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CCI directs DG to probe alleged restrictive practices of Ola Cabs

The order was issued on a petition filed by Chennai-based Fast Track Call Cab Pvt Ltd

BS Reporter  |  Chennai 

The Competition Commission of India (CCI) has directed the Director General (DG) of CCI to conduct an investigation into the business practices of Ola Cabs for alleged predatory pricing and abuse of dominant position in the radio taxi services. The order was issued on a petition filed by Chennai-based Fast Track Call Cab Pvt Ltd.

The petition was filed by Fast Track Call Cab against ANI Technologies Pvt Ltd, which runs the Ola brand of Cabs, alleging contravention of verious provisions under the Sections under the Competition Act, 2002.

Considering the petition, the CCI said, "Accordingly, the Commission, as per the provisions of Section 26(1) of the Act, directs the Director General to cause an investigation into the matter and to complete the investigation within a period of 60 days from receipt of this order." During the course of the investigation, DG shall also investigate the conduct of officials of the ANI Technologies for fixing liability with respect to contravention of the Act in case the company is found to have violated the provisions of the Act, added the order.

Noting that under the Act, imposition of unfair price in purchase or sale (including predatory price) of goods or service as a violation of the provisions of the Act, the Commission observed that the company is spending more money on discounts and incentives (apart from the varaiable costs it may be incurring) on customers and drivers compared to the revenue it earning.

"It is also observed that, per trip, the Opposite Party (ANI Technologies) is spending around Rs 574 while earning an average revenue of Rs 344 leading to a direct loss of Rs 230 per trip. While the propriety of these figures is a subject matter of investigation, prima facie, the Commission is of the view that, they indicate predatory pricing aimed to oust other players from the relevant market," it said.

In view of the allegations projected in the information and the observations made as detailed above, prima facie, the Commission is of the opinion that the conduct of ANI Technologies amounts to abuse of dominant position within the meaning of Section 4 of the Act, added the Commission.

Fast Track, a part of the Fast Track Group that offers radio taxi services in the States of Tamil Nadu, Karnataka, Andhra Pradesh, Kerala, Maharashtra and West Bengal, alleged that ANI Technologies has received huge funding from various agencies and "alleged that armed with moneybags from various funding agencies, the Opposite Party has unleashed a series of abusive practices of unfair conditions, predatory pricing etc. to establish its monopoly and eliminate otherwise equally efficient competitors who cannot indulge in such predatory pricing in the radio taxi services market."

ANI Technologies has raised investment of $5 million from Tiger Global Management in 2012, $20 million from Matrix Partners India, $41.8 million from Hong Kong based equity hedge fund and $210 million from SoftBank Corp, it said.

It holds 43.2 pr cent of the active fleet and 47 per cent of the market share as per number of trips in Bengaluru, it said.

Quoting a market research report, Bangaluru Radio Taxi Service Market Analysis, prepared by New Age TechSci Research Pvt ltd, in December 2014, in Bengaluru about 22,000 cars were available on radio cabs network, out of which ANI Technologies has a share of about 42.8 pr cent. Further, out of the active fleet size, the company has a share of ab out 43.2 per cent cars available with it at any given point of time. As per the said report, ANI Technologies handles ab out 40 lakh bookings for a full month. Further, it alleged that ANI Technologies restricts its driver fleet operators from using any other competing platform for providing their services.

First Published: Wed, May 06 2015. 20:14 IST