As a general rule, most people believe that if a firm doesn’t have much market-power in an industry, it cannot be construed to be indulging in predatory pricing, even if its pricing is way below its costs.
As a general rule, most people believe that if a firm doesn’t have much market-power in an industry, it cannot be construed to be indulging in predatory pricing, even if its pricing is way below its costs. Indeed, as a recent case involving cab firms Meru and Uber shows, even the Competition Commission of India (CCI) seems to believe this to be the case. This never really made sense since, even in the case of imports from countries that have little market share, the government is quick to impose anti-dumping duties, which are, in a fundamental sense, the same as action against predatory pricing. In this particular case, Meru approached CCI in 2015, alleging new entrant Uber was indulging in predatory pricing; to support this contention, it gave details of how much Uber was losing—Rs 204 per trip—and said that its market share was above 50%, as per a market survey report by New Age Tech Sci Research Private Limited. Meru also said that, while Uber began its service, it charged Rs 20 per km—most radio cabs charged around Rs 23 at that point—but this was dropped to Rs 7-12 per km for different categories of services.
CCI, however, rejected Meru’s plea for an investigation on various grounds. For one, it contested the New Age Tech study, and said its findings were quite different from a report by 6Wresearch that CCI had been presented with in another case; CCI also said that the relevant market was Delhi, and not the Delhi-NCR that Meru argued was the case; CCI added that there is a vibrant and dynamic radio taxi service market in Delhi, so Uber was not dominant in the relevant market.
This ruling was struck down by the Competition Appellate Tribunal (Compat), and this has just been upheld by the Supreme Court (SC). Compat pulled up CCI for first dismissing the New Age Tech report, and yet, later, combining this with the 6Wresearch report; and if the findings were contradictory, why not get a fresh report done? More important, Compat said that, under competition law, dominance doesn’t necessarily have to be related to just market-share in statistical terms. Compat drew CCI’s attention to sub-clauses b, c, d, and e of 19(4) of the Competition Act; the “issue of dominance needs to be seen from a perspective that does not limit to the market share of the enterprise alone…” The Compat ruling, and the SC stamp of approval are an important milestone in India’s competition law. Indeed, if the market-share criterion was to be rigidly followed, this would have meant CCI would never take action against an RJio—it didn’t, as it happens—or a Flipkart/Amazon, just because their initial market-shares were low. Of course, CCI action has to look at other issues as well, like technology and consumer welfare—technology changes market dynamics more than anything else, and lower prices benefit consumers—but recognising that concepts like significant market share are outdated is also important.