegations with regard to low
pricing strategy of OP in the relevant market.

119. Taxis are not a new feature in the transport sector in India. Historically,
the sector featured a mix of black-yellow and private taxis, which were
mainly unorganised. While the black yellow taxis could be booked by
hailing a hand or approaching at a taxi stand, the private taxis were
restricted in terms of accessibility owing to information asymmetry
between the riders/drivers about the demand/supply situation. The
introduction of radio taxi model in the year 2008, by Meru, brought
some transformation that enabled booking of taxis via telephone calls or
online. Soon, other players like Mega Cabs, Easy Cabs etc. entered the
market. All of these were operating under the asset-owned model.

120. The emergence of platform-based model, introduced by OP in the

relevant market, challenged the well-established asset-owned model in
this industry. The platform-based model allowed real time tracking of
prospective riders and drivers on an App to facilitate quick booking and
availability of taxis at a click/touch of a button/icon. The drivers were no
more constrained to run the taxis idle, after dropping a rider and the
riders were also not obliged to pay for the taxis return fare, which was a
norm, at least in the unorganized sector.

Case No. 6 & 74 of 2015 Page 46 of 48

121. However, popularizing taxi, as a preferred mode of transport, was not
free from challenges, especially considering the common perception by
consumer of it being a luxury good in most Indian cities. The platform-
based model in the taxi industry, like any other two-sided market, was
dependent upon the growth of taxi network for benefits to permeate to
riders and drivers. However, riding in taxis operated under asset-owned
model was not only expensive in terms of the price, but, as discussed
earlier, also entailed transaction and search costs. Thus, to attract
prospective consumers/rider to experience the taxi services on this newly
introduced model, it was necessary to make it attractively affordable to
riders and profitable to drivers. The data on record shows that the taxi
industry grew exponentially after the emergence of platform-based
model (as much as 1900%) which can be attributed to the strategies
adopted by the app based taxi operators. OP and Uber have, in a manner,
revolutionized the taxi market by providing radio taxi services at
abysmally low prices.

122. 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.

123. At this stage, it is difficult to determine with certainty the long-term

impact of this pricing strategy as the market is yet to mature. Without
going into the legitimacy of OPs pricing strategy, suffice to say that
besides statutory compulsion of non-intervention in the present case, as
OP is not dominant in the relevant market, the Commission is hesitant to

Case No. 6 & 74 of 2015 Page 47 of 48

 interfere in a market, which is yet to fully evolve. Any interference at
this stage will not only disturb the market dynamics, but also pose a risk
of prescribing sub-optimal solution to a nascent market situation.

124. Based on the foregoing reasons, 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. Hence,
the cases are thus hereby closed.

125. The Secretary is, hereby, directed to inform the parties accordingly.

Sd/-
(Devender Kumar Sikri)
Chairperson

Sd/-
(S. L. Bunker)
Member

Sd/-
(Sudhir Mital)
Member

Sd/-
(Augustine Peter)
Member

Sd/-
(U. C. Nahta)
Member

Sd/-
(Justice G. P. Mittal)
New Delhi Member
Date: 19/07/2017

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