Is Ola Taking Up All the Competition With Its Prices?

Will be landmark if proved, says ex-competition commission DG; Fast Track claims Ola’s average loss is `230 per trip in Bengaluru

Published: 11th May 2015 06:03 AM  |   Last Updated: 11th May 2015 07:42 AM   |  A+A-

Ola Cabs

CHENNAI: The Competition Council of India’s (CCI) probe into leading cab aggregator Ola for predatory pricing and abuse of dominance has the potential to turn into a landmark case in Indian competition law, revolving around one of the toughest conditions to prove in a legal battle — intent.

According to Amitabh Kumar, the former Director General of the CCI and partner at law firm J Sagar Associates, if predatory pricing is proved in the case of Ola, it will be a first and a milestone verdict.

While both leading competitors of Ola in Tamil Nadu — NTL Taxi and Meru Cabs — have hailed the probe and assured cooperation, the case over the petition filed by yet another competitor Fast Track could drag on for years. The CCI order is merely a starting point.

Fast Track, Meru and NTL allege that Ola’s “unrealistically low and unsustainable tariffs” are predatory. In Chennai, for example, Ola charges `12 per km on its hatchbacks, while Fast Track and NTL charge `16. Taxi For Sure and Uber charge even less, with rates going below `10 per km.

Fast Track alleged that Ola spends Rs 574 while earning an average revenue of `344 per trip in Bengaluru, leading to a direct loss of Rs 230.

“Their pricing is unsustainable and their aim is to push out competitors. We welcome the probe and will cooperate fully,” said G Saravanan, director, NTL.

Meru’s CEO Siddhartha Pahwa said any industry requires healthy competition. “But many operators are resorting to predatory pricing to achieve monopoly in the market that will hurt consumers in the long term,” he said. According to them, Ola’s financial muscle is the only reason that they have been able to sustain such continuous losses, something that smaller players cannot follow.

However, findings of predatory pricing are not that simple, say experts. “This case, if it goes against Ola, will be a landmark case in India,” said Kumar.

Predator Proof.JPG“But for predatory pricing (an abuse of dominance) to be proved, there are a few major issues that will need to be established in the probe  and the hearings,” he said.

At the top of that list is determining Ola’s dominance of the relevant market. But even if Ola’s dominance is proved, “the intention of Ola to oust competitors from the relevant market will need to be established irrefutably” and this can be very tough,  pointed out Kumar.

If there is no dominance, and more importantly, if there is no intent to oust competitors, pricing cannot be termed predatory.

“Ola can argue that they set their tariffs because they see a potential for profit making in the future and there is nothing wrong there. No business makes a profit in its initial years,” pointed out Kumar.

Whatever the reality, if Fast Track and Ola’s other competitors are to prove that Ola prices are predatory, they are set to have their work cut out for them. “Ultimately, evidence and economic analysis are the key in such cases,” concluded Kumar.

All the players involved — Ola, Taxi For Sure, NTL and Uber — remained unavailable for comment on these issues.

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