SC Rejects Uber's Appeal Against Probe Into Alleged Anti-Competitive Practices

The bench noted that the allegations of intentionally incurring losses on rides and offering incentives to drivers did not make sense economically unless the company aimed at establishing a monopoly.

New Delhi: The Supreme Court has dismissed Uber’s appeal against an investigation into its alleged anti-competitive practices of predatory pricing ordered by the Competition Appellate Tribunal (COMPAT), according to a report in LiveLaw.

Previously, the complaint filed by Meru Cabs in the Competition Commission of India against Uber had been rejected. After Meru filed an appeal the Competition Appellate Tribunal ordered that a fresh probe be conducted into allegations of abuse of dominance and anti-competitive practices by Uber.

It was in response to this order that Uber had approached the Supreme Court.

Refusing to overturn the COMPAT’s order, the apex court bench, comprising of Justices R.F. Nariman and Surya Kant, found sufficient material to order an investigation into allegations against Uber.

The bench also noted of the allegations, that claimed that Uber was intentionally losing as much as Rs 200 per ride, offering cheap rides to customers and heavy incentives to drivers, did not make sense economically unless the company aimed at eliminating competition in the market.

Also read: The Dark Truths Lurking Within Uber’s Preliminary Prospectus for Its IPO

The bench, which also directed the CCI’s probe unit Director-General to conduct a fresh probe within a period of six months, further noted:

“Given the allegation made, as extracted above, it is clear that if, in fact, a loss is made for trips made, Explanation (a)(ii) would prima facie be attracted inasmuch as this would certainly affect the appellant’s competitors in the appellant’s favour or the relevant market in its favour.

Insofar as ‘abuse’ of dominant position is concerned, under Section 4(2)(a), so long as this dominant position, whether directly or indirectly, imposes an unfair price in purchase or sale including predatory price of services, abuse of dominant position also gets attracted. Explanation (b) which defines ‘predatory price’ means sale of services at a price which is below cost.”

According to the complaint filed by Meru Cabs, Uber had employed abusive and unfair practices to eliminate competition from efficient competitors in the market to establish a monopoly. It was also alleged that Uber was spending close to $885 million to generate a revenue of $415 million.

In February, the CCI had rejected Meru’s complaint on the grounds that the inability of other market players to match Uber’s model and innovative technology did not imply the creation of entry barriers in the market.

The fair trade watchdog also held that there existed very few small players in the market who could be affected in case a bigger player adopted anti-competitive practices and noted that radio taxi services had transformed public transportation and “done wonders to consumer satisfaction”.

Meru Cabs then appealed against the CCI decision, that refused to order a probe into allegations of unfair practices and predatory pricing against Uber, in the appellate tribunal, which found sufficient reasons to overturn the CCI order and order an investigation.

Also read: As Uber Gears up for IPO, Discontent Among Indian Drivers Grows

“The size of discounts and incentives shows there are either phenomenal efficiency improvements which are replacing existing business models with the new business models or there could be an anti-competitive stance to it,” the tribunal had said, according to a report in the Financial Express.

Speaking to Business Today, Charanya Lakshmikumaran, partner, Lakshmikumaran & Sridharan said that the Director-General would have to determine if Uber had adopted predatory pricing and had been preventing driver, directly and indirectly, from accessing other platforms.

“The DG will be expected to answer whether in competition law economics Uber can be termed as a dominant player or not, either in the market for radio taxis in Delhi or in Delhi-NCR,” Lakshmikumaran said and added that any adverse observations by the DG against Uber could result in penalties being imposed on the radio taxi service provider.

Uber has also been the target of anti-trust lawsuits in the US.