The Competition Commission of India (CCI) on Tuesday dismissed allegations of price-fixing against cab aggregators Ola and Uber, and their respective drivers, finding that drivers agreeing to algorithmically determined prices do not amount to a cartel operating on a ‘hub and spoke’ model.
It also ruled that dynamic pricing models used by the firms do not contravene the provisions of the Competition Act, which prohibit setting a minimum floor price, since such models resulted in prices falling below those set by independent drivers depending on demand and supply.
In its 13-page order, CCI noted that a hub and spoke arrangement requires the players to use a third party platform (hub) for exchange of sensitive information, including information on prices, which can facilitate price fixing.
However, in the case of the cab aggregators, it found that estimation of fares are done by algorithms on the basis of data, where factors such as time of the day and traffic situation are taken into account, apart from personalised information.
“Resultantly, the algorithmically determined pricing for each rider and each trip tends to be different owing to the interplay of large data sets. Such pricing does not appear to be similar to the ‘hub and spoke’ arrangement as understood in the traditional competition parlance,” the regulator said.
It also noted that for a cartel to operate as a hub-and-spoke, there needs to be a conspiracy to fix prices, which requires existence of collusion in the first place. “In the present case, the drivers may have acceded to the algorithmically determined prices by the platform (Ola/ Uber), this cannot be said to be amounting to collusion between the drivers,” it ruled.
A hub-and-spoke cartel also requires an agreement between all drivers to set prices through the platform or an agreement for the platform to coordinate prices between them. “There does not appear to be any such agreement between drivers inter-se to delegate this pricing power to the platform/ cab aggregators,” CCI said.
As for allegations of the dynamic pricing model resulting in a minimum fixed price or a floor price, CCI ruled that this is not the case with regards to the mentioned cab aggregators since this model also results in prices falling below those that are charged by independent drivers. “Thus, there does not seem to be any fixed floor price that is set and maintained by the aggregators for all drivers and the centralised pricing mechanism cannot be viewed as a vertical instrument employed to orchestrate price-fixing cartel among the drivers,” CCI said.
On charges of price fixing, the regulator pointed out that as per the Competition Act, the existence of an agreement, understanding or arrangement that demonstrates meeting of minds, is a prerequisite for establishing a violation. In the present case, there does not appear to be any such agreement between the firms and their drivers, CCI said.