Competition panel stand may go against Ola

Fair trade regulator Competition Commission of India is nearing a verdict on the “unfair trade practices” resorted to by Ola Cabs in a Bangalore case. As per reliable sources, the verdict is tilted against Ola. Ola is an app-based taxi operator. Its parent company, ANI Technologies, was accused by Fast Track Call Cab Private Limited of predatory pricing in Bangalore to muscle out competitors. The case is under investigation by the Director General of Investigation Nitin Gupta and is nearing its final stages.
“The DG has been investigating the case. Even though the CCI had quashed the prayer by the informant for interim relief owing to the ongoing investigation, we believe that a verdict will come very soon. I don’t think that the verdict will be in favour of the defendant,” a senior bureaucrat close to the case told The Sunday Guardian, requesting anonymity.
“They (CCI) are crushing competition. The market itself sets the price quotient. They (informant) knew the risk when they entered the business. Ola was a startup and it is impressive that a newcomer can unsettle the market in such a small time frame. It has changed customer behaviour and carved out a niche for itself. Nobody is stopping other service providers to expand. It is their shortcoming if they fail to do so,” he added.
Experts believe that the business model employed by app-based taxi service providers has given them an edge over their competitors and the only way to move forward is to embrace technology and move forward by reinventing themselves.
Professor Praveen Jha, economist and professor, Jawaharlal Nehru University, said, “This matter is plain and simple. The economics of cab services vary according to the business model employed. Before the entry of Ola Cabs and international players like Uber in the market, the fleet of cabs was required to be owned. Ola came in with the model of taxi affiliation with a service provider. Regulations changed with changing market demands. Obviously, the return of investment was going to be more for Ola than the conventional operators. That enabled them to expand faster and earn more than their competitors. That was the advantage of their business model. Taxi operators agreed to the price structure.”
Arguing that the pricing structure helps build a more robust market, Professor Jha said: “It helps the customer; makes our travel more convenient and gives us a variety of options with better services. The market cannot be held to ransom just because some business owners are unwilling to accept latest technologies and move forward with time. They have to reinvent their business model. There is enough demand in the market. What Ola and Uber have done is that they have introduced a habit within customers to opt for app-based cab services with their affordable prices. Even a common middle-class person can consider the option of hiring a cab for transport, which was not the case earlier. I trust the CCI will make an informed judgment that will be in the larger interests of customers.”
As per records of the case, while placing reliance on the material submitted by the informant, prima facie, the commission held that the Opposite Party (Ola) was spending more money on discounts and incentives on customers and drivers compared to the revenue it was earning, thereby contravening the provisions of section 4 of the Act.
While passing the order under section 26(1) of the Act, the Commission observed that while the veracity of the figures submitted by the informant is a subject matter of investigation, prima facie, such figures indicated low cost pricing by the Opposite Party to oust other players from the market.