After Ecommerce Giants, Now Competition Commission Orders Probe Against Ola For Predatory Pricing

Just few days after rejecting all the allegations of unfair business practices against ecommerce players including Flipkart, Snapdeal, Amazon, Jabong and Myntra, now, the Competition Commission of India has ordered a probe against cab hailing app Ola for alleged predatory pricing. The organisation has ordered a detailed investigation against the company after it found that Ola was violating competition norms.

This move comes after a complaint was filed by Chennai-based Fast Track Call Cab against ANI Technologies, the parent company 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, has now directed the Director-General to investigate the matter and complete it within 2 months.

During this investigation, the Director-General will be investigating 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.

“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.

Additionally, it was also observed the cab hailing company was also 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.

Fast Track, the complainant also said that 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. It further added that Ola has unleashed a series of abusive practices of unfair conditions and predatory pricing to establish its monopoly and eliminate otherwise equally efficient competitors.

Thus all the allegations, apart from predatory pricing, which include restriction on taxi drivers, incentives, loyalty rebate offers, predatory discounts to customers, etc will also be probed.

Ola was founded in 2011 by IIT Bombay graduates Bhavish Aggarwal and Ankit Bhat. Last year, Ola had received $210 Mn funding led by Steadview Capital and VC firm Sequoia Capital, with its existing investors Matrix Partner India and Tiger Global also participating. Prior to this, it had raised $41.8 Mn in Series C, about $20 Mn in Series B and over $3.2 Mn. Recently, it closed Series E round of funding of $400 Mn led by DST Global with participation from GIC, Falcon Edge Capital and existing investors and has also acquired TaxiForSure for $200 Mn.

The company has over 100,000 drivers on its platform across 85+ cities and competes with Meru, Uber, Taxipixi among others.

In recent times, the CCI have been increasingly looking into the alleged violation of fair trade norms by the startups including ecommerce and other online startups.