AMITY LAW SCHOOL

(2015-2020)
FINANCIAL MARKET REGULATIONS PROJECT ON

SAMIR AGARWAL V. ANI TECHNOLOGIES PVT

LTD.(OLA), UBER INDIA SYSTEMS PVT LTD.,
UBER B.V., UBER TECHNOLOGIES INC.
 BACKGROUND OF THE CASE

• The Informant filed information in four different circumstances against the OPs. The core of the allegations
raised in all four information was similar, but only demarcated by different geographical markets namely
Hyderabad, Mumbai, Kolkata and Chennai. They alleged similar contraventions in all the four cases. The
informants alleged that the OPs:-
• Have entered into a vertical anti-competitive arrangement with the driver partners by offering them the
Minimum Business Guarantee Scheme

• Are individually as well as collectively dominant in the in the 4 geographical markets and are abusing that
dominant position in pursuing anti- competitive practices.
• Are part of the same group within the meaning of Section 5 of the Competition Act, 2002 (‘the Act’), and
hence subject to section 4 of the Act.
• Informants relied on market study reports on the market share of the radio taxi operators in the respective
cities in the span of three years to show the market strength of the OPs.
 SECTION 3:ANTI COMPETITIVE
AGREEMENTS

• Section 3 of the Act prohibits and also declares the agreements between
two or more enterprise or person or association of persons, which have
an appreciable adverse impact on the competition as void.
• The scope of Section 3 of Competition Act is to undertake a general
prohibition on Anti-Competitive Agreements, without any purpose for
specified agreements.
• Section 3(1) prescribes the adverse effect on competition in India.
• Section 3(2) declared such agreements are void.
• Section 3(3) deals with cartels
• Section 3(4) dealing with the vertical agreements.
• Section 3(5) deals with the exception and save the rights of owners of
property rights.
• The basic requirement for Section 3(1) is that an agreement between
enterprises identifying with the supply of goods or services ought to
cause or likely to cause an appreciable adverse effect on competition
within India.
 HORIZONTAL AGREEMENTS-SECTION3(3)

• These kinds of agreements are known as horizontal agreements because the parties to the agreement are at the
same level of production in the same market. According to Section 3(3) certain agreements between enterprises,
decisions by associations of enterprise including cartels engaged in identical or similar trade of goods or
provision of services are presumed to have an appreciable effect on the competition, which –

a) directly or indirectly determines purchase or sale prices;

b) limits or controls production, supply, markets, technical development, investment or provision of services;
c) shares the market or source of production or provision of services by way of allocation of geographical area of
market, or type of goods or services, or number of customers in the market or any other similar way;
d) directly or indirectly results in bid rigging or collusive bidding,
These kinds of agreements are per se illegal and it is not necessary to show that the agreement in the issue is
anti-competitive or not.
 HOW PRICE FIXING HAPPENS

Price-fixing is agreeing with a competitor what price customers will be charged. It can also
include agreements not to sell something below a minimum price or agreeing not to undercut
a competitor. Price-fixing leads to inflated prices and customers being overcharged.

• Price fixing can happen several ways. Businesses can agree to set their prices high, so that
consumers have no choice but to buy at the high price. They can also agree to set mark-
ups, sales, surcharges or discounts on goods or services at the same rate.
• Businesses can also agree to set their maximum purchasing price so that a seller of a
product, service or commodity will be forced to sell at the set price. Price fixing can also
happen in the credit market, where companies agree to standardize credit terms to
consumers. Many states have “below sales-cost laws,” which prohibit businesses from
selling goods or services below market cost, if their intent is anti-competitive.
• It is important to remember that illegal price fixing only occurs when there is an
agreement between businesses to fix prices. A business, acting on its own, may use
legitimate efforts to obtain the best price they can, including the ability to raise prices to
the detriment of the general public.
• Further, businesses that conform to the same prices without an express or implied
agreement are not in violation of price fixing laws. However, there is a fine line between
conforming to prices at one’s own accord, and having an implied agreement to do so.
 VERTICAL AGREEMENTS -SECTION 3(4)

• Vertical agreements are those agreements which are amongst enterprises or persons at different stages or levels of the
production chain in different markets. These agreements are not per se illegal and in order to establish that they are anti-
competitive it must proved that such agreement causes or is likely to cause an appreciable adverse effect on competition in
India. The Act on the other hand as such does not define the term appreciable effect on competition but under Section 19
(3) provides some factors all or any of which may be considered while determining whether an agreement
has an appreciable adverse effect on competition. These factors are -

a) creation of barriers to new entrants in the market;

b) driving existing competitors out of the market;
c) foreclosure of competition by hindering entry into the market;
d) accrual of benefits to consumers;
e) improvements in production or distribution of goods or provision of services;
f) promotion of technical, scientific and economic development by means of production or distribution of goods or provision
of services.
 DEFINITION OF DOMINANT POSITION

• According to the Act, dominant position means a position of strength, enjoyed by an enterprise in the relevant market in India which enables
it to:

• 1. Operate independently of competitive forces in relevant market

• 2. Affect competitors, consumers or relevant market in its favor

• SECTION 4-ABUSE OF DOMINANT POSITION

• Section 4 prevents any enterprise or group from abusing its dominant position. The Act also provides circumstances under which there is abuse
of dominant position.section4(2) prevents following acts resulting in abuse of dominant position:

• 1. Impose unfair or discriminatory condition or price in sale and purchase of goods or services;

• 2. Limit or restrict;

• 3. Production of goods or services

• 4. Technical or scientific development relating to goods or services to the prejudice of consumers;

PROCEDURE FOR INQUIRY UNDER
SECTION 19-SECTION 26
 OBJECTIVE OF THIS STUDY

• 1. Drivers
• Who are not employee of Ola and uber but actually third party service providers rendering there services through
the application based platform of Ola and uber.
• These service providers do not have any say in the price fixing and there commissions on every ride are also fixed by
Ola and uber.
• 2. Consumers
• Who do not have diverse choices in the market when Ola and uber through there algorithm fix similar prices?
• As the market dominated by Ola and uber this has created an imbalance in the equilibrium of the radio taxi market.
• 3. Other radio taxi providing companies
• As Ola and uber combined have relatively major market share of the radio taxi industry which will hinder existence
and growth of other competitors in the market.
• There anti-competitive practices may hinder other companies from entering the market thus creating an oligopolistic
market in the radio taxi industry
 PARTIES TO THE CASE

• The information has been filed under Section 19(1)(a) of the Competition Act, 2002 (hereinafter the ‘Act’)
by Mr. Samir Agrawal (hereinafter the ‘Informant’) against

• ANI Technologies Pvt. Ltd. (hereinafter the ‘Opposite Party No. 1/ OP-1/Ola’),

• Uber India Systems Pvt. Ltd. (hereinafter the ‘Opposite Party No. 2/ OP-2/Uber’),

• Uber B.V., Amsterdam, Netherlands (hereinafter the ‘Opposite Party No. 3/ OP-3’)

• Uber Technologies Inc., San Francisco, U.S.A (hereinafter the ‘Opposite Party No. 4/ OP-4’) (collectively
referred to as ‘Opposite Parties’/ ‘OPs’) alleging contravention of the provisions of Sections 3 of the Act.
 FACTS OF THE CASE
• OP-1, a domestic app-based radio taxi service provider, acts as an intermediary between riders and drivers for provision of its services
through a software application, ‘Ola’ app. Similarly, OP-2 to OP-4, as a group, are engaged in the business of facilitating on-demand taxi service
through ‘Uber’ app in India among other countries. The OP-4, based out of USA, is the holding company of Uber group. The OP-3 enters into
contract with different taxi owners attached to Uber network and is responsible for making payment of rider services as well as incentives to
drivers. The OP-2 acts as an agent of OP-3 for conducting business in India and provides assistance in connection with marketing and
promotion of services.
• The Informant, stated to be an independent law
• practitioner, is a consumer of services provided by OP-1 (‘Ola’) and OP-2 (‘Uber’). He is primarily aggrieved by the pricing mechanism
adopted by the aforesaid OPs while providing radio taxi services. The Informant has alleged that the algorithmic pricing adopted by the OPs
takes away the liberty of individual drivers to compete with each other and thus, amounts to price fixing by the OPs, in contravention of the
provisions of Section 3 of the Act.
•
• The Informant has stated that OPs essentially operate as platforms through a mobile application which allows commuter and driver (two
sides of the platform) to interact. The commuters and drivers can download the ‘App’ on their smartphones and register themselves. Using
the App of a respective OP, the rider opts for a ride and the driver accepts the ride, pursuant to which the driver provides end-to-end
services from pick-up of rider to drop at their destination.The fare is calculated by the algorithm based on many factors, including the
expected time and distance which is shown to the rider before the rider opts for a ride. The App facilitates payment of the fare by digital
mode of credit card/debit card/Ola money and serves as the driver’s limited payment collection agent, and sends a receipt of the same to the
rider’s email address.
 FACTS OF THE CASE
• The Informant has submitted that due to algorithmic pricing, riders are not able to negotiate fares with individual drivers for rides matched
through App nor drivers are able to offer any discounts. Thus, the algorithm takes away the freedom of the riders and drivers to choose the
other side on the basis of price competition and both have to accept the price set by the algorithm. It is further alleged that the algorithm
calculates the fare based on a base amount, ride distance, and time spent in transit, which is multiplied by a ‘surge’ factor during periods of high
demand. The drivers who use the Ola/Uber App, instead of competing on price, accept the fare which is the outcome of Ola/Uber pricing
algorithm. Further, the drivers who are attached to OPs’ networks do not function as their employees, but as independent third party service
providers. It has been alleged that the OPs, i.e. Ola/Uber, act as ‘Hub’ where ‘spokes’ (competing drivers) collude on prices.
•
• As per the Driver Terms and Conditions, which are agreed upon between the cab aggregators (i.e. Ola/Uber) with their respective drivers, the
taxi fare is reflected on the App at the end of the trip which the driver is bound to accept without having any discretion. The drivers receive
their share after deduction of commission by Ola/Uber.
•
• The Informant has contended that, being a platform, Ola/Uber does not own any taxi and operate only as a platform; and in this sense, their
model is comparable to Zomato, Trivago or Airbnb who do not own any restaurants, properties or hotels, respectively, but acts only as platforms
that connect buyers and sellers. In none of these models, price is fixed by the platform. Rather the independent restaurants, properties or hotels
fix the prices; however, in case of Ola/Uber, the driver is assigned a ride for a fare determined by the App, due to which
suppliers/competitors/drivers indulge in price fixation. The Informant has alleged that Ola’s/Uber’s pricing algorithm artificially manipulates supply
and demand,
 FACTS OF THE CASE

• The Informant has stated that the OPs have greater bargaining power than riders/commuters in determination of price for a
ride owing to availability of asymmetric information. Owing to this information asymmetry, OPs are enabled to implement
perfect price discrimination, whereby riders are charged on the basis of their willingness to pay. Since they are under no legal
obligation to publicly disclose data regarding the calculation of such prices, OPs use personalised data of the riders to
manipulate prices. It is also stated that drivers have a common motive to adhere to OPs’ pricing algorithm which results in
artificially high fares. If such motive was not present, individual drivers would have sought to differentiate themselves from
other drivers on the basis of price, among other factors.

• The Informant has further alleged that Ola/Uber and its drivers are in a vertical relationship wherein Ola/Uber imposes a
minimum price level on the drivers, resulting in a contravention of Resale Price Maintenance under Section 3(4)(e) of the Act.
The Informant has stated that Ola/Uber’s algorithm determines the price, below which drivers cannot charge which results
in a minimum fixed price. The Informant has relied upon the Commission’s order in Fx Enterprise Soultions India Pvt. Ltd. v.
Hyundai Motor India Limited, Case no. 36 and 82 of 2014, decided on 14.06.2017, wherein the Commission observed that an
agreement that has as its direct or indirect object in the establishment of a fixed or minimum resale price level, may restrict
competition. It has been submitted that the Commission had emphasised the linkage between intra-brand price competition
and its subsequent impact on inter-brand price competition in the said case, which is particularly significant from a pricing
perspective and therefore, affects the ultimate consumer.
 JUDGEMENT

• Contentions of Informant:
• Opposite Parties have entered anti-competitive
agreements with their drivers imposing exclusivity
restrictions, in contravention of Section 3(4) read
with Section 3(1) of the Act.
• Strategy/incentive model of the Opposite Parties
namely providing incentives to lure the drivers to
fulfil a minimum number of rides, amounts to an
agreement between the Opposite Parties and their
drivers. The strategy/incentive model is such that
the drivers stay locked in a particular network to
fulfil the minimum guarantee and are not available
to provide services on any other competing
platform.
 JUDGEMENT

• Contentions of Opposite Parties:

• There is no exclusivity condition in
the agreement between Uber/Ola
and their respective driver partners
nor any conditions are imposed on
them.
• There is no exclusivity condition in
the agreement between Uber/Ola
and their respective driver partners
nor have there been any conditions
imposed on them.
 DECISION

• The CCI held the existence of an agreement/arrangement

between parties is a pre-requisite under Section 3 of the
Act. Considering strategy/incentive model to be an
agreement between the Opposite Parties and their
respective driver partners, would be a narrow reading of
the term 'agreement’.
• There is no compulsion on drivers to join the network of
Opposite Parties but they avail out of own choice to
receive benefits and incentives. Relying on earlier
decisions,8 CCI held that both drivers and riders have
access to multiple applications and can 'multi-home' and
easily switch between different aggregators.
• Further, there is no dearth of supply in the relevant market
for drivers and thus such incentives are not anti-
competitive and do not pose any entry barriers.
 PROVISION IN THE CASE

• Section 3.
• Anti-competitive agreements.—
• (1) No enterprise or association of enterprises or person or association of persons shall enter
into any agreement in respect of production, supply, distribution, storage, acquisition or control
of goods or provision of services, which causes or is likely to cause an appreciable adverse effect
on competition within India.
• (2) Any agreement entered into in contravention of the provisions contained in sub-section (1)
shall be void.
• (3) Any agreement entered into between enterprises or associations of enterprises or persons or
associations of persons or between any person and enterprise or practice carried on, or decision
taken by, any association of enterprises or association of persons, including cartels, engaged in
identical or similar trade of goods or provision of services,
• (4) Any agreement amongst enterprises or persons at different stages or levels of the production
chain in different markets, in respect of production, supply, distribution, storage, sale or price of,
or trade in goods or provision of services,
 PROVISION IN THE CASE
• Section 4.
• 1) No enterprise shall abuse its dominant position.
• (2) There shall be an abuse of dominant position under sub-section (1), if an enterprise,—(a) directly or
indirectly, imposes unfair or discriminatory—
• (i) condition in purchase or sale of goods or services; or
• (ii) price in purchase or sale (including predatory price) of goods or service;
• (b) limits or restricts—
• (i) production of goods or provision of services or market therefor; or
• (ii) technical or scientific development relating to goods or services to the prejudice of consumers; or
• (c) indulges in practice or practices resulting in denial of market access; or
• (d) makes conclusion of contracts subject to acceptance by other parties of supplementary obligations
which, by their nature or according to commercial usage, have no connection with the subject of such
contracts; or
• (e) uses its dominant position in one relevant market to enter into, or protect, other relevant market.
 PROVISION IN THE CASE
• Section 19. (1) The Commission may inquire into any alleged contravention of the
• provisions contained in subsection (1) of section 3 or sub-section (1) of
• section 4 either on its own motion or on—
• (a) receipt of any information, in such manner and] accompanied by such
• fee as may be determined by regulations, from any person, consumer or
• their association or trade association; or
• (b) a reference made to it by the Central Government or a State
• Government or a statutory authority.

• Section26(2) Where on receipt of a reference from the Central Government or

• a State Government or a statutory authority or information received under section 19, the Commission is of the
opinion that there exists no prima facie case, it shall close the matter forthwith and pass such orders as it deems fit and
send a copy of its order to the Central Government or the State Government or the statutory authority or the parties
concerned, as the case may be.
 CONCLUSION

Group learning:-
In our group Project we carefully analyzed each and every aspect of the case and we came to learn that in
order for a company to be dominating in the finical market it requires complete control over the significant
sector of the market to do so.
As in this case the CCI gave its judgement in favor of the opposite parties
(Ola & Uber) and stated that existence of an agreement, understanding or
arrangement that demonstrates meeting of minds, is a sine qua non for
establishing a contravention under Section 3 of the Act” and that in its view, no such agreement exists and
therefore, the charges stand rejected.
While selecting this case our main focus was to target the most common and interesting case in order to
understand and present the concept and make it interactive and connectable to the students which will not
only help our cause but will also make the project lay a significant impact on every student who can relate
to there most used services in their daily basis life.
 COMMENTS BY MR. AMIT UPADHYAYA

• Firstly, these cab-aggregators deploy a large set of data, that include the demand and supply, the time of the
day and the traffic conditions and so on, in addition to certain personalized information to come out with
the suggested fare for each trip. It is dynamic and not done through human intervention. There are
algorithms built into the technology deployed by the companies that determine the fares.
• This, by itself rules out any complicity on the part of the drivers and the hail-taxi app owners in fixing the
fares for each trip. The fact that the drivers of the vehicles have agreed to this algorithm-based fare fixation
process does not amount to collusion, the CCI has declared. There is clearly the absence of any hub and
spoke like arrangement in the case of Ola and Uber.
• "There does not appear to be any such agreement between drivers inter-se to delegate this pricing power
to the platform/ cab aggregators,"
• On the technical aspect of resale price maintenance, CCI has said there should be evidence of some kind
of floor price being fixed and maintained by the service provider to be charged under the competition
laws. The Commission did not find any such evidence in the case of Uber and Ola of any floor price being
fixed; on the other hand, CCI has pointed out that on occasions the fares go down much below the normal
rates any taxi driver would have charged for the same distance or trip.
 COMMENTS BY PRESIDENT CONSUMER
FORUM
Under the Competition Act, resale price maintenance refers to the setting of a floor price on resale. In case
of app-based taxi services, the dynamic pricing can and does on many occasions drive the prices to levels
much lower than fares that would have been charged by independent taxi drivers.

“Thus, there does not seem to be any fixed floor price that is set and maintained
by aggregators for all drivers and the centralized pricing mechanism cannot be
viewed as a vertical instrument employed to orchestrate price-fixing cartel among
drivers," according to the order.

About alleged price fixing, the CCI said the existence of an agreement, understanding or arrangement that
demonstrates meeting of minds, was a sine qua non for establishing a contravention under Section 3 of the
Act. In the current case neither there appeared to be any such agreement or meeting of minds between cab
aggregators and respective drivers nor between the drivers inter-se, the order said. As a result, the watchdog
said there was no contravention of Section 3, pertaining to anti-competitive agreements.
 RECOMMENDATIONS
With an increased emphasis on digitalization, incentives for start-ups and the overall ease of doing business, India has
been ranked third in terms of showcasing promise for maximum disruptive technology breakthroughs. The time is
therefore ripe for disruptive innovation to provide an impetus to traditional industries/markets in India.
However, given that the growth of any industry/market requires a stable, foreseeable regulation and a focused
government policy, the role of the CCI, in particular, can either exacerbate or inhibit the development of a
market/industry, by virtue of the policy it adopts.
While conventional competition regulations/tools may not be wholly applicable in assessing the
true impact of disruptive innovations in the market, it will be essential to strike the much-needed
balance between giving disruptors carte blanche and excessively stifling competition and innovation.
This has been accepted in mature jurisdictions such as the European Union as well, where it is
believed that a rigid application of traditional antitrust rules to these markets risks severely restricting competition,
innovation, and consumer welfare and competition authorities should only intervene in dynamically competitive
markets where the potential for anti-competitive harm is large and the potential benefits from intervention are
great.
Commendably, despite being a fairly young regulator, the CCI seems to be in line with international best practices
since it has so far appreciated the importance of innovation and refrained from premature intervention in nascent
innovation driven markets, thus providing necessary headroom for disruptive innovations in India.
THANK YOU