CCI orders probe into Ola’s ‘predatory’ pricing

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Chennai | Published: May 7, 2015 1:44:11 AM

Chennai-based taxi operator files complaint; prima facie, Ola abusing dominant position, feels CCI

Fair trade watchdog Competition Commission of India (CCI) has ordered a probe against app-based taxi service operator Ola for its alleged predatory pricing. A detailed investigation has been ordered after the regulator found prima facie evidence of Ola violating competition norms.

Chennai-based Fast Track Call Cab has filed a complaint against ANI Technologies, the owners of Ola, alleging contravention of provisions of section 3 and 4 of the relevant Act. Accordingly, the commission, as per provisions of section 26(1) of the Act, directed the Director-General to investigate the matter and complete it within 60 days.

During the course of investigation, the DG will also investigate the conduct of officials of Ola for fixing liability with respect to contravention of the Act, in case Ola is found to have violated the provisions.

The complainant is a rival operating under the Fast Track brand. The CCI, after looking into the allegations, said it was of the view that prima facie Ola’s conduct amounts to abuse of dominant position. “It is observed from the material placed on record that the opposite party is spending more money on discounts and incentives (apart from the variable costs it may be incurring) on customers and drivers compared to the revenue it is earning,” the regulator said.

Besides, it was observed that Ola was spending more per trip compared to the average revenue gain. “While the propriety of these figures is a subject matter of investigation, prima facie, the Commission is of the view that they indicate predatory pricing aimed to oust other players from the relevant market,” the order said.

According to Fast Track, Ola has incentivised drivers unrealistically by using the money it has got through foreign investments, including from Tiger Capital, which can never be matched by existing radio cab operators or potential indigenous enterprises desirous of starting such operations in India.

Fast Track submitted that the opposite party has received huge funding from various agencies. It said that so far four series of investment have already been made in Ola, including a $5-million investment by Tiger Global Management in 2012, $20 million by Matrix Partners India, $41.8 million by a Hong Kong-based equity hedge fund, and $210-million by SoftBank Corp. The complainant has alleged that armed with moneybags from various funding agencies, Ola has unleashed a series of abusive practices of unfair conditions and predatory pricing to establish its monopoly and eliminate otherwise equally efficient competitors.

Fast Track has contended that in the radio taxi services market in Bengaluru, Ola holds a dominant position with 43.2% of active fleet and 47% market share. Further, it is alleged that Ola has acquired Taxi For Sure, another radio taxi company, after which its market share has increased to almost 69%.

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