Uber - Ola, The Competition Killer Or The Competition .
Research Partnership Platform8th meetingWednesday, 5 July 2017Room XVII, Palais des Nations, GenevaUBER - OLATHE COMPETITION KILLERORTHE COMPETITION TRIGGER?India Case StudyContribution byMumbai Grahak Panchayat (MGP - India)IndiaThis material has been reproduced in the language and form as it was provided. The views expressed arethose of the author and do not necessarily reflect the views of UNCTAD.
UBER - OLATHE COMPETITION KILLERORTHE COMPETITION TRIGGER ?India Case StudyByAdv. Shirish V. DeshpandeChairman – Mumbai Grahak PanchayatIndia witnessed entry of app-based taxi servicesthrough aggregators such as Uber and OLAsomewhere in 2013. Uber group entered Indian RadioTaxi Services Market in 2013 and started its operationsin Delhi in December 2013 and offered services underthree band names namely, Uber Black, Uber X andUber Go. ANI Technologies Pvt Ltd. an IndianAggregator, introduced OLA app-based Taxi and autoservices around same time.PRE- UBER / OLA SCENARIO :Before the entry of Ola and Uber, intra-city taxiservices in major metropolitan cities in India wereordinary non-a/c black & yellow taxis, cool cabs, fewa/c radio taxis and large number of 3-wheelerautorickshaws. In Mumbai there were about 45,000black & yellow non a/c taxis and about 100,000 threewheeler auto-rickshaws operating. There were about8,000 air-conditioned taxis operational. The fares of allthese taxis and autorickshaws were regulated by thestate transport regulator in each state and all thesetaxis and autos were required to display these fares onthe Meters. The mechanical meters meant to displayfare payable were not re-calibrated since 1978 andafter every revision in the taxi/auto fares, the TariffCard used to be issued by the Transport Authority toindicate the revised fare by reading it in conjunctionwith the mechanical meter for the distance travelled.Somewhere in andaround 2013, the typicalmechanical Meters installed on taxis and autos - whichwere prone for manipulation, rigging and therebyexcess charging - were replaced by Electronic Metersat the insistence of Mumbai Grahak Panchayat, theleading consumer body from Mumbai. TheGovernment's decision to replace the mechanicalmeters with installation of Electronic meters on taxis &autos was also challenged by the drivers' Unions rightupto Supreme Court, but in vain.The owners/drivers of black & yellow taxis / autoswere unionized and used to often dictate the terms onthe transport regulators in the matter of fixation oftaxi/auto fares on the strength of their organized unit.Negotiations for revision in fares were often precededby strikes of taxis/autos with a view to pressurize thegovernment and the transport regulator for morefavourable and beneficial fare revision. Seldom thegovernment or the regulatory authority found itappropriate to hear the views of the passengers /consumers, with exception of Mumbai where MumbaiGrahak Panchayat used to represent the passengerinterest before the transport regulator. As such, thegeneral scenario before the entry of Uber & Ola canbe summed up as follows:â Taxi/auto fares used to be unreasonablyhigh.â The services offered by taxi/auto drivers werefar from satisfactory.â Rampant Cherry-picking of the long-distancepassengers & blatant refusals of passengersfor short distances,â Poor maintenance of the vehicles,â Rigging / Manipulation of the Meters toovercharge the passengers,â Rude and arrogant behavior of the drivers,â Abusing the collective bargaining strength ofdrivers to go on strikes to force TransportRegulator to succumb to their unreasonabledemands for fare hike and other concessionsin traffic offences.Thus, with the above scenario, the passengerswere on a lookout for a better and more economicaloption for their transport needs.ENTRY OF UBER / OLA & THE CHANGEDSCENARIO : Uber and OLA entered the taxi servicesas aggregators to provide app-based taxi services topassengers in major metropolitan cities in India. BothOla and Uber offered passengers air-conditioned taxiservices at comparatively cheaper fares. Assured taxiservice at a door step to be summoned on the mobileapp gave the passengers the much needed comfortcoupled with reasonable fares. In many cases thefares offered by Uber and OLA were found to be lessthan the fares charged by 3-wheeler autorickshaws.No wonder, in less than a year's time there was a majorshift of passengers from traditional black & yellow taxisand autos to the newly introduced air-conditioned appbased taxis offered by Uber and OLA.This major migration of passengers from traditionaltaxi/auto services to app-based taxi services obviouslycreated panic amongst the taxi/auto owners/drivers asthey witnessed losses in their daily revenues and theirvery survival threatened. On the other hand, thepassengers - hitherto harassed and exploited by thetaxi/auto drivers - had a smile on their face as they gotcomfortable journey ride at a most affordable price.
This changing scenario in taxi services brought tothe fore the issue of much-needed competition in thefield of taxi services. Uber/Ola app-based taxi serviceswith use of modern technology and smart phonestriggered the competition and offered the consumersan attractive option to choose.Although Uber/Ola taxi fares were largely found tobe attractive and affordable to the passengers, therewas also some irritant which the passengers did notlike and that was the Surge Pricing by Uber and Ola.The algorithmic pricing by Uber and Ola at peak hoursshowed huge spurt in the fares which the passengersoften found unpalatable. In fact, the very algorithmicfare structure lacked transparency and became thepoint of debate.Thus, on one hand Uber/Ola fares were found to bequite attractive, so much so as to appear likePredatory pricing aimed at killing the competitionand also the competitors and on the other hand theSurge Pricing, resorted to by Uber/ Ola at peak hourswhen the demand out-weighed the supply, attractedthe charge of undue profiteering.MGP's ON-LINE PERCEPTION SURVEY: It is inthis cross-fire of allegations of Predatory pricing to killthe competition and competitors and Surge Pricing toexploit consumers, Mumbai Grahak Panchayat(M.G.P.) decided to have an on-line perception surveyof passengers about their experience of app-basedtaxi services offered by Uber/Ola vis-à-vis traditionaltaxi/auto services. There was an unprecedentedresponse to this on-line survey which was respondedby no less than 76,169 passengers from different citiesin India with predominant response from Mumbai.The findings of this online perception surveyconducted by M.G.P. are quite revealing. Overwhelming 94% of the respondents feltharassed by refusals by traditionaltaxi/auto drivers. 47% of the respondents found Uber/Olafares cheaper than taxis as well as autos,whereas 22% of them found them cheaperthan all taxis but bit expensive comparedto autorickshaw fares. 67% of respondents found behavior ofUber/Ola drivers as good, 14% found it asaverage and 19 % found it as bad Only 8% of respondents found the behavior ofblack & yellow taxi drivers as good whereas55% of respondents found their behavior asaverage and 37% as bad. Only 9% of respondents found the behavior ofautorickshaw drivers as good whereas 44%of respondents found their behavior asaverage and 37% found it as bad. 65% of the respondents felt Surge Pricing asirritant and expensive proposition. 80% of respondents opined that Uber/ Olaare offering better option of travel.From the above on-line Perception Survey it canbe observed that on the whole, the passengers in Indiaand particularly from Mumbai were quite satisfied withUber /Ola fares, the behavior of their drivers and thequality of service. No doubt, 65% of the passengershave also protested against the Surge Pricing. Itneeds to be noted that this is a Perception Survey ofthe passengers regardless of what is legally right orwrong and economically viable or not.The entry of Uber and Ola in Indian TaxiServices has thrown open a question whetherUber / Ola are killing the competition or have theytriggered the competition?In India the Competition Act, 2003 governs thecompetition issues. Any anti-competitive practices ofstifling the competition or adoption of predatory pricingto kill the competition and the competitors is beinglooked after by Competition Commission of India(CCI).It is interesting to note that both Ola and Uber havebeen dragged before Competition Commission ofIndia (CCI) by the affected competitors. Thecompetitors have alleged : that both Ola and Uber, backed by hugefunding from abroad has indulged in a seriesof abusive practices including predatorypricing with a view to establishing itsmonopoly and eliminate other competitorsfrom the radio taxi services market. that Ola and Uber are holding a dominantmarket position and abusing such dominancethrough unrealistic incentivization of driversleading to exclusion of existing competitorsand creating entry barriers. that Ola/Uber restricted its driver fleetoperators from using any other competingplatform for providing their services. that Ola/Uber's direct cost for providing taxiservices was way above their revenue fromcustomers. that Ola/Uber have been offering discountsand loyalty rebates to their customers whichled to discriminatory pricing.
UBER DISCHARGED OF PREDATORYPRICING: The CCI has, however, dismissed thecomplaint against Uber, holding that in Delhi regionUber is not having a dominant position and as suchthere is no need to investigate allegations of predatorypricing or abusing the dominant position to kill thecompetition.PRIMA FACI CASE OF PREDATORY PRICINGAGAINST OLA: On the other hand, CCI has, primafacie held that Ola is having a dominant position inChennai and therefore, ordered investigation into theallegations of predatory pricing and market abuse.However, the application for restraining Ola fromcarrying out such predatory pricing pending theinvestigation has been dismissed by the majorityjudgement of CCI. It is interesting to note that onemember, out of the beach of five, has given adissenting judgement and held that Ola is liable torestrain by way of interim order from continuing with itsexisting pricing and has directed Ola to organize itspricing system in such a way to ensure that theirvariable cost do not exceed the revenue collected fromthe passengers. The dissenting Member has alsodirected the Director General of CCI to complete theinvestigation against Ola within 60 days. However, thisbeing a minority judgement, will not be operative andas such presently Ola, by virtue of majority judgement,is at liberty to operate with their present pricing system.State Transport Department under Section 93 of theMotor Vehicles Act, 1988 before they start operations.All the aggregators should comply with the followingrules. They should have a physical presence/premise in the concerned state. They should have a functional grievanceredressal system which should be dulypublicized. They should make available an emergencyresponse centre to handle SOS alerts bypassengers as prescribed by the States. Aggregators should preserve and provide ondemand the data regarding taxi trips andcustomers for a period specified by the StateTransport, Police or any other enforcementauthorities as per law. Clear display of a photograph of the driver ordescription of the vehicle (including licenseplate number) should be provided to the rideron the web or mobile application as well asinside the car, so as to enable verification ofthe same once the Vehicle arrives with thesaid driver, details of which has been receivedvia the Aggregator They should develop and include a feature inthe mobile application that provides riders theability to share their location with a minimum 2persons within their safety network. They should develop and include a feature inthe mobile application that gives riders theability to contact local police in case of anemergency. They should follow the directions / guidelinesof the State in terms of maximum duty hours ofdrivers to promote road safety and to complywith the labour laws. Violation of the stipulated rules by the taxioperators/ drivers should be strictly dealt inaccordance with law. In the event of an incident of a criminal natureinvolving a trip booked through thea g g r e g a t o r, t h e a g g r e g a t o r s h o u l dimmediately inform and cooperate withrelevant authorities upon lawful request. Aggregator Platforms must establish a policyof zero tolerance for discrimination ordiscriminatory conduct while a driver isworking on such platforms. Discriminatoryconduct may include: refusal of serviceThis is how India will Regulate Ola / Uber :TRANSPORT REGULATOR TO REGULATEOLA / UBER : Notwithstanding the legal battle beingfiercely fought before the Competition Commission(CCI), the Indian transport regulators in differentstates of India have taken initiative to regulate theoperations of Ola and Uber in India.Following the legal battle and public debate aboutpredatory pricing & surge pricing, the Ministry of RoadTransport & Highways (MoRTH), Government of Indiahad appointed a 6 - Member Expert Committee topropose Taxi policy guidelines to promote urbanmobility. The committee has now submitted its reportand the report has been accepted by MoRTH. TheCommittee has proposed guidelines for various areasin the taxi segment. The report also proposedguidelines for aggregators like Ola & Uber.The recommendations state that the aggregatorscan aggregate all types of vehicles, provided thevehicles comply with all the existing regulations.Aggregators can provide services for both intra-cityand inter-city services. The committee alsorecommended that three-wheeler auto-rickshaws canalso be brought under aggregation. It is alsorecommended that the state transport departmentsallow a service charge to be charged by theaggregators.Aggregators have to comply with the followingrules:The committee recommended that all taxiaggregators obtain an appropriate license from the using derogatory or harassing languagedirected at passenger;rating a passenger on the basis of sex,race, caste, creed, religion, ornationality.
Aggregator Platforms upon receiving acomplaint from a passenger containing anallegation that the driver violated the zerotolerance policy for discriminationimmediately suspend the services of suchdriver, for the duration of the investigation bythe Licensee.Aggregator's Software & Fare CalculationAlgorithms will need validation by MEITY:The Committee has also recommended that thealgorithms used for distance and fare calculation etc.should be checked and validated for accuracy.Quality of these software applications should beaudited by from Standardisation Testing and QualityCertification(STQC) or any other agency authorisedby Ministry of Electronic and Information Technology(MEITY), on a one-time basis.STQC or other nominated agency of MEITYshould validate the attributes used by cabaggregators to calculate the shortest path for anyinaccuracy and this validation should be maintained.This is to ensure that the customers are notovercharged.The committee also recommended that in theinterest of security of personal data, the Aggregatorsshould provide options to the consumers whetherthey want to share the data on their mobiles with theaggregators or not. Express consent of theconsumers should be obtained to share the personaldata and it should be ensured that all the data isprotected by a firewall. However, if any such data isrequisitioned by any enforcement agency then theaggregators would be bound to provide the same. Maximum & Maximum Tariff for Aggregatorbased taxis:The committee recommended that the taxisunder aggregators should be categorized into thefollowing two segments: Economy DeluxeThe committee recommended that the tariffs ofdeluxe taxi segment should not be controlled andmarket dynamics should be allowed to determine thetariffs. But the State Transport Departments mayregulate the fares of the taxis in the economysegment. The following rules may be used for fixingthe tariff in the economy segment. States may fix minimum as well asmaximum fares charged by the aggregators. Thecommittee recommended that the maximum tariffmay be permitted up to three times the minimumtariff. To increase the availability of taxis duringnight time, Committee recommended that maximumtariff may be allowed up to four times that ofminimum tariff from 12 midnight to 5 am inmorning.Alternatively, the committee also recommendedthat aggregators may be asked to provide theminimum fare that would be charged from thecustomers and the State Transport Department mayfix a multiplier to cap the maximum fare. While fixingthe tariffs, the states may engage the services oftransport economists and related experts who wouldbe able to provide a scientific approach todetermination of tariffs and permit charges.Acting on the above recommendations, in the stateof Maharashtra - the capital of which is Mumbai - thestate government has issued what is known as“Maharashtra City Taxi Rules, 2017” under MotorVehicles Act and which has come into effect from 4thMarch, 2017. By virtue of these rules the operations ofOla and Uber and any other app-based taxi serviceproviders will be regulated by the state transportregulator. Although, Ola and Uber will have thefreedom of fixing their own fares for the passengers,the fares will have minimum and maximum limitthereby preventing the possibility of predatory pricingby Ola and Uber and thereby either killing or distortingthe competition. The said rules also put certainrestrictions on conduct of the drivers as well as ensuresecurity & safety aspects of the passengers.Most of the other states in India are soon expectedto follow the suit. As such the unregulated andunbridled taxi operations by Ola and Uber taxiaggregators will now be regulated in India in order toensure that the passengers get a fair deal withouthurting the competition in the transport sector.This Paper is being presented at the Research Partnership Platform (RPP) of UNCTAD in Geneva on 5th July 2017 by AdvocateShirish V. Deshpande, Chairman of Mumbai Grahak Panchayat (MGP).MGP is a registered voluntary consumer organization active in the field of consumer education, consumer protection and consumerresearch for last more than 42 years.Its unique Grocery Distribution System based on “Collective Buying” has been applauded as a Role Model of Sustainable Lifestyleon the platform of UN Commission on Sustainable Development.With membership of about 35,000, MGP is the largest voluntary consumer organization in Asia.Contact:Email: 1) shirish50@yahoo.com 2) mpanchayat@gmail.comWebsite: mumbaigrahakpanchayat.org
This changing scenario in taxi services brought to the fore the issue of much-needed competition in the field of taxi services. Uber/Ola app-based taxi services with use of modern technology and smart phones triggered the competition and offered the consumers an attractive option to choose. Although U
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