Supreme Court rules out cartelization by Ola and Uber drivers

Supreme Court rules out cartelization by Ola and Uber drivers

The apex court upholds CCI and NCLAT observations that drivers act independently of each other.

The Supreme Court has disposed an Appeal at the instance of an Informant (Appellant) without interfering with the observation of the CCI and the NCLAT, wherein it has been found that Ola and Uber do not facilitate cartelization or anti-competitive practices between drivers, who are independent individuals and act independently of each other, so as to attract the application of section 3 of the Competition Act, 2002 (Act).

In this case, the Appellant/Informant, by an Information filed on 13 August 2018, sought that the Competition Commission of India (CCI) initiate an inquiry, under section 26(2) into the alleged anti-competitive conduct of ANI Technologies Pvt. Ltd. [Ola], and Uber India Systems Pvt. Ltd., Uber B.V. and Uber Technologies Inc. (together referred to as Uber), alleging that they entered into price-fixing agreements in contravention of section 3(1) read with section 3(3)(a) of the Act, and engaged in resale price maintenance in contravention of section 3(1) read with section 3(4)(e) of the Act.

According to the Informant, the pricing algorithm used by Ola and Uber artificially manipulates supply and demand, guaranteeing higher fares to drivers who would otherwise compete against one and another. Cooperation between drivers, through the Ola and Uber apps, results in concerted action under section 3(3)(a) read with section 3(1) of the Act.

Thus, the Informant submitted that the Ola and Uber apps function akin to a trade association, facilitating the operation of a cartel. Various other averments, quaprice, discrimination resale, price maintenance, etc. were also made, alleging a contravention of section 3(4)(e) of the Act.

The CCI opined that Ola and Uber are not an association of drivers, rather they act as separate entities from their respective drivers. In the present situation, a rider books his/her ride at any given time which is accepted by an anonymous driver available in the area, and there is no opportunity for such driver to coordinate its action with other drivers. This cannot be termed as a cartel activity/conduct through Ola/Ubers platform and no case of contravention of the provisions of Section 3 was made out and the matter was accordingly closed herewith under Section 26(2) of the Act. The Appeal was also dismissed by the NCLAT (National Company Law Appellate Tribunal).

The apex court observed that when the CCI performs inquisitorial, as opposed to adjudicatory functions, the doors of approaching the CCI and the appellate authority, i.e., the NCLAT, must be kept wide open in the public interest, so as to sub serve the high public purpose of the Act.

It was stated that the CCI may inquire into any alleged contravention of the provisions of the Act on its own motion, as laid down in section 19(1) of the Act. Further, even while exercising suomotu powers, the CCI may receive information from any person and not merely from a person who is aggrieved by the conduct that is alleged to have occurred.

This also follows from a reading of section 35 of the Act, in which the earlier expression complainant or defendant has been substituted by the expression, person or an enterprise, setting out that the informant may appear either in person or through one or more agents, before the CCI to present the information that he has gathered. It was also held that it was difficult to agree with the impugned judgment of the NCLAT in its narrow construction of section 19 of the Act, which therefore was set aside.

It was also opined that given the context of the Act in which the CCI and the NCLAT deal with practices which have an adverse effect on competition in derogation of the interest of consumers, it is clear that the Act vests powers in the CCI and enables it to act in the public interest. This would make it clear that a person aggrieved must, in the context of the Act, be understood widely and not be constructed narrowly.

Further, it is not without significance that the expressions used in sections 53B and 53T of the Act are any person, thereby signifying that all persons who bring to the CCI information of practices that are contrary to the provisions of the Act, could be said to be aggrieved by an adverse order of the CCI in case it refuses to act upon the information supplied. By way of contrast, section 53N(3) speaks of making payment to an applicant as compensation for the loss or damage caused to the applicant as a result of any contravention of the provisions of Chapter II of the Act, having been committed by an enterprise.

By this sub-section, clearly, therefore, any person who makes an application for compensation, under sub-section (1) of section 53N of the Act, would refer only to persons who have suffered loss or damage, thereby, qualifying the expression any person as being a person who has suffered loss or damage. Thus, the preliminary objections against the Informant/Appellant filing Information before the CCI and filing an appeal before the NCLAT was rejected.

The judgment of this Court reported as Competition Commission of India v. Steel Authority of India was also referred to wherein it was opined that the powers conferred by the legislature upon the Commission under Sections 27(d) and 31(3) are of a wide magnitude and of serious ramifications. The Commission has the jurisdiction even to direct that an agreement entered into between the parties shall stand modified to the extent and in the manner, as may be specified.