Fair trade regulator 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.
In a 13-page order, the Competition Commission of India (CCI) also dismissed complaints that Ola and Uber are imposing a resale price maintenance system on the drivers as well as alleged price discrimination.
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.
Further, the regulator 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 agreement for the platform to coordinate prices between them.
"There does not appear to be any such agreement between drivers inter-se to delegate this pricing power to the platform/ cab aggregators," the watchdog said.
The complaint was filed by an individual against ANI Technologies, which provides the app-based taxi services under 'Ola', Uber India Systems , the Netherlands-based Uber B V and US-based Uber Technologies, the holding company of Uber group.
Uber B V enters into contract with different taxi owners attached to Uber network and is responsible for making payment of rider services as well as incentives to drivers, as per details provided in the CCI order.
Noting that fares offered by Ola and Uber are dynamic in nature, the CCI said there does not seem to be any fixed floor price maintained by the taxi aggregators for drivers.
Under the Competition Act, resale price maintenance refers to setting of a floor price on resale.
"In case of app-based taxi services, the dynamic pricing can and does on many occasions drive the prices to levels much lower than the fares that would have been charged by independent taxi drivers.
"Thus, there does not seem to be any fixed floor price that is set and maintained by the aggregators for all drivers and the centralised pricing mechanism cannot be viewed as a vertical instrument employed to orchestrate price-fixing cartel among the drivers," the order said.
About alleged price fixing, the CCI said existence of an agreement, understanding or arrangement that demonstrates meeting of minds, is a sine qua non for establishing a contravention under Section 3 of the Act.
In the present case neither there appears to be any such agreement or meeting of minds between the cab aggregators and their respective drivers nor between the drivers inter-se, the order said.
As a result, the watchdog said there is no contravention of Section 3, which pertains to anti-competitive agreements.