Supreme Court Dismisses Allegations of Cartelisation against Ola and Uber, Upholds NCLAT Order

On December 15, 2020, the Supreme Court of India (‘Supreme Court’) upheld an NCLAT order dismissing allegations of anti-competitive practices against ANI Technologies Pvt. Ltd. (‘Ola’), Uber India Systems Pvt. Ltd., Uber B.V. and Uber Technologies Inc. (together referred to as ‘Uber’) (collectively, ‘Cab Aggregators’). [1]

The informant in this case, who is an independent practitioner of law, claimed that the Cab Aggregators had entered into price fixing and resale price maintenance agreements on their respective platforms. According to the informant, as a result of algorithmic pricing, drivers and riders were unable to negotiate fares and discounts, thus taking away their freedom to choose the best price on the basis of competition, and forcing the acceptance of the price calculated via the platform algorithm. The informant further claimed that despite drivers not being employees or agents of the Cab Aggregators, they were forced to accept the trip fare reflected on the platform, leading to an artificial manipulation of supply and demand, guaranteeing higher fares to drivers who would otherwise compete against each other. Thus, the Cab Aggregators’ apps function akin to a trade association, facilitating the operation of a cartel (i.e., a hub-and-spoke cartel). Further, since the Cab Aggregators have greater bargaining power than riders in the determination of price, they are able to implement price discrimination, whereby riders are charged on the basis of their willingness to pay and as a result, artificially inflated fares are paid.

The CCI issued an order dated November 6, 2018, observing that no prima facie case was made against the Cab Aggregators. The CCI noted that for an allegation of cartelisation to stand, there needs to be concerted action to fix prices. In the present case, there was no evidence of collusion, as the drivers are not agreeing to set prices. Rather, the prices are algorithmically determined, and there is no agreement between the drivers to delegate the pricing power to the Cab Aggregators. The CCI held that the Cab Aggregators are not an association of drivers, but rather act as separate entities from their respective drivers. A rider books his/her ride at any given time which is accepted by an anonymous driver available in the area, and there is no opportunity for such driver to coordinate its action with other drivers.

Pursuant to the order issued by the CCI, the informant filed an appeal before the National Company Law Appellate Tribunal (‘NCLAT’). The NCLAT, in its order dated May 5, 2020, delved into the locus standi of the informant to move the CCI and held that the Act must be construed to only allow reference to receipt of information from a person who has suffered an invasion of his legal rights as a consumer or beneficiary of healthy competitive practices.

The NCLAT further noted that there was no evidence to show that the informant had suffered an injury at the hands of the Cab Aggregators and that there is no possibility of information exchange between the drivers of the Cab Aggregators. Further, driver partners and riders are free to accept the ride or choose the app of a competing service and therefore have the liberty to negotiate a lower fare. Thus, the Cab Aggregators were not found to be facilitating a cartel.

Pursuant to this, the informant preferred an appeal before the Supreme Court. The informant argued that any person may approach the CCI and that for the purposes of filing an appeal, any informant who had moved the CCI would be a ‘person aggrieved’.

On the point of the informant’s locus standi, the Supreme Court held that it was difficult to agree with the NCLAT’s narrow reading of the Act. The Supreme Court held that proceedings before the CCI are proceedings in rem that affect the public interest. The Act and the various regulations made under the same allow information to be filed with the CCI by any person (“…any person, consumer or their association or trade association”), irrespective of whether such person is or is not personally affected. The Supreme Court also noted that the term ‘person’ under the Act is an inclusive and wide term, including individuals of all kinds and every artificial juridical person.

Similarly, the term ‘person aggrieved’ was held to be broad enough to encompass all persons who bring the CCI information of practices contrary to the provisions of the Act, who are then aggrieved by an adverse order of the CCI in case it refuses to act upon the information supplied.

On the merits of the case, however, the Supreme Court upheld the order of the NCLAT and CCI, finding no reason to interfere.

[1] Civil Appeal No. 3100 of 2020, Order dated December 15, 2020.

Published In:Inter Alia Special Edititon - Competition Law - March 2021 [ English
Date: March 15, 2021