The Uber and Ola battle against the Hub and Spoke rule
The situation where most of the people want to prefer taking an Auto to succeed in a close-by bus-stop then board a bus to succeed in the specified destination is barely experienced now. The Cabs are now playing a prominent role in our lifestyle. it's now become how easier to travel within the stipulated time, through Cabs.
With the introduction of Ola and Uber cabs in India, people are, ready to hail a cab at the smallest amount possible time as soon as they book it online. within the Indian ride-hailing business market, Ola and Uber have majority market share. These two companies give out over 200 million people in India.
This article mainly focusses on the continued challenges against the service providers through the e-Platforms, with special regard to Ola and Uber cab-aggregators. These cab-service providers operate under an App-based system wherein the drivers and therefore the riders can find their potential ride through a web App. These application-based cab-aggregators follow a special mechanism in determining the costs of the rides, unlike the opposite taxi-service providers.
The “Hub and Spoke” rule may be a model that's not so documented in India. this is often a model under which one or more competitors engaged under the supply of comparable products or services, assign the responsibility of determining the worth to at least one single contractor, who is common to all or any. The contractor might not be necessarily a competitor but a player within the same market. The competitors here are referred to as “Spokes” and therefore the contractor is understood because the “Hub”. The Hub is typically an enormous enterprise that holds a big market power during a region.
The following example gives a good simpler understanding of this rule.
“A” may be a great retailer during a specific State who sells toys to the people. There are various toy manufacturers within the State, say B1, B2, B3, and so on. Here, “A” determines the worth of the toys and sends independent agreements to all or any the manufacturers manufacturing the toys therein State. No manufacturer is deciding the worth here, and each manufacturer is, conscious of the very fact that every of them is agreeing on the identical terms set by “A” and as far because the Price determination cares its only “A” who decides it. So, here “A” and every one the manufacturers are participants of the “Hub and Spoke,” rule, where “A” is that the hub and “B1, B2, B3”, so on are the spokes.
Competition Act, 2002
The Hub and Spoke rule is taken into account an anti-competitive practice in foreign countries. Whereas, in India, these sorts of issues concerning anti-competitive market practices are supervised by the “Competition Commission of India”. The Competition Commission of India is set under the “Competition Act, 2001”, which governs the competition law in India.
Act foresees and halts the activities that adversely affect the competition within the Indian market. It acts as an instrument to enforce and execute the competition policies and punishes the anti-competitive business practices by the businesses.
The Competition Commission of India established under the Act, is obligated to preserve the interests of free and fair competition in India, thus ensuring that both the consumers and therefore the operators within the market aren't over excited by any untraditional and unethical market practices.
Samir Agrawal v. ANI Technologies (P.) Ltd. & Ors.
Information Ordered Before CCI (Competition Commission of India)
In the recent past, a case was brought against ANI Technologies, which provides the App-based cab services under Ola and Uber systems in India, alleging that they were using the Hub and Spoke version for the fetish of ride fares. the knowledge was first filed by the informant before the Competition Commission of India. He also alleged that there was conspiracy between both the cab aggregators and between the respective drivers.
He contended that both the businesses are going against the established provision i.e., Section-3 of the Competition Act, 2002.
Section-3 of the Competition Act, 2002 provides that, if an enterprise enters into an agreement including cartels, by which such entering would cause an adverse effect on the competitive market in India, then such agreement are going to be declared as void. These agreements to be declared void under this Section should directly or indirectly determine the costs on purchase or sale of products or services and will limit the technical development within the market.
The informant argued that the cab-aggregators are using their own price algorithms to line out the worth and therefore the drivers are sure to accept an equivalent. He contended that this type of policy by the cab-aggregators falls under the ambit of the Hub and Spoke rule which adversely affects competition within the market.
No Prima-Facie Contravention
The Commission noticed that there's no prima-facie case of conspiracy between the cab-aggregators and their respective drivers inter se. It said that under a Hub and Spoke cartel, there require individual agreements with all the drivers to line the worth under one platform, but during this case, there's no such agreement intrinsically, nor any meeting of minds between the cab-aggregators or the drivers inter-se which is required under Hub and Spoke model.
There is a difference between accepting price algorithms set by the cab-aggregators, by the drivers and therefore the concept where the drivers under collusion are sure to accept the costs by the hub. The latter one may be a contravention of Section-3 of the Competition Act, 2002 and forms no place within the present case.
The Commission further noticed that there's no fixed price set by the aggregator for all the drivers, and therefore the prices are estimated by the algorithms supported various factors that constantly change day today. These factors include the traffic situation during a particular area, time, etc alongside the personalized information they possess. These factors are taken into deliberation to estimate the fares.
This apparently shows that the worth determined by the aggregators is different by the rationale of reciprocity in large data sets that they hold, which is differing from the concept of Hub and Spoke.
The Commission rejected all the allegations against Ola and Uber and closed the case under Section-26(2) of the Competition Act, 2002 and held that there's no contravention of Section-3 under the Act, concerning the Anti-competitive agreements because the drivers rather opted for acceding to the fare which is an outcome of the worth algorithms set by the aggregators, than competing on price within the market.
According to Section-26(2) of the Act, the Competition Commission of India can close the matter of a case if it finds that there's no Prima-facie violation of the Competition Act, 2002.
Appeal to NCLAT
The informant being unsatisfied with the choice of the Commission filed for an appeal within the NCLAT (National Company Law Appellate Tribunal) expanding his allegations on price determination by both the cab-aggregators, under Section-3 and 4 of the Act.
Section-4 of the Act says that the enterprises shouldn't abuse their dominant position which could cause price discrimination within the market.
Contentions by the Parties
The Ola may be a respondent argued that the appellant isn't an offended person and he's neither an aggrieved party nor has any prejudice been caused to him. On the contrary, the appellant contended that he falls under the ambit of Section-19(1)(a) which provides that ‘any person’ can file the knowledge before the commission if he finds that a corporation goes against the provisions of the Act or getting into contravention of the Section-3(1) & Section-4(1) of the Act.
On hearing the contentions of both the parties, the NCLAT noted that “any person” under Section-19(1)(a) of the Competition Act, refers to an individual whose legal rights are invaded either as a consumer or entity a beneficiary of healthy competitive practices.
If the phrase “any person” is interpreted otherwise, then unscrupulous people would take a plus of it targeting a couple of enterprises, driven by their own motives. Thus, the informant doesn't have any locus standi to take care of an action within the capacity of the allegations made against Ola and Uber.
The Tribunal observed that Ola and Uber are two different cab-aggregators operating independently of every other, and there's no collusion between them. It said that the Hub and Spoke model doesn't apply to the business models of Ola and Uber.
With regards to Ola, the Tribunal noticed that there's no inter se connectivity as this platform doesn't have chance of sharing information with credentials to the earnings that it makes through the rides provided. In other words, the Ola platform excludes the prospect of collusion amongst the drivers.
In the case of Uber, it had been observed that Uber App provides a technology service wherein it assists the drivers and therefore the riders find the simplest possible ride while recommending the fare for an equivalent. Also, with regards to fares under Uber App, the drivers are under liberty to barter a lower fare.
In both cases, it's free for both the driving partners also as for the riders to either choose the respective App or choose another alternative transport mode of their choice. The NCLAT also stated that there's no contravention of Section-4, Competitive Act, by Ola and Uber. they are doing not hold a dominant position to inflict price-discrimination within the market, as there are various other cab service providers operating under the transport sector.
Therefore, the appeal was dispersed by the NCLAT accordingly.
It is so surprising to ascertain that both the CCI and therefore the NCLAT opted to suppose the arguments made by Ola and Uber at its face even without calling on for an investigation. The contentions made by the respondents could be true but considering the likelihood of harm to the market competition, it's significant to form a necessary investigation to verify whether there's any such discriminatory procedure followed by the businesses. The person regardless of whether he's a consumer or a beneficiary within the market possesses the knowledge filed thinking that the businesses are following a so-called practice Hub and Spoke model, which can go against this competitive practice. Every citizen has the proper to report it to the Commission when he foresees that there's illegal conduct by the businesses. The Commission is sure to discuss the matter if that's a prima-facia case to be investigated.