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Common ownership: CCI rejects allegations of unfair biz ways at Ola, Uber

Further, the regulator said existence of alleged abusive conduct under the provisions of Section 4 is a "sine qua non" to order investigation under the Competition Act.


PTI
Updated: 20-06-2018 20:37 IST

Fair trade regulator CCI has dismissed allegations of anti-competitive practices made against Ola and Uber with respect to common ownership in them, saying there is no "discernible effect" of softening of competition.

At present, the watchdog said facts of the case have not led to establishment of a "prima facie" case against the opposite parties (OPs), either under Section 3 or 4 of the Competition Act.

Section 3 and 4 pertains to anti-competitive agreements and abuse of dominant market position, respectively.

The ruling has come on four separate complaints filed by taxi service provider -- Meru Travel Solutions -- against Ola cabs operator ANI Technologies, Uber India Systems, Uber BV, Uber Technologies (OPs).

Citing that the allegations are similar, the Competition Commission of India (CCI) has passed a common order.

The OPs in the present case are two competing cab aggregators whose shares have been acquired by common investors. There are at least four common investors -- Softbank, Tiger Global Management LLC, Sequoia Capital and Didi Chuxing -- in Ola and Uber, according to the regulator.

In a 28-page order, the regulator said there is no material on record to suggest that competition between the two cab aggregators has been compromised because of the common investments.

"In the absence of any discernible effect, it will be legally untenable to hold that OPs can be influenced in their decisions on operations by the minority number of directors of parties having common shareholding in them, and that they could reach an agreement to this effect as envisaged under Section 3 of the (Competition) Act," the CCI said.

Even if contention of the complainant is accepted that the OPs have secured a dominant position as a group pursuant to common ownership, the watchdog said, "existence of dominance in itself cannot be held to be the basis to order investigation".

Further, the regulator said existence of alleged abusive conduct under the provisions of Section 4 is a "sine qua non" to order investigation under the Competition Act.

"In the absence of such a conduct, the Commission is hesitant to conclude that overlapping investments by common investors in competing firms can be a proxy for anti-competitive conduct," it added.

For three of the four cases, the regulator had considered the "market for radio taxi services" in Hyderabad, Mumbai and Chennai, to be the relevant ones. In one case, "market for radio taxi and yellow taxi services" in Kolkata was taken to be relevant.

"Before parting with this order, the Commission observes that market dynamics post common investments is yet to fully effectuate.

"The details are yet to unfold regarding the impact of investments by common investors i.e. whether the common ownership has translated into control and, if yes, whether such an ownership can pose a competitive risk," the CCI said.

The regulator observed that it is cognizant that the degree of competition between the opposite parties who are the only effective competitors in the radio taxi service industry, may undergo a significant change, especially if the common investors try to control the destiny of the companies in ways that may at times conflict with the interest of the firm or competition in the market.

"In other words, common ownership may lead to softening of competition and it is possible that the anti-competitive effects of common ownership may arise more as an error of omission, rather than an error of commission. There is presumably a long path ahead in this direction," the CCI said.

However, the watchdog said it would not hesitate to take action, if concern arising out of horizontal shareholdings prima facie seem to exist in future wherein the OPs are found to be competing less vigorously consequent to any interference by the common investors in the management decisions.

"The economic theory has not yet produced a definitive, tested prediction that establishes a causal relation between common ownership and softening of competition.

"It only suggests that in cases where common ownership translates into control, there can be potential harm to the competition in concentrated markets," the order said.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)

COUNTRY : India