Introduction
The Supreme Court of India (Supreme Court) in a landmark judgment has after a wait of almost four years allowed the Director General (DG) to investigate into the alleged dominance of Uber India Systems Pvt. Ltd. (Uber) and abuse thereof in the radio taxi services market in the Delhi-NCR area[1]. The Uber Order[2] emanates from an information filed by Meru Travel Solutions Private Limited (Meru), that was dismissed by the Competition Commission of India (CCI) stating that Uber is not prima facie dominant in the relevant market and thus, closing the case under Section 26(2) of the Competition Act, 2002 (CCI order).
The CCI order was then challenged by Meru before the Competition Appellate Tribunal (Compat)[3] which reversed the findings of the CCI regarding the prima facie dominance of Uber and expanded the relevant geographical market from Delhi to Delhi-NCR. The Compat primarily differed from the CCI on the issue of reliance on a market research report by New Age TechSci Research Private Limited (TechSci). Whereas the CCI did not consider the TechSci report due to contrary findings in a 6Wresearch report, the Compat noted that the CCI in an earlier case has relied upon a TechSci report and that the two reports showing contrary results is a good reason to order an investigation into the matter. Consequently, the Compat judgment ordering the DG to investigate the matter was challenged and upheld by the Supreme Court in appeal.
The Uber Order[4] supplements the growing competition law jurisprudence in India and highlights “predatory pricing” as a factor for both establishing dominance and abuse of dominance. The primary reasons for the Supreme Court to interfere in the matter was that the information filed before the CCI was presented has been shown to them which prima facie depicts that Uber has been engaging in predatory pricing by offering huge discounts to consumers and high incentives to driver-partners resulting in an average loss of INR 204 to Uber on each trip. The Supreme Court based on this information alone stated that it would be very tough to say that there is no prima facie case under Section 26(1) of the Competition Act, 2002.
CCI Jurisprudence on Predatory Pricing So Far
Thus far, the CCI has stated that predatory pricing is exclusionary and can be indulged in only by enterprises(s) which are dominant in a relevant market[5]. To this extent, the major elements in the determination of predatory behaviour include :
(a) Establishment of the dominant position of the enterprise in the relevant market,
(b) Pricing below cost for the relevant product in the relevant market by the dominant enterprise,
(c) Intention to reduce competition or eliminate competitors, which is, traditionally known as the predatory intent test. [6]
The timeline and the evolution of CCIs jurisprudence in respect of predatory pricing has been discussed below:
In MCX Stock Exchange Ltd. v. National Stock Exchange of India Ltd. (2011)[7], the CCI held that predatory pricing is a subset of unfair price and as the unfair price has not been defined anywhere, the unfairness has to be determined on the basis of the facts of the case. The unfairness has to be examined in relation to the customer or the competitor. The CCI stated that there is no justifiable reason for the National Stock Exchange of India (NSE) to continue offering its services free of charge for such a long duration and stated that the conduct of zero pricing, in this case, is beyond promotional or penetrative pricing.
The CCI in its orders has laid down the factors to be taken into consideration while assessing the allegations of predatory pricing, specifically with regard to whether there is reduction or elimination of competition.
In Transparent Energy Systems (P) Ltd. v. TECPRO Systems Ltd. (2013)[8], the CCI provided that the following findings are relevant for the identification of predation :
(a) The prices of the goods or services of the enterprise are at a very low level;
(b) the objective is to drive out competitors from the market, who due to the low pricing would be unable to compete at that price;
(c) there is significant planning to recover the losses if any, after the market rises again; or
(d) the competitors have already been forced out.
The allegation of predatory pricing was the primary issue argued before the CCI in Bharti Airtel Ltd. v. Reliance Industries Ltd. (2017)[9]. The issue arose from an allegation that Reliance Jio Infocomm Limited (RJIL) since its inception has been providing free telecom services below its average variable cost with the intention of eliminating competitors. The CCI noted that the alleged predatory conduct should be investigated only if RJIL is prime facie dominant in the relevant market and in the absence of such dominance, there is no question of any investigation for predatory pricing. The CCI’s observation disclosed that the informant had not demonstrated reduction of competition or elimination of any competitor arising from RJIL’s actions. The CCI also noted that RJIL was a new entrant to market and its competitive pricing is a short-term business strategy to penetrate the market and establish its identity. The CCI accordingly dismissed the information filed against RJIL and closed the case under Section 26(2) of the Competition Act, 2002. 
In Fast Track Call Cab (P) Ltd. v. ANI Technologies (P) Ltd. (2017)[10], similar allegations as in the Uber Order[11] were raised before the CCI i.e. pertaining to predatory pricing. The CCI, concurring with the DG’s investigation, found that ANI Technologies Pvt. Ltd. (Ola) did not exercise dominant position in the market. The informants put forth the allegation that the conduct of predatory pricing, was an evidence of dominance in itself. In this regard, the CCI noted that 97. … New entrants commonly engage in such practices to gain a toehold in the market and holding them dominant based on simple observation of conduct may have the undesirable result of chilling competition [12]. and accordingly, closed the case against Ola.
Uber Order—Impact on Establishing Dominance and Predatory Pricing
The importance of establishing “dominance” of an enterprise before proceeding with an investigation has been clearly emphasised by the CCI in its jurisprudence. However, the Supreme Court has taken a slightly divergent view in the Uber Order [13]. It has stipulated that predatory pricing itself could tantamount to proof of dominance as it affects the competitors of a relevant enterprise in its favour as per Explanation (a) of Section 4 of the Competition Act, 2002. In this regard, the Supreme Court in the Uber Order[14] cited that 6. … if … a loss is made for the trips, Explanation (a)(ii) would prima facie be attracted inasmuch as this would certainly affect the appellant’s competitors in the appellant’s favour or the relevant market in its favour.
The CCI in its orders has not considered predatory pricing as a factor for ascertaining dominance of an enterprise rather dominance has been taken as an after-effect of dominance. For e.g., in the NSE case[15], the CCI considered, inter alia, the ability of NSE to sustain zero pricing in the relevant market for long enough to outlive competition as a factor to ascertain the position of strength of NSE, however, did not state that engaging in predatory pricing can itself amount to proof of dominance.
Takeaways
The CCI has not held predatory pricing to be abusive under all circumstances. It has been held to be a legitimate strategy for a new entrant to capture market share and attracting customers to a new product or service. However, the same practice becomes abusive when it is continued indefinitely with the intent of driving out existing competitors and subsequently recouping losses incurred while carrying out the predatory pricing.
The Uber Order[16] has taken a circular approach to dominance. This approach was discussed in the Ola case[17] where it was argued that predatory pricing is evidence of dominance in itself. However, the CCI’s position in the Ola case[18] does not get compromised by the Uber Order[19] and this is because the CCI explained that the market for radio taxis was at a nascent stage and the low prices are not because of cost efficiency but because of the funding it has received from private equity funds.
Thus, the Ola case[20] is not rendered wholly inconsistent with the approach of the Supreme Court. It will be interesting to watch whether the CCI going forward considers predatory pricing as proof of both dominance and abuse of such dominance.
Dhruv Rajain, Principle Associate, can be contacted at dhruv.rajain@cyrilshroff.com.
Shubhankar Jain, Associate can be contacted at shubhankar.jain@cyrilshroff.com, Aakriti Thakur, Associate can be contacted at aakriti.thakur@cyrilshroff.com and with the Competition Law Practice at Cyril Amarchand Mangaldas.
[1] Uber (India) Systems (P) Ltd. v. CCI, (2019) 8 SCC 697 (Uber Order).
[3] Erstwhile Appellate Tribunal replaced by the National Company Law Appellate Tribunal by way of Notification in the Gazette
of India dated 26-5-2017 available at <http://egazette.nic.in/WriteReadData/2017/176250.pdf>.
[5] Advocacy Booklet on Provisions Relating to Abuse of Dominance available at
<https://www.cci.gov.in/sites/default/files/advocacy_booklet_document/AOD.pdf>.
[6] Ibid
[14] (2019) 8 SCC 697, 700.
[18] Ibid
