The fair trade watchdog, Competition Commission of India (CCI), has ordered an investigation against app-based taxi-service provider Ola Cabs. This is over Ola's alleged involvement in predatory pricing to keep rivals out of the market.
The CCI ordered an inquiry after it seemed the company may have violated Section 4 of the Competition Act, 2002, relating to the abuse of a dominant position by an enterprise.
The CCI said, "It is observed from the material placed on record that Ola Cabs is spending more money on discounts and incentives (apart from the variable costs it may be incurring) on customers and drivers compared to the revenue it is earning."
The CCI observed that Ola gained a market share of 69 per cent in radio taxi services in Bengaluru, after the acquisition of service provider TaxiForSure.
A high market share is not the only factor to be considered for assessment of dominance in the relevant market, the CCI said. That the company acquired such a high share within three to four years of its operations indicates its strong market position, the CCI added. "Though CCI is not concerned with individual firms getting excluded from the market on grounds of inefficiency, the exclusion created because of abusive practices of a dominant entity in a market is covered under Section 4 of the Competition Act, 2002," CCI said in its order dated April 24.
The complainant, Chennai-based Fast Track Call Cab, had alleged Ola Cabs incentivised the drivers by using the money available with it thanks to foreign funding, which could not be matched by the existing radio cab operators or potential indigenous enterprises desirous of starting such operations in India.
The complainant also raised several other allegations pertaining to the restriction on taxi drivers, incentives, loyalty rebate offers, predatory discounts to customers, etc.
The CCI has been increasingly looking into the alleged violation of fair trade norms by entities from the new-age sectors such as e-commerce and Internet. The competition watchdog recently let off five online retailers, including Flipkart and Snapdeal, after it did not find any evidence of wrongdoing on their part.