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Uber opposes ex-ante regulations for digital markets in India

Ex-ante regulations aim to prevent anti-competitive conduct from occurring, as opposed to the current ex-post framework under the Competition Act, 2002.

Uber has opposed ex-ante regulations for digital markets in India calling the current competition framework sufficient and stating that ex-ante interventions may discourage innovation. 

Uber submitted its views to the Committee on Digital Competition Law (CDCL). A report by the CDCL on the matter of ex-ante regulation in India along with the draft Digital Competition Bill,  2024, was released by the Government on March 12.

The draft bill prohibits large digital platforms, identified as Systemically Significant Digital Enterprises, from engaging in self-preferencing, restricting third-party apps, imposing anti-steering policies, misusing the data of business users, and bundling products and services. The draft is open for public feedback until April 15.  

Ex-ante regulations aim to prevent anti-competitive conduct from occurring, as opposed to the current ex-post framework under the Competition Act, 2002, wherein the Competition Commission of India (CCI) intervenes after the occurrence of anti-competitive conduct. 

What did Uber say in its submission?

Ex-ante regulations restrict innovation and consumer benefit: In its submission, Uber said that ex-ante regulations may discourage innovation and restrict enterprises from investing in improving quality, efficiency, processes, etc. They added that it might change market dynamics/incentives leading to reduced consumer benefits.

Existing framework sufficient: Uber said that the existing framework of regulation is sufficient and that fresh legislation to regulate digital markets is unnecessary.

Further, empower CCI: They said rather than introducing new regulations, the CCI must be further empowered to track changing market dynamics across digital markets.

CCI probes into Uber

In 2016, the CCI dismissed radio taxi service Meru’s complaint against Uber,  as well as a subsequent appeal in 2021. The complaint alleged that Uber abused its dominant position in the market. Meru Cabs cited Uber charging significantly lower prices than average as instances of predatory pricing. The complaint also claimed that Uber used “incentive policies” to create exclusive contracts with their drivers, thus denying its competitors access to drivers.

According to the order, the CCI disagreed with Meru’s claims that Uber was dominant in the market. It noted that the cab aggregator market is very competitive, pointing to Ola Cabs, another cab aggregator service as Uber’s biggest competitor. The order explained how market shares were constantly fluctuating. Thus, Uber could not be deemed dominant. According to the CCI, Uber not being dominant voids Meru’s argument that Uber is abusing its market share to be anti-competitive through predatory pricing. Further, it also ruled that performance-linked incentives provided to drivers do not foreclose competition.  The order also found that Uber’s contracts with its drivers were not exclusionary.

In 2018, the Competition Commission of India dismissed another complaint against Uber (and Ola) filed by a legal practitioner, Samir Agarwal, who accused the two aggregators of price fixing by deciding ride fares algorithmically. The argument made was that as cab drivers are independent, they must set their prices to maintain competition.  Further, he said that by not being transparent with their price-setting algorithm, the cab aggregators could charge artificially high fares. The CCI dismissed this argument and explained that the algorithm decided prices on multiple external factors and the practice was not anti-competitive as “determination of price by the OPs (companies) is integral to the functioning of the aggregation-based models.” Further, the CCI ruled that accusations of anti-competitive practices and price fixing were unsubstantiated. “[Agarwal has] come to an erroneous conclusion without placing any evidence on record, that an algorithm-determined price as explained above will eliminate price competition and that the price so determined will be necessarily higher than the prices that are negotiated by drivers and the riders on an individual trip basis.”, the CCI said.

CCI advisory to cab aggregators to adopt self-regulatory measures

In September 2022, following concerns from various stakeholders, the CCI issued an advisory to cab aggregators recommending that they adopt self-regulatory measures to address issues of surge pricing and lack of transparency. In its advisory, the CCI  called for apps to be more transparent with their surge pricing policies and disclose various components of total fare, for both consumers and drivers. They called for transparency in data collection and the cancellation policy. The CCI also said that cab aggregators must not give preference to a vehicle owned by them.

 The advisory was based on a market study conducted by the CCI to understand if surge pricing and personal pricing needed regulation and to increase transparency in fare calculation. The study revealed that riders and drivers faced issues with a lack of transparency in surge prices. Broadly, the study found that riders and drivers were aware of surge pricing and were not opposed to it. However, problems arose when there was a discrepancy in information. The study found instances where the fare charged to riders was different from what was displayed to the drivers. The study also noted that the precise amount of surge charges incorporated was not disclosed to riders, showing the total fare instead. The study also showed that traditional taxi operators found that cab aggregators created an unequal playing field. The CCI notes that Motor Vehicle Aggregator Guidelines 2020 requires transparency on the workings of the app, including but not limited to the fare calculation. It also said that MVA Guidelines made an effort to bridge the gap between traditional taxis and cab aggregators.

In addition to the recommendations made in the advisory, the CCI also called for a cap on surge pricing. Particularly,  it noted that the Motor Vehicle Aggregator Guidelines 2020, “proposed a floor (0.5 times base fare) and ceiling (1.5 times base fare) for surge pricing.”

Also Read:  

  • Summary: India’s Draft Digital Competition Bill, 2024
  • Why the Indian government is exploring ex-ante regulations for digital markets
  • Why are industry bodies supporting ex-ante regulations in India
  • Meta Opposes Ex-Ante Regulations Similar To DMA In India

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