Fair trade regulator the Competition Commission of India (CCI) on Tuesday rejected allegations of price fixing against app-based taxi service providers Ola and Uber, saying that drivers acceding to "algorithmically determined prices" by the platforms does not amount to collusion between them.
For the model followed by cab aggregators, estimation of fares are done by algorithms on the basis of large data sets. Apart from personalised information, various other factors such as time of the day and traffic situation, are taken into account with respect to fares. "Resultantly, the algorithmically determined pricing for each rider and each trip tends to be different owing to the interplay of large data sets. Such pricing does not appear to be similar to the 'hub and spoke'' arrangement as understood in the traditional competition parlance," the regulator said.
Generally, a hub and spoke arrangement requires the spokes to use a third party platform (hub) for exchange of sensitive information, including information on prices which can facilitate price fixing. For a cartel to operate as a hub and spoke, the CCI said there needs to be a conspiracy to fix prices, which requires existence of collusion in the first place. "In the present case, the drivers may have acceded to the algorithmically determined prices by the platform (Ola/ Uber), this cannot be said to be amounting to collusion between the drivers," it noted. It said in the case of ride-sourcing and ride-sharing services, a hub-and-spoke cartel would require an agreement between all drivers to set prices through the platform or an dealfor the platform to coordinate prices between them.